(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-8094
Seagull Energy Corporation
(Exact name of registrant as specified in its charter)
Texas 74-1764876
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
1001 Fannin, Suite 1700
Houston, Texas 77002-6714
(Address of principal executive (Zip Code)
offices)
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Registrant's telephone number, including area code: (713) 951-4700
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, par value $.10 per share New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ___
As of March 9, 1998, the aggregate market value of the outstanding shares of Common Stock of the Company held by non-affiliates (based on the closing price of these shares on the New York Stock Exchange) was approximately $997,089,000.
As of March 9, 1998, 63,021,232 shares of Common Stock, par value $0.10 per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Document Part of Form 10-K
(1) Annual Report to Shareholders for PARTS I and II
year ended December 31, 1997
(2) Proxy Statement for Annual Meeting PART III
of Shareholders to be held on May 13, 1998
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Index
Page
Part I
Item 1. Business:
Oil and Gas Operations............................................... 1
Alaska Transmission and Distribution................................. 13
Corporate............................................................ 16
Environmental Matters................................................ 17
Employees............................................................ 19
Executive Officers of the Company.................................... 20
Item 2. Properties....................................................... 21
Item 3. Legal Proceedings................................................ 21
Item 4. Submission of Matters to a Vote of Security Holders.............. 22
Part II
Item 5. Market for Registrant's Common Stock and Related Shareholder
Matters................................................. 22
Item 6. Selected Financial Data.......................................... 23
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................... 23
Item 8. Financial Statements and Supplementary Data...................... 23
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.................................... 23
Part III
Item 10. Directors and Executive Officers of the Registrant.............. 23
Item 11. Executive Compensation.......................................... 24
Item 12. Security Ownership of Certain Beneficial Owners and Management.. 24
Item 13. Certain Relationships and Related Transactions.................. 24
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. 24
Signatures................................................................ 29
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PART I
Item 1. Business
Seagull Energy Corporation (the "Company" or "Seagull") is an international
oil and gas company engaged primarily in exploration and development activities
in the United States, Egypt, Cote d'Ivoire, Indonesia and the Russian Republic
of Tatarstan. The Company also transports, distributes and markets natural gas,
liquids products and petrochemicals. Seagull's long-range goal is to grow its
reserve base and its crude oil and natural gas production capacity. The Company
seeks a balanced approach of growing through its internal drilling efforts
complemented by strategic acquisitions of additional oil and gas assets in its
core operating areas. The Company's desire to grow more through internal
drilling has led it to broaden its exploration focus beyond the Gulf Coast
offshore area where Seagull originally concentrated its exploration efforts.
Seagull also has endeavored to bring more balance to its mix of crude oil and
natural gas assets, thereby lessening its dependence upon natural gas and
increasing (i) the percentage of crude oil represented in the Company's total
portfolio of proved reserves, (ii) its capacity to produce those reserves, and
(iii) the international orientation of its reserve base. To these ends, the
Company completed two business combinations in 1996 that reflect this shift in
strategy - the purchase of two Egyptian concessions from Exxon Corporation and
the merger of Global Natural Resources Inc.
These business combinations brought a substantial number of exploratory prospects to the Company, complementing its large portfolio of long-lived domestic natural gas producing properties and its large, stable cash flow base generated from oil and gas sales and non-exploration and production activities. These combinations have increased the Company's ability to generate growth in both its proved reserves and its crude oil and natural gas production capacity.
For financial information relating to industry segments, see Note 13 of Notes to Consolidated Financial Statements of Seagull Energy Corporation and Subsidiaries (the "Consolidated Financial Statements") included in the Company's 1997 Annual Report to Shareholders and as part of Exhibit 13 attached hereto.
Items 1, 3 and 7 of this document include forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Although Seagull
believes that such forward-looking statements are based on reasonable
assumptions, it can give no assurance that its expectations will in fact occur.
Important factors that could cause actual results to differ materially from
those in the forward-looking statements include political developments in
foreign countries, federal and state regulatory developments, the timing and
extent of changes in commodity prices, the timing and extent of success in
discovering, developing and producing or acquiring oil and gas reserves, the
availability of skilled personnel, materials and equipment, operating hazards
attendant to the industry and conditions of the capital and equity markets
during the periods covered by the forward-looking statements.
OIL AND GAS OPERATIONS
Revenues from the Oil and Gas Operations ("O&G") segment accounted for 83%, 81% and 76% of the Company's consolidated revenues for 1997, 1996 and 1995, respectively. Production of gas and liquids for 1997 averaged 357 MMcf per day ("Mcf/d") and 20,711 Bbl per day ("Bbl/d"), respectively, compared to 392 MMcf/d and 13,409 Bbl/d, respectively, in 1996. Oil production in 1997 increased from the prior year primarily as a result of increased production in Egypt. In October 1997, the
Company sold all of its Canadian oil and gas operations. In September 1995, the Company sold substantially all of its gas gathering and processing assets. With the sale of the gas gathering and processing assets, Seagull's former Exploration and Production segment and the Pipeline and Marketing segment were reclassified into Oil and Gas Operations.
Seagull's principal oil and gas producing areas include the following:
Proved Reserves at December 31, 1997
--------------------------------------------------------------------------------------
Gas (MMcf) (1) Oil (Mbbl) (2) MBOE (3)
-------------------------- ------------------------- -------------------------
UNITED STATES:
Arkoma Basin.................. 169,318 1 28,221
Arklatex Area................. 306,520 7,233 58,320
Mid-Continent Area............ 180,171 7,329 37,358
Offshore Gulf of Mexico....... 84,441 2,757 16,830
Gulf Coast Onshore............ 34,234 722 6,427
Other......................... 5,362 499 1,393
-------------------------- ------------------------- -------------------------
780,046 18,541 148,549
EGYPT:
East Beni Suef................ - 3,368 3,368
East Zeit..................... - 15,760 15,760
Qarun......................... 1,786 12,098 12,396
South Hurghada................ - 2,647 2,647
West Abu Gharadig............. - 1,130 1,130
-------------------------- ------------------------- -------------------------
1,786 35,003 35,301
COTE D'IVOIRE................... 24,835 1,212 5,351
TATARSTAN....................... - 16,455 16,455
INDONESIA....................... 61,324 1,074 11,294
-------------------------- ------------------------- -------------------------
867,991 72,285 216,950
========================== ========================= =========================
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(1) Gas is stated in million cubic feet ("MMcf"). It may also be stated herein in billion cubic feet ("Bcf"), or thousand cubic feet ("Mcf").
(2) Oil,condensate and natural gas liquids ("NGL") are stated in thousands of barrels ("Mbbl"). It may also be stated herein in barrels ("Bbl"). As used in this Annual Report on Form 10-K, liquids means oil, condensate and natural gas liquids, unless otherwise indicated or the context otherwise suggests.
(3) MBOE and BOE represent one thousand barrels of oil equivalent and one barrel of oil equivalent, respectively, with six Mcf of gas converted to one barrel of liquid.
For additional information relating to the Company's oil and gas reserves, based substantially upon reports of DeGolyer and MacNaughton, Netherland, Sewell & Associates, Inc. and Ryder Scott Company, independent petroleum engineers (collectively the "Engineers"), see Note 15 of Notes to Consolidated Financial Statements included in the Company's 1997 Annual Report to Shareholders and as part of Exhibit 13 attached hereto. All information in Note 15 not provided by the Engineers was supplied by the Company. The Company's reserve estimates in Indonesia have been obtained from a public source which, although not independently verified, the Company believes to be reliable. As required, Seagull also files estimates of oil and gas reserve data with various governmental regulatory authorities and agencies. These estimates were not materially different from the reserve estimates reported in the Consolidated Financial Statements.
The future results of the O&G segment will be affected by the market prices of oil and natural gas and the Company's exploration and exploitation success. The availability of a ready market for oil, natural gas and liquids products in the future will depend on numerous factors beyond the control of the Company, including weather, the Company's ability to hire and retain skilled personnel, production of other crude oil, natural gas and liquids products, imports, marketing of competitive fuels, proximity and capacity of oil, gas and liquids pipelines and other transportation facilities, demand for storage refills,
any oversupply or undersupply of gas and liquids products, operating hazards attendant to the oil and gas business, the availability and cost of material and equipment, the regulatory environment and other regional, international and political events, none of which can be predicted with certainty.
United States
In excess of 65% of the Company's proved oil and gas reserves and annual production are contributed by properties in the United States. These domestic properties are generally located in three geographic areas -- the Mid-South, Mid-Continent and Gulf Coast regions. The Company's capital program for 1998 is designed to maintain domestic reserves and deliverability at approximately year-end 1997 levels. In addition, Seagull will continue to pursue strategic acquisitions to increase its domestic reserves and deliverability. Capital expenditures, excluding any acquisitions, for the Company's domestic activities are expected to be approximately $151 million for 1998, including $47 million for exploration, $83 million for development and $21 million for leasehold.
Mid-South -- The CompanY's Mid-South properties are situated generally in the Arkoma Basin of eastern Oklahoma and western Arkansas and the Arklatex area of east Texas and northwest Louisiana. The Company's interests in Mid-South provide production from long-lived assets where ongoing activities are devoted principally to exploitation. These development activities in 1997 were particularly successful in the Arkoma Basin of western Arkansas with the completion of 13 successful development wells. The Company's 3-D seismic survey in this area was one of the earliest 3-D applications to be attempted in this relatively mature part of the Arkoma Basin. It has been successful in identifying untested reservoirs and new pay intervals. Capital expenditures in the Mid-South region for 1998 are expected to be near 1997's $51 million and will continue to focus on 3-D seismic surveys and development activities.
Mid-Continent -- The Company's Mid-Continent properties are situated generally in the Anadarko Basin of the Texas Panhandle and western Oklahoma. The Mid-Continent region also provides production from long-lived assets where ongoing activities are devoted principally to exploitation. Capital expenditures in this region during 1997, which totaled $19 million, were devoted primarily to development activities. Plans for 1998 call for a somewhat lower level of capital spending but it will again be focused on developing existing reserves through drilling and 3-D seismic surveys.
Gulf Coast -- The Company's Gulf Coast properties are located onshore in south Texas and south Louisiana and offshore in the Gulf of Mexico off the coasts of the same two states. Both exploration and exploitation activities are conducted in this region. In 1997, the Company purchased its first interests in the Deep Water Gulf of Mexico play where the Company plans to be an active participant in the future. Seagull also completed two successful exploratory wells in the Frio/Wilcox play in a tertiary trend in onshore Texas. These two exploratory wells confirmed the Lower Wilcox can be highly productive. The second well, the Zeidman Trust #2, tested nearly 22 MMcf/d of natural gas with very strong pressures from the bottom third of a 1,500-foot Lower Wilcox interval.
The Company has been evaluating the Zeidman Trust #2 since its completion, observing flow rates and pressures and dealing with mechanical problems while formulating plans for further drilling in 1998. The Company has a 45% interest in some 16,000 acres in the immediate vicinity of the discovery.
During 1997, Seagull's capital expenditures totaled some $71 million in the Gulf Coast region, primarily for exploratory wells but also for development drilling and the acquisition of offshore leases. Plans for 1998 will continue this focus on exploratory drilling but once again will have some development drilling and acquisition of offshore leases.
Egypt
The Company's Egyptian operations consist of working interests in six concessions -- Qarun, East Beni Suef, East Zeit, South Hurghada, West Abu Gharadig and Darag. The interest in West Abu Gharadig was purchased in 1997 while the East Zeit and South Hurghada interests were purchased in 1996. The Company's interests in Qarun, East Beni Suef and Darag were acquired in the Global merger. With 1997 production of 3,383 MBOE, the Company's Egyptian assets contributed approximately 12% of total production. Capital expenditures for 1997 were approximately $83 million in Egypt and are expected to be $94 million in 1998.
Each concession is governed by a concession agreement (collectively, the "Egyptian Concession Agreements") between the working interest partners and the Egyptian national oil company ("EGPC"). Under the Egyptian Concession Agreements, the working interest partners pay 100% of capital and operating costs and production is split between EGPC and the working interest partners. Working interest partners recover costs from a percentage, ranging from 25% to 40% depending upon the concession, of the oil and gas produced and sold from the applicable concession ("Cost Recovery Petroleum"). Cost Recovery Petroleum forms a single unified pool for the entire concession from which costs of all fields, zones, products and types may be recovered without differentiation, except that operating costs are recovered prior to the recovery of any capital costs. Capital costs (which include exploration, development and other equipment and facilities costs) are amortized for recovery over four to five years while operating expenses are recoverable on a current basis. To the extent that the costs eligible for recovery in any quarter exceed the amount of Cost Recovery Petroleum produced and sold in that quarter, such costs are recoverable from Cost Recovery Petroleum in future quarters with no limit on the ability to carry forward such costs.
The remaining oil and gas produced and sold is divided between EGPC and the working interest partners. Depending on the concession and varying with production levels, the working interest partners receive 12% to 30% of the remaining oil and up to 29% of the remaining gas. Included in EGPC's share of this remaining oil or gas are all Egyptian government royalties as well as the applicable Egyptian income taxes of the working interest partners.
Qarun -- The Company has a 25% non-operated working interest in the Qarun Concession Agreement. The concession covers approximately 1.9 million gross acres located 45 miles southwest of Cairo, Egypt. Initial oil production, via trucking, began in late 1995 while conventional production facilities became fully operational in 1997. With the completion of these production facilities, Qarun became one of the Company's largest producing concessions. While 1998 capital expenditures are expected to decrease significantly from 1997's $35 million due to the completion of the production facilities, the expenditures will continue to be split between additional exploratory wells, seismic work and development activities.
East Beni Suef -- Seagull, as the operator, has a 50% working interest in
the East Beni Suef Concession Agreement. The concession covers approximately 6.8
million gross acres lying adjacent and
to the south of the Qarun concession. Thefirst exploratory well was successfully completed in late 1997 and the Company expects to begin trucking production in the first half of 1998.
East Zeit -- The Company, as the operator, has a 100% working interest in the East Zeit concession which is located offshore in the Gulf of Suez. The Company acquired its interest primarily as a producing concession and it continues to be one of the largest producing concessions among the Company's Egyptian interests. With this emphasis on production, capital expenditures of approximately $27 million in 1997 were concentrated in development wells and activities and capital expenditures are expected to be in this same range for 1998.
South Hurghada -- Seagull, as the operator, has a 100% working interest in the 61,000-acre concession, located onshore on the coast of the Gulf of Suez approximately 250 miles south of Cairo. After the completion of two successful exploratory wells in mid-1997, oil production was trucked to the nearby East Zeit production terminal. While the 1997 capital expenditures of $10 million were concentrated on exploratory drilling, expected 1998 capital expenditures of about this same amount will reflect the beginning of development activities.
West Abu Gharadig -- In October 1997, the Company purchased a 30% non-operating working interest in the West Abu Gharadig concession, covering 3.5 million gross acres in upper Egypt. While three exploratory wells were producing by year-end, the Company has identified more than 10 exploratory leads. Seagull expects exploratory drilling will continue in this concession in 1998 or 1999.
Darag -- The Company has a 50%, non-operated working interest in the Darag block, which is located in the northern portion of the Gulf of Suez, and covers 460,000 gross acres. Future plans for this concession are uncertain as the working interest owners and EGPC have been unable to secure the necessary drilling permits from marine authorities. At the end of 1997, Seagull had approximately $5 million in capitalized costs associated with this concession. The working interest owners and EGPC are discussing ways for the working interest owners to recover the costs associated with the Darag concession, however, there can be no guarantee that these discussions will be successful in recovering the costs of the working interest owners.
Cote d'Ivoire
Seagull's operations in Cote d'Ivoire, West Africa consist of working interests in three blocks- CI-11, CI-12 and CI-104. The CI-11 concession, where the Company has a nearly 13% unitized working interest, extends from the western coast to approximately eight miles offshore Cote d'Ivoire. The Company has an almost 17% working interest in CI-12, which lies adjacent to and west of block CI-11, and a 100% working interest in block CI-104, which lies adjacent to and west of block CI-12.
Each block is subject to a production sharing contract whereby the working
interest partners pay 100% of capital and operating costs, and production is
split between the Ivorian government and the working interest partners. Working
interest partners recover costs from a percentage, ranging from 40% to 75%
depending upon the concession, of produced and sold petroleum. The remaining oil
and gas produced and sold, and any portion of cost recovery not used to recover
costs, is divided between the Ivorian government and the working interest
partners. Included in the Ivorian government's share of remaining petroleum are
all Ivorian government royalties as well as the applicable Ivorian income taxes
for the working interest partners.
Tatarstan
Through its 90% owned subsidiary, Texneft, the Company has a net 45% interest in a joint venture in Tatarstan, a republic in the Russian Federation located west of the Ural Mountains and east of the Volga River. The joint venture is with Tatneft, a Russian closed joint stock company. The joint venture, Tatex, operates various oil fields in Tatarstan. Under the terms of the joint venture and various supplemental agreements, the funding for the joint venture is supplied by Texneft and Tatneft through various credit agreements.
The joint venture's activities currently include three projects: (i) vapor recovery, (ii) the development and operation of the Onbysk field, near the city of Almetyevsk, and (iii) the upcoming development and operation of the Demkinsky field, located 110 kilometers southwest of Almetyevsk. Texneft's share of capital spending for 1998 is approximately $8 million, primarily for development drilling and facilities.
Indonesia
Seagull has a 1.7% interest in the Indonesia Joint Venture ("IJV") for the exploration, development and production of oil and gas in East Kalimantan, Indonesia, under a production sharing contract with the state petroleum enterprise of Indonesia ("Pertamina"). The majority of the revenue derived from the IJV results from the sale of liquefied natural gas ("LNG"). Under the terms of the PSC with Pertamina, the IJV is authorized to explore for, develop and produce petroleum reserves in an approximately 1.1 million acre area in East Kalimantan.
The IJV participants are entitled to recover cumulative operating and certain capital costs out of the oil and gas produced each year, and to receive a share of the remaining oil production and a share of the remaining revenues from the sale of gas on an after Indonesian tax basis.
Oil and Gas Drilling Activities
Seagull's oil and gas exploratory and developmental drilling activities are
as follows for the periods indicated. A well is considered productive for
purposes of the following table if it justifies the installation of permanent
equipment for the production of oil or gas. The term "gross wells" means the
total number of wells in which Seagull owns an interest, while the term "net
wells" means the sum of the fractional working interests Seagull owns in gross
wells. The information should not be considered indicative of future
performance, nor should it be assumed that there is necessarily any correlation
between the number of productive wells drilled, quantities of reserves found or
economic value.
Year Ended December 31,
------------------------------------------------------------------------------------
1997 1996 1995
---------------------- ---------------------- -----------------------
Gross Net Gross Net Gross Net
--------- --------- -------- --------- ---------- ---------
UNITED STATES:
Exploratory Drilling:
Productive Wells................. 18 9.5 14 6.2 9 5.7
Dry Holes........................ 12 4.2 15 6.6 14 7.5
Development Drilling:
Productive Wells................. 142 73.9 123 54.2 64 29.0
Dry Holes........................ 12 6.3 13 8.2 4 1.1
CANADA: (*)
Exploratory Drilling:
Productive Wells................. 3 1.7 5 0.8 3 1.0
Dry Holes........................ 1 1.0 2 2.0 3 3.0
Development Drilling:
Productive Wells................. 57 28.9 17 8.6 7 1.9
Dry Holes........................ 1 0.3 2 1.5 1 0.5
EGYPT:
Exploratory Drilling:
Productive Wells................. 4 2.8 2 0.5 2 0.5
Dry Holes........................ 11 3.0 5 1.3 1 0.3
Development Drilling:
Productive Wells................. 14 3.5 14 3.5 4 1.0
Dry Holes........................ - - - - 1 0.3
COTE D'IVOIRE:
Exploratory Drilling:
Productive Wells................. 1 0.1 2 0.3 - -
Dry Holes........................ 2 0.3 1 0.1 - -
Development Drilling:
Productive Wells................. 3 0.4 1 0.1 4 0.6
Dry Holes........................ - - - - - -
TATARSTAN:
Exploratory Drilling:
Productive Wells................. 1 0.5 - - 1 0.5
Dry Holes........................ - - - - - -
Development Drilling:
Productive Wells................. 21 10.5 20 10.0 17 8.5
Dry Holes........................ - - - - - -
OTHER INTERNATIONAL:
Exploratory Drilling:
Productive Wells................. - - - - - -
Dry Holes........................ 1 0.2 - - 2 0.4
TOTAL:
Exploratory Drilling:
Productive Wells................. 27 14.6 23 7.8 14 7.2
Dry Holes........................ 27 8.7 23 10.0 21 11.7
Development Drilling:
Productive Wells................. 237 117.2 175 76.4 96 41.0
Dry Holes........................ 13 6.6 15 9.7 6 1.9
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(*) All of the Company's Canadian oil and gas operations were sold in October 1997.
The Company had 14 gross (4.3 net) exploratory wells and 12 gross (5.5 net)
development wells in progress at December 31, 1997. Wells classified as "in
progress" at year-end represent wells where drilling activity is ongoing, wells
awaiting installation of permanent equipment and wells awaiting the drilling of
additional delineation wells.
Production
The following table summarizes the Company's production, average sales prices and operating costs for the periods indicated:
Year Ended December 31,
------------------------------------------------------------
1997 1996 1995
---------------- ----------------- --------------
UNITED STATES:
Net Production:
Gas (MMcf)................................................ 110,595 116,238 113,482
Oil, condensate and NGL (Mbbl)............................ 1,763 1,561 1,403
Average sales price: (1)
Gas (per Mcf)............................................. $ 2.34 $ 2.17 $ 1.62
Oil, condensate and NGL (per Bbl)......................... $ 17.60 $ 19.03 $ 15.84
Average operating costs (per BOE) (2)....................... $ 3.75 $ 3.27 $ 3.04
CANADA:(3)
Net Production:
Gas (MMcf)................................................ 13,510 21,203 22,057
Oil, condensate and NGL (Mbbl)............................ 243 361 399
Average sales price: (1)
Gas (per Mcf)............................................. $ 1.63 $ 1.32 $ 1.07
Oil, condensate and NGL (per Bbl)......................... $ 16.46 $ 16.77 $ 13.01
Average operating costs (per BOE) (2)....................... $ 3.42 $ 3.57 $ 3.17
EGYPT:
Net Oil Production (Mbbl)................................... 3,383 1,305 25
Average Oil Sales Price (per Bbl) (1)....................... $ 18.26 $ 21.56 $ 17.97
Average operating costs (per BOE) (2)....................... $ 3.46 $ 4.45 $ 2.24
COTE D'IVOIRE:
Net Production:
Gas (MMcf)................................................ 2,245 1,445 203
Oil (Mbbl)................................................ 603 511 261
Average sales price: (1)
Gas (per Mcf)............................................. $ 1.93 $ 1.77 $ 1.61
Oil (per Bbl)............................................. $ 19.34 $ 20.04 $ 15.51
Average operating costs (per BOE) (2)....................... $ 3.95 $ 3.56 $ 4.75
TATARSTAN:
Net Oil Production (Mbbl)................................... 1,512 1,117 1,062
Average Oil Sales Price (per Bbl) (1)....................... $ 14.26 $ 13.98 $ 15.11
Average operating costs (per BOE) (2)....................... $ 9.25 $ 10.17 $ 8.35
INDONESIA AND OTHER:
Net Production:
Gas (MMcf)................................................ 3,965 4,429 3,933
Oil (Mbbl)................................................ 56 51 45
Average sales price: (1)
Gas (per Mcf)............................................. $ 3.18 $ 3.36 $ 2.96
Oil (per Bbl)............................................. $ 19.31 $ 19.58 $ 17.38
Average operating costs (per BOE ) (2)...................... - - -
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(1) Average sales prices are before deduction of production, severance, and other taxes.
(2) Operating costs represent costs incurred to operate and maintain wells and related equipment and facilities. These costs include, among other things, repairs and maintenance, workover expenses, labor, materials, supplies, property taxes, insurance, severance taxes, transportation costs and general operating expenses.
(3) All of the Company's Canadian oil and gas operations were sold in October 1997.
The following table sets forth information regarding the number of productive wells in which the Company held a working interest at December 31, 1997. Productive wells are either producing wells or wells capable of commercial production although currently shut-in. One or more completions in the same borehole are counted as one well.
Gross Wells Net Wells
----------------------------------------------- ----------------------------------------------------
Multiple Multiple
Gas Oil Total Completions Gas Oil Total Completions
--------- --------- --------- -------------- ---------- -------- ---------- ---------------
United States.... 2,641 1,713 4,354 264 1,074.5 185.4 1,259.9 144.0
Egypt............ - 52 52 11 - 24.4 24.4 2.8
Cote d'Ivoire.... 2 11 13 2 0.3 1.4 1.7 0.3
Tatarstan........ - 196 196 57 - 98.0 98.0 28.5
--------- --------- --------- -------------- ---------- -------- ---------- ---------------
2,643 1,972 4,615 334 1,074.8 309.2 1,384.0 175.6
========= ========= ========= ============== ========== ======== ========== ===============
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Developed and Undeveloped Oil and Gas Acreage
As of December 31, 1997, the Company owned working interests in the following developed and undeveloped oil and gas acreage:
Developed Undeveloped
--------------------------------------- --------------------------------------
Gross Net (*) Gross Net (*)
---------------- --------------- --------------- --------------
UNITED STATES:
Onshore:
Oklahoma..................... 278,753 130,038 25,215 12,735
Texas........................ 208,133 101,987 111,748 33,851
Arkansas..................... 210,071 71,225 12,645 8,177
Louisiana.................... 44,663 21,905 5,765 2,809
Montana...................... 1,175 228 161,306 147,928
Other........................ 28,397 9,882 57,291 27,686
Bays and State Waters.......... 2,609 722 9,618 6,402
Federal Offshore:
Texas........................ 156,379 64,071 309,402 214,020
Louisiana.................... 59,675 28,991 250,426 139,919
EGYPT:
Darag.......................... - - 459,606 229,803
East Beni Suef................. - - 6,819,960 3,409,980
East Zeit...................... 6,672 6,672 - -
Qarun.......................... 407,213 101,803 1,080,130 270,033
South Hurghada................. 26,934 26,934 34,627 34,627
West Abu Gharadig.............. 15,419 4,626 4,725,615 1,417,684
COTE D'IVOIRE:
CI-11.......................... 11,860 1,537 180,329 23,443
CI-12.......................... - - 393,634 65,618
CI-104......................... - - 250,300 250,300
TATARSTAN........................ 12,630 6,315 12,107 6,053
INDONESIA........................ 97,000 1,663 1,156,780 19,827
OTHER INTERNATIONAL.............. - - 2,790,298 395,615
---------------- --------------- --------------- --------------
1,567,583 578,599 18,846,802 6,716,510
================ =============== =============== ==============
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(*) When describing acreage on drilling locations, the term "net" refers to the total acres on drilling locations in which the Company has a working interest, multiplied by the percentage working interest owned by the Company.
Additionally, as of December 31, 1997, the Company owned mineral and/or
royalty interests in 591,032 gross (41,334 net) developed and 2,846,585
gross (105,751 net) undeveloped oil and gas acres, located primarily in the
United States.
For additional information relating to oil and gas producing activities, see Note 15 of Notes to the Consolidated Financial Statements included in the Company's 1997 Annual Report to Shareholders and as part of Exhibit 13 attached hereto.
Regulation
The availability of a ready market for oil and natural gas production depends upon numerous regulatory factors beyond the Company's control. These factors include regulation of oil and natural gas production, federal and state regulations governing environmental quality and pollution control and state limits on allowable rates of production by a well or proration unit. State and federal regulations generally are intended to prevent waste of oil and natural gas, protect rights to produce oil and natural gas between owners in a common reservoir, control the amount of oil and natural gas produced by assigning allowable rates of production and control contamination of the environment.
Regulation of Oil and Natural Gas Exploration and Production. Exploration and production operations of the Company are subject to various types of regulation at the federal, state and local levels. Such regulation includes requiring permits for the drilling of wells, maintaining bonding requirements in order to drill or operate wells, and regulating the location of wells, the method of drilling and casing wells, the surface use and restoration of properties upon which wells are drilling and the plugging and abandonment of wells. The Company's operations are also subject to various conservation laws and regulations. These include the regulation of the size of drilling and spacing units or proration units and the density of wells which may be drilled and unitization or pooling of oil and gas properties. In this regard, some states allow the forced pooling or integration of tracts to facilitate exploration while other states rely on voluntary pooling of lands and leases. In addition, state conservation laws establish maximum rates of production requirements regarding the ratability of production.
Natural Gas Marketing and Transportation. Although maximum selling prices of natural gas were formerly regulated, the Natural Gas Wellhead Decontrol Act of 1989 ("Decontrol Act") terminated wellhead price controls on all domestic natural gas on January 1, 1993, and amended the Natural Gas Policy Act of 1978 to remove completely by January 1, 1993 price and nonprice controls for all "first sales" of natural gas, which will include all sales by the Company of its own production. Consequently, sales of the Company's natural gas currently may be made at market prices, subject to applicable contract provisions. The jurisdiction of the Federal Energy Regulatory Commission (the "FERC") over natural gas transportation was unaffected by the Decontrol Act.
The FERC regulates interstate natural gas transportation rates and service conditions, which affect the marketing of natural gas produced by the Company, as well as the revenues received by the Company for sales of such natural gas. Since the latter part of 1985, the FERC has endeavored to make interstate natural gas transportation more accessible to gas buyers and sellers on an open and nondiscriminatory basis. The FERC's efforts have significantly altered the marketing and pricing of natural gas. Commencing in April 1992, the FERC issued Order Nos. 636, 636-A and 636-B (collectively, "Order No. 636"), which, among other things, require interstate pipelines to "restructure" to provide transportation separate or "unbundled" from the pipelines' sales of gas. Also, Order No. 636 requires pipelines to provide open-access transportation on a basis that is equal for all gas supplies.
Additional proposals and proceedings that might affect the natural gas industry are considered from time to time by Congress, the FERC, state regulatory bodies and the courts. The Company cannot predict when or if any such proposals might become effective, or their effect, if any, on the Company's operations. The natural gas industry historically has been very heavily regulated; therefore, there is no assurance that the less stringent regulatory approach recently pursued by the FERC and Congress will continue indefinitely into the future. State regulation of gathering facilities generally includes various transportation, safety, environmental, and nondiscriminatory purchase and transport requirements, but does not generally entail rate regulation.
Offshore Leasing. Certain operations the Company conducts are on federal oil and gas leases, which the Mineral Management Service ("MMS") administers. The MMS issues such leases through competitive bidding. These leases contain relatively standardized terms and require compliance with detailed MMS regulations and orders pursuant to the Outer Continental Shelf Lands Act ("OCSLA") (which are subject to change by the MMS). For offshore operations, lessees must obtain MMS approval for exploration plans and development and production plans prior to the commencement of such operations. In addition to permits required from other agencies (such as the Coast Guard, the Army Corps of Engineers and the Environmental Protection Agency), lessees must obtain a permit from the MMS prior to the commencement of drilling. The MMS has promulgated regulations requiring offshore production facilities located on the Outer Continental Shelf ("OCS") to meet stringent engineering and construction specifications, and has recently proposed additional safety-related regulations concerning the design and operating procedures for OCS production platforms and pipelines. The MMS also has issued regulations to prohibit the flaring of liquid hydrocarbons and oil without prior authorization. Similarly, the MMS has promulgated other regulations governing the plugging and abandonment of wells located offshore and the removal of all production facilities. To cover the various obligations of lessees on the OCS, the MMS generally requires that lessees post substantial bonds or other acceptable assurances that such obligations will be met.
The MMS recently adopted a rule detailing the kinds of natural gas marketing and transportation services that should be considered part of a producer's duty to market. The rule, which is currently under appeal, may prevent producers from deducting from royalties the full cost of transporting and marketing natural gas to the marketplace. The Company cannot predict how it might be affected by this rule, or the disposition of such rule on appeal.
In addition, the MMS is conducting an inquiry into certain contract settlement agreements from which producers on MMS leases have received settlement proceeds that are royalty bearing and the extent to which producers have paid the appropriate royalties on those proceeds. The restructuring of oil and gas markets has resulted in a shifting of markets downstream from the wells. Deregulation has altered the marketplace such that lessors, including the MMS, are challenging the methods of valuation of gas for royalty purposes.
The MMS has issued a notice of proposed rulemaking in which it proposes to amend its regulations governing the calculation of royalties and the valuation of oil and natural gas produced from federal leases. The principal feature in the amendments, as proposed, would establish an alternative market-index based method to calculate royalties on certain natural gas production sold to affiliates or pursuant to non-arms'-length sales contracts. The MMS has proposed this rulemaking to facilitate royalty valuation in light of changes in the gas marketing environment. The Company cannot predict what action the MMS will take on these matters, nor can it predict at this stage of the rulemaking proceedings how the Company might be affected by amendments to the regulations.
Pipeline, Marketing and Other
The Company's O&G segment also includes pipeline and marketing operations involving (i) the transportation and marketing of Seagull's own and third-party gas, oil and natural gas liquids; (ii) gas gathering and processing; and (iii) pipeline engineering, design, construction and operation.
The Company actively provides marketing services geared toward matching gas supplies available in the major producing areas with attractive markets available in the Midwest, Northeast, Mid-Atlantic, Appalachian and Texas/Louisiana Gulf Coast areas. The matching process includes arranging transportation on a network of open-access pipelines on a firm or interruptible basis. Seagull contracts to provide oil and natural gas to various customers and aggregates supplies from various sources including third-party producers, marketing companies, pipelines, financial institutions and the Company's own production. Marketing profit margins are often small due to competition, and results can vary significantly from period to period. Large amounts of working capital are involved for relatively small net margins, which makes working capital management critical. The Company has policies and procedures in place that are designed to minimize any potential risk of loss from these transactions. These policies and procedures are reviewed and updated periodically by the Company's management.
Most of the Company's natural gas is transported through gas gathering systems and gas pipelines which are not owned by the Company. Transportation space on such gathering systems and pipelines is occasionally limited and at times unavailable due to repairs or improvements being made to such facilities or due to such space being utilized by other gas shippers with priority transportation agreements. While the Company has not experienced any inability to market its natural gas, if transportation space is restricted or is unavailable, the Company's cash flow from the affected properties could be adversely affected.
In late 1995, Seagull initiated a risk management program for a portion of its own E&P production and third-party activities, utilizing such derivative financial instruments as futures contracts, options and swaps. In early 1997, the Company closed substantially all of its derivative financial instruments related to equity production and focused its risk management efforts on reducing price and basis risk for its third-party marketing activities. Seagull accounts for its commodity derivative contracts as hedging activities and, accordingly, the effect is included in revenues when the commodities are produced. See Note 2 of Notes to the Company's Consolidated Financial Statements and Oil and Gas Operations in Management's Discussion and Analysis of Financial Condition and Results of Operations, both of which are included in the Company's 1997 Annual Report to Shareholders and as part of Exhibit 13 attached hereto.
Pipeline Operations and Construction -- Seagull operates certain pipelines owned by other companies. In some cases the operating agreements provide for reimbursement of expenses incurred in connection with operations plus a profit margin. In other cases the Company receives a negotiated annual fee. The Company also builds pipelines for other companies for which it receives construction fees that are fixed, cost-plus or a combination of both. The Company currently has one ongoing construction project for an existing customer and plans to continue its pursuit of additional operating and construction opportunities.
Competition
The Company's competitors in oil and gas exploration, development, production and marketing include major oil companies, as well as numerous independent oil and gas companies, individuals and drilling programs. Some of these competitors have financial and personnel resources substantially in excess of those available to the Company and, therefore, the Company may be placed at a competitive disadvantage. The Company's success in discovering reserves will depend on its ability to select suitable prospects for future exploration in today's competitive environment.
The Company's gas marketing activities are in competition with numerous other companies offering the same services. Some of these competitors are affiliates of companies with extensive pipeline systems that are used for transportation from producers to end-users. The Company believes its ability to compete depends upon building strong relationships with producers and end-users by consistently purchasing and supplying gas at competitive prices.
The Company actively competes with numerous other companies for the construction and operation of short and medium length pipelines. The Company's competitors include oil companies, other pipeline companies, natural gas gatherers and petrochemical transporters, many of which have financial resources, staffs and facilities substantially larger than those of the Company. In addition, many of the Company's gas purchasers are also competitors or potential competitors in the sense that they have extensive pipeline-building capabilities and experience and generally operate large pipeline systems of their own. Seagull believes that its ability to compete will depend primarily on its ability to complete pipeline projects quickly and cost effectively, and to operate pipelines efficiently.
International Operations
Seagull's interests in countries outside the United States are subject to the various risks inherent in foreign operations. These risks may include, among other things, currency restrictions and exchange rate fluctuations, loss of revenue, property and equipment as a result of expropriation, nationalization, war, insurrection and other political risks, risks of increases in taxes and governmental royalties, renegotiation of contracts with governmental entities, changes in laws and policies governing operations of foreign-based companies, restrictions on drilling permits (such as those facing the Darag concession) and other uncertainties arising out of foreign government sovereignty over the Company's international operations. The Company's international operations may also be adversely affected by laws and policies of the United States affecting foreign trade, taxation and investment. In addition, in the event of a dispute arising from foreign operations, the Company may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons to the jurisdiction of the courts of the United States. The Company seeks to manage these risks by among other things, concentrating its international exploration efforts in areas where the Company believes that the existing government is stable and favorably disposed towards United States exploration and production companies.
ALASKA TRANSMISSION AND DISTRIBUTION
The Company operates in Alaska as a single business unit, ENSTAR Alaska, which is regulated by the Alaska Public Utilities Commission (the "APUC"). ENSTAR Alaska engages in the intrastate transmission of natural gas in South-Central Alaska and the distribution of natural gas in Anchorage and
other nearby communities in Alaska. Revenues from ENSTAR Alaska accounted for 17%, 19% and 24% of the Company's consolidated revenues for 1997, 1996 and 1995, respectively.
Gas Transmission System
ENSTAR Alaska owns and operates the only natural gas transmission lines in its service area that are operated for utility purposes. The pipeline transmission system is composed of approximately 277 miles of 12 to 20-inch diameter pipeline and approximately 74 miles of smaller diameter pipeline. The system's present design delivery capacity is approximately 410 MMcf/d. The average throughput of the system in 1997, 1996 and 1995 was 124, 131 and 122 MMcf/d, respectively.
Gas Distribution System
ENSTAR Alaska distributes natural gas through approximately 2,114 miles of gas mains to approximately 96,800 residential, commercial, industrial and electric power generation customers within the cities and environs of Anchorage, Eagle River, Palmer, Wasilla, Girdwood, Whittier, Soldotna, Kenai and the Nikiski area of the Kenai Peninsula, Alaska. During the year ended December 31, 1997, ENSTAR Alaska added approximately 63 miles of new gas distribution mains, installed 2,500 new service lines and added approximately 2,700 net customers. ENSTAR Alaska anticipates relatively modest growth in its residential customer base and will install additional main and service lines to accommodate this growth.
ENSTAR Alaska distributes gas to its customers under tariffs and contracts which provide for varying delivery priorities. ENSTAR Alaska's business is seasonal with approximately 65-70% of its revenues earned in the first and fourth quarters of each year.
In 1997, purchase/resale volumes represented 51% of ENSTAR Alaska's throughput and 78% of ENSTAR Alaska's operating margin. The remaining volumes are transported for power, industrial and large commercial customers for a transportation fee. Under tariffs approved by the APUC, ENSTAR Alaska's transportation fees approximate ENSTAR Alaska's purchase/resale margin.
Gas Supply
ENSTAR Alaska has an APUC-approved gas purchase contract (the "Marathon Contract") with Marathon Oil Company ("Marathon") that is a "requirements" contract with no specified daily deliverability or annual take-or-pay quantities. ENSTAR Alaska has agreed to purchase and Marathon has agreed to deliver all of ENSTAR Alaska's gas requirements in excess of those provided for in other presently existing gas supply contracts, subject to certain exceptions, until the commitment has been exhausted and without limit as to time; however, Marathon's delivery obligations are subject to certain specified annual limitations after 2001. The contract has a base price, subject to annual adjustment based on changes in the price of certain traded oil futures contracts, of $1.55 per Mcf plus reimbursements for any severance taxes and other charges. During 1997, the cost of gas purchased under the Marathon Contract averaged $1.89 per Mcf, including reimbursements for severance taxes.
ENSTAR Alaska also has an APUC-approved gas purchase contract with the Municipality of Anchorage, Chevron U.S.A., Inc. and ARCO Alaska, Inc. (the "Beluga Contract") which provides for the delivery of up to approximately 220 Bcf of gas through the year 2009. The pricing mechanism in the
Beluga Contract is similar to that contained in the Marathon Contract. The 1997 price under the Beluga Contract, after application of contractual adjustments, averaged $1.93 per Mcf, including reimbursements for severance taxes.
Based on gas purchases during the twelve months ended December 31, 1997, which are not necessarily indicative of the volume of future purchases, gas reserves committed to ENSTAR Alaska under the Marathon and Beluga Contracts are sufficient to supply all of ENSTAR Alaska's expected gas supply requirements through the year 2001. After that time supplies will still be available under the Marathon and Beluga contracts in accordance with their terms, but at least a portion of ENSTAR Alaska's requirements are expected to be satisfied outside the terms of these contracts, as currently in effect.
Currently, ENSTAR Alaska's supply source, primarily through the Marathon and Beluga Contracts, is confined to the Cook Inlet area with no direct access to other natural gas pipelines. During 1997, two of the Cook Inlet area's major suppliers filed for regulatory approval to export certain quantities of gas to overseas LNG markets. ENSTAR Alaska has filed as an intervenor in these proceedings and is actively working with regulatory authorities to insure that the supply needs of its customers are met.
ENSTAR Alaska's average cost of gas sold in 1997, 1996 and 1995 was $1.89, $1.59 and $1.75 per Mcf, respectively. ENSTAR Alaska's average gas sales price in 1997, 1996 and 1995 was $3.65, $3.29 and $3.41 per Mcf, respectively.
As stated above, ENSTAR Alaska purchases all of its natural gas under long-term contracts in which the price is indexed to changes in the price of crude oil futures contracts. However, because ENSTAR Alaska's sales prices are adjusted to include the projected cost of its natural gas, there has been and is expected to be little or no impact on margins derived from ENSTAR Alaska's gas sales as a result of fluctuations in oil prices due to worldwide political events and changing market conditions.
Competition
ENSTAR Alaska competes primarily with municipal and cooperative electric power distributors and with various suppliers of fuel oil and propane for the available energy market. There are also extensive coal reserves proximate to ENSTAR Alaska's operating area; however, such reserves are not presently being produced.
During the last nine years, ENSTAR Alaska's natural gas volumes delivered on a purchase/resale basis have declined. Beginning in 1989, several of its major customers began purchasing gas directly from gas producers or gas marketers. However, the APUC has approved tariffs allowing ENSTAR Alaska to transport these volumes for a transportation fee that approximates the margin that would have been earned had the customer remained a sales customer rather than becoming a transportation customer. Consequently, ENSTAR Alaska anticipates no adverse economic impact to result from these transportation arrangements.
If any other existing large customer of ENSTAR Alaska chooses to purchase gas directly from producers, ENSTAR Alaska would expect to collect a fee for transporting that gas equivalent to the margin earned on sales volumes for those customers because the large distance of remaining user facilities from producing fields would preclude the by-pass of ENSTAR Alaska's pipelines.
ENSTAR Alaska supplies natural gas to its customers at prices that at the present time economically preclude substitution of alternative fuels. Since the Beluga Contract and the Marathon Contract include prices that fluctuate based on oil indices, a competitive margin favoring natural gas over oil-based energy sources is expected to continue. However, there is no assurance that the competitive advantage over other alternative fuels will not be reduced or eliminated by the development of new energy technology, by changes in the price of oil or refined products or by decreased gas supply if additional exports are allowed out of the Cook Inlet area.
Regulation
The APUC has jurisdiction as to rates and charges for gas sales, construction of new facilities, extensions and abandonments of service and certain other matters. Rates are generally designed to permit the recovery of the cost of providing service, including purchased gas costs, and a return on investment in plant. Because ENSTAR Alaska's operations are wholly intrastate, ENSTAR Alaska is not subject to or affected by Order 636 or any other economic regulation by the FERC.
As a result of a proceeding filed in 1984, which was concluded in May 1986, the APUC granted ENSTAR Alaska an aggregate rate increase of 20.27% and authorized a regulatory rate of return on common equity of 15.65%. ENSTAR Alaska has no significant regulatory issues pending before the APUC. Since its inception in 1961, ENSTAR Alaska has participated in only three formal rate proceedings.
CORPORATE
Regulation
The Company is a "public utility company" within the meaning of the Public Utility Holding Company Act of 1935, as amended (the "1935 Act"). Accordingly, if any "company" (as defined for purposes of the 1935 Act and therefore including so-called "organized groups") becomes the owner of 10% or more of the Company's outstanding voting stock, that company would be required to register as a "holding company" under the 1935 Act, in the absence of an exemption of the type described below. Section 9(a)(2) also requires a person (including both individuals and "companies") to obtain prior approval from the Securities and Exchange Commission (the "SEC") in connection with the acquisition of 5% or more of the outstanding voting stock of a public utility if that person is also the owner of 5% or more of the outstanding voting stock of another public utility.
In March 1991, the Company filed an application in good faith with the SEC pursuant to Section 2(a)(8) of the 1935 Act, seeking a determination that Seagull was not subject to regulation as a "subsidiary company" of FMR Corp. (the "FMR Application"), which was then the owner of 2,805,624 shares (approximately 12.5% at such time) (shares adjusted for a 2-for-1 stock split of all the issued shares of the Company's common stock (the "Common Stock"), effected June 4, 1993) of the outstanding Common Stock. Under the 1935 Act, a company is a "subsidiary company" of a "holding company" if the "holding company" owns 10% or more of the total voting power of the "subsidiary company", unless the SEC determines otherwise. Based upon the most recent information furnished to the Company by FMR Corp., FMR Corp.'s beneficial shares owned have fallen below 5% of the outstanding voting stock of the Company.
In December 1993, Seagull filed an additional application in good faith with the SEC pursuant to Section 2(a)(8) of the 1935 Act, seeking a determination that the Company was not subject to regulation as a "subsidiary company" of AXA Assurances I. A. R. D. Mutuelle, AXA Assurances Vie Mutuelle, Alpha Assurances I. A. R. D. Mutuelle, Alpha Assurances Vie Mutuelle, Uni Europe Assurance Mutuelle and AXA (collectively, the "Mutuelles AXA") and The Equitable Companies Incorporated ("Equitable") and their respective affiliates (collectively, the "Equitable Entities"), (the "Equitable Application"). At such time, the Equitable Entities beneficially owned 4,495,600 shares (approximately 12.5%) of Common Stock. Based upon the most recent information furnished to the Company by the Equitable Entities, the Equitable Entities' beneficial shares owned have fallen below 5% of the outstanding voting stock of the Company.
On October 3, 1996, the Company filed an application in good faith with the SEC pursuant to Section 2(a)(8) of the 1935 Act, seeking a determination that Seagull was not subject to regulation as a "subsidiary company" of The Prudential Insurance Company of America ("Prudential"), (the "Prudential Application"), which was then the owner of 5,573,061 shares (approximately 8.9% at such time of the outstanding Common Stock). According to information provided by Prudential, in its capacity as investment adviser, is beneficial owner of 5,883,861 shares (9.3%) of the Common Stock which are owned by numerous investment counseling clients, none of which is known to have such interest with respect to more than 5% of the class. Prudential has sole voting and dispositive power as to 5,561,361 shares and shared voting and dispositive power as to 322,500 shares.
As a result of the Company's good faith filing of the Prudential Application, the Company will not be subject to any obligation, duty or liability imposed by the 1935 Act, unless and until the SEC enters an order denying or otherwise adversely disposing of the Prudential Application. To date, no such order has been issued. The Company believes that the Prudential Application ultimately should be granted.
ENVIRONMENTAL MATTERS
Seagull's operations are subject to federal, state and local laws and regulation governing the discharge of materials into the environment or otherwise relating to environmental protection. Numerous governmental departments issue rules and regulations to implement and enforce such laws which are often difficult and costly to comply with and which carry substantial penalties for failure to comply. These laws and regulations may require the acquisition of a permit before drilling commences, restrict the types, quantities and concentration of various substances that can be released into the environment in connection with drilling and production activities, limit or prohibit drilling activities on certain lands lying within wilderness, wetlands and other protected areas, and impose substantial liabilities for pollution resulting from the Company's operations. In addition, these laws, rules and regulations may restrict the rate of oil and natural gas production below the rate that would otherwise exist. State laws often require some form of remedial action to prevent pollution from former operations, such as pit closure and plugging abandoned wells.
The Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), also known as the "Superfund" law, imposes liability, without regard to fault or the legality of the original conduct, on certain classes of persons who are considered to be responsible for the release of a "hazardous substance" into the environment. These persons include the owner or operator of the disposal site or sites where the release occurred and companies that disposed or arranged for the disposal of the
hazardous substances. Under CERCLA, such persons may be subject to joint and several liability for the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources and for the costs of certain health studies. It is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by hazardous substances or other pollutants released into the environment.
Stricter standards in environmental legislation may be imposed on the oil and gas industry in the future. For instance, legislation has been proposed in Congress from time to time that would reclassify certain oil and natural gas exploration and production wastes as "hazardous wastes" and make the reclassified wastes subject to more stringent handling, disposal and clean-up requirements. If such legislation were to be enacted, it could have a significant impact on the operating costs of the Company, as well as the oil and gas industry in general. Furthermore, although petroleum, including crude oil and natural gas, is exempt from CERCLA, at least two courts have recently ruled that certain wastes associated with the production of crude oil may be classified as "hazardous substances" under CERCLA and thus such wastes may become subject to liability and regulation under CERCLA, as described above. State initiatives to further regulate the disposal of oil and natural gas wastes are also pending in certain states, and these various initiatives could have a similar impact on the Company. Compliance with environmental requirements generally could have a material adverse effect upon the capital expenditures, earnings or competitive position of the Company. Although the Company has not experienced any material adverse effect from compliance with environmental requirements, there is no assurance that this will continue in the future.
The Oil Pollution Act of 1990 ("OPA") and regulations promulgated pursuant thereto impose a variety of requirements on "responsible Parties" related to the prevention of oil spills and liability for damages resulting from such spills. Few defenses exist to the liability imposed by the OPA and such liability could be substantial. A failure to comply with ongoing requirements or inadequate cooperation in a spill event could subject a responsible party to civil or criminal enforcement action.
On October 19, 1996, legislative amendments to OPA were enacted. These amendments reduced the requirement of obtaining a certificate of financial responsibility to $35 million in the event of a spill, instead of the $150 million originally called for under OPA. In addition, the Texas Railroad Commission proposed an amendment to its regulations in line with OPA. The proposed amendment requires operators of hazardous liquid pipeline facilities inland of the Gulf coast to prepare facility response plans within 60 days of the effective date of the rule or simultaneously with the filing of the plan with federal authorities.
In addition, the OCSLA authorizes regulations relating to safety and environmental protection applicable to lessees and permittees operating in the OCS. Specific design and operation standards may apply to OCS vessels, rigs, platforms, vehicles and structures. Violations of lease conditions or regulations issued pursuant to OCSLA can result in substantial civil and criminal penalties, as well as potential court injunctions curtailing operations and the cancellation of leases. Such enforcement liabilities can result from either governmental or private prosecution.
The Federal Water Pollution Control Act ("FWPCA") imposes restrictions and
strict controls regarding the discharge of pollutants to state and federal
waters. The FWPCA provides for civil, criminal and administrative penalties for
any unauthorized discharges of oil and other hazardous substances in reportable
quantities and, along with the OPA, imposes substantial potential liability for
the costs of removal, remediation and damages. State laws for the control of
water pollution also provide varying
civil, criminal and administrative penalties and liabilities in the case of a discharge of petroleum or its derivatives into state waters. Within the next few years, both state water discharge regulations and the federal permits are expected to prohibit the discharge of produced water and sand, and some other substances related to the oil and gas industry, to coastal waters. Although the costs to comply with zero discharge mandates under federal or state law may be significant, the entire industry will experience similar costs and the Company believes that these costs will not have a material adverse impact on the Company's financial condition and operations. Some oil and gas exploration and production facilities are required to obtain permits for their storm water discharges. Costs may be associated with treatment of wastewater or developing storm water pollution prevention plans. Further, the Coastal Zone Management Act authorizes state implementation and development of programs of management measures for non-point source pollution to restore and protect coastal waters.
Many states in which the Company operates have recently begun to regulate naturally occurring radioactive materials ("NORM") and NORM wastes that are generated in connection with oil and gas exploration and production activities. NORM wastes typically consist of very low-level radioactive substances that become concentrated in pipe scale and in production equipment. State regulations may require the testing of pipes and production equipment for the presence of NORM, the licensing of NORM-contaminated facilities and the careful handling and disposal of NORM wastes. The Company believes that the growing regulation of NORM will have a minimal effect on the Company's operations because the Company generates only a very small quantity of NORM on an annual basis.
EMPLOYEES
As of March 1, 1998, the Company had 877 full time employees. In addition to the services of its full time employees, the Company employs, as needed, the services of consulting geologists, engineers, regulatory consultants, contract pumpers and certain other temporary employees.
ENSTAR Alaska operates under collective bargaining agreements with separate bargaining units for operating and clerical employees. These units represent approximately 80% of ENSTAR Alaska's work force. Contracts have been negotiated that set wages and work relationships for the two units. The operating bargaining unit contract is effective from April 1, 1996 through April 1, 2000. The clerical bargaining unit contract is effective from April 1, 1995 through April 1, 2000. The Company is not a party to any other collective bargaining agreements. The Company has never had a work stoppage.
The Company considers its relations with its employees to be satisfactory.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company, each of whom has been elected to serve until his successor is elected and qualified, are as follows:
Name Age Present Position and Prior Business Experience
Barry J. Galt.............. 64 Chairman of the Board and Chief Executive Officer since December 1983 and President
of the Company from April 1997; President of the Company from December 1983 to
October 1996.
John W. Elias.............. 57 Executive Vice President since April 1993; For the previous 30 years, he served in a
variety of positions for Amoco Production Company and its parent, Amoco Corporation.
Richard F. Barnes.......... 54 President of ENSTAR Alaska since September 1987.
Gerald R. Colley........... 47 Senior Vice President, International Exploration and Production since November 1996;
Senior Vice President - International Exploration of Global from December 1994 to
November 1996; Vice President - International Exploration of Global from July 1993 to
December 1994; Vice President - International Exploration of Global Natural Resources
Corporation of Nevada ("GNRC"), a wholly owned subsidiary of Global, since October
1992; Vice President and Exploration Director of Hadson Europe, Inc. from August 1986
to October 1992.
John N. Goodpasture........ 49 Senior Vice President, Pipelines and Marketing since May 1993; President of Seagull
Pipeline Company since March 1990.
William L. Transier........ 43 Senior Vice President and Chief Financial Officer since May 1996; For the previous 20
years, he held a variety of positions at KPMG Peat Marwick LLP and was promoted to
partner in July 1986.
Carl B. King............... 55 Senior Vice President and General Counsel since February 1998; Senior Vice President
and General Counsel of PanEnergy Corp from 1991 to February 1998; For the previous
16 years, he served in a variety of positions with Cooper Industries/Cameron Iron
Works.
Gordon L. McConnell........ 51 Vice President and Controller since November 1996; Vice President - Accounting of
Global from January 1996 to November 1996; Controller of Global from July 1993 to
January 1996; Controller of GNRC since October 1991; Assistant Controller of GNRC
from July 1991 to October 1991.
H. Alan Payne.............. 56 Vice President, Investor Relations since November 1996; Director, Investor Relations
from December 1984 to November 1996.
Jack M. Robertson.......... 54 Vice President, Human Resources since November 1996; Director, Human Resources from
November 1990 to November 1996.
Stephen A. Thorington...... 42 Vice President, Finance and Treasurer since May 1996; Managing Director of Chase
Securities Inc. from January 1992 to May 1996; Managing Director for The Chase
Manhattan Bank, N.A. from June 1991 through April 1994.
M. Lee Van Winkle.......... 45 Vice President, Corporate Planning since November 1996; Vice President - Corporate
Planning of Global from July 1993 to November 1996; Vice President - Corporate
Planning of GNRC since August 1992; Corporate Manager - Planning and Budget for Adobe
Resources Corporation for more than five years prior to August 1992.
Carl E. Volke.............. 54 Vice President, Administration since November 1996; Director, Administration from
November 1986 to November 1996.
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Item 2. Properties
Incorporated herein by reference to Item 1 of this Annual Report on Form 10-K.
Item 3. Legal Proceedings
Royalty Litigation -- Increasingly, royalty owners under oil and gas leases are challenging valuation methodology and post-production deductions used by producers. These cases have arisen because oil and gas producers such as Seagull have begun to provide services that had previously been provided by the interstate gas pipelines prior to the "unbundling" of gas services. For example, in 1996, Seagull was sued in Anne K. Barnaby, et al. v. Seagull Mid-South Inc. This case is pending in state court of Latimer County, Oklahoma. In this case, the plaintiffs seek additional royalties based upon the alledged deduction by Seagull of post-production costs, such as those related to gathering, compression, dehydration and treating. In addition, the plaintiffs have questioned the sales price used by Seagull as a basis for calculating royalties to the extent that sales were made to Seagull's gas marketing subsidiary. While Seagull intends to vigorously defend this case, the Company cannot predict the outcome of these matters.
NorAm Litigation -- Seagull also was sued in NorAm Gas Transmission Co., et al. v. Seagull Mid-South Inc. (the "NorAm Litigation"). The case relates to Seagull's termination of a 1956 gas contract which provided for the sale of gas by Seagull from certain wells in the Aetna Field in Arkansas for approximately $0.16 per Mcf. NorAm Gas Transmission Co. ("NorAm") and Arkansas Western Gas Company ("AWG") have sought a declaratory judgment that the gas contract remains in effect with respect to these wells or, in the alternative, money damages. Since the termination by Seagull of the gas contract, Seagull has been selling the gas in question on the spot market. Seagull believes that it had reasonable grounds for terminating the gas contract. NorAm and AWG have also sought a declaratory judgment to the effect that certain additional wells in the Aetna Field (including any new wells) would be subject to the $0.16 per Mcf price (the "Additional Well Claim"). If NorAm and AWG were successful with the Additional Well Claim, Seagull's operations in the Aetna Field would be materially affected in an adverse manner. By mid-1997, the plaintiffs had alleged losses in these matters of approximately $90 million plus attorney's fees.
In November 1997, the Company, NorAm and AWG signed a Settlement Proposal that ultimately could lead to a final settlement and resolution of the NorAm Litigation discussed above. The Settlement Proposal calls for Seagull to make a cash payment and deliver gas under a five-year gas sales contract. As a result of this Settlement Proposal, the Company recorded in the fourth quarter a one-time pre-tax charge of approximately $4.5 million, included in general and administrative expense.
Gulf Coast Vacuum Site -- In 1993, the Environmental Protection Agency ("EPA") notified the Company that a subsidiary was a potentially responsible party ("PRP") at the Gulf Coast Vacuum Services Superfund Site (the "GCV Site") in Vermilion Parish, Louisiana. Based upon the Company's investigation of this claim, the Company believes that the basis for its alleged liability is a series of transactions between the Company's subsidiary and the operator of the GCV Site that occurred during 1979 and 1980. While the EPA's cleanup cost estimate of the GCV Site is in the range of $17 million, the Company believes that its liability is unlikely to be material to its financial condition, results of operations or cash flows because of the large number of PRPs at the GCV Site and the relative amount of contamination, if any, that may have been caused at the GCV Site by the disposal of wastes by the Company during 1979 and 1980.
Comstock Mill Site -- On February 21, 1996, the United States Department of Interior Bureau of Land Management ("BLM") sent a letter to Houston Oil & Minerals Corporation ("HO&M"), a wholly owned subsidiary of Seagull, requesting HO&M to prepare and submit a plan for sampling and analyzing groundwater at a former mining operation located near Virginia City, Nevada (the "Comstock Mill Site"). The basis for the BLM's request was the alleged operation of the Comstock Mill Site by HO&M between 1978 and 1982. Pursuant to an indemnity provision in the stock purchase agreement by which Seagull acquired HO&M in 1988 (the "HO&M Purchase Agreement"), Seagull tendered the BLM's letter to Tenneco Inc. ("Tenneco") with a demand for indemnity and notified the BLM that Tenneco would respond to the BLM letter on behalf of HO&M. The BLM has also indicated that Tenneco and HO&M might be required to address cyanide contamination of groundwater at the Comstock Mill Site by separate action of the Nevada Division of Environmental Protection. Seagull believes that any liability associated with the Comstock Mill Site is the responsibility of Tenneco or its successors in liability pursuant to the HO&M Purchase Agreement.
Other -- The Company is a party to other ongoing litigation in the normal course of business. Management regularly analyzes current information and, as necessary, provides accruals for probable liabilities on the eventual disposition of these matters. While the outcome of lawsuits or other proceedings against the Company cannot be predicted with certainty, management believes that the effect on its financial condition, results of operations and cash flows, if any, will not be material.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for Registrant's Common Stock and Related Shareholder Matters
A. The Company's Common Stock (the "Common Stock") is traded on the New York Stock Exchange under the ticker symbol "SGO." The high and low sales prices on the New York Stock Exchange Composite Tape for each quarterly period during the last two fiscal years were as follows:
1997 1996
--------------------------------------- --------------------------------------
High Low High Low
----------------- ----------------- ---------------- ----------------
First Quarter 24 1/8 17 7/8 22 7/8 17 1/8
Second Quarter 19 1/4 16 1/2 25 1/2 21
Third Quarter 25 7/8 17 3/4 26 17 1/2
Fourth Quarter 27 5/8 19 1/16 24 3/8 20 5/8
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B. As of March 9, 1998, there were approximately 4,370 holders of record of Common Stock.
C. Seagull has not declared any cash dividends on its Common Stock since it became a public entity in 1981. The decision to pay Common Stock dividends in the future will depend upon the Company's earnings and financial condition and such other factors as the Company's Board of Directors deems relevant. The Company's revolving credit agreement (the "Revolving Credit Facility") restricts
the Company's declaration or payment of dividends on and repurchases of Common Stock unless each of the following tests have been met: (i) the Company's Total Debt/Capitalization Ratio cannot be more than 60% and (ii) no Default or Event of Default shall have occurred and be continuing. The capitalized terms used herein to describe the restrictions contained in the Revolving Credit Facility have the meanings assigned to them in the Revolving Credit Facility. Under the most restrictive of these tests, as of December 31, 1997, approximately $344 million was available for payment of dividends or repurchase of Common Stock. In addition, certain debt instruments of ENSTAR Alaska restrict the ability of ENSTAR Alaska to transfer funds to the Company in the form of cash dividends, loans or advances. For a description of such restrictions, reference is made to Note 6 of the Consolidated Financial Statements included in the Company's 1997 Annual Report to Shareholders and as part of Exhibit 13 attached hereto.
Item 6. Selected Financial Data
Incorporated herein by reference to the Selected Financial Data included in the Company's 1997 Annual Report to Shareholders and as part of Exhibit 13 attached hereto.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Incorporated herein by reference to Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's 1997 Annual Report to Shareholders and as part of Exhibit 13 attached hereto.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
Based on the Company's market capitalization, the quantitative and qualitative disclosures required by Rule 305 of the Securities and Exchange Act of 1934 are required for Seagull's Form 10-K for the year ended December 31, 1998 and, if material, will be so included.
Item 8. Financial Statements and Supplementary Data
Incorporated herein by reference to the Consolidated Financial Statements and Supplementary Data included in the Company's 1997 Annual Report to Shareholders and as part of Exhibit 13 attached hereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Incorporated herein by reference to "Election of Directors" included in the Proxy Statement for the Company's Annual Meeting of Shareholders to be held on May 13, 1998 (the "Proxy Statement"). See also "Executive Officers of the Company" included in Part I of this Annual Report on Form 10-K, which is incorporated by reference herein.
Item 11. Executive Compensation
Incorporated herein by reference to "Executive Compensation--Summary Compensation Table," "--Compensation Arrangements," "--Option Exercises and Fiscal Year-End Values," "--Option Grants," "--Executive Supplemental Retirement Plan," "--ENSTAR Natural Gas Company Supplemental Executive Retirement Plan" and "--ENSTAR Natural Gas Company Retirement Plan"; and "Election of Directors--Compensation of Directors" included in the Proxy Statement. Notwithstanding any provision in this Annual Report on Form 10-K to the contrary, under no circumstances are the "Compensation Committee Report" or the information under the heading "Shareholder Return Performance Presentation" incorporated herein for any purpose.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Incorporated herein by reference to "Principal Shareholders" and "Election of Directors--Security Ownership of Directors and Management" included in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions
Incorporated herein by reference to "Election of Directors--Certain Transactions" included in the Proxy Statement.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements:
The Consolidated Financial Statements, Notes to Consolidated Financial Statements and Independent Auditors' Report thereon are included in the Company's 1997 Annual Report to Shareholders and as part of Exhibit 13 attached hereto, and are incorporated herein by reference:
2. Schedules:
All schedules have been omitted because the required information is insignificant or not applicable.
3. Exhibits:
3.1 Articles of Incorporation of the Company, as amended, including Articles of Amendment filed May 12, 1988, May 21, 1991, and May 21, 1993 with the Secretary of State of the State of Texas, that certain Statement of Relative Rights and Preferences related to the designation and issuance of the Company's $2.25 Convertible Exchangeable Preferred Stock, Series A, filed August 6, 1986 with the Secretary of State of the State of Texas and that certain Statement of Resolution Establishing Series of Shares of Series B Junior Participating Preferred Stock of Seagull Energy Corporation filed March 21, 1989 with the Secretary of State of the State of Texas (incorporated by reference to Exhibit 3.1 to Quarterly Report on Form 10-Q for the quarter ended June 30, 1993).
3.2 Bylaws of the Company, as amended through March 7, 1997 (incorporated by reference to Exhibit 4.9 to Form S-3 filed with the Securities and Exchange Commission on September 18, 1997).
*4.1 $500,000,000 Revolving Credit and Competitive Bid Facility among Seagull Energy Corporation, The Chase Manhattan Bank, Morgan Guaranty Trust Company of New York, NationsBank of Texas, N.A., and The Other Banks Signatory Thereto, dated December 27, 1997.
4.2 Senior Indenture dated as of July 15, 1993 by and between the Company and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K dated August 4, 1993; Specimen of 7 7/8% Senior Note due 2003 and resolutions adopted by the Chairman of the Board of Directors is incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K dated August 4, 1993).
4.3 Senior Subordinated Indenture dated as of July 15, 1993 by and between the Company and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K dated August 4, 1993; Specimen of 8 5/8% Senior Subordinated Note due 2005 and resolutions adopted by the Chairman of the Board of Directors is incorporated by reference to Exhibit 4.4 to Current Report on Form 8-K dated August 4, 1993).
*4.4 Senior Indenture among the Company and The Bank of New York, as Trustee, and Specimen of 7 1/2% Senior Notes due September 15, 2027.
4.5 Terms Agreement and the resolutions of adoption by the Chairman of the Board of Directors related to Exhibit 4.4 (incorporated by reference to Exhibit 2.3 to Current Report on Form 8-K filed with the Securities and Exchange Commission on October 17, 1997).
*4.6 Note Agreement dated June 17, 1985 by and among Alaska Pipeline Company and The Travelers Insurance Company, The Travelers Life Insurance Company, and the Equitable Life Assurance Society of the United States (collectively, the "Insurance Companies") (including forms of notes and other exhibits thereto) and Inducement Agreement of even date therewith by and among Seagull and the Insurance Companies (the Note Agreement including exhibits thereto incorporated by reference to Exhibit 4.1 to Annual Report on Form 10-K for the year ended December 31, 1995; the Form of Consent and Agreement dated April 15, 1991 by and among Alaska Pipeline Company and the Insurance Companies (including exhibits thereto) is filed herewith).
4.7 Note Agreement dated May 14, 1992 by and among Alaska Pipeline Company and each of the purchasers thereto (including forms of notes and other exhibits thereto) and Inducement Agreement of even date therewith by and among Seagull and Aid Association for Lutherans, The Equitable Life Assurance Society of the United States, Equitable Variable Life Insurance Company, Provident Life & Accident Insurance Company and Teachers Insurance & Annuity Association of America (including exhibits thereto) (incorporated by reference to Exhibit 4.1 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1997).
4.8 Trust Agreement dated as of September 1, 1995 for the Seagull Series 1995 Trust (the Trust Agreement is incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1995; the Guaranty by Seagull Energy Corporation in favor of the Seagull Series 1995 Trust is incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1995).
4.9 Amended and Restated Rights Agreement dated March 17, 1989, as amended effective June 13, 1992, and amended and restated as of December 12, 1997, between the Company and BankBoston, N.A. (as successor to NCNB Texas National Bank), including Form of Statement of Resolution Establishing the Series B Junior Participating Preferred Stock, the Form of Right Certificate and Form of Summary of Rights to Purchase Preferred Shares (incorporated by reference to Exhibit 2 to Current Report on Form 8-K dated December 15, 1997).
#10.1 Seagull Energy Corporation 1995 Executive Incentive Plan(incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for the quarter ended June 30, 1995).
#10.2 Seagull Energy Corporation 1996 Executive Incentive Plan(incorporated by reference to Exhibit 10.3 to Annual Report on Form 10-K for the year ended December 31, 1996).
#10.3 Seagull Energy Corporation 1997 Executive Incentive Plan (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended June 30, 1997).
#10.4 Seagull Energy Corporation 1981 Stock Option Plan (Restated), including forms of agreements, as amended (the amended and restated plan is incorporated by reference to Exhibit 10.6 to Quarterly Report on Form 10-Q for the quarter ended June 30, 1993; Form of Amendment to Stock Option Agreement(s) for the Seagull Energy Corporation is incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1995; Form of Amendment to Stock Option Agreement(s) is incorporated by reference to Exhibit 10.4 to Annual Report on Form 10-K for the year ended December 31, 1996).
#10.5 Seagull Energy Corporation 1983 Stock Option Plan (Restated), including forms of agreements, as amended (the amended and restated plan is incorporated by reference to Exhibit 10.7 to Quarterly Report on Form 10-Q for the quarter ended June 30, 1993; the amended form of Nonstatutory Stock Option Agreement is incorporated by reference to Exhibit 10.15 to Annual Report on Form 10-K for the year ended December 31, 1993; Form of Amendment to Stock Option Agreement(s) for the Seagull Energy Corporation is incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1995; Form of Amendment to Stock Option Agreement(s) is incorporated by reference to Exhibit 10.5 to Annual Report on Form 10-K for the year ended December 31, 1996).
#10.6 Seagull Energy Corporation 1986 Stock Option Plan (Restated), including forms of agreements, as amended (the amended and restated plan is incorporated by reference to Exhibit 10.8 to Quarterly Report on Form 10-Q for the quarter ended June 30, 1993; the amended form of Nonstatutory Stock Option Agreement is incorporated by reference to Exhibit 10.16 to Annual Report on Form 10-K for the year ended December 31, 1993; Form of Amendment to Stock Option Agreement(s) for the Seagull Energy Corporation is incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1995; Form of Amendment to Stock Option Agreement(s) is incorporated by reference to Exhibit 10.6 to Annual Report on Form 10-K for the year ended December 31, 1996).
#10.7 Seagull Energy Corporation 1990 Stock Option Plan, including forms of agreements, as amended (incorporated by reference to Exhibit 10.22 to Annual Report on Form 10-K for the year ended December 31, 1995; Form of Amendment to Stock Option Agreement(s) is incorporated by reference to Exhibit 10.7 to Annual Report on Form 10-K for the year ended December 31, 1996).
#10.8 Global Natural Resources Inc. 1989 Key Employees Stock Option Plan (the Plan is incorporated by reference to Exhibit 4.1 to Registration Statement No. 33-31537 of Global Natural Resources Inc.; the Form of Stock Option Agreement is incorporated by reference to Exhibit 4.2 to Registration Statement No. 33-31537 of Global Natural Resources Inc.; Form of Amendment to Stock Option Agreement(s) is incorporated by reference to Exhibit 10.8 to Annual Report on Form 10-K for the year ended December 31, 1996).
#10.9 Global Natural Resources Inc. 1992 Stock Option Plan (the Plan is incorporated by reference to Exhibit 10.47 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1992 of Global Natural Resources Inc. (Registration No. 1-8674); the Form of Stock Option Agreement is incorporated by reference to Exhibit 10.48 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1992 of Global Natural Resources Inc. (Registration No. 1-8674); Form of Amendment to Stock Option Agreement(s) is incorporated by reference to Exhibit 10.9 to Annual Report on Form 10-K for the year ended December 31, 1996).
#10.10 Seagull Energy Corporation 1993 Nonemployee Directors' Stock Option Plan, including forms of agreements, as amended (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1997).
#10.11 Seagull Energy Corporation 1993 Stock Option Plan, as amended (incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1997).
#10.12 1995 Omnibus Stock Plan (the Plan is incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q for the quarter ended June 30, 1995; Form of Amendment to Stock Option Agreement(s) is
incorporated by reference to Exhibit 10.12 to Annual Report on Form 10-K for the year ended December 31, 1996).
#10.13 Seagull Energy Corporation Management Stability Plan (the Plan is incorporated by reference to Exhibit 10.35 to Annual Report on Form 10-K for the year ended December 31, 1994; the First Amendment is incorporated by reference to Exhibit 10.13 to Annual Report on Form 10-K for the year ended December 31, 1996).
#10.14 Outside Directors Deferred Fee Plan of the Company, as amended and restated (incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for the quarter ended June 30, 1996).
#10.15 Employment Agreement dated December 30, 1983 by and between the Company and Barry J. Galt, Chairman of the Board, President and Chief Executive Officer of the Company (the Agreement is incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended June 30, 1993; Amendment to Employment Agreement is incorporated by reference to Exhibit 10.15 to Annual Report on Form 10-K for the year ended December 31, 1996).
#10.16 Executive Supplemental Retirement Plan Membership Agreement between the Company and Barry J. Galt dated as of February 3, 1986, as amended (incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for the quarter ended September 31, 1996).
#10.17 Restricted Stock Agreement made and entered into as of March 17, 1995 between Seagull Energy Corporation and Barry J. Galt (incorporated by reference to Exhibit 10.32 to Annual Report on Form 10-K for the year ended December 31, 1994).
#10.18 Severance Agreement between Seagull Energy Corporation and Barry J.
Galt (incorporated by reference to Exhibit 10.3 to Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995).
#10.19 Seagull Energy Corporation Executive Supplemental Retirement Plan, as amended (incorporated by reference to Exhibit 1.1 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1996).
#10.20 Seagull Energy Corporation Supplemental Benefit Plan, as amended, including the First Amendment thereto (incorporated by reference to Exhibit 10.11 to Annual Report on Form 10-K for the year ended December 31, 1995).
#10.21 Form of Restricted Stock Agreement made and entered into as of March 17, 1995 between Seagull Energy Corporation and, individually, Richard F. Barnes (granted 2,000 shares of restricted Common Stock), John W. Elias (granted 3,000 shares of restricted Common Stock) and William L. Transier (granted 3,000 shares of restricted Common Stock) (incorporated by reference to Exhibit 10.33 to Annual Report on Form 10-K for the year ended December 31, 1994).
#10.22 Form of Severance Agreement between Seagull Energy Corporation and Richard F. Barnes, John W. Elias and William L. Transier (incorporated by reference to Exhibit 10.34 to Annual Report on Form 10-K for the year ended December 31, 1994).
#10.23 Consulting Agreement between Robert Vagt and Seagull Energy Corporation (incorporated by reference to Exhibit 10.9 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1997).
10.24 Royalty Incentive Plan, as amended (incorporated by reference to Exhibit 1.4 to the Annual Report on Form 20-F for the year ended December 31, 1981 of the U.K. Company).
10.25 Purchase and Sale Agreement by and among Seagull Energy Corporation, Amoco Gas Company, Houston Pipe Line Company, Enron Gas Processing Company and Mantaray Pipeline Company, as sellers and Seahawk Gathering & Liquids Company as buyer and Tejas Power Corporation as Guarantor dated July 28, 1995 (incorporated by reference to Exhibit 10.6 to Quarterly Report on Form 10-Q for the quarter ended June 30, 1995).
10.26 Stock Purchase Agreement Between Seagull Energy Corporation and Exxon Corporation relating to all of the Outstanding Capital Stock of Esso Suez Inc., as executed in Houston, Texas on July 22, 1996 (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on August 28, 1996).
10.27 Purchase and Sale Agreement Between Esso Egypt Limited and Seagull Energy Corporation dated July 22, 1996 (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K filed on August 28, 1996).
10.28 Agreement and Plan of Merger dated as of July 22, 1996 by and among Seagull Energy Corporation, GNR Merger Corporation and Global Natural Resources Inc. (incorporated by reference to Exhibit 2.1 to Registration Statement No. 333-09845 on Form S-4 of Seagull Energy Corporation).
10.29 Share Sale Agreement, dated as of September 11, 1997, by and between Seagull Energy Canada Holding Company, Seagull Energy Corporation and Rio Alto Exploration Ltd. (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K dated September 11, 1997).
*13 Portions of the Seagull Energy Corporation and Subsidiaries Annual Report to Shareholders for the year ended December 31, 1996 which are incorporated by reference herein to this Annual Report on Form 10-K of Seagull Energy Corporation and Subsidiaries for the year ended December 31,1997.
*21 Subsidiaries of Seagull Energy Corporation.
*23.1 Consent of KPMG Peat Marwick LLP.
*23.2 Consent of Ryder Scott Company, independent petroleum engineers.
*23.3 Consent of DeGolyer and MacNaughton, independent petroleum engineers.
*23.4 Consent of Netherland, Sewell and Associates, Inc., independent petroleum engineers.
*27.1 Financial Data Schedule.
(b) Reports on Form 8-K
The Company filed a current report on Form 8-K, dated December 15, 1997, with respect to certain amendments to the Rights Agreement governing its Preferred Share Purchase Rights.
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.
SEAGULL ENERGY CORPORATION
Date: March 17, 1998 By: /s/ Barry J. Galt
Barry J. Galt, Chairman of the Board and
Chief Executive Officer
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: /s/ Barry J. Galt By: /s/ Peter J. Fluor
Barry J. Galt, Chairman of the Board, President Peter J. Fluor, Director
and Chief Executive Officer and Director Date March 17, 1998
(Principal Executive Officer) By: /s/ William R. Grant
Date: March 17, 1998 William R. Grant, Director
By: /s/ John W. Elias Date: March 17, 1998
John W. Elias, Executive Vice President By: /s/ Dean P. Guerin
and Director Dean P. Guerin, Director
Date: March 17, 1998 Date: March 17, 1998
By: /s/ William L. Transier By: /s/ Richard M. Morrow
William L. Transier, Senior Vice President Richard M. Morrow, Director
and Chief Financial Officer Date: March 17, 1998
(Principal Financial Officer) By: /s/ Dee S. Osborne
Date: March 17, 1998 Date: Dee S. Osborne, Director
By: /s/ Gordon L. McConnell March 17, 1998
Gordon L. McConnell, Vice President and By: /s/ Sidney R. Petersen
Controller (Principal Accounting Officer) Sidney R. Petersen, Director
Date: March 17, 1998 Date: March 17, 1998
By: /s/ J. Evans Attwell By: /s/ Sam F. Segnar
J. Evans Attwell, Director Sam F. Segnar, Director
Date: March 17, 1998 Date: March 17, 1998
By: /s/ Richard J. Burgess By:
Richard J. Burgess, Director Robert F. Vagt, Director
Date: March 17, 1998 Date: March 17, 1998
By: /s/ Milton Carroll By: /s/ R. A. Walker
Milton Carroll, Director R. A. Walker, Director
Date: March 17, 1998 Date: March 17, 1998
By: /s/ Thomas H. Cruikshank
Thomas H. Cruikshank, Director
Date: March 17, 1998
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EXHIBIT INDEX
EXHIBITS:
3.1 Articles of Incorporation of the Company, as amended, including Articles of Amendment filed May 12, 1988, May 21, 1991, and May 21, 1993 with the Secretary of State of the State of Texas, that certain Statement of Relative Rights and Preferences related to the designation and issuance of the Company's $2.25 Convertible Exchangeable Preferred Stock, Series A, filed August 6, 1986 with the Secretary of State of the State of Texas and that certain Statement of Resolution Establishing Series of Shares of Series B Junior Participating Preferred Stock of Seagull Energy Corporation filed March 21, 1989 with the Secretary of State of the State of Texas (incorporated by reference to Exhibi 3.1 to Quarterly Report on Form 10-Q for the quarter ended June 30, 1993).
3.2 Bylaws of the Company, as amended through March 7, 1997 (incorporated by reference to Exhibit 4.9 to Form S-3 filed with the Securities and Exchange Commission on September 18, 1997).
*4.1 $500,000,000 Revolving Credit and Competitive Bid Facility among Seagull Energy Corporation, The Chase Manhattan Bank, Morgan Guaranty Trust Company of New York, NationsBank of Texas, N.A., and The Other Banks Signatory Thereto, dated December 27, 1997.
4.2 Senior Indenture dated as of July 15, 1993 by and between the Company and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K dated August 4, 1993; Specimen of 7 7/8% Senior Note due 2003 and resolutions adopted by the Chairman of the Board of Directors is incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K dated August 4, 1993).
4.3 Senior Subordinated Indenture dated as of July 15, 1993 by and between the Company and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K dated August 4, 1993; Specimen of 8 5/8% Senior Subordinated Note due 2005 and resolutions adopted by the Chairman of the Board of Directors is incorporated by reference to Exhibit 4.4 to Current Report on Form 8-K dated August 4, 1993).
*4.4 Senior Indenture among the Company and The Bank of New York, as Trustee, and Specimen of 7 1/2 Senior Notes due September 15, 2027.
4.5 Terms Agreement and the resolutions of adoption by the Chairman of the Board of Directors related to Exhibit 4.4 (incorporated by reference to Exhibit 2.3 to Current Report on Form 8-K filed with the Securities and Exchange Commission on October 17, 1997).
*4.6 Note Agreement dated June 17, 1985 by and among Alaska Pipeline Company and The Travelers Insurance Company, The Travelers Life Insurance Company, and the Equitable Life Assurance Society of the United States (collectively, the "Insurance Companies") (including forms of notes and other exhibits thereto) and Inducement Agreement of even date therewith by and among Seagull and the Insurance Companies (the Note Agreement including exhibits thereto incorporated by reference to Exhibit 4.1 to Annual Report on Form 10-K for the year ended December 31, 1995; the Form of Consent and Agreement dated April 15, 1991 by and among Alaska Pipeline Company and the Insurance Companies (including exhibits thereto) is filed herewith).
4.7 Note Agreement dated May 14, 1992 by and among Alaska Pipeline Company and each of the purchasers thereto (including forms of notes and other exhibits thereto) and Inducement Agreement of even date therewith by and among Seagull and Aid Association for Lutherans, The Equitable Life Assurance Society of the United States, Equitable Variable Life Insurance Company, Provident Life & Accident Insurance Company and Teachers Insurance & Annuity Association of America (including exhibits thereto) (incorporated by reference to Exhibit 4.1 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1997).
4.8 Trust Agreement dated as of September 1, 1995 for the Seagull Series 1995 Trust (the Trust Agreement is incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1995; the Guaranty by Seagull Energy Corporation in favor of the Seagull Series 1995 Trust is incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1995).
4.9 Amended and Restated Rights Agreement dated March 17, 1989, as amended effective June 13, 1992, and amended and restated as of December 12, 1997, between the Company and BankBoston, N.A. (as successor to NCNB Texas National Bank), including Form of Statement of Resolution Establishing the Series B Junior Participating Preferred Stock, the Form of Right Certificate and Form of Summary of Rights to Purchase Preferred Shares (incorporated by reference to Exhibit 2 to Current Report on Form 8-K dated December 15, 1997).
#10.1 Seagull Energy Corporation 1995 Executive Incentive Plan (incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for the quarter ended June 30, 1995).
#10.2 Seagull Energy Corporation 1996 Executive Incentive Plan (incorporated by reference to Exhibit 10.3 to Annual Report on Form 10-K for the year ended December 31, 1996).
#10.3 Seagull Energy Corporation 1997 Executive Incentive Plan (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended June 30, 1997).
#10.4 Seagull Energy Corporation 1981 Stock Option Plan (Restated), including forms of agreements, as amended (the amended and restated plan is incorporated by reference to Exhibit 10.6 to Quarterly Report on Form 10-Q for the quarter ended June 30, 1993; Form of Amendment to Stock Option Agreement(s) for the Seagull Energy Corporation is incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1995; Form of Amendment to Stock Option Agreement(s) is incorporated by reference to Exhibit 10.4 to Annual Report on Form 10-K for the year ended December 31, 1996).
#10.5 Seagull Energy Corporation 1983 Stock Option Plan (Restated), including forms of agreements, as amended (the amended and restated plan is incorporated by reference to Exhibit 10.7 to Quarterly Report on Form 10-Q for the quarter ended June 30, 1993; the amended form of Nonstatutory Stock Option Agreement is incorporated by reference to Exhibit 10.15 to Annual Report on Form 10-K for the year ended December 31, 1993; Form of Amendment to Stock Option Agreement(s) for the Seagull Energy Corporation is incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1995; Form of Amendment to Stock Option Agreement(s) is incorporated by reference to Exhibit 10.5 to Annual Report on Form 10-K for the year ended December 31, 1996).
#10.6 Seagull Energy Corporation 1986 Stock Option Plan (Restated), including forms of agreements, as amended (the amended and restated plan is incorporated by reference to Exhibit 10.8 to
Quarterly Report on Form 10-Q for the quarter ended June 30, 1993; the amended form of Nonstatutory Stock Option Agreement is incorporated by reference to Exhibit 10.16 to Annual Report on Form 10-K for the year ended December 31, 1993; Form of Amendment to Stock Option Agreement(s) for the Seagull Energy Corporation is incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1995; Form of Amendment to Stock Option Agreement(s) is incorporated by reference to Exhibit 10.6 to Annual Report on Form 10-K for the year ended December 31, 1996).
#10.7 Seagull Energy Corporation 1990 Stock Option Plan, including forms of agreements, as amended (incorporated by reference to Exhibit 10.22 to Annual Report on Form 10-K for the year ended December 31, 1995; Form of Amendment to Stock Option Agreement(s) is incorporated by reference to Exhibit 10.7 to Annual Report on Form 10-K for the year ended December 31, 1996).
#10.8 Global Natural Resources Inc. 1989 Key Employees Stock Option Plan (the Plan is incorporated by reference to Exhibit 4.1 to Registration Statement No. 33-31537 of Global Natural Resources Inc.; the Form of Stock Option Agreement is incorporated by reference to Exhibit 4.2 to Registration Statement No. 33-31537 of Global Natural Resources Inc.; Form of Amendment to Stock Option Agreement(s) is incorporated by reference to Exhibit 10.8 to Annual Report on Form 10-K for the year ended December 31, 1996).
#10.9 Global Natural Resources Inc. 1992 Stock Option Plan (the Plan is incorporated by reference to Exhibit 10.47 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1992 of Global Natural Resources Inc. (Registration No. 1-8674); the Form of Stock Option Agreement is incorporated by reference to Exhibit 10.48 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 1992 of Global Natural Resources Inc. (Registration No. 1-8674); Form of Amendment to Stock Option Agreement(s) is incorporated by reference to Exhibit 10.9 to Annual Report on Form 10-K for the year ended December 31, 1996).
#10.10 Seagull Energy Corporation 1993 Nonemployee Directors' Stock Option Plan, including forms of agreements, as amended (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1997).
#10.11 Seagull Energy Corporation 1993 Stock Option Plan, as amended (incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1997).
#10.12 1995 Omnibus Stock Plan (the Plan is incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q for the quarter ended June 30, 1995; Form of Amendment to Stock Option Agreement(s) is incorporated by reference to Exhibit 10.12 to Annual Report on Form 10-K for the year ended December 31, 1996).
#10.13 Seagull Energy Corporation Management Stability Plan (the Plan is incorporated by reference to Exhibit 10.35 to Annual Report on Form 10-K for the year ended December 31, 1994; the First Amendment is incorporated by reference to Exhibit 10.13 to Annual Report on Form 10-K for the year ended December 31, 1996).
#10.14 Outside Directors Deferred Fee Plan of the Company, as amended and restated (incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for the quarter ended June 30, 1996).
#10.15 Employment Agreement dated December 30, 1983 by and between the Company and Barry J. Galt, Chairman of the Board, President and Chief Executive Officer of the Company (the Agreement is incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended June 30, 1993; Amendment to Employment Agreement is incorporated by reference to Exhibit 10.15 to Annual Report on Form 10-K for the year ended December 31, 1996).
#10.16 Executive Supplemental Retirement Plan Membership Agreement between the Company and Barry J. Galt dated as of February 3, 1986, as amended (incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for the quarter ended September 31, 1996).
#10.17 Restricted Stock Agreement made and entered into as of March 17, 1995 between Seagull Energy Corporation and Barry J. Galt (incorporated by reference to Exhibit 10.32 to Annual Report on Form 10-K for the year ended December 31, 1994).
#10.18 Severance Agreement between Seagull Energy Corporation and Barry J. Galt (incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1995).
#10.19 Seagull Energy Corporation Executive Supplemental Retirement Plan, as amended (incorporated by reference to Exhibit 1.1 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1996).
#10.20 Seagull Energy Corporation Supplemental Benefit Plan, as amended, including the First Amendment thereto (incorporated by reference to Exhibit 10.11 to Annual Report on Form 10-K for the year ended December 31, 1995).
#10.21 Form of Restricted Stock Agreement made and entered into as of March 17, 1995 between Seagull Energy Corporation and, individually, Richard F. Barnes (granted 2,000 shares of restricted Common Stock), John W. Elias (granted 3,000 shares of restricted Common Stock) and William L. Transier (granted 3,000 shares of restricted Common Stock) (incorporated by reference to Exhibit 10.33 to Annual Report on Form 10-K for the year ended December 31, 1994).
#10.22 Form of Severance Agreement between Seagull Energy Corporation and Richard F. Barnes, John W. Elias and William L. Transier (incorporated by reference to Exhibit 10.34 to Annual Report on Form 10-K for the year ended December 31, 1994).
#10.23 Consulting Agreement between Robert Vagt and Seagull Energy Corporation (incorporated by reference to Exhibit 10.9 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1997).
10.24 Royalty Incentive Plan, as amended (incorporated by reference to Exhibit 1.4 to the Annual Report on Form 20-F for the year ended December 31, 1981 of the U.K. Company).
10.25 Purchase and Sale Agreement by and among Seagull Energy Corporation, Amoco Gas Company, Houston Pipe Line Company, Enron Gas Processing Company and Mantaray Pipeline Company, as sellers and Seahawk Gathering & Liquids Company as buyer and Tejas Power Corporation as Guarantor dated July 28, 1995 (incorporated by reference to Exhibit 10.6 to Quarterly Report on Form 10-Q for the quarter ended June 30, 1995).
10.26 Stock Purchase Agreement Between Seagull Energy Corporation and Exxon Corporation relating to all of the Outstanding Capital Stock of Esso Suez Inc., as executed in Houston, Texas on July 22, 1996 (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on August 28, 1996).
10.27 Purchase and Sale Agreement Between Esso Egypt Limited and Seagull Energy Corporation dated July 22, 1996 (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K filed on August 28, 1996).
10.28 Agreement and Plan of Merger dated as of July 22, 1996 by and among Seagull Energy Corporation, GNR Merger Corporation and Global Natural Resources Inc. (incorporated by reference to Exhibit 2.1 to Registration Statement No. 333-09845 on Form S-4 of Seagull Energy Corporation).
10.29 Share Sale Agreement, dated as of September 11, 1997, by and between Seagull Energy Canada Holding Company, Seagull Energy Corporation and Rio Alto Exploration Ltd. (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K dated September 11, 1997).
*13 Portions of the Seagull Energy Corporation and Subsidiaries Annual Report to Shareholders for the year ended December 31, 1996 which are incorporated by reference herein to this Annual Report on Form 10-K of Seagull Energy Corporation and Subsidiaries for the year ended December 31, 1997.
*21 Subsidiaries of Seagull Energy Corporation.
*23.1 Consent of KPMG Peat Marwick LLP.
*23.2 Consent of Ryder Scott Company, independent petroleum engineers.
*23.3 Consent of DeGolyer and MacNaughton, independent petroleum engineers.
*23.4 Consent of Netherland, Sewell and Associates, Inc., independent petroleum engineers.
*27.1 Financial Data Schedule.
CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
PAGE
Selected Financial Data................................................. 23
Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................... 24
Selected Quarterly Financial Data....................................... 35
Report of Management to Shareholders.................................... 36
Independent Auditors' Report............................................ 37
Consolidated Statements of Operations................................... 38
Consolidated Balance Sheets............................................. 39
Consolidated Statements of Cash Flows................................... 40
Consolidated Statements of Shareholders' Equity......................... 41
Notes to Consolidated Financial Statements.............................. 42
|
SELECTED FINANCIAL DATA (1)
(Amounts in Thousands Except Per Share Data)
Year Ended December 31,
--------------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ------------- ------------- -------------- --------------
Revenues............................... $ 549,367 $ 517,211 $ 406,280 $ 467,579 $ 452,232
Net income (loss) (2).................. 49,130 28,961 (1,738) (4,405) 34,095
Earnings (loss) per share:
Basic............................... 0.78 0.46 (0.03) (0.07) 0.56
Diluted............................. 0.77 0.46 (0.03) (0.07) 0.56
Net cash provided by operating
activities before changes in
operating assets and liabilities.... 249,587 220,543 124,822 182,413 174,697
Net cash provided by
operating activities................ 262,749 258,439 117,727 207,339 139,292
Total assets........................... 1,411,066 1,515,063 1,359,125 1,454,050 1,286,391
Long-term debt......................... 469,017 573,455 557,107 622,080 459,787
Shareholders' equity................... 647,204 597,730 562,621 557,646 567,943
Capital expenditures................... 275,608 213,462 144,101 202,553 137,894
Acquisitions, net of cash acquired..... 17,665 104,420 - 193,859 29,470
Standardized measure of discounted
future net cash flows before taxes.. 1,219,363 2,137,870 1,103,962 865,047 1,022,140
|
(1) Includes Seagull Energy Canada Ltd. from January 4, 1994 through October 6, 1997.
(2) 1995 includes a non-cash pre-tax charge for the impairment of long-lived assets of $49 million.
23 Seagull Energy Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
CONSOLIDATED HIGHLIGHTS
(Amounts in Thousands)
Year Ended December 31,
-----------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
Revenues:
Oil and gas operations................................................ $ 453,648 $ 419,595 $ 308,510
Alaska transmission and distribution.................................. 95,719 97,616 97,770
--------------- --------------- ---------------
$ 549,367 $ 517,211 $ 406,280
=============== =============== ===============
Operating profit (loss):
Oil and gas operations................................................ $ 106,983 $ 97,192 $ (35,867)
Alaska transmission and distribution.................................. 22,588 25,781 22,896
Corporate............................................................. (19,095) (19,530) (23,798)
--------------- --------------- ---------------
$ 110,476 $ 103,443 $ (36,769)
=============== =============== ===============
Net income (loss).......................................................... $ 49,130 $ 28,961 $ (1,738)
Net cash provided by operating activities before changes in operating
assets and liabilities.................................................. $ 249,587 $ 220,543 $ 124,822
Net cash provided by operating activities.................................. $ 262,749 $ 258,439 $ 117,727
|
In the last three years, Seagull Energy Corporation ("Seagull" or the "Company") has made substantial changes in its operational focus. These changes have resulted in more international operations, a greater component of oil in Seagull's reserve base, a renewed emphasis on its exploration and production activities and a strengthening of its balance sheet. These changes were accomplished through various transactions throughout the three-year period ended December 31, 1997 - including the sale of its Canadian oil and gas operations, the merger with Global Natural Resources Inc. ("Global"), the purchase of additional Egyptian concessions and the sale of substantially all of the Company's pipeline and gas processing assets.
With these changes and an increase in domestic gas prices, Seagull's net income improved by $20 million to $49 million in 1997 versus 1996 and cash flow provided by operating activities before changes in operating assets and liabilities improved $29 million to $250 million for 1997. The same factors helped create a $31 million increase in net income (loss) from $(2) million in 1995 to $29 million in 1996 and a $96 million increase in cash flow provided by operating activities before changes in operating assets and liabilities to $221 million for 1996 over $125 million for 1995. The increase in net income and cash flow is concentrated in the Oil and Gas Operations ("O&G") segment.
24 Seagull Energy Corporation
OIL AND GAS OPERATIONS
(Amounts in Thousands)
Year Ended December 31,
-----------------------------------------------------------
1997 1996 1995
----------------- ----------------- -----------------
Revenues:
Natural gas................................................... $ 298,223 $ 298,235 $ 219,111
Oil and NGL................................................... 131,096 90,779 48,725
Pipeline and marketing........................................ 24,329 30,581 40,674
----------------- ----------------- -----------------
453,648 419,595 308,510
----------------- ----------------- -----------------
Production operating expenses...................................... 115,713 102,158 85,025
Pipeline and marketing expenses.................................... 28,670 24,091 30,674
Exploration charges................................................ 42,085 50,772 40,223
Depreciation, depletion and amortization........................... 160,197 145,382 139,613
Impairment of long-lived assets.................................... - - 48,842
----------------- ----------------- -----------------
Operating profit (loss)............................................ $ 106,983 $ 97,192 $ (35,867)
================= ================= =================
|
As discussed previously, the O&G segment's results reflect some significant changes in the focus of the Company's operations. Revenues from oil production are now a more significant part of the Company's activities as reflected by Seagull's expanding operations in Egypt. This growing presence in Egypt and increases in domestic gas prices over the last three years have helped the O&G segment's operating profit to grow from $13 million (excluding impairment of $49 million) in 1995 to $107 million in 1997.
The O&G segment showed a $34 million increase in revenues to $454 million and a $10 million increase in operating profit to $107 million for 1997. This 8% increase in O&G revenues was principally due to stronger natural gas prices in nearly all areas of the Company's production operations and increases in international oil and gas production, excluding Canada which was sold in October 1997.
The effect of stronger gas prices and international liquids production was partially offset by a decline in oil prices in all areas other than Tatarstan, particularly Egypt where the price decreased 15% from 1996 to 1997, and a decrease in pipeline and marketing revenues. The 10% increase in the operating profit of the O&G segment was primarily a result of the 160% increase in oil production in Egypt. Increases in Egyptian oil production accounted for over three quarters of the Company's overall increase in oil production, as Seagull realized additional contributions from (i) the East Zeit and South Hurghada concessions, the two concessions purchased in late 1996; (ii) the Qarun concession, as additional production facilities became operational; and (iii) the West Abu Gharadig concession, purchased in October 1997. Oil prices in Egypt declined $3.30 per Bbl to $18.26 per Bbl in 1997 versus $21.56 per Bbl in 1996.
25 Seagull Energy Corporation
In October 1997, the Company sold its Canadian oil and gas operations, which had revenues of approximately $26 million, $34 million and $29 million and income (loss) before income taxes of approximately $6 million, $(5) million and $(11) million for the years ended December 31, 1997, 1996 and 1995, respectively.
The $111 million increase in revenues for 1996 as compared to 1995 was primarily the result of increases in domestic natural gas prices, increases in international oil production and increases in international oil and gas prices. The increase in domestic natural gas prices from $1.62 per Mcf for 1995 to $2.17 per Mcf for 1996 accounted for approximately $63 million of the overall increase in revenues. International oil production increased over 1995 as production from the Qarun concession in Egypt began in November 1995 and the Company purchased interests in two additional Egyptian concessions in September 1996. Also, production increased steadily during 1996 from Cote d'Ivoire, where production began in April 1995. The increases in production in Cote d'Ivoire and Egypt contributed approximately $35 million of the overall increase in revenues. Domestic production also increased slightly, providing approximately $6 million of the overall increase in revenues.
Pipeline and marketing revenues declined to $24 million in 1997 with the absence of the higher margins created from the high volatility in the natural gas markets during early 1996, partially offset by an increase in revenues related to the Company's gas gathering and processing facilities. This increase in gas gathering and processing revenues was substantially offset by an increase in the related cost of gas. Pipeline and marketing revenues decreased from $41 million in 1995 to $31 million in 1996, primarily due to the sale of substantially all of the Company's gas gathering and processing facilities (the "Pipeline Assets") in September 1995, partially offset by the contribution of the higher margins realized in 1996. The Pipeline Assets contributed approximately $18 million in revenues and $6 million in operating profit for 1995.
In late 1995, Seagull initiated a risk management program for a portion of its equity production and certain third-party marketing activities, utilizing such derivative financial instruments as futures contracts, options and swaps. In early 1997, the Company closed substantially all of its derivative financial instruments related to equity production and focused its risk management efforts on reducing price and basis risk for its third-party marketing activities. Seagull accounts for its commodity derivative contracts as hedging activities and, accordingly, the effect is included in revenues when the commodities are sold.
The Company recorded $10 million, $9 million and $0.5 million for 1997, 1996 and 1995, respectively, in costs related to equity hedging activities and $3 million in costs and $0.5 million in income for 1997 and 1996, respectively, related to third-party marketing activities. By the end of the first quarter of 1997, the Company's equity hedging activities had been substantially reduced, leaving primarily the commodity hedges in place as required by the monetary production payment (related to the 1995 sale of the Company's Section 29 tax credit-bearing properties) for approximately 11 MMcf per day through December 1998. The equity hedging costs discussed above include costs related to the monetary production payment hedges of approximately $3 million and $4 million in 1997 and 1996, respectively. Total equity hedging costs had the effect of reducing average gas prices by $0.06 per Mcfe
26 Seagull Energy Corporation
for both 1997 and 1996 and $0.004 per Mcfe for 1995. At December 31, 1997, the Company had open natural gas futures, swaps and option contracts related to its third-party marketing efforts totaling 6 Bcf and 14 Bcf related to purchases and sales, respectively, for the period from January through December 1998. At December 31, 1997, the fair value related to the Company's commodity hedging activities was $1 million of unrealized costs related to open contracts.
OIL AND GAS REVENUES BY AREA
(Amounts in Thousands)
Year Ended December 31,
-----------------------------------------------------------------
1997 1996 1995
------------------ ------------------ -------------------
Domestic..................................................... $ 290,337 $ 282,508 $ 205,706
Canada (*)................................................... 25,956 34,006 28,849
Egypt........................................................ 61,772 28,126 442
Cote d'Ivoire................................................ 15,995 12,798 4,377
Tatarstan.................................................... 21,558 15,626 16,037
Indonesia and other.......................................... 13,701 15,950 12,425
------------------ ------------------ -------------------
$ 429,319 $ 389,014 $ 267,836
================== ================== ===================
|
(*) All of the Company's Canadian oil and gas operations were sold in October 1997.
PRODUCTION AND UNIT PRICE BY AREA
Net Daily Production Unit Price
----------------------------------------------- --------------------------------------------
Year Ended December 31, Year Ended December 31,
----------------------------------------------- --------------------------------------------
1997 1996 1995 1997 1996 1995
------------ ------------- ------------- ---------- -------------- ------------
Gas Sales(1):
Domestic.................. 303 318 311 $ 2.34 $ 2.17 $ 1.62
Canada (2)................ 37 58 60 1.63 1.32 1.07
Cote d'Ivoire............. 6 4 1 1.93 1.77 1.61
Indonesia and other....... 11 12 11 3.18 3.36 2.96
------------ ------------- ------------- ----------- -------------- -----------
357 392 383 $ 2.29 $ 2.08 $ 1.57
============ ============= ============= =========== ============= ===========
Oil and NGL Sales(1):
Domestic................. 4,830 4,264 3,845 $17.60 $19.03 $15.84
Canada (2)............... 665 985 1,092 16.46 16.77 13.01
Egypt 9,268 3,565 67 18.26 21.56 17.97
Cote d'Ivoire............ 1,653 1,395 715 19.34 20.04 15.51
Tatarstan................ 4,143 3,053 2,909 14.26 13.98 15.11
Indonesia and other...... 152 147 125 19.31 19.58 17.38
------------ ------------- ------------- ----------- -------------- -----------
20,711 13,409 8,753 $17.34 $18.50 $15.53
============ ============= ============= =========== ============== ===========
|
(1) Natural gas is stated in MMcf and $ per Mcf. Oil and NGLs are stated in Bbl and $ per Bbl.
(2) All of the Company's Canadian oil and gas operations were sold in October 1997.
27 Seagull Energy Corporation
Production operating expenses for 1997 increased approximately $14 million, primarily due to the increased production associated with the Company's Egyptian operations and increased domestic operating expenses. This increase in operating expenses associated with the Company's domestic operations was the primary reason for the $0.40 per BOE increase in production operating expense per equivalent unit of production to $3.95 per BOE for 1997. Increased production taxes as natural gas prices increased, a change in the mix of producing properties and an increase in transportation expenses were the major contributing factors to the increase in domestic operating expenses during 1997.
Production operating expenses increased $17 million from 1995 to 1996 principally as a result of the increased production in the United States and Egypt. However, operating expense per equivalent unit of production for the Company's E&P activities increased from $3.21 per BOE in 1995 to $3.55 per BOE in 1996, primarily due to increased domestic transportation expense.
Depreciation, depletion and amortization ("DD&A") expense per equivalent unit of production increased to $5.42 per BOE in 1997 from $4.98 per BOE in 1996 and combined with the increase in Egyptian production to produce a 10% increase in DD&A expense for the O&G segment. A change in the mix of the properties being produced internationally was the primary factor for the increase, partially offset by a decrease in DD&A expense related to Canadian oil and gas properties. DD&A expense increased from $140 million in 1995 to $145 million in 1996, primarily due to increased production discussed above, partially offset by a decrease in the average DD&A rate per equivalent unit of production from $5.16 per BOE in 1995 to $4.98 per BOE in 1996.
During 1995, the Company recognized a pre-tax, non-cash charge against earnings of $49 million related to impairment of long-lived assets.
Capital Spending and Oil and Gas Reserves
Exploration and production capital expenditures in 1997 totaled $257 million, up substantially from $200 million in 1996 and $134 million in 1995. Spending outside North America in 1997 totaled $102 million, of which $42 million was for exploration and $60 million for exploitation. Seagull participated in the drilling of 54 exploratory wells during 1997, of which 27 were successful. Another 14 wells were in progress at year-end. Of the successes, 18 were in the U.S., 4 in Egypt, 1 in Cote d'Ivoire, 1 in Tatarstan and 3 in Canada. In addition, domestic exploitation expenditures picked up considerably in 1997 and 1996 after being severely curtailed in 1995 due to depressed U.S. gas prices.
Seagull's program of relatively small domestic producing property acquisitions initiated in 1996 resulted in the addition of 1.2 MMBOE at a cost of $7 million in 1997 and 6.2 MMBOE at a cost of $29 million in 1996.
Through drilling and proved property acquisitions, the Company replaced 168% of its production during 1997 at a cost of $5.58 per BOE and 144% of its production over the three-year period 1995 through 1997 at a cost of $5.73 per BOE. However, Seagull's proved oil and gas reserves decreased from 258 MMBOE at year-end 1996 to 217 MMBOE at December 31, 1997, as the sale of the Company's Canadian properties offset reserve additions realized elsewhere.
The standardized measure of discounted future net cash flows before taxes for Seagull's
28 Seagull Energy Corporation
proved oil and gas reserves, calculated based on Securities and Exchange Commission criteria, decreased to $1.2 billion at December 31, 1997 compared with $2.1 billion at the end of 1996. This decrease was primarily the result of the Canadian sale and lower year-end commodity prices at December 31, 1997 compared to December 31, 1996. Year-end calculations were made using an average price of $15.41 and $20.99 per Bbl for oil, condensate and NGL and $2.42 and $3.27 per Mcf for gas for 1997 and 1996, respectively. The Company's average realized prices for the year ended December 31, 1997 were $17.34 per Bbl for oil, condensate and NGL and $2.29 per Mcf for gas. The Company's average realized prices for the month ended January 31, 1998 were $14.47 per Bbl for oil, condensate and NGL and $2.21 per Mcf for gas. Because the disclosure requirements for discounted future net cash flows are standardized, significant changes can occur in these estimates based upon oil and gas prices in effect at year-end. The above estimates should not be viewed as an estimate of fair market value. See Note 15 of Notes to Consolidated Financial Statements.
Outlook
At year-end 1997, the Company was producing about 320 MMcf per day of natural gas and 20,900 Bbl per day of crude oil, condensate and NGL worldwide. In the United States, Seagull expects to maintain its level of domestic gas production of about 300 MMcf per day. Internationally, liquids production increases are anticipated in Egypt, as the first production from the East Beni Suef concession begins.
The future results of the O&G segment will be affected by the market prices of oil and natural gas and the Company's degree of exploration success. The availability of a ready market for oil, natural gas and liquid products in the future will depend on numerous factors beyond the control of the Company, including weather, the Company's ability to hire and return skilled personnel, production of other crude oil, natural gas and liquid products, imports, marketing of competitive fuels, proximity and capacity of oil and gas pipelines and other transportation facilities, any oversupply or undersupply of oil, gas and liquid products, operating hazards attendant to the oil and gas business, the availability and cost of material and equipment, the regulatory environment in the domestic and foreign jurisdictions where the Company does business and other international, regional and political events, none of which can be predicted with certainty.
29 Seagull Energy Corporation
ALASKA TRANSMISSION AND DISTRIBUTION
(Amounts in Thousands Except Degree Days)
Year Ended December 31,
--------------------------------------------------------
1997 1996 1995
---------------- --------------- ---------------
Revenues................................................................ $ 95,719 $ 97,616 $ 97,770
Cost of gas sold........................................................ 43,684 42,600 46,328
---------------- --------------- ---------------
Gross margin............................................................ 52,035 55,016 51,442
Operations and maintenance expense...................................... 21,079 21,045 20,504
Depreciation, depletion and amortization................................ 8,368 8,190 8,042
---------------- --------------- ---------------
Operating profit........................................................ $ 22,588 $ 25,781 $ 22,896
================ =============== ===============
OPERATING DATA:
Degree days (*)...................................................... 9,727 10,975 9,997
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(*) A measure of weather severity calculated by subtracting the mean temperature for each day from 65 degrees Fahrenheit. More degree days equate to colder weather.
Operating profit of the Alaska transmission and distribution segment of the Company ("ENSTAR Alaska") is primarily a function of the weather in the Anchorage, Alaska area during the winter heating season. Cold weather equates to higher gas volumes delivered, resulting in increased profits. This relationship between operating profit and degree days held true in 1997 and 1996 as the percentage change in operating profit (12% decrease in 1997 versus 1996 and 13% increase in 1996 versus 1995) was approximately equal to the percentage change in degree days (11% decrease in 1997 and 10% increase in 1996).
Outlook
ENSTAR Alaska will continue to play a significant role in Seagull's future. Even though its activities may be somewhat different from the Company's other O&G-oriented activities, management expects ENSTAR Alaska's stable cash flows and activities to continue to contribute to Seagull's goals and financial stability.
Future operating profit for this segment will be affected by weather, regulatory action and customer growth in ENSTAR Alaska's service area. The 1997 degree days were 6% under the previous 30-year average degree days. The Company expects customer growth to continue at a modest 2% to 3% rate. During the 1997 summer construction season, approximately 63 miles of new distribution pipelines were installed to connect some 2,700 new customers (a 3% increase in customers over 1996).
ENSTAR Alaska purchases all of its natural gas under long-term contracts in which the price is indexed to changes in the price of crude oil futures contracts. However, because ENSTAR Alaska's sales prices are adjusted to include the projected cost of its natural gas, there has been and is expected to be little or no impact on margins derived from ENSTAR Alaska's gas sales as a result of fluctuations in commodity prices due to worldwide political events and changing market conditions.
Currently, ENSTAR Alaska's supply source is confined to the Cook Inlet area. During 1997, two of the Cook Inlet area's major suppliers filed for regulatory approval to export certain quantities of gas to overseas LNG markets. ENSTAR Alaska has filed as an intervenor in these proceedings and is actively working with regulatory authorities to ensure that the future gas supply needs of its customers are met.
30 Seagull Energy Corporation
OTHER
After excluding the effects of provisions for litigation ($4.5 million in 1997 for a proposed settlement and $3 million in 1996 covering several minor settlements), general and administrative expenses decreased from $14.4 million in 1996 to $11.6 million in 1997. This decrease in general and administrative expenses from 1996 to 1997 was primarily due to a decrease in certain expenses due to efficiencies realized as a result of the Global merger and a decline in expenses associated with compensation plans that are tied directly to the market price of Seagull's common stock. In November 1997, the Company, NorAm Gas Transmission Company and Arkansas Western Gas Company signed a settlement proposal regarding the litigation discussed in Note 14 of Notes to the Consolidated Financial Statements. As a result of the settlement proposal, the Company recorded a pre-tax charge of approximately $4.5 million.
In the second quarter of 1995, the Company initiated a workforce reduction and consolidation with the savings reflected in lower operating expenses. As part of this action, Seagull recorded one-time pre-tax charges of $8 million in general and administrative expenses. General and administrative expenses increased approximately $4 million to $17 million in 1996 as compared to 1995, excluding the $8 million charge for workforce reduction and consolidation, as a result of an increase in incentive compensation expenses and the Company's expanding international operations.
Interest expense declined from $53 million in 1995 and $45 million in 1996 to $39 million for 1997 through utilization of the proceeds from the sale of the Company's Canadian operations in late 1997 and Pipeline Assets in late 1995 to repay amounts outstanding under the Company's existing credit facilities. Interest cost capitalized as property, plant and equipment amounted to approximately $7 million, $3 million and $1 million in 1997, 1996 and 1995, respectively.
As discussed earlier, the Company and Global completed a merger in October 1996, which was accounted for as a pooling-of-interests. As a result of the merger, expenses of $10 million ($9 million after taxes) representing investment banking fees, legal, accounting and other expenses were recorded.
Gain on sales of assets is primarily comprised of pre-tax gains of approximately $12 million related to the 1997 sale of the Company's Canadian oil and gas operations and $82 million related to the 1995 sale of the Pipeline Assets.
Seagull's effective tax rate for 1997 of 43% decreased from the effective tax rate of 47% for 1996 primarily due to an income tax benefit associated with the gain on the sale of the Company's Canadian operations. With the increase in the Company's international activities with their associated higher effective tax rates, Seagull's 1997 effective tax rate had been expected to increase. However substantial increases in domestic O&G income before taxes kept the domestic to international proportion of income before taxes (and therefore the effective tax rate before the sale of the Company's Canadian operations) unchanged. In 1996, the increasing proportion of international operations, and an increase in income before taxes, did lead to an increase in income tax expense from $3 million in 1995 to $26 million in 1996.
31 Seagull Energy Corporation
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL EXPENDITURES AND ACQUISITIONS
(Amounts in Thousands)
Year Ended December 31,
---------------------------------------------------------
1997 1996 1995
------------------ ----------------- -----------------
Capital Expenditures:
Exploration and production:
Lease acquisitions................................................ $ 23,141 $ 12,986 $ 18,000
Exploration....................................................... 95,681 77,774 46,575
Development....................................................... 137,806 108,763 69,260
------------------ ----------------- -----------------
256,628 199,523 133,835
Other oil and gas operations......................................... 885 228 441
------------------- ----------------- -----------------
Total oil and gas operations...................................... 257,513 199,751 134,276
Alaska transmission and distribution................................. 9,607 9,287 7,611
Corporate............................................................ 8,488 4,424 2,214
------------------- ----------------- -----------------
$ 275,608 $ 213,462 $ 144,101
=================== ================= ================
Acquisitions........................................................... $ 17,665 $ 104,420 $ -
=================== ================= ================
|
Seagull's long-term goal is to grow its reserve base and its crude oil and natural gas production capacity while maintaining a strong balance sheet. The Company seeks a balanced approach of growing through its drilling efforts complemented by strategic acquisitions of additional oil and gas assets in its core operating areas. This desire to grow more through drilling has led the Company in the last few years to broaden its exploration focus beyond the Gulf Coast offshore area where Seagull originally concentrated its exploration efforts. Seagull also has endeavored to bring more balance to its mix of crude oil and natural gas assets, thereby lessening its dependence upon natural gas and increasing (i) the percentage of crude oil represented in the Company's total portfolio of proved reserves, (ii) its capacity to produce those reserves, and (iii) the international orientation of its reserve base. To these ends, the Company completed two business combinations in 1996 that reflect this shift in strategy - the purchase of two Egyptian concessions from Exxon Corporation and the stock-for-stock Global merger. These combinations brought a substantial number of exploratory prospects to the Company, complementing its large portfolio of long-lived domestic natural gas producing properties and a large, stable cash flow base generated from oil and gas sales and its non-exploration and production activities. These combinations also increased the Company's ability to generate
32 Seagull Energy Corporation
growth through its drilling efforts over the next several years in both its proved reserves and its crude oil and natural gas production capacity.
Seagull's capital expenditures increased by $62 million to $276 million for 1997 versus almost $214 million in 1996. Of this amount, exploration and production capital expenditures in 1997 totaled $257 million, up substantially from $200 million in 1996 and $134 million in 1995. Spending outside North America totaled $103 million, of which $43 million was for exploration and $60 million for exploitation.
DATA FROM GRAPHICS
(In Millions) 1998 Plan for E&P Expenditures of $257 Million Domestic........................................................................$151 Egypt.............................................................................94 Other.............................................................................12 1997 Actual E&P Expenditures of $257 Million Domestic........................................................................$141 Egypt.............................................................................83 Canada............................................................................13 Other.............................................................................20 1996 Actual E&P Expenditures of $200 Million Domestic........................................................................$140 Egypt.............................................................................33 Canada............................................................................15 Other.............................................................................12 |
Plans for 1998 call for capital expenditures of approximately $274 million, including about $257 million in E&P. Seagull anticipates spending approximately $154 million for development, $22 million for lease acquisitions and $81 million will be devoted to exploration. Of this total, about $106 million is expected to
be spent outside the U.S. The 1998 capital program anticipates about 60 exploratory wells, of which approximately half would be drilled in the U.S.
LIQUIDITY
Combined with the Company's long-term goal to grow its reserve base through its drilling efforts and complementary strategic acquisitions, a strong balance sheet is also a specific objective of management. To that end, Seagull reduced its borrowings under existing bank facilities in 1997 by $133 million with a portion of the proceeds from the sale of the Company's Canadian operations and in 1995 by $143 million with the proceeds from the sale of the Pipeline Assets and the Section 29 Properties. At December 31, 1997, there were no balances outstanding under the Company's $500 million credit facility and the Company's debt to capitalization ratio was 42%, compared with 49% at December 31, 1996. With this stronger balance sheet in place, management believes that the Company is well positioned to achieve its reserve growth and production capacity objectives even in times when declining commodity prices result in lower cash flows from operations.
On September 30, 1997, Seagull issued $150 million of senior notes (the "1997 Senior Notes") at a public offering price of 99.544% of face value. The 1997 Senior Notes have a coupon of 7.5% and mature September 15, 2027. The 1997 Senior Notes are not redeemable prior to maturity and are not subject to any sinking fund. The net proceeds of approximately $146 million were used to repay existing debt and for general corporate purposes. The 1997 Senior Notes represent unsecured obligations of the Company and rank pari passu with all other unsecured, unsubordinated obligations of the Company.
The Company also has a $500 million revolving credit facility ("Revolving Credit Facility"). During 1997, the Company amended and restated the Revolving Credit Facility to, among other things, change the maturity date to December 31, 2002, reduce stated interest rate margins and remove, or modify, various financial covenants. At December 31, 1997, there were no amounts borrowed under the Revolving Credit Facility, however standby letters of credit totaling approximately $19 million were outstanding. See Notes 4 and 6 of Notes to Consolidated Financial Statements for additional information relating to acquisitions and debt.
The Company has money market facilities with two U.S. banks with a combined maximum commitment of $100 million. These lines of cred-
33 Seagull Energy Corporation
it bear interest at rates made available by the banks at their option and may be canceled at either Seagull's or the banks' option. There were no amounts outstanding under these money market facilities at December 31, 1997.
ENVIRONMENTAL
To date, compliance with applicable environmental and safety regulations by the Company has not required any significant capital expenditures or materially affected its business or earnings. The Company believes it is in substantial compliance with environmental and safety regulations and foresees no material expenditures in the future; however, the Company is unable to predict the impact that compliance with future regulations may have on capital expenditures, earnings and competitive position.
YEAR 2000
Historically, most computer systems (including microprocessors embedded into field equipment and other machinery) utilized software that processed transactions using two digits to represent the year of the transaction (i.e., 97 represents the year 1997). This software (including software built into embedded microprocessors) requires modification to properly process dates beyond December 31, 1999 (the "Year 2000 Issue"). In the first quarter of 1997, the Company completed its assessment of the Year 2000 Issue and determined that modifications or replacements of a portion of its software were required. The Company's Year 2000 remediation was substantially complete at December 31, 1997. The Company utilized both internal and external resources to reprogram, or replace, and test the software for Year 2000 Issue modifications. To date, the Company has incurred and expensed approximately $300,000 related to the assessment and remediation of the Year 2000 Issue. The Company presently believes that, as a result of these modifications to existing software and conversions to new software, the Year 2000 Issue will not have a material adverse effect attributable to the Company's systems.
The Company has initiated formal communications with all of its significant suppliers and large customers to determine the extent to which the Company is vulnerable to those third parties' potential failure to remediate their own Year 2000 Issue. However, there can be no guarantee that the systems of other companies, on which the Company's systems rely, will be timely converted, or that a failure to convert by another company, or a conversion that is incompatible with the Company's systems, would not have a material adverse effect on the Company.
ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 130, "Reporting Comprehensive Income." This statement establishes standards for reporting and display of comprehensive income and its components in the Company's financial statements. Comprehensive income includes all changes in the Company's equity except investments by and distributions to owners and includes, among other things, foreign currency translation adjustments. In June 1997, the FASB also issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." This statement establishes standards for reporting information about operating segments in annual financial statements and requires selected infor-
34 Seagull Energy Corporation
mation about operating segments to be included in interim reports issued to shareholders. Both of these statements are effective for financial statements for periods beginning after December 15, 1997. As both SFAS No's. 130 and 131 establish standards for reporting and display, the Company does not expect the adoption of these statements to have a material impact on its financial condition or results of operations.
DEFINED TERMS
Natural gas is stated herein in billion cubic feet ("Bcf"), million cubic feet ("MMcf") or thousand cubic feet ("Mcf"). Oil, condensate and natural gas liquids ("NGL") are stated in barrels ("Bbl") or thousands of barrels ("Mbbl"). MMcfe and Mcfe represent the equivalent of one million and one thousand cubic feet of natural gas, respectively. Oil, condensate and NGL are converted to gas at a ratio of one barrel of liquids per six Mcf of gas, based on relative energy content. MMBOE, MBOE and BOE represent one million, one thousand and one barrel of oil equivalent, respectively, with six Mcf of gas converted to one barrel of liquid.
SELECTED QUARTERLY FINANCIAL DATA
Summarized quarterly financial data is as follows (amounts in thousands except per share data):
Quarter Ended
------------------------------------------------------------------------------------------------
March 31 June 30 September 30 December 31
-------------------- ------------------- ---------------------- ----------------------
1997:
Revenues....................... $ 159,573 $ 122,180 $ 120,655 $ 146,959
Operating Profit............... $ 46,606 $ 17,811 $ 13,456 $ 32,603
Net Income..................... $ 17,254 $ 2,621 $ 3,202 $ 26,053 (2)
Earnings per Share:
Basic........................ $ 0.27 $ 0.04 $ 0.05 $ 0.41
Diluted(1)................... $ 0.27 $ 0.04 $ 0.05 $ 0.41
1996:
Revenues....................... $ 136,575 $ 112,289 $ 109,931 $ 158,416
Operating Profit............... $ 37,375 $ 13,616 $ 19,200 $ 33,252
Net Income (Loss).............. $ 18,312 $ (2,934) $ 7,458 $ 6,125 (3)
Earnings (Loss) per Share:
Basic........................ $ 0.29 $ (0.05) $ 0.12 $ 0.10
Diluted(1)................... $ 0.29 $ (0.05) $ 0.12 $ 0.10
|
(1) Quarterly earnings (loss) per common share may not total to the full year per share amount, as the weighted average number of shares outstanding for each quarter fluctuated as a result of the assumed exercise of stock options.
(2) Includes $12 million pre-tax gain on sale of Canadian oil and gas operations.
(3) Includes $10 million pre-tax merger expenses relating to the Global merger.
35 Seagull Energy Corporation
REPORT OF MANAGEMENT TO SHAREHOLDERS
The management of Seagull Energy Corporation is responsible for the preparation and integrity of financial statements and related data in this Annual Report, whether audited or unaudited. The financial statements were prepared in conformity with generally accepted accounting principles and include certain estimates and judgments which management believes are reasonable under the circumstances.
Management is responsible for and maintains a system of internal accounting controls that is sufficient to provide reasonable assurance that assets are safeguarded against loss or unauthorized use and that financial records are reliable for preparing financial statements, as well as to prevent and detect fraudulent financial reporting. The internal control system is supported by written policies and procedures and the employment of trained, qualified personnel. The Company has an internal auditing staff which reviews the adequacy of the internal accounting controls and compliance with them. Management has considered the recommendations of the internal auditing staff and KPMG Peat Marwick LLP concerning the Company's system of internal controls and has responded appropriately to those recommendations.
The accompanying consolidated financial statements of Seagull Energy Corporation and Subsidiaries as of December 31, 1997 have been audited by KPMG Peat Marwick LLP, independent certified public accountants, and their report is included herein. Their audits were made in accordance with generally accepted auditing standards and included a review of the system of internal controls to the extent considered necessary to determine the audit procedures required to support their opinion on the consolidated financial statements.
The Board of Directors, through its Audit Committee composed exclusively of outside directors, meets periodically with representatives of management, the internal auditing staff and the independent auditors to ensure the existence of effective internal accounting controls and to ensure that financial information is reported accurately and timely with all appropriate disclosures included. The independent auditors and the internal auditing staff have full and free access to, and meet with, the Audit Committee, with and without management present.
/s/ Barry J. Galt Barry J. Galt Chairman and Chief Executive Officer /s/ William L. Transier William L. Transier Senior Vice President and Chief Financial Officer /s/ Gordon L. McConnell Gordon L. McConnell Vice President and Controller January 28, 1998 |
36 Seagull Energy Corporation
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Seagull Energy Corporation:
We have audited the accompanying consolidated balance sheets of Seagull Energy Corporation and Subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Seagull Energy Corporation and Subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1997 in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP Houston, Texas January 28, 1998 |
37 Seagull Energy Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands Except Per Share Amounts)
Year Ended December 31,
---------------------------------------------------
1997 1996 1995
-------------- --------------- ---------------
Revenues:
Oil and gas operations............................ $ 453,648 $ 419,595 $ 308,510
Alaska transmission and distribution.............. 95,719 97,616 97,770
-------------- --------------- ---------------
549,367 517,211 406,280
-------------- --------------- ---------------
Costs of Operations:
Operations and maintenance........................ 165,462 147,294 136,203
Alaska transmission and distribution cost of gas
sold............................................ 43,684 42,600 46,328
Exploration charges............................... 42,085 50,772 40,223
Depreciation, depletion and amortization.......... 171,516 155,669 149,685
Impairment of long-lived assets................... - - 48,842
General and administrative........................ 16,144 17,433 21,768
-------------- --------------- ---------------
438,891 413,768 443,049
-------------- --------------- ---------------
Operating Profit (Loss)............................... 110,476 103,443 (36,769)
Other (Income) Expense:
Interest expense.................................. 38,533 44,842 52,978
Merger expenses................................... - 9,982 -
Gain on sales of assets, net...................... (11,311) (1,088) (83,388)
Interest income and other......................... (2,946) (5,149) (7,403)
-------------- --------------- ---------------
24,276 48,587 (37,813)
-------------- --------------- ---------------
Income Before Income Taxes............................ 86,200 54,856 1,044
Income Tax Expense.................................... 37,070 25,895 2,782
-------------- --------------- ---------------
Net Income (Loss)..................................... $ 49,130 $ 28,961 $ (1,738)
============== =============== ===============
Earnings (Loss) Per Share:
Basic............................................. $ 0.78 $ 0.46 $ (0.03)
============== =============== ===============
Diluted........................................... $ 0.77 $ 0.46 $ (0.03)
============== =============== ===============
Weighted Average Number of Common
Shares Outstanding:
Basic.......................................... 63,022 62,584 62,107
============== =============== ===============
Diluted........................................ 63,791 63,552 62,107
============== =============== ===============
|
See accompanying Notes to Consolidated Financial Statements.
38 Seagull Energy Corporation
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands Except Share and Per Share Data)
December 31,
------------------------------------
1997 1996
--------------- ----------------
ASSETS
Current Assets:
Cash and cash equivalents......................................... $ 45,654 $ 15,284
Accounts receivable, net.......................................... 147,442 193,659
Inventories....................................................... 13,635 12,285
Prepaid expenses and other........................................ 16,240 6,389
--------------- ----------------
Total Current Assets........................................... 222,971 227,617
Property, Plant and Equipment:
Oil and gas properties (successful efforts method)................ 1,742,725 1,750,784
Utility plant..................................................... 246,670 238,091
Other............................................................. 64,288 60,481
--------------- ----------------
2,053,683 2,049,356
Accumulated Depreciation, Depletion and Amortization.................. 908,849 804,715
--------------- ----------------
1,144,834 1,244,641
Other Assets.......................................................... 43,261 42,805
--------------- ----------------
Total Assets.......................................................... $ 1,411,066 $ 1,515,063
=============== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts and note payable......................................... $ 159,138 $ 166,775
Accrued expenses.................................................. 47,625 57,368
Current maturities of long-term debt.............................. 7,097 7,227
--------------- ----------------
Total Current Liabilities...................................... 213,860 231,370
Long-Term Debt........................................................ 469,017 573,455
Other Noncurrent Liabilities.......................................... 51,168 65,428
Deferred Income Taxes................................................. 14,126 31,021
Redeemable Bearer Shares.............................................. 15,691 16,059
Commitments and Contingencies......................................... - -
Shareholders' Equity:
Common Stock, $.10 par value; authorized 100,000,000
shares; issued 63,877,442 in 1997 and 63,073,287 in 1996....... 6,388 6,307
Additional paid-in capital........................................ 493,829 483,118
Retained earnings................................................. 164,935 115,805
Foreign currency translation adjustment........................... - 51
Less: note receivable from employee stock
ownership plan................................................. (2,990) (4,284)
Less: treasury stock, at cost; 861,314 shares in 1997
and 361,314 shares in 1996..................................... (14,958) (3,267)
--------------- ----------------
Total Shareholders' Equity............................................ 647,204 597,730
--------------- ----------------
Total Liabilities and Shareholders' Equity............................ $ 1,411,066 $ 1,515,063
=============== ================
|
See accompanying Notes to Consolidated Financial Statements.
39 Seagull Energy Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Year Ended December 31,
----------------------------------------------
1997 1996 1995
-------------- ------------- --------------
Operating Activities:
Net income (loss)............................................................... $ 49,130 $ 28,961 $ (1,738)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation, depletion and amortization..................................... 171,516 155,669 149,685
Impairment of long-lived assets.............................................. - - 48,842
Amortization of deferred financing costs..................................... 2,037 2,969 3,429
Deferred income taxes........................................................ 9,418 8,701 (16,292)
Dry hole expense............................................................. 20,062 23,671 22,153
Gains on sale of assets, net................................................. (11,311) (1,088) (83,388)
Other........................................................................ 8,735 1,660 2,131
-------------- ------------- --------------
249,587 220,543 124,822
Changes in operating assets and liabilities, net of acquisitions:
Decrease in short-term liquid investments.................................. - 5,014 28,538
Decrease (increase) in accounts receivable................................. 39,211 (53,531) (21,721)
Decrease (increase) in inventories, prepaid expenses and other............. (10,797) 9,731 1,793
Increase (decrease) in accounts payable.................................... 9,779 53,281 (15,551)
Increase (decrease) in accrued expenses and other.......................... (25,031) 23,401 (154)
-------------- ------------- --------------
Net Cash Provided By Operating Activities..................................... 262,749 258,439 117,727
Investing Activities:
Capital expenditures............................................................ (275,608) (213,462) (144,101)
Acquisitions of oil and gas properties.......................................... (17,665) (90,867) -
Acquisitions of other assets and liabilities, net of cash acquired.............. - (13,553) -
Proceeds from sale of assets, net............................................... 186,494 10,557 107,960
-------------- ------------- --------------
Net Cash Used In Investing Activities......................................... (106,779) (307,325) (36,141)
Financing Activities:
Proceeds from debt.............................................................. 821,097 407,738 668,815
Principal payments on debt...................................................... (938,554) (368,754) (737,473)
Proceeds from sales of common stock............................................. 7,422 4,401 2,241
Purchase of treasury stock...................................................... (11,691) - -
Other.......................................................................... (3,846) (1,051) (3,957)
-------------- ------------- --------------
Net Cash Provided By (Used In) Financing Activities........................... (125,572) 42,334 (70,374)
Effect of exchange rate changes on cash............................................ (28) 359 (48)
-------------- ------------- --------------
Increase (Decrease) In Cash and Cash Equivalents................................ 30,370 (6,193) 11,164
Cash and Cash Equivalents at Beginning of Year..................................... 15,284 21,477 10,313
-------------- ------------- --------------
Cash and Cash Equivalents at End of Year........................................... $ 45,654 $ 15,284 $ 21,477
============== ============= ==============
|
See accompanying Notes to Consolidated Financial Statements.
40 Seagull Energy Corporation
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Amounts in Thousands)
Foreign Note
Additional Currency Receivable
Common Paid-in Retained Translation From Treasury
Stock Capital Earnings Adjustment ESOP Stock Total
---------- ------------- ------------- ------------ ----------- ------------- -------------
January 1, 1995............... $ 6,577 $ 493,578 $ 88,582 $ (2,684) $(5,502) $ (22,902) $ 557,649
Net loss for the period.... - - (1,738) - - - (1,738)
Exercise of employee
stock options........... 21 2,220 - - - - 2,241
Foreign currency
translation adjustment.. - - - 3,073 - - 3,073
Repayment of ESOP note..... - - - - 580 - 580
Other...................... - 579 - - - 237 816
---------- ------------- ------------- ------------ ----------- ------------- -------------
December 31, 1995............. 6,598 496,377 86,844 389 (4,922) (22,665) 562,621
Net income for the period.. - - 28,961 - - - 28,961
Retirement of treasury
stock pursuant to the
Global Merger........... (335) (19,021) - - - 19,356 -
Exercise of employee
stock options........... 44 4,357 - - - - 4,401
Foreign currency
translation adjustment.. - - - (338) - - (338)
Repayment of ESOP note .... - - - - 638 - 638
Other...................... - 1,405 - - - 42 1,447
---------- ------------- ------------- ------------ ----------- ------------- -------------
December 31, 1996............. 6,307 483,118 115,805 51 (4,284) (3,267) 597,730
Net income for the period.. - - 49,130 - - - 49,130
Purchase of treasury stock. - - - - - (11,691) (11,691)
Exercise of employee
stock options........... 81 7,341 - - - - 7,422
Foreign currency
translation adjustment.. - - - (51) - - (51)
Repayment of ESOP note .... - - - - 1,294 - 1,294
Other...................... - 3,370 - - - 3,370
---------- ------------- ------------- ------------ ----------- ------------- -------------
December 31, 1997............. $ 6,388 $ 493,829 $ 164,935 $ - $(2,990) $ (14,958) $ 647,204
========== ============= ============= ============ =========== ============= =============
|
See accompanying Notes to Consolidated Financial Statements.
41 Seagull Energy Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Seagull Energy Corporation (the "Company" or "Seagull") is an international oil and gas company engaged in exploration and development activities in the United States, Egypt, Cote d'Ivoire, Indonesia and the Russian Republic of Tatarstan. It also transports, distributes and markets natural gas, liquids products and petrochemicals.
Merger with Global Natural Resources Inc. -- On October 3, 1996, the shareholders of Seagull and Global Natural Resources Inc. ("Global") approved a merger of a wholly owned subsidiary of Seagull into Global (the "Global Merger"), with each share of Global common stock converted into 0.88 shares of Seagull common stock. The Global Merger was accounted for as a pooling of interests.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General -- The accompanying consolidated financial statements of Seagull have been prepared according to generally accepted accounting principles and pursuant to the rules and regulations of the Securities and Exchange Commission. These accounting principles require the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain reclassifications have been made in the 1996 and 1995 financial statements to conform to the presentation used in 1997.
Consolidation -- The accompanying consolidated financial statements include the accounts of Seagull Energy Corporation and its majority-owned entities. All significant intercompany transactions have been eliminated.
Regulation -- The Company operates in Alaska through a division of the Company and a wholly owned subsidiary (collectively referred to herein as "ENSTAR Alaska"). ENSTAR Alaska is subject to regulation by the Alaska Public Utilities Commission ("APUC"), which has jurisdiction over, among other things, rates, accounting procedures and standards of service.
Cash Equivalents -- The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
Inventories -- Materials and supplies are valued at the lower of average cost or market value (net realizable value).
Oil And Gas Properties -- The Company uses the successful efforts method of accounting for its oil and gas operations whereby acquisition costs and exploratory drilling costs related to properties with proved reserves and all development costs including development dry holes are capitalized. Under this method, all costs to acquire mineral interest in oil and gas properties, to acquire production sharing contracts with foreign governments, to drill and equip exploratory wells which find proved reserves and to drill and equip development wells are capitalized. Exploratory charges, including
42 Seagull Energy Corporation
exploratory dry holes, geological and geophysical costs, delay rentals and technical support, are expensed as incurred. Other internal costs related to oil and gas activities are generally expensed as operations and maintenance expense or exploration charges. Unproved leaseholds with significant acquisition costs are assessed periodically, on a property-by-property basis, and a loss is recognized to the extent, if any, that the cost of the property has been impaired. Unproved leaseholds whose acquisition costs are not individually significant are aggregated, and the portion of such costs estimated to ultimately prove nonproductive, based on experience, are amortized over an average holding period. As unproved leaseholds are determined to be productive, the related costs are transferred to proved leaseholds. Capitalized costs are depleted using the unit-of-production method based upon estimates of proved oil and gas reserves on a depletable unit basis. Estimated costs (net of salvage value) of dismantling and abandoning oil and gas production facilities are computed by the Company's engineers and included when calculating depreciation and depletion using the unit-of-production method. The total estimated future dismantlement and abandonment cost being amortized as of December 31, 1997 was approximately $26 million.
The Company performs a review for impairment of proved oil and gas properties on a depletable unit basis when circumstances suggest there is a need for such a review. For each depletable unit determined to be impaired, an impairment loss equal to the difference between the carrying value and the fair value of the depletable unit will be recognized. Fair value, on a depletable unit basis, is estimated to be the present value of expected future cash flows computed by applying estimated future oil and gas prices, as determined by management, to estimated future production of oil and gas reserves over the economic lives of the reserves. As a result of the impairment review, the Company recognized a non-cash pre-tax charge against income in 1995 of $46 million related to oil and gas properties. No impairment charges were recorded during 1996 and 1997.
Interest cost capitalized as property, plant and equipment amounted to approximately $7 million, $3 million and $1 million in 1997, 1996 and 1995, respectively.
Other Property, Plant And Equipment -- Depreciation of the utility plant, gas gathering pipeline facility, gas processing plant and other property is computed principally using the straight-line method over their estimated useful lives, which vary from 3 to 33 years.
Utility plant facilities are subject to APUC regulation. When utility facilities are disposed of or otherwise retired, the original cost of the facilities, plus cost of retirement, less salvage value, is charged to accumulated depreciation.
The Company groups and evaluates other property, plant and equipment for impairment based on the ability to identify separate cash flows generated therefrom. As a result of the impairment review, the Company recognized a pre-tax non-cash charge against income in 1995 of $3 million for impairment of other property, plant and equipment. No impairment charges were recorded during 1996 and 1997.
Maintenance, repairs and renewals are charged to operations and maintenance expense except that renewals which extend the life of the property are capitalized.
Environmental Liabilities -- Environmental expenditures that relate to current or future revenues are expensed or capitalized as appropriate. Expenditures that relate to an existing
43 Seagull Energy Corporation
condition caused by past operations, and do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or clean-ups are probable, and the costs can be reasonably estimated. Generally, the timing of these accruals coincides with the Company's commitment to a formal plan of action.
Treasury Stock -- The Company follows the average cost method of accounting for treasury stock transactions.
Revenue Recognition -- The Company records oil and natural gas revenue following the entitlement method of accounting for production, in which any excess amount received above the Company's share is treated as a liability. If less than the Company's entitlement is received, the underproduction is recorded as an asset.
ENSTAR Alaska's operating revenues are based on rates authorized by the APUC which are applied to customers' consumption of natural gas. ENSTAR Alaska records unbilled revenue, including amounts to be billed under a purchased gas adjustment clause, at the end of each accounting period.
Derivative Financial Instruments -- The Company enters into a variety of commodity derivative financial instruments (futures contracts, price swaps and options) only for non-trading purposes as a hedging strategy to manage commodity prices associated with oil and gas sales and to reduce the impact of price fluctuations. To qualify as hedges, these instruments must highly correlate to anticipated future production such that the Company's exposure to the effects of price changes is reduced. The Company uses the hedge or deferral method of accounting for these instruments and, as a result, gains and losses on commodity derivative financial instruments are generally offset by similar changes in the realized prices of the commodities. Income and costs related to these hedging activities are recognized in oil and gas revenues when the commodities are produced. Income and costs on commodity derivative financial instruments that are closed before the hedged production occurs are also deferred until the production month originally hedged. In the event of a loss of correlation between changes in oil and gas reference prices under a commodity derivative financial instrument and actual oil and gas prices, income or costs are recognized currently to the extent the financial instrument has not offset changes in actual oil and gas prices. Any realized income and costs that are deferred at the balance sheet date and any margin accounts for futures contracts are included as net current assets. While commodity derivative financial instruments are intended to reduce the Company's exposure to declines in the market price of oil and natural gas, the commodity derivative financial instruments may also limit the Company's gain from increases in those market prices.
The Company recorded $10 million, $9 million and $0.5 million for 1997, 1996 and 1995, respectively, in costs related to equity hedging activities and $3 million in costs and $0.5 million in income for 1997 and 1996, respectively, related to third-party marketing activities. By the end of the first quarter of 1997, the Company's equity hedging activities had been substantially reduced, leaving primarily the commodity hedges in place as required by the monetary production payment (related to the 1995 sale of the Company's Section 29 tax credit-bearing properties) for approximately 11 MMcf per day through December 1998. The equity hedging costs discussed above include costs related to the monetary production payment hedges of
44 Seagull Energy Corporation
approximately $3 million and $4 million in 1997 and 1996, respectively. Total equity hedging costs had the effect of reducing average gas prices by $0.06 per Mcfe for both 1997 and 1996 and $0.004 per Mcfe for 1995. At December 31, 1997, the Company had open natural gas futures, swaps and option contracts related to its third-party marketing efforts totaling 6 Bcf and 14 Bcf related to purchases and sales, respectively, for the period from January through December 1998. At December 31, 1997, the fair value related to the Company's commodity hedging activities was $1 million of unrealized costs related to open contracts.
From time to time, the Company has entered into various financial instruments, such as interest rate swaps and interest rate lock agreements, to manage the impact of changes in interest rates. To qualify as a hedge, these instruments must highly correlate to anticipated future changes in interest rates such that the Company's exposure to the effects of interest rate changes is reduced. The Company uses the hedge or deferral method of accounting for these instruments and, as a result, gains and losses on these financial instruments are generally offset by similar changes in the realized interest rate. The differential interest to be paid or received is accrued as interest rates change and is recognized over the life of the agreements as a component of interest expense. Currently, Seagull has no open interest rate swap or interest rate lock agreements. The Company recorded no costs related to interest rate hedging activities during 1997 and $1.7 million and $0.6 million for 1996 and 1995, respectively.
Income Taxes -- The Company uses the liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as part of the provision for income taxes in the period that includes the enactment date.
Foreign Currency Translation -- The functional currency for the Company's Canadian operations was the applicable local currency. Translation from Canadian dollars to U. S. dollars was performed for balance sheet accounts using exchange rates in effect at the balance sheet date and for revenue and expense accounts using primarily a weighted average exchange rate during the period. Adjustments resulting from such translation were included as a separate component of shareholders' equity. Deferred income taxes were not provided on translation adjustments because any unremitted income from Seagull's foreign operations was considered to be permanently invested. The Company's Canadian operations were sold in October 1997 (see Note 4).
The U.S. dollar is the functional currency for all other foreign operations, as predominantly all transactions in those operations are denominated in U.S. dollars.
Stock-Based Compensation -- The Company accounts for stock-based compensation under the intrinsic value method. Under this method, the Company records no compensation expense for stock options granted when the exercise price of options granted is equal to the fair market value of Seagull's common stock on the day of grant.
45 Seagull Energy Corporation
Earnings Per Share -- Effective December 31, 1997, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." This statement establishes standards for computing and presenting earnings per share and requires, among other things, dual presentation of basic and diluted earnings per share on the face of the statement of operations. In accordance with SFAS No. 128, earnings per share and weighted average shares outstanding have been restated to conform to this statement for all periods presented.
The following table provides a reconciliation between basic and diluted earnings (loss) per share (stated in thousands except per share data):
Weighted Average
Common Shares Per-Share
Net Income (Loss) Outstanding Amount
-------------------- --------------------- ----------------
Year Ended December 31, 1997:
Basic earnings per share ........................... $ 49,130 63,022 $ 0.78
Effect of dilutive stock options.................... - 769
-------------------- ---------------------
Diluted earnings per share ......................... $ 49,130 63,791 $ 0.77
==================== =====================
Year Ended December 31, 1996:
Basic earnings per share ........................... $ 28,961 62,584 $ 0.46
Effect of dilutive stock options.................... - 968
-------------------- ---------------------
Diluted earnings per share ......................... $ 28,961 63,552 $ 0.46
==================== =====================
Year Ended December 31, 1995:
Basic loss per share ............................... $ (1,738) 62,107 $(0.03)
Effect of dilutive stock options.................... - -
-------------------- ---------------------
Diluted loss per share ............................. $ (1,738) 62,107 $(0.03)
==================== =====================
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Options to purchase 1,610,100 and 1,685,500 shares of common stock at $21.13 to $26.38 per share were outstanding during 1997 and 1996, respectively, but were not included in the computation of diluted earnings per share because the options' exercise prices were greater than the average market price of the common shares. These options, which expire at various dates from 2003 to 2007, remained outstanding at the end of 1997 and 1996. At December 31, 1995, options to purchase 4,501,920 shares of common stock were outstanding but not included in the computation of diluted loss per share because the effect of the assumed exercise of these stock options as of the beginning of the year would have an antidilutive effect on the computation of diluted loss per share. These options had exercise prices ranging from $5.89 to $26.38 and expire at various dates through 2005.
Concentrations Of Market Risk -- The future results of the oil and gas operations segment will be affected by the market prices of oil and natural gas. The availability of a ready market for natural gas, oil and liquid products in the future will depend on numerous factors beyond the control of the Company, including weather, production of other natural gas, crude oil and liquid products, imports, marketing of competitive fuels, proximity and capacity of oil and gas pipelines and other transportation facilities, any oversupply or undersupply of gas, oil and liquid products, the regulatory environment and other
46 Seagull Energy Corporation
regional and political events, none of which can be predicted with certainty.
The Company operates in various phases of the oil and natural gas industry with sales to resellers such as pipeline companies and local distribution companies as well as to end-users such as commercial businesses, industrial concerns and residential consumers. The Company's receivables include amounts due from purchasers of oil and gas production and amounts due from joint venture partners for their respective portions of operating expense and exploration and development costs. The Company believes that no single customer or joint venture partner exposes the Company to significant credit risk. While certain of these customers and joint venture partners are affected by periodic downturns in the economy in general or in their specific segment of the natural gas or oil industry, the Company believes that its level of credit-related losses due to such economic fluctuations has been and will continue to be immaterial to the Company's results of operations in the long term. Trade receivables are generally not collateralized; however, the Company analyzes customers' and joint venture partners historical credit positions prior to extending credit. The Company had one customer, the Egyptian national oil company ("EGPC") with 11%, who accounted for more than 10% of total revenues during 1997.
The Company has a significant portion of its operations in various geographic areas of the world. The Company's activities in these areas are subject to the usual risks associated with international operations, including political and economic uncertainties, risks of cancellation or unilateral modification of agreements, operating restrictions, currency repatriation restrictions, expropriation, export restrictions, the imposition of new taxes and the increase of existing taxes, inflation, foreign exchange fluctuations and other risks arising out of international government sovereignty over areas in which the operations are conducted. The Company has endeavored to protect itself against political and commercial risks inherent in these operations. There is no certainty that the steps taken by the Company will provide adequate protection.
Concentrations Of Credit Risk -- Derivative financial instruments that hedge the price of oil and natural gas and interest rates are generally executed with major financial or commodities trading institutions which expose the Company to acceptable levels of market and credit risks and may at times be concentrated with certain counterparties or groups of counterparties. Although notional amounts are used to express the volume of these contracts, the amounts potentially subject to credit risk, in the event of non-performance by the counterparties, are substantially smaller. The credit worthiness of counterparties is subject to continuing review and full performance is anticipated.
Accounting Pronouncements -- In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 130, "Reporting Comprehensive Income." This statement establishes standards for reporting and display of comprehensive income and its components in the Company's financial statements. Comprehensive income includes all changes in the Company's equity except investments by and distributions to owners and includes, among other things, foreign currency translation adjustments. In June 1997, the FASB also issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." This statement establishes standards for reporting information about operating segments in annual
47 Seagull Energy Corporation
financial statements and requires selected information about operating segments be included in interim reports issued to shareholders. Both of these statements are effective for financial statements for periods beginning after December 15, 1997. As both SFAS Nos. 130 and 131 establish standards for reporting and display, the Company does not expect the adoption of these statements to have a material impact on its financial condition or results of operations.
3. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Supplemental disclosures of cash flow information (stated in thousands) are as follows:
Year Ended December 31,
------------------------------------------------------------
1997 1996 1995
------------------ ----------------- ---------------
Cash paid during the year for:
Interest, net of amount capitalized.............................. $34,947 $44,033 $46,804
Income taxes..................................................... $25,684 $12,046 $14,074
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4. ACQUISITION AND DISPOSITION OF ASSETS
Sale of Canadian Oil and Gas Properties -- On October 6, 1997, Seagull sold its Canadian oil and gas subsidiary, Seagull Energy Canada Ltd. ("Seagull Canada"), to Rio Alto Exploration Ltd. Seagull realized approximately $185 million of net sales proceeds and recognized a pre-tax gain of approximately $12 million in the fourth quarter of 1997. The sales proceeds were used to repay existing long-term debt, including all U.S. and Canadian bank debt, and for general corporate purposes.
The Company's operations in Canada consisted of oil and gas exploration and production activities through interests in fields located in Alberta, Canada with proved reserves of approximately 60 million barrels of oil equivalents at the date of the sale. The Company's Canadian operations contributed approximately $26 million, $34 million and $29 million in revenue and $6 million, $(5) million and $(11) million in income (loss) before taxes for the years ended December 31, 1997, 1996 and 1995, respectively.
The following table presents the unaudited pro forma results (stated in thousands except per share data) of Seagull as though the disposition of Seagull Canada had occurred on January 1, 1996:
UNAUDITED PRO FORMA INFORMATION
Year Ended December 31,
------------------------------------------------------
1997 1996
---------------------- -----------------------
Revenues ................................................................... $523,411 $483,395
Net income.................................................................. 36,520 39,168
Basic earnings per share.................................................... 0.58 0.63
Diluted earnings per share.................................................. 0.57 0.62
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48 Seagull Energy Corporation
The unaudited pro forma information does not purport to be indicative of actual results, if the disposition of Seagull Canada had been in effect for the periods indicated, or of future results.
Purchase of Egyptian Concessions -- In September 1996, Seagull purchased interests in two Egyptian concessions from units of Exxon Corporation for a net purchase price of approximately $74 million in cash financed through additional borrowings under Seagull's revolving credit facility. The transaction was accounted for as a purchase. The Company acquired a 100% working interest in both the East Zeit oil producing concession in the offshore Gulf of Suez and the South Hurghada exploratory concession located onshore on the coast of the Gulf of Suez approximately 250 miles southeast of Cairo.
Sale of Pipeline Assets -- In September 1995, the Company and three other sellers completed the sale of their disparate interests in 19 natural gas gathering systems and a gas processing plant (the "Pipeline Assets"). From its share of the proceeds, Seagull realized a one-time, pre-tax gain of approximately $82 million recorded in the third quarter of 1995. For the year ended December 31, 1995, the Pipeline Assets contributed approximately $18 million to the revenues and $6 million to the operating profit of the Oil and Gas Operations segment.
Sale of Section 29 Properties -- In September 1995, the Company sold certain Internal Revenue Code Section 29 Tax Credit-bearing gas properties (the "Section 29 Properties") to an investment group which includes a Seagull subsidiary and two financial investors. For accounting purposes, the Company has treated the sale as a non-recourse monetary production payment reflected in long-term debt on the balance sheet (see Note 6).
5. OTHER NONCURRENT ASSETS
Other noncurrent assets (stated in thousands) include the following:
December 31,
-------------------------------------
1997 1996
---------------- ---------------
Oil, gas and marketing imbalances............................................................ $ 27,428 $ 24,673
Deferred financing costs..................................................................... 10,437 10,935
Other........................................................................................ 5,396 7,197
---------------- ---------------
$ 43,261 $ 42,805
================ ===============
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49 Seagull Energy Corporation
Oil, Gas and Marketing Imbalances -- As discussed in Note 2, the Company records oil and gas revenues following the entitlement method of accounting for production. The Company records revenue from gas marketing sales net of the cost of gas and third-party delivery fees, with any resulting imbalances recorded as a current receivable or payable. The Company's oil, gas and marketing imbalance assets and liabilities (stated in thousands) were as follows:
December 31,
-------------------------------------------------------------------------------
1997 1996
--------------------------------------- -------------------------------------
Volume Volume
Amount (Bcfe) Amount (Bcfe)
---------------- ---------------- ---------------- ---------------
Assets:
Current........................................ $ 13,117 6.5 $ 17,650 9.8
Noncurrent..................................... 27,428 16.8 24,673 15.9
---------------- ---------------- ---------------- ---------------
$ 40,545 23.3 $ 42,323 25.7
================ ================ ================ ===============
Liabilities:
Current........................................ $ 8,009 5.5 $ 12,060 6.5
Noncurrent..................................... 16,405 10.4 20,047 13.4
---------------- ---------------- ---------------- ---------------
$ 24,414 15.9 $ 32,107 19.9
================ ================ ================ ===============
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Deferred Financing Costs -- Deferred financing costs represent financing costs incurred in connection with the execution of various debt facilities entered into or securities issued by the Company. These costs are capitalized and amortized to interest expense over the life of the related debt.
6. DEBT
Money Market Facilities -- Seagull has money market facilities with two U.S. banks with a combined maximum commitment of $100 million. These facilities bear interest at rates made available by the banks at their discretion (7.5% at December 31, 1996) and may be canceled at either Seagull's or the banks' discretion. At December 31, 1997 and 1996, the total amounts outstanding under the money market facilities of none and $17 million, respectively, were classified as a current liability and included in accounts and notes payable since it was Seagull's intent to repay these amounts within the following year.
Long-term debt (stated in thousands) for 1997 and 1996 was as follows:
December 31,
-----------------------------------------
1997 1996
------------------ -----------------
Revolving credit.................................................................... $ - $236,620
1997 Senior notes................................................................... 150,000 -
1993 Senior notes................................................................... 100,000 100,000
1993 Senior subordinated notes...................................................... 150,000 150,000
Monetary production payment......................................................... 25,384 34,378
ENSTAR Alaska:
Unsecured industrial development bonds.......................................... 9,305 10,230
Other unsecured notes........................................................... 44,158 50,460
------------------ -----------------
478,847 581,688
Less: Current maturities........................................................... 7,097 7,227
Unamortized debt discount.................................................... 2,733 1,006
------------------ -----------------
$ 469,017 $573,455
================== =================
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50 Seagull Energy Corporation
Revolving Credit -- The Company has a $500 million revolving credit facility ("Revolving Credit Facility"). During 1997, the Company amended and restated the Revolving Credit Facility to, among other things, change the maturity date to December 31, 2002, reduce stated interest rate margins and remove, or modify, various financial covenants. At December 31, 1997, there were no amounts borrowed under the Revolving Credit Facility and $481 million of the unused commitment was immediately available. The Revolving Credit Facility bears interest, at Seagull's option, at LIBOR or prime rates plus applicable margins, ranging from none to 0.45% or competitive bid rates. Actual interest rates varied from 3.7% to 6.3% at December 31, 1996.
The Revolving Credit Facility contains certain covenants and restrictive provisions, including limitations on the incurrence of additional debt or liens, the declaration or payment of dividends and the repurchase or redemption of capital stock and the maintenance of certain financial ratios. Under the most restrictive of these provisions, approximately $344 million was available for payment of cash dividends on common stock or to repurchase common stock as of December 31, 1997.
1997 Senior Notes -- On September 30, 1997, Seagull issued $150 million of senior notes (the "1997 Senior Notes") offered at a public offering price of 99.544% of face value. The 1997 Senior Notes have a coupon of 7.5% paid semiannually and mature September 15, 2027. The 1997 Senior Notes are not redeemable prior to maturity and are not subject to any sinking fund. The net proceeds of approximately $146 million were used to repay existing debt and for general corporate purposes. The 1997 Senior Notes represent unsecured obligations of the Company and rank pari passu with all other unsecured, unsubordinated obligations of the Company. The 1997 Senior Notes contain conditions and restrictive provisions including, among other things, restrictions on additional indebtedness by the Company and its subsidiaries and entering into sale and leaseback transactions.
1993 Senior and Senior Subordinated Notes -- In July 1993, Seagull sold $100 million of senior notes (the "1993 Senior Notes") and $150 million of senior subordinated notes (the "1993 Senior Subordinated Notes") (collectively the "1993 Notes"). The 1993 Senior Notes bear interest at 7 7/8% per annum, are not redeemable prior to maturity or subject to any sinking fund and mature on August 1, 2003. The 1993 Senior Subordinated Notes bear interest at 8 5/8% per annum, are not subject to any sinking fund and mature on August 1, 2005. On or after August 1, 2000, the 1993 Senior Subordinated Notes are redeemable at the option of the Company, in whole or in part, at redemption prices declining from 102.59% in 2000 to 100.00% in 2003 and thereafter (expressed as a percentage of principal amount), plus accrued interest to the redemption date. The 1993 Notes were issued at par and interest is paid semiannually.
The 1993 Notes represent unsecured obligations of the Company. The 1993 Senior Notes rank pari passu with senior indebtedness of the Company while the 1993 Senior Subordinated Notes are subordinate in right of payment to all existing and future senior indebtedness of the Company. The 1993 Notes contain conditions and restrictive provisions including, among other things, restrictions on additional indebtedness by the Company and by its subsidiaries, the right of
51 Seagull Energy Corporation
each note holder to have the notes repurchased by the Company at 101% of the principal amount upon a change in control, as well as restrictions on the incurrence of secured debt and entering into sale and leaseback transactions.
Monetary Production Payment -- In September 1995, the Company sold the
Section 29 Properties for approximately $46 million in net proceeds. The
transaction was recorded as a monetary production payment for accounting
purposes. The investors receive the operating cash flow from the properties,
less funds required for working capital purposes, and are expected to recoup
their investment plus their required after-tax rate of return by 2000. Seagull's
pre-tax effective interest rate is currently estimated to be approximately 4%.
ENSTAR Alaska -- All long-term debt of ENSTAR Alaska is issued by a wholly owned subsidiary of Seagull in the form of senior unsecured notes. These senior unsecured notes bear interest at various fixed rates ranging from 7.75% to 12.8% with principal payments due 1998 through 2009. These senior unsecured notes of the subsidiary provide for restrictions on dividends, additional borrowings and purchases, redemptions or retirements of shares of capital stock, other than in stock of the subsidiary. Under the most restrictive provisions of these financing arrangements, ENSTAR Alaska had approximately $12 million available for the making of restricted investments, restricted stock payments and restricted subordinated debt payments as of December 31, 1997.
Interest Rate Swap Agreements -- The Company periodically enters into interest rate swap agreements to manage the impact of changes in interest rates. At December 31, 1997, the Company had no outstanding interest rate swaps in place. At December 31, 1996, the Company had outstanding interest rate swaps with a notional amount of $100 million whereby the Company paid a floating interest rate and received a fixed interest rate ranging from 5.43% to 5.635%. These interest rate swaps expired on January 31, 1997 and did not have a material impact on the Company's results of operations or cash flow for 1997.
Annual Maturities -- At December 31, 1997, the Company's aggregate annual maturities of long-term debt are $7 million, $7 million, $9 million, $9 million and $3 million for the years 1998, 1999, 2000, 2001 and 2002, respectively.
7. OTHER NONCURRENT LIABILITIES
Other noncurrent liabilities (stated in thousands) include the following:
December 31,
-------------------------------------
1997 1996
----------------- ---------------
Oil, gas and marketing imbalances (see Note 5)............................................... $ 16,405 $20,047
Refundable customer advances for construction................................................ 11,940 11,567
Other........................................................................................ 22,823 33,814
----------------- ---------------
$ 51,168 $65,428
================= ===============
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Refundable Customer Advances for Construction -- Refundable customer advances for construction represent customer deposits received by ENSTAR Alaska for construction of main extensions refundable either wholly or in part over a period not to exceed 10 years.
52 Seagull Energy Corporation
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments has been determined by the Company using available market information and valuation methodologies described below. Considerable judgment is required in interpreting market data to develop the estimates of fair value. The use of different market assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. The estimated fair values of the Company's financial instruments (stated in thousands) are summarized as follows:
December 31,
------------------------------------------------------------------------------------
1997 1996
------------------------------------- ------------------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
----------------- ---------------- -------------------- ------------------
Assets:
Cash and cash equivalents................. $ 45,654 $ 45,654 $ 15,284 $ 15,284
Liabilities:
Refundable customer advances
and deposits.......................... (14,725) (11,880) (14,075) (11,405)
Debt...................................... (476,114) (497,382) (580,682) (589,815)
Redeemable bearer shares....................... (15,691) NA (16,059) NA
Derivative transactions:
Payable for interest rate swaps........... - - - (107)
Commodity hedging instruments:
In a receivable position.................. - 278 (42) 247
In a payable position..................... (287) (1,219) (291) (10,798)
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Cash And Cash Equivalents -- The carrying amount approximates fair value because of the short maturity of these instruments.
Refundable Customer Advances And Deposits -- The fair value is based on discounted cash flow analyses utilizing a discount rate of 8.5% and 8.25% at December 31, 1997 and 1996, respectively, with monthly payments ratably over the estimated period of deposit or advance refunding.
Debt -- The fair value of the 1993 Notes, 1997 Senior Notes and ENSTAR Alaska debt is estimated based on quoted market prices for the same or similar issues. The fair value of the monetary production payment is estimated using discounted cash flow analyses utilizing a discount rate of approximately 4% at December 31, 1997 and 1996. The carrying amount of all other debt approximates fair value because these instruments bear interest at rates tied to current market rates.
Redeemable Bearer Shares -- The fair value is not determinable because reductions in the outstanding balance are on demand only to the extent necessary to redeem bearer shares presented for exchange until July 2008 with any remaining balance reverting to the Company. The Company is not able to determine when the bearer shares will be presented or how many will be presented.
Interest Rate Swap Agreements -- The fair values are obtained from the financial institutions that are counterparties to the transactions. These values represent the estimated amount the Company would pay or receive to terminate the agreements, taking into consideration
53 Seagull Energy Corporation
current interest rates and the current creditworthiness of the counterparties. Seagull's interest rate swap agreements were off balance sheet transactions and, accordingly, no respective carrying amounts for these transactions were included in the accompanying consolidated balance sheets as of December 31, 1996.
Commodity Related Transactions -- The fair value of the company's commodity hedging instruments is the estimated amount the Company would receive or pay to settle the applicable commodity hedging instrument at the reporting date, taking into account the difference between New York Mercantile Exchange ("NYMEX") prices or index prices at year-end and the contract price of the commodity hedging instrument. Certain of the Company's commodity hedging instruments, primarily swaps and options, are off balance sheet transactions and, accordingly, no respective carrying amounts for these instruments were included in the accompanying consolidated balance sheets as of December 31, 1997 and 1996.
9. REDEEMABLE BEARER SHARES
In 1983, the Company became the successor issuer to Global Natural Resources PLC, a United Kingdom company, pursuant to the terms of a Scheme of Arrangement (the "Arrangement") under Section 206 of the English Companies Act. The effect of the Arrangement was to move the domicile of the parent company to the United States from the United Kingdom.
Under the terms of the Arrangement, 24,270,876 common shares of Global were registered in the name of Hambros Trust ("Trust Shares"). The Trust Shares were held for the owners of bearer share warrants issued by Global Natural Resources PLC. The Arrangement provided that Trust Shares not claimed by July 26, 1988 be sold by the Trust and the sale proceeds together with earned interest used to satisfy subsequent claims by the holders of bearer share warrants. Holders of bearer shares were entitled to receive at their election either cash or Global shares on a share-for-share basis until July 1993 and only cash thereafter.
In August 1993, Global received approximately $19 million, the remaining cash held by the Trust, in the form of an interest-free loan. The loan is repayable on demand only to the extent necessary to redeem bearer share warrants presented for exchange until July 2008. Each bearer share warrant presented during this period will be redeemed for $6.66. As of December 31, 1997 and 1996, there were 2,418,868 and 2,463,008 outstanding bearer share warrants, respectively. The loan is secured by a letter of credit issued under the Revolving Credit Facility. During 1997 and 1996 there were no drawings under the letter of credit. In July 2008, the obligation of the Company to holders of bearer share warrants will cease, the interest-free loan will terminate, and any remaining cash will revert to the Company and be accounted for as an increase in additional paid-in capital.
54 Seagull Energy Corporation
10. SHAREHOLDERS' EQUITY
The following table reflects the activity in shares of the Company's Common Stock and Treasury Stock during the three years ended December 31, 1997:
1997 1996 1995
------------------ ----------------- ----------------
Common Stock Outstanding:
Shares at beginning of year...................................... 63,073,287 65,983,199 65,767,743
Exercise of employee stock options............................... 804,155 449,256 215,104
Executive incentive compensation................................. - 3,000 -
Retirement of treasury stock pursuant to Global Merger - (3,361,185) -
Other............................................................ - (983) 352
------------------ ----------------- ----------------
Shares at end of year............................................ 63,877,442 63,073,287 65,983,199
================== ================= ================
Treasury Stock Outstanding:
Shares at beginning of year...................................... 361,314 3,729,823 3,759,425
Acquisition of treasury stock.................................... 500,000 - -
Issuance of treasury stock to 401(k) plan........................ - (7,324) (11,602)
Executive incentive compensation................................. - - (18,000)
Retirement of treasury stock pursuant to Global Merger - (3,361,185) -
------------------ ----------------- ---------------
Shares at end of year............................................ 861,314 361,314 3,729,823
================== ================= ===============
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Preferred Stock -- The Company is authorized to issue 5,000,000 shares of preferred stock, par value $1.00 per share, in one or more series. There were no shares issued or outstanding as of December 31, 1997 and 1996.
Preferred Share Purchase Rights -- Seagull has a Share Purchase Rights Plan to protect the Company's shareholders from coercive or unfair takeover tactics. Under this Plan, each outstanding share and each share of Common Stock subsequently issued has attached to it one Right, exercisable at $30.75, subject to certain adjustments. In December 1997, the Company amended the Share Purchase Rights Plan whereby, in the event a person or group acquires 10% or more of the outstanding Common Stock, or in the event the Company is acquired in a merger or other business combination or 50% or more of the Company's consolidated assets or earning power is sold, each Right entitles the holder to purchase $30.75 worth of shares of Common Stock of the Company or of the acquiring company, as the case may be, for half of the then-current, per-share market prices. The Rights, under certain circumstances, are redeemable at the option of Seagull's Board of Directors at a price of $0.01 per Right, within 10 days (subject to extension) following the day on which the acquiring person or group exceeds the 10% threshold. If any person or group acquires 10% or more (but less than 50%) of the Company's outstanding common stock, the Board may, at its option, issue common stock in exchange for all or part of the outstanding and exercisable Rights (other than Rights owned by such person or group which would become null and void) at an exchange ratio of one share of common stock for each two shares of common stock for which each Right is then exercisable, subject to adjustment. The Rights expire on March 22, 1999.
55 Seagull Energy Corporation
11. BENEFIT PLANS
Stock Option Plans -- The Company currently has various stock option plans. The stock options become exercisable over a three to six year period and all options expire 10 years after the date of grant. At December 31, 1997, approximately 0.8 million shares of Common Stock were available for grant. Information relating to stock options is summarized as follows:
1997 1996 1995
---------------------------------- --------------------------------- -----------------------------------
Weighted Average Weighted Weighted
Exercise Average Exercise Average Exercise
Price Price Price
Shares Per Share Shares Per Share Shares Per Share
-------------- ------------------- ------------- ------------------- -------------- -------------------
Balance outstanding -
Beginning of year........ 4,746,792 $ 16.15 4,501,920 $ 14.67 4,065,084 $ 14.52
Granted................ 983,200 $ 19.13 844,000 $ 21.79 766,640 $ 16.08
Exercised.............. (809,764) $ 9.16 (449,256) $ 9.80 (215,104) $ 10.40
Forfeited.............. (321,976) $ 21.33 (149,872) $ 22.36 (114,700) $ 25.59
-------------- ------------------- ------------- ------------------- -------------- -------------------
Balance outstanding -
End of year.............. 4,598,252 $ 17.63 4,746,792 $ 16.15 4,501,920 $ 14.67
============== =================== ============= =================== ============== ===================
Options exercisable -
End of year.............. 2,355,972 $ 14.97 2,417,492 $ 11.19 2,265,809 $ 10.02
============== =================== ============= =================== ============== ===================
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The weighted average fair value of stock options granted during 1997, 1996 and 1995 was $9.28, $10.77 and $8.36 per share, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes options-pricing model. The model assumed expected volatility of 44%, 43% and 41%, weighted average risk-free interest rates of 6.3%, 6.5% and 6.1%, for grants in 1997, 1996 and 1995, respectively, and an expected life of three years after the vesting term. As Seagull has not declared dividends since it became a public entity, no dividend yield was used. Actual value realized, if any, is dependent on the future performance of Seagull Common Stock and overall stock market conditions. There is no assurance the value realized by an optionee will be at or near the value estimated by the Black-Scholes model.
Information relating to stock options outstanding at December 31, 1997 is summarized as follows:
Options Outstanding Options Exercisable
-------------------- --------------------- --------------------- ----------------------------------------------
Weighted
Number Outstanding Weighted Average Average Weighted
Range of at December 31, Remaining Exercise Price Number Exercisable Average Exercise
Exercise Prices 1997 Contractual Life Per Share at December 31, 1997 Price Per Share
-------------------- ------------------- ----------------- --------------------- ---------------------
$ 5.89 - $ 9.45 961,084 2 years $ 8.05 921,660 $ 7.99
$ 9.46 - $18.00 1,114,768 5 years $14.54 680,512 $13.19
$18.01 - $21.49 924,300 9 years $18.84 26,400 $19.13
$21.50 - $25.50 1,120,100 8 years $24.21 400,200 $24.49
$25.51 - $26.38 478,000 5 years $26.38 327,200 $26.38
-------------------- ------------------- ----------------- --------------------- ---------------------
$ 5.89 - $26.38 4,598,252 6 years $17.63 2,355,972 $14.97
==================== =================== ================= ===================== =====================
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56 Seagull Energy Corporation
The majority of Seagull's options must be granted at the fair market value of Seagull's Common Stock on the New York Stock Exchange on the date of grant. The remaining stock options may have an exercise price not less than 50% of the fair market value of Seagull's Common Stock on the date of grant. All outstanding options, other than 44,000 granted by Global in 1993, were issued at the fair market value of Seagull's Common Stock. Accordingly as discussed in Note 2 for the years ending December 31, 1997, 1996 and 1995, no compensation expense relating to these options is recognized in the Company's results of operations. Had compensation cost for the Company's stock option plans been determined based on the fair value at the grant dates for awards made after December 31, 1994 under those plans, the Company's net income (loss) and earnings (loss) per share would have been restated to the pro forma amounts (stated in thousands except per-share data) indicated below:
Year Ended December 31,
----------------------------------------------------------------------------
1997 1996 1995
-------------------- --------------------- ----------------------
Net income (loss) As reported......... $49,130 $28,961 $(1,738)
Pro forma........... 44,641 26,429 (2,443)
Earnings (loss) per share:
Basic As reported......... 0.78 0.46 (0.03)
Pro forma........... 0.71 0.42 (0.04)
Diluted As reported......... 0.77 0.46 (0.03)
Pro forma........... 0.70 0.42 (0.04)
|
Under the provisions of SFAS No. 123, the pro forma disclosures above include only the effects of stock options granted by Seagull subsequent to December 31, 1994. During this initial phase-in period, the pro forma disclosures as required by SFAS No. 123 are not representative of the effects on reported net income for future years as options vest over several years and additional awards are generally made each year.
Profit Sharing Plans -- ENSTAR Alaska has trusteed profit sharing plans for salaried employees and union employees. Annual contributions for each plan are determined by the Company's Board of Directors pursuant to formulae which contain minimum contribution requirements. Profit sharing expense was approximately $0.3 million, $0.4 million and $0.3 million for 1997, 1996 and 1995, respectively, and is included in operations and maintenance expenses.
Thrift Plans -- The Company has various thrift plans which are qualified employee savings plans in accordance with the provisions of Section 401(k) of the Internal Revenue Code of 1986, as amended. Company contributions to these plans (collectively, the "Thrift Plans") were approximately $2 million for each of the years 1997, 1996 and 1995. The Thrift Plans' costs are included in operations and maintenance expenses and general and administrative expenses.
One of the Thrift Plans, the Employees 401(k) Savings Plan ("ESP"), was a defined contribu-
57 Seagull Energy Corporation
tion plan which covered substantially all of Global's U.S. employees. Employees' contributions were matched by the Company with treasury shares of common stock. The Company recorded expense of approximately $0.1 million in both of the years 1996 and 1995 relating to its contributions of 7,324 and 11,602 shares, respectively, of common stock to the ESP. Subsequent to December 31, 1996, contributions to the ESP were suspended and those employees eligible to contribute to the ESP prior to the Global Merger were eligible to contribute to the Seagull Thrift Plan.
Defined Benefit Plans -- The Company has an unfunded retirement plan which provides for supplemental benefits to certain officers and key employees. As of December 31, 1997, only one person was designated to participate in such plan. Total expenses of the plan were approximately $0.2 million for each of the years 1997, 1996 and 1995. The retirement plan's costs are included in general and administrative expenses.
ENSTAR Alaska has two defined benefit retirement plans which cover salaried, clerical and operating employees. Determination of benefits for the salaried employees is based upon a combination of years of service and final monthly compensation. Benefits for operating employees are based solely on years of service. ENSTAR Alaska's policy is to fund the minimum contributions required by applicable regulations. The net pension costs are included in operations and maintenance expenses.
Global sponsored a defined benefit pension plan which covered substantially all of Global's U.S. employees. The plan provided benefits based on the employee's years of service and compensation during the years immediately preceding retirement. Global made annual contributions to the plan to comply with the minimum funding provisions of the Employee Retirement Income Security Act. The plan investments consisted primarily of common equities and fixed income securities. During 1997, the Company terminated this defined benefit pension plan and participants were paid the present value of their accrued benefits. Termination of this plan did not have a material effect on Seagull's financial position or results of operations.
58 Seagull Energy Corporation
The following table (stated in thousands) details the components of pension income and expense, the funded status of the Company's plans, amounts recognized in the Company's consolidated balance sheets and major assumptions used to determine these projected benefit obligations. Certain assumptions are based on factors, such as interest rates and long-term rates of return on investments, which are subject to change due to forces beyond the Company's control. Changes in the various assumptions utilized could have a significant effect on the amounts reported.
December 31,
---------------------------------------
1997 1996
----------------- ----------------
Actuarial present value of benefit obligations:
Vested benefit obligation........................................................... $ (11,896) $ (16,242)
================= ================
Accumulated benefit obligation...................................................... $ (11,955) $ (16,278)
================= ================
Projected benefit obligation for services rendered to date.............................. $ (13,623) $ (17,740)
Plan assets at fair value, primarily listed stocks and
corporate and U. S. bonds........................................................... 13,859 15,520
----------------- ----------------
Plan assets at fair value in excess of (less than) projected benefit
obligation.........
236 (2,220)
Unrecognized prior service cost......................................................... 80 91
Unrecognized net (gain) loss............................................................ (1,045) 753
Unrecognized net obligation arising out of the initial application of
SFAS No. 87, amortized over 15 years to 18 years ................................... 309 394
----------------- ----------------
Accrued pension cost.................................................................... $ (420) $ (982)
================= ================
Net pension cost includes the following components:
Service cost-benefits earned during the period...................................... $ 479 $ 1,025
Interest cost on projected benefit obligation....................................... 901 1,212
Actual return on plan assets ....................................................... (3,320) (2,605)
Net amortization and deferral....................................................... 2,578 1,835
----------------- ----------------
Net periodic pension cost............................................................... $ 638 $ 1,467
================= ================
Assumptions:
Discount rate....................................................................... 7% 7%
Rate of increase in future compensation............................................. 3% 2%
Expected long-term rate of return on plan assets.................................... 8% 8%
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Employee Stock Ownership Plan -- On November 15, 1989, the Company formed the Seagull Employee Stock Ownership Plan (the "ESOP") for the benefit of the non-Alaskan employees of the Company. The ESOP borrowed from the Company $8 million at an interest rate of 10 percent per annum to be repaid in twelve equal annual installments of principal and interest. The ESOP used the borrowed funds and the 1989 contributions from the Company to purchase 948,150 shares of Common Stock at $8.438 per share from Seagull's treasury. The purchase price was based upon the closing price of the Common Stock on the New York Stock Exchange on the date the ESOP was formed.
The promissory note has been and will be funded entirely by contributions from Seagull. Such contributions, included in operations and
59 Seagull Energy Corporation
maintenance expenses and administrative expenses, were approximately $1.3 million in 1997 and $0.6 million in both 1996 and 1995.
Postretirement Medical Plan -- ENSTAR Alaska has a postretirement medical plan which covers all of its salaried employees. Determination of benefits is based upon a combination of the retiree's age and years of service at retirement. The Company accrues for such benefits during the years the plan participants render service. Expenses related to the postretirement medical plan of $0.2 million, $0.3 million and $0.2 million in 1997, 1996 and 1995, respectively, are included in operations and maintenance expenses.
12. INCOME TAXES
The income (loss) before income taxes and the components of income tax expense (benefit) (stated in thousands) for each of the years ended December 31, 1997, 1996 and 1995 were as follows:
1997 1996 1995
----------------- ------------------ ------------------
Income (loss) before income taxes:
Domestic......................................................... $ 43,530 $ 38,200 $ 6,841
Foreign.......................................................... 42,670 16,656 (5,797)
----------------- ------------------ ------------------
$ 86,200 $ 54,856 $ 1,044
================= ================== ==================
Current income tax expense (benefit):
Federal......................................................... $ 3,503 $ (643) $ 6,236
Foreign......................................................... 22,899 17,737 9,376
State........................................................... 1,250 100 3,462
----------------- ------------------ -------------------
Total current................................................ 27,652 17,194 19,074
----------------- ------------------ -------------------
Deferred income tax expense (benefit):
Federal......................................................... 5,787 7,605 (13,570)
Foreign......................................................... 3,893 815 (1,935)
State........................................................... (262) 281 (787)
----------------- ------------------ -------------------
Total deferred............................................... 9,418 8,701 (16,292)
----------------- ------------------ ------------------
Income tax expense.................................................. $ 37,070 $ 25,895 $ 2,782
================= ================== ==================
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In addition to the income tax expense detailed above, the Company had income tax benefits, related to the tax effect of compensation expense, of $3 million, $1 million and $0.4 million for each of the years ended December 31, 1997, 1996 and 1995, respectively, which were recorded in paid-in capital. Seagull also had current income tax receivables of $2 million and $1 million at December 31, 1997 and 1996, respectively.
60 Seagull Energy Corporation
The provision for income taxes (stated in thousands) for each of the years ended December 31, 1997, 1996 and 1995 was different than the amount computed using the federal statutory rate (35%) for the following reasons:
1997 1996 1995
---------------- ---------------- ---------------
Amount computed using the statutory rate.................................. $ 30,170 $ 19,200 $ 365
Increase (reduction) in taxes resulting from:
Utilization of Internal Revenue Code Section 29 credits................ (81) (171) (3,096)
State income taxes, net of federal income tax benefits................. 642 248 1,739
Taxation of foreign operations, net of
federal income tax benefits.......................................... 6,209 13,613 8,494
Decrease in deferred tax asset valuation allowance..................... - (8,430) (6,194)
Adjustments to beginning-of-the-year tax bases
per the 1995 tax returns and effects of IRS exam..................... - -
(1,385)
Other.................................................................. 130 1,435 2,859
---------------- ---------------- ---------------
Income tax expense........................................................ $ 37,070 $ 25,895 $ 2,782
================ ================ ===============
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The net decrease in the valuation allowance for the year ended December 31, 1996 of approximately $8 million included $6 million related to the utilization in 1996 of net operating losses. The remaining change for 1996 and the change for 1995 are related to management's belief that, due to events occurring in the year of change, it is more likely than not such deferred tax assets, for which a valuation allowance had previously been established, will be realized.
The significant components of deferred income tax expense (benefit) (stated in thousands) attributable to income from continuing operations for the years ended December 31, 1997, 1996 and 1995 were as follows:
1997 1996 1995
--------------- ---------------- --------------
Deferred tax expense (benefit) (exclusive of the effects of other
components listed below)................................................ $ 9,418 $ 17,131 $ (10,098)
Decrease in deferred tax asset valuation allowance........................... - (8,430) (6,194)
--------------- ---------------- --------------
$ 9,418 $ 8,701 $ (16,292)
=============== ================ ==============
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61 Seagull Energy Corporation
The tax effects of temporary differences (stated in thousands) that gave rise to significant portions of the deferred tax liabilities and deferred tax assets as of December 31, 1997, 1996 and 1995 were as follows:
1997 1996 1995
---------------- --------------- --------------
Deferred tax liabilities:
Property, plant and equipment, due to
differences in depreciation, depletion and amortization................... $ 49,815 $ 66,242 $ 50,783
Other....................................................................... 456 583 197
---------------- --------------- --------------
Deferred tax liabilities........................................................ 50,271 66,825 50,980
---------------- --------------- --------------
Deferred tax assets:
Minimum tax credit carryforwards............................................ (16,352) (15,972) (18,950)
Investment tax credit carryforwards (expiring in 1999 and 2000)............. (1,462) (1,851) (1,682)
Net operating loss carryforwards............................................ - (1,727) (7,129)
Capital loss carryback...................................................... (2,847) - -
Deferred compensation/retirement related
items accrued for financial reporting purposes............................ (5,390) (5,464) (4,349)
Contingent considerations................................................... (4,897) (5,018) (651)
Notes receivable............................................................ (5,262) (6,209) (5,333)
Other....................................................................... (4,364) (3,636) (3,178)
---------------- --------------- --------------
Deferred tax assets............................................................. (40,574) (39,877) (41,272)
Less - valuation allowance...................................................... - - 8,430
---------------- --------------- --------------
Net deferred tax assets......................................................... (40,574) (39,877) (32,842)
Less - reclassification to current deferred..................................... 4,429 4,073 5,239
---------------- --------------- --------------
Non-current deferred tax assets................................................. (36,145) (35,804) (27,603)
---------------- --------------- --------------
Net non-current deferred tax liabilities........................................ $ 14,126 $ 31,021 $ 23,377
================ =============== ==============
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62 Seagull Energy Corporation
13. BUSINESS SEGMENTS
Information on the Company's operations by business segment (stated in thousands) is summarized as follows:
Year ended December 31,
-----------------------------------------------------------------
1997 1996 1995
------------------- ------------------- ------------------
Revenues:
Oil and gas operations..................................... $ 453,648 $ 419,595 $ 308,510
Alaska transmission and distribution....................... 95,719 97,616 97,770
------------------- ------------------- ------------------
$ 549,367 $ 517,211 $ 406,280
=================== =================== ==================
Operating Profit (Loss):
Oil and gas operations(*).................................. $ 106,983 $ 97,192 $ (35,867)
Alaska transmission and distribution....................... 22,588 25,781 22,896
Corporate.................................................. (19,095) (19,530) (23,798)
------------------- ------------------- ------------------
$ 110,476 $ 103,443 $ (36,769)
=================== =================== ==================
Depreciation, Depletion And Amortization:
Oil and gas operations(*).................................. $ 160,197 $ 145,382 $ 188,455
Alaska transmission and distribution....................... 8,368 8,190 8,042
Corporate.................................................. 2,951 2,097 2,030
------------------- ------------------- ------------------
$ 171,516 $ 155,669 $ 198,527
=================== =================== ==================
Identifiable Assets:
Oil and gas operations..................................... $ 1,161,108 $ 1,267,481 $ 1,118,216
Alaska transmission and distribution....................... 184,422 189,867 189,081
Corporate.................................................. 65,536 57,715 51,828
------------------- ------------------- ------------------
$ 1,411,066 $ 1,515,063 $ 1,359,125
=================== =================== ==================
Capital Expenditures:
Oil and gas operations:
Leasehold................................................. $ 23,141 $ 12,986 $ 18,000
Exploration............................................... 95,681 77,774 46,575
Development............................................... 137,806 108,763 69,260
------------------- ------------------- ------------------
256,628 199,523 133,835
Other oil and gas operations.............................. 885 228 441
------------------- ------------------- ------------------
Total oil and gas operations.......................... 257,513 199,751 134,276
Alaska transmission and distribution........................ 9,607 9,287 7,611
Corporate................................................... 8,488 4,424 2,214
------------------- ------------------- ------------------
$ 275,608 $ 213,462 $ 144,101
=================== =================== ==================
Acquisitions, Net of Cash Acquired:
Acquisitions of oil and gas properties..................... $ 17,665 $ 90,867 $ -
Acquisitions of other assets and liabilities............... - 13,553 -
------------------- ------------------- ------------------
$ 17,665 $ 104,420 $ -
=================== =================== ==================
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(*) Includes $49 million relating to the impairment of long-lived assets for the year ended December 31, 1995.
63 Seagull Energy Corporation
Identifiable assets (stated in thousands) by geographic area are summarized as follows:
Year ended December 31,
-----------------------------------------------------------
1997 1996 1995
---------------- ---------------- ---------------
United States........................................................ $1,157,186 $1,138,619 $1,074,787
Canada............................................................... - 200,352 211,040
Egypt................................................................ 190,321 119,680 11,003
Cote d'Ivoire........................................................ 35,519 28,854 33,167
Tatarstan............................................................ 25,051 21,152 21,120
Indonesia............................................................ 2,956 3,487 4,237
Other(*)............................................................. 33 2,919 3,771
---------------- ---------------- ---------------
$1,411,066 $1,515,063 $1,359,125
================ ================ ===============
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(*) Other includes Argentina, Malaysia, Turkey and the United Kingdom.
14. COMMITMENTS AND CONTINGENCIES
Lease Commitments -- The Company leases certain office space and equipment under operating lease arrangements which contain renewal options and escalation clauses. Future minimum rental payments under these leases range between $2 million and $3 million in each of the years 1998-2002, and total $7 million for all subsequent years. Total rental expense under operating leases was approximately $3 million for each of the three years ended December 31, 1997.
Royalty Litigation -- Increasingly, royalty owners under oil and gas leases are challenging valuation methodology and post-production deductions used by producers. These cases have arisen because oil and gas producers such as Seagull have begun to provide services that had previously been provided by the interstate gas pipelines prior to the "unbundling" of gas services. For example, in 1996, Seagull was sued in Anne K. Barnaby, et al. v. Seagull Mid-South Inc. This case is pending in state court of Latimer County, Oklahoma. In this case, the plaintiffs seek additional royalties based upon the alleged deduction by Seagull of post-production costs, such as those related to transportation, compression, dehydration and treating. In addition, the plaintiffs have questioned the sales price used by Seagull as a basis for calculating royalties to the extent that sales were made to Seagull's gas marketing subsidiary. While Seagull intends to vigorously defend this case, the Company cannot predict the outcome of these matters.
NorAm Litigation -- Seagull also was sued in NorAm Gas Transmission Co., et al. v. Seagull Mid-South Inc. (the "NorAm Litigation"). The case relates to Seagull's termination of a 1956 gas contract which provided for the sale of gas by Seagull from certain wells in the Aetna Field in Arkansas for approximately $0.16 per Mcf. NorAm Gas Transmission Co. ("NorAm") and Arkansas Western Gas Company ("AWG") have sought a declaratory judgment that the gas contract remains in effect with respect to these wells or, in the alternative, money damages. Since the termination by Seagull of the gas contract, Seagull has been selling the gas in question on the spot market. Seagull believes that it had reasonable grounds for terminating the gas contract. NorAm and AWG have also sought a declaratory judgment to the effect that certain additional wells in the Aetna Field (including any new wells) would be subject to the $0.16 per Mcf price (the "Additional Well Claim"). If NorAm and AWG were successful with the
65 Seagull Energy Corporation
Additional Well Claim, Seagull's operations in the Aetna Field would be materially affected in an adverse manner. By mid - 1997, the plaintiffs had alleged losses in these matters of approximately $90 million plus attorney's fees.
In November 1997, the Company , NorAm and AWG signed a Settlement Proposal that ultimately could lead to a final settlement and resolution of the NorAm Litigation discussed above. The Settlement Proposal calls for Seagull to make a cash payment to deliver gas under a five-year gas sales contract. As a result of this Settlement Proposal, the Company recorded in the fourth quarter of 1997 a one-time pre-tax charge of approximately $4.5 million, included in general and administrative expenses.
Gulf Coast Vacuum Site -- In 1993, the Environmental Protection Agency ("EPA") notified the Company that a subsidiary was a potentially responsible party ("PRP") at the Gulf Coast Vacuum Services Superfund Site (the "GCV Site") in Vermilion Parish, Louisiana. Based upon the Company's investigation of this claim, the Company believes that the basis for its alleged liability is a series of transactions between the Company's subsidiary and the operator of the GCV Site that occurred during 1979 and 1980. While the EPA's cleanup cost estimate of the GCV Site is in the range of $17 million, the Company believes that its liability is unlikely to be material to its financial condition, results of operations or cash flows because of the large number of PRPs at the GCV Site and the relative amount of contamination, if any, that may have been caused at the GCV Site by the disposal of wastes by the Company during 1979 and 1980.
Comstock Mill Site -- On February 21, 1996, the United States Department of Interior Bureau of Land Management ("BLM") sent a letter to Houston Oil & Minerals Corporation ("HO&M"), a wholly owned subsidiary of Seagull, requesting HO&M to prepare and submit a plan for sampling and analyzing groundwater at a former mining operation located near Virginia City, Nevada (the "Comstock Mill Site"). The basis for the BLM's request was the alleged operation of the Comstock Mill Site by HO&M between 1978 and 1982. Pursuant to an indemnity provision in the stock purchase agreement by which Seagull acquired HO&M in 1988 (the "HO&M Purchase Agreement"), Seagull tendered the BLM's letter to Tenneco Inc. ("Tenneco") with a demand for indemnity and notified the BLM that Tenneco would respond to the BLM letter on behalf of HO&M. The BLM has also indicated that Tenneco and HO&M might be required to address cyanide contamination of groundwater at the Comstock Mill Site by separate action of the Nevada Division of Environmental Protection. Seagull believes that any liability associated with the Comstock Mill Site is the responsibility of Tenneco or its successors in liability pursuant to the HO&M Purchase Agreement.
Other -- The Company is a party to other ongoing litigation in the normal course of business. Management regularly analyzes current information and, as necessary, provides accruals for probable liabilities on the eventual disposition of these matters. While the outcome of lawsuits or other proceedings against the Company cannot be predicted with certainty, management believes that the effect on its financial condition, results of operations and cash flows, if any, will not be material.
65 Seagull Energy Corporation
15. SUPPLEMENTAL OIL AND GAS INFORMATION (Unaudited)
Capitalized Costs Relating to Oil and Gas Producing Activities (amounts in
thousands)
United Cote
States Canada (*) Egypt d'Ivoire Tatarstan Indonesia Other Total
---------- ---------- -------- -------- --------- --------- ----- ----------
At December 31, 1997:
Proved . . . . . . . . . . . . $1,421,004 $ - $174,702 $ 45,343 $ 22,500 $ 3,962 $ - $1,667,511
Unproved. . . . . . . . . . . . 52,449 - 22,101 664 - - - 75,214
---------- ---------- -------- -------- --------- --------- ------ ----------
1,473,453 - 196,803 46,007 22,500 3,962 - 1,742,725
Accumulated depreciation,
depletion and amortization 732,627 - 28,769 15,835 8,810 3,042 - 789,083
---------- ---------- -------- -------- --------- --------- ------ ----------
$ 740,826 $ - $168,034 $ 30,172 $ 13,690 $ 920 $ - 953,642
========== ========== ======== ======== ========= ========= ====== ==========
At December 31, 1996:
Proved . . . . . . . . . . . . $1,312,448 239,323 98,407 $ 32,648 $ 17,056 $ 3,962 $ - $1,703,844
Unproved . . . . . . . . . . . 33,959 2,525 5,584 664 - - 4,208 46,940
---------- --------- -------- -------- --------- --------- ------ ----------
1,346,407 241,848 103,991 33,312 17,056 3,962 4,208 1,750,784
Accumulated depreciation,
depletion and amortization 620,602 49,561 7,442 6,245 4,979 2,911 1,441 693,181
---------- --------- -------- -------- --------- --------- ------ ----------
$ 725,805 $192,287 $ 96,549 $ 27,067 $ 12,077 $ 1,051 $2,767 $1,057,603
========== ========= ======== ======== ========= ========= ====== ==========
(*) All of the Company's Canadian oil and gas operations were sold in October
1997.
Costs Incurred in Oil and Gas Property Acquisition, Exploration and Development
Activities (amounts in thousands)
United Cote
States Canada (*) Egypt d'Ivoire Tatarstan Indonesia Other Total
---------- ---------- -------- -------- --------- --------- ----- ----------
Year ended December 31, 1997:
Acquisition costs:
Proved. . . . . . . . . . . . . $ 7,382 $ 54 $ 4,542 $ - $ - $ - $ - $ 11,978
Unproved. . . . . . . . . . . . 21,886 595 6,285 53 - - 9 28,828
Exploration costs. . . . . . . . . 51,058 2,999 38,086 3,357 181 - - 95,681
Development costs. . . . . . . . . 68,059 9,749 43,900 10,801 5,297 - - 137,806
---------- --------- ------- -------- --------- --------- ------ ----------
$ 148,385 $ 13,397 $92,813 $14,211 $ 5,478 $ - $ 9 $ 274,293
========== ========= ======= ======== ========= ========= ====== ==========
Year ended December 31, 1996:
Acquisition costs:
Proved. . . . . . . . . . . . . $ 29,102 $ 1,000 $56,051 $ - $ - $ - $ - $ 86,153
Unproved. . . . . . . . . . . . 10,371 862 5,584 782 - - 101 17,700
Exploration costs. . . . . . . . . 64,066 3,332 6,934 2,823 - - 619 77,774
Development costs. . . . . . . . . 65,309 10,992 25,176 3,255 4,031 - - 108,763
---------- --------- ------- ------- --------- --------- ------ ----------
$ 168,848 $ 16,186 $93,745 $ 6,860 $ 4,031 $ - $ 720 $ 290,390
========== ========= ======= ======== ========= ========= ====== ==========
Year ended December 31, 1995:
Acquisition costs:
Proved. . . . . . . . . . . . . $ 3,193 $ 553 $ - $ - $ - $ - $ - $ 3,746
Unproved. . . . . . . . . . . . 13,036 873 13 126 - - 206 14,254
Exploration costs. . . . . . . . . 38,762 764 3,412 (29) 312 - 3,354 46,575
Development costs. . . . . . . . . 39,669 2,507 4,792 18,359 3,933 - - 69,260
---------- --------- ------- ------- --------- --------- ------ ----------
$ 94,660 $ 4,697 $ 8,217 $18,456 $ 4,245 $ - $3,560 $ 133,835
========== ========= ======= ======== ========= ========= ====== ==========
(*) All of the Company's Canadian oil and gas operations were sold in October
1997.
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66 Seagull Energy Corporation
Results of Operations for Oil and Gas Producing Activities (amounts in
thousands) (1)
United Cote
States Canada (*) Egypt d'Ivoire Tatarstan Indonesia Other Total
---------- ---------- -------- -------- --------- --------- ------- ----------
Year Ended December 31, 1997:
Revenues . . . . . . . . . . . . . $ 290,337 $ 25,956 $ 61,772 $ 15,995 $ 21,558 $ 13,551 $ 150 $ 429,319
Operating expense (3). . . . . . . 75,692 8,541 11,701 3,864 13,994 - 1,921 115,713
Exploration charges. . . . . . . . 31,259 2,193 2,553 3,218 (48) - 2,910 42,085
DD&A (4) . . . . . . . . . . . . . 116,257 7,595 21,615 9,641 3,093 131 273 158,605
Income tax expense (5) . . . . . . 23,495 4,156 11,763 2,474 811 7,589 - 50,288
--------- --------- -------- -------- --------- --------- ------- ----------
Results of activities. . . . . . . $ 43,634 $ 3,471 $ 14,140 $ (3,202) $ 3,708 $ 5,831 $(4,954) $ 62,628
========== ========= ======== ======== ========= ========= ======= ==========
Year Ended December 31, 1996:
Revenues . . . . . . . . . . . . . $ 282,508 $ 34,006 $ 28,126 $ 12,798 $ 15,626 $ 15,892 $ 58 $ 389,014
Operating expense (3). . . . . . . 68,409 13,889 5,806 2,673 11,364 - 17 102,158
Exploration charges. . . . . . . . 36,098 4,295 2,725 5,401 (133) - 2,386 50,772
DD&A (4) . . . . . . . . . . . . . 110,989 17,114 7,416 4,151 2,830 131 878 143,509
Income tax expense (5) . . . . . . 23,047 1,375 5,579 2,158 541 8,899 - 41,599
--------- --------- -------- -------- --------- --------- ------- ----------
Results of activities. . . . . . . $ 43,965 $ (2,667) $ 6,600 $ (1,585) $ 1,024 $ 6,862 $(3,223) $ 50,976
========== ========= ======== ======== ========= ========= ======= ==========
Year Ended December 31, 1995:
Revenues . . . . . . . . . . . . . $ 205,706 $ 28,849 $ 442 $ 4,377 $ 16,037 $ 12,418 $ 7 $ 267,836
Operating expense (3). . . . . . . 61,784 12,934 56 1,400 8,872 - (21) 85,025
Exploration charges. . . . . . . . 26,156 2,866 2,086 471 367 - 8,277 40,223
DD&A (4) . . . . . . . . . . . . . 113,430 18,046 136 2,106 2,111 131 536 136,496
Impairment of oil and gas
properties. . . . . . . . . . . 46,122 - - - - - - 46,122
Income tax expense (benefit)(5). (20,776) (2,233) - 832 1,066 6,953 - (14,158)
--------- --------- --------- --------- --------- --------- ------- ----------
Results of activities. . . . . . . $ (21,010) $ (2,764) $ (1,836) $ (432) $ 3,621 $ 5,334 $(8,785) $ (25,872)
========== ========= ========= ========= ========= ========= ======= ==========
|
(1) Excludes revenues and expenses associated with pipeline and marketing activities, interest expense and general corporate expenses. Revenues and expenses associated with pipeline and marketing activities are directly related to Oil and Gas Operations with regard to segment reporting as defined in SFAS No. 14, Financial Reporting for Segments of a Business Enterprise, but are not part of Disclosures about Oil and Gas Producing Activities as defined by SFAS No. 69.
(2) All of the Company's Canadian oil and gas operations were sold in October 1997.
(3) Operating expense represents cost incurred to operate and maintain wells and related equipment and facilities. These costs include, among other things, repairs and maintenance, labor, materials, supplies, property taxes, insurance, severance taxes, transportation costs and all overhead expenses directly related to oil and gas producing activities.
(4) DD&A represents depreciation, depletion and amortization.
(5) Income tax expense (benefit) is calculated by applying the statutory tax rate to operating profit then adjusting for any applicable permanent tax differences or tax credits or allowances.
67 Seagull Energy Corporation
Reserve Quantity Information - Thousand Equivalent Barrels of Proved Reserves (MBOE)
United Cote Indonesia
States Canada (2) Egypt d'Ivoire Tatarstan and Other Total
----------- ------------ ------------ ------------ ------------ ------------ -----------
January 1, 1997 . . . . . . . . . . 155,847 42,682 25,965 5,132 16,338 11,993 257,957
Revisions of previous estimates . (1,744) 8,896 3,752 978 (3,155) 18 8,745
Extensions and discoveries. . . . 14,150 11,105 7,796 219 4,784 - 38,054
Purchases of reserves in place. . 1,157 - 1,171 - - - 2,328
Sales of reserves in place. . . . (666) (60,189) - - - - (60,855)
Production. . . . . . . . . . . . (20,195) (2,494) (3,383) (978) (1,512) (717) (29,279)
----------- ------------ ------------ ------------ ------------ ------------ -----------
December 31, 1997 (1). . . . . . . . 148,549 - 35,301 5,351 16,455 11,294 216,950
=========== ============ ============ ============ ============ ============ ===========
January 1, 1996 . . . . . . . . . . 153,794 45,816 8,151 6,521 15,570 13,300 243,152
Revisions of previous estimates . 4,021 (2,713) 386 (900) 651 (518) 927
Extensions and discoveries. . . . 12,769 5,261 1,798 263 1,234 - 21,325
Purchases of reserves in place. . 6,217 288 16,935 - - - 23,440
Sales of reserves in place. . . . (20) (2,075) - - - - (2,095)
Production. . . . . . . . . . . . (20,934) (3,895) (1,305) (752) (1,117) (789) (28,792)
----------- ------------ ------------ ------------ ------------ ------------ -----------
December 31, 1996 (1). . . . . . . . 155,847 42,682 25,965 5,132 16,338 11,993 257,957
=========== ============ ============ ============ ============ ============ ===========
January 1, 1995 . . . . . . . . . . 158,848 48,714 3,520 5,282 13,157 14,397 243,918
Revisions of previous estimates . 3,515 363 4,656 118 1,497 (396) 9,753
Extensions and discoveries . . . 11,242 1,054 - 1,416 1,978 - 15,690
Purchases of reserves in place. . 1,254 323 - - - - 1,577
Sales of reserves in place. . . . (748) (563) - - - - (1,311)
Production . . . . . . . . . . . (20,317) (4,075) (25) (295) (1,062) (701) (26,475)
----------- ------------ ------------ ------------ ------------ ------------ -----------
December 31, 1995 (1). . . . . . . . 153,794 45,816 8,151 6,521 15,570 13,300 243,152
=========== ============ ============ ============ ============ ============ ===========
Proved developed reserves (MBOE):
December 31, 1997 . . . . . . . . 126,439 - 20,706 4,004 10,919 11,294 173,362
December 31, 1996 . . . . . . . . 127,871 37,150 14,502 3,092 10,806 9,528 202,949
December 31, 1995 . . . . . . . . 122,918 40,787 265 3,623 9,176 10,652 187,421
|
(1) At December 31, 1997, 1996 and 1995, approximately 12,963 MBOE, 14,072 MBOE and 14,733 MBOE, respectively, were dedicated to the monetary production payment.
(2) All of the Company's Canadian oil and gas operations were sold in October 1997.
The reserve volumes presented are estimates only and should not be
construed as being exact quantities. These reserves may or may not be recovered
and may increase or decrease as a result of future operations of the Company and
changes in economic conditions.
68 Seagull Energy Corporation
United Cote Indonesia
States Canada (3) Egypt d'Ivoire Tatarstan and Other Total
------------- ------------ ------------ ------------ ------------ ------------ ------------
Reserve Quantity Information - Proved Oil Reserves (Mbbl)
January 1, 1997 . . . . . . . . . . 19,885 3,725 25,724 1,525 16,338 1,125 68,322
Revisions of previous estimates . (487) 2,137 3,708 263 (3,155) 5 2,471
Extension and discoveries . . . . 754 969 7,783 27 4,784 - 14,317
Purchases of reserves in place. . 204 - 1,171 - - - 1,375
Sales of reserves in place. . . . (52) (6,588) - - - - (6,640)
Production. . . . . . . . . . . . (1,763) (243) (3,383) (603) (1,512) (56) (7,560)
------------- ------------ ------------ ------------ ------------ ------------ ------------
December 31, 1997 (1) . . . . . . . 18,541 - 35,003 1,212 16,455 1,074 72,285
============= ============ ============ ============ ============ ============ ============
January 1, 1996 . . . . . . . . . . 20,163 3,667 7,918 3,010 15,570 1,153 51,481
Revisions of previous estimates . (800) (47) 384 (1,038) 651 23 (827)
Extension and discoveries . . . . 1,656 916 1,792 64 1,234 - 5,662
Purchases of reserves in place. . 429 21 16,935 - - - 17,385
Sales of reserves in place. . . . (2) (471) - - - - (473)
Production . . . . . . . . . . . (1,561) (361) (1,305) (511) (1,117) (51) (4,906)
------------- ------------ ------------ ------------ ------------ ------------ ------------
December 31, 1996 (1) . . . . . . . 19,885 3,725 25,724 1,525 16,338 1,125 68,322
============= ============ ============ ============ ============ ============ ============
January 1, 1995 . . . . . . . . . . 15,481 4,051 3,520 2,210 13,157 1,066 39,485
Revisions of previous estimates . 4,000 (164) 4,423 72 1,497 132 9,960
Extension and discoveries . . . . 1,382 258 - 989 1,978 - 4,607
Purchases of reserves in place. . 781 74 - - - - 855
Sales of reserves in place. . . . (78) (153) - - - - (231)
Production. . . . . . . . . . . . (1,403) (399) (25) (261) (1,062) (45) (3,195)
------------- ------------ ------------ ------------ ------------ ------------ ------------
December 31, 1995 (1) . . . . . . . 20,163 3,667 7,918 3,010 15,570 1,153 51,481
============= ============ ============ ============ ============ ============ ============
Reserve Quantity Information - Proved Gas Reserves (Mmcf)
January 1, 1997 . . . . . . . . . . 815,781 233,744 1,447 21,644 - 65,217 1,137,833
Revisions of previous estimates . (7,548) 40,558 256 4,287 - 72 37,625
Extension and discoveries . . . . 80,372 60,817 83 1,149 - - 142,421
Purchases of reserves in place. . 5,717 - - - - - 5,717
Sales of reserves in place. . . . (3,681) (321,609) - - - - (325,290)
Production. . . . . . . . . . . . (110,595) (13,510) - (2,245) - (3,965 (130,315)
------------- ------------ ------------ ------------ ------------ ------------ ------------
December 31, 1997 (2) . . . . . . . 780,046 - 1,786 24,835 - 61,324 867,991
============= ============ ============ ============ ============ ============ ============
January 1, 1996 . . . . . . . . . . 801,797 252,892 1,399 21,066 - 72,892 1,150,046
Revisions of previous estimates . 28,925 (15,994) 13 828 - (3,246) 10,526
Extension and discoveries . . . . 66,678 26,071 35 1,195 - - 93,979
Purchases of reserves in place. . 34,729 1,603 - - - - 36,332
Sales of reserves in place. . . . (110) (9,625) - - - - (9,735)
Production. . . . . . . . . . . . (116,238) (21,203) - (1,445) - (4,429) (143,315)
------------- ------------ ------------ ------------ ------------ ------------ ------------
December 31, 1996 (2) . . . . . . . 815,781 233,744 1,447 21,644 - 65,217 1,137,833
============= ============ ============ ============ ============ ============ ============
January 1, 1995 . . . . . . . . . . 860,209 267,980 - 18,432 - 79,990 1,226,611
Revisions of previous estimates . (2,908) 3,159 1,399 278 - (3,165) (1,237)
Extension and discoveries . . . . 59,157 4,773 - - - - 63,930
Purchases of reserves in place. . 2,840 1,494 - 2,559 - - 6,893
Sales of reserves in place. . . . (4,019) (2,457) - - - - (6,476)
Production. . . . . . . . . . . . (113,482) (22,057) - (203) - (3,933) (139,675)
------------- ------------ ------------ ------------ ------------ ------------ ------------
December 31, 1995 (2) . . . . . . . 801,797 252,892 1,399 21,066 - 72,892 1,150,046
============= ============ ============ ============ ============ ============ ============
|
(1) At December 31, 1997, 1996 and 1995, includes approximately 2,079 Mbbl,
2,248 Mbbl and 2,281 Mbbl, respectively, of oil dedicated to the monetary
production payment.
(2) At December 31, 1997, 1996 and 1995, includes approximately 65,306 MMcf,
70,914 MMcf and 74,713 MMcf, respectively, of gas dedicated to the monetary
production payment.
(3) All of the Company's Canadian oil and gas operations were sold in October
1997.
69 Seagul Energy Corporation
Reserve Quantity Information - Proved Developed Reserves
United Cote Indonesia
States Canada (*) Egypt d'Ivoire Tatarstan and Other Total
------------- ------------ ------------ ------------ ------------ ------------ -----------
Proved developed oil reserves (Mbbl):
December 31, 1997 . . . . . . . 14,406 - 20,452 866 10,919 1,074 47,717
December 31, 1996 . . . . . . . 12,855 2,913 14,336 1,035 10,806 936 42,881
December 31, 1995 . . . . . . . 11,205 3,196 265 1,720 9,176 1,022 26,584
Proved developed gas reserves (MMcf):
December 31, 1997 . . . . . . . 672,195 - 1,522 18,826 - 61,324 753,867
December 31, 1996 . . . . . . . 690,095 205,422 993 12,344 - 51,554 960,408
December 31, 1995 . . . . . . . 670,277 225,544 - 11,415 - 57,777 965,013
|
(*) All of the Company's Canadian oil and gas operations were sold in October 1997.
The Company's standardized measure of discounted future net cash flows as of December 31, 1997 and 1996 and changes therein for each of the years 1997, 1996 and 1995 are provided based on the present value of future net revenues from proved oil and gas reserves estimated by independent petroleum engineers in accordance with guidelines established by the Securities and Exchange Commission. These estimates were computed by applying appropriate year-end prices for oil and gas to estimated future production of proved oil and gas reserves over the economic lives of the reserves and assuming continuation of existing operating conditions. Year-end 1997 calculations were made using prices of $15.41 per Bbl and $2.42 per Mcf for oil and gas, respectively. The Company's average realized prices for the year ended December 31, 1997 were $17.34 per Bbl and $2.29 per Mcf for oil and gas, respectively. Seagull's average prices for the month ended January 31, 1998 were $14.47 per Bbl and $2.21 per Mcf for oil and gas, respectively. Because the disclosure requirements are standardized, significant changes can occur in these estimates based upon oil and gas prices in effect at year-end. The following estimates should not be viewed as an estimate of fair market value. Income taxes are computed by applying the statutory income tax rate in the jurisdiction to the net cash inflows relating to proved oil and gas reserves less the tax bases of the properties involved and giving effect to appropriate net operating loss carryforwards, tax credits and allowances relating to such properties.
70 Seagull Energy Corporation
Standardized Measure of Discounted Future Net Cash Flows (amounts in thousands)
United Cote Indonesia
States Canada (*) Egypt d'Ivoire Tatarstan and Other Total
-------------- ----------- ------------ ----------- ------------- ------------ ----------
December 31, 1997:
Future cash inflows . . . . . . . $2,174,296 $ - $ 576,178 $ 67,976 $ 227,401 $ 169,394 $3,215,245
Future development costs. . . . . (140,603) - (122,066) (6,661) (33,395) - (302,725)
Future production costs . . . . . (552,878) - (156,970) (19,048) (103,453) (40,248) (872,597)
-------------- ----------- ------------ ----------- ------------- ------------ ----------
Future net cash flows before
income taxes . . . . . . . . . 1,480,815 - 297,142 42,267 90,553 129,146 2,039,923
10% annual discount . . . . . . . (606,449) - (93,567) (11,239) (42,846) (66,459) (820,560)
-------------- ----------- ------------ ----------- ------------- ------------ ----------
Discounted future net cash flows
before income taxes. . . . . . 874,366 - 203,575 31,028 47,707 62,687 1,219,363
Discounted income taxes . . . . . (165,620) - (70,935) (8,028) (12,664) (29,673) (286,920)
-------------- ----------- ------------ ----------- ------------- ------------ ----------
Standardized measure of dis-
counted future net cash flows . $ 708,746 $ - $ 132,640 $ 23,000 $ 35,043 $ 33,014 $ 932,443
============== =========== ============ =========== ============= ============ ==========
December 31, 1996:
Future cash inflows . . . . . . . $3,489,097 $ 481,159 $ 604,613 $ 80,526 $ 266,304 $ 229,497 $5,151,196
Future development costs. . . . . (169,240) (20,487) (115,639) (15,529) (30,896) - (351,791)
Future production costs . . . . . (712,881) (129,313) (122,697) (17,700) (121,137) (41,640) (1,145,368)
-------------- ----------- ------------ ----------- ------------- ----------- -----------
Future net cash flows before
income taxes . . . . . . . . . 2,606,976 331,359 366,277 47,297 114,271 187,857 3,654,037
10% annual discount . . . . . . . (1,086,947) (153,161) (114,772) (11,121) (54,171) (95,995) (1,516,167)
-------------- ----------- ------------ ----------- ------------- ----------- -----------
Discounted future net cash flows
before income taxes. . . . . . 1,520,029 178,198 251,505 36,176 60,100 91,862 2,137,870
Discounted income taxes . . . . . (383,032) (63,079) (75,306) (5,072) (18,236) (48,623) (593,348)
-------------- ----------- ------------ ----------- ------------- ----------- -----------
Standardized measure of dis-
counted future net cash flows . $1,136,997 $ 115,119 $ 176,199 $ 31,104 $ 41,864 $ 43,239 $1,544,522
============== =========== ============ =========== ============= =========== ===========
|
(*) All of the Company's Canadian oil and gas operations were sold in October 1997.
Principal Sources of Change in the Standardized Measure of Discounted Future Net
Cash Flows (amounts in thousands)
Year Ended December 31,
----------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,544,522 $ 861,351 $ 728,303
Revisions of previous quantity estimates less related costs . . . . . . . . . 58,132 3,825 54,287
Extensions and discoveries less related costs . . . . . . . . . . . . . . . . 196,358 209,860 163,131
Purchases of reserves in place. . . . . . . . . . . . . . . . . . . . . . . . 12,082 219,510 11,967
Sales of reserves in place. . . . . . . . . . . . . . . . . . . . . . . . . . (212,125) (6,593) (5,238)
Net changes in future prices and production costs . . . . . . . . . . . . . . (811,501) 785,928 166,325
Development costs incurred during the period . . . . . . . . . . . . . . . . 137,806 108,763 69,260
Sales of oil and gas produced, net of production costs. . . . . . . . . . . . (313,606) (299,702) (196,123)
Accretion of discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213,787 110,396 86,151
Net changes in income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 306,428 (350,738) (105,655)
Changes in production, timing and other . . . . . . . . . . . . . . . . . . . (199,440) (98,078) (111,057)
--------------- --------------- ---------------
(612,079) 683,171 133,048
--------------- --------------- ---------------
End of Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 932,443 $1,544,522 $ 861,351
=============== =============== ===============
|
71 Seagull Energy Corporation
AMONG
SEAGULL ENERGY CORPORATION,
THE CHASE MANHATTAN BANK,
Individually and as Administrative Agent,
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
Individually, and as Documentation Agent,
NATIONSBANK OF TEXAS, N.A.,
Individually, and as Syndication Agent,
AND
THE OTHER BANKS SIGNATORY HERETO
December 24, 1997
CHASE SECURITIES INC.,
as Arranger
TABLE OF CONTENTS
Section 1. Definitions and Accounting Matters........................ 1
1.1 Certain Defined Terms..................................... 1
1.2 Accounting Terms and Determinations.......................17
1.3 Types of Loans............................................17
1.4 Miscellaneous.............................................17
Section 2. Commitments; Competitive Bid Facility.....................17
2.1 Committed Loans...........................................17
2.2 Letters of Credit.........................................17
2.3 Reductions and Changes of Commitments.....................20
2.4 Fees......................................................21
2.5 Affiliates; Lending Offices...............................21
2.6 Several Obligations.......................................21
2.7 Repayment of Loans; Evidence of Debt......................21
2.8 Use of Proceeds...........................................22
2.9 Competitive Bid Procedure.................................22
Section 3. Borrowings, Prepayments and Selection of Interest Rates...24
3.1 Borrowings................................................24
3.2 Prepayments...............................................24
3.3 Selection of Interest Rates...............................25
Section 4. Payments of Principal and Interest........................25
4.1 Repayment of Loans and Reimbursement Obligations..........25
4.2 Interest..................................................25
Section 5. Payments; Pro Rata Treatment; Computations, Etc...........26
5.1 Payments..................................................26
5.2 Pro Rata Treatment........................................27
5.3 Computations..............................................27
5.4 Minimum and Maximum Amounts...............................27
5.5 Certain Actions, Notices, Etc.............................27
5.6 Non-Receipt of Funds by Administrative Agent..............28
5.7 Sharing of Payments, Etc..................................29
Section 6. Yield Protection and Illegality...........................30
6.1 Additional Costs..........................................30
6.2 Limitation on Types of Loans..............................31
(1)
|
6.3 Illegality................................................32
6.4 Substitute Alternate Base Rate Loans......................32
6.5 Compensation..............................................33
6.6 Additional Costs in Respect of Letters of Credit..........33
6.7 Capital Adequacy..........................................34
6.8 Limitation on Additional Charges; Substitute Banks;
Non-Discrimination.......................................34
Section 7. Conditions Precedent......................................35
7.1 Initial Loans.............................................35
7.2 Initial and Subsequent Loans..............................36
Section 8. Representations and Warranties............................37
8.1 Corporate Existence.......................................37
8.2 Corporate Power and Authorization.........................37
8.3 Binding Obligations.......................................37
8.4 No Legal Bar or Resultant Lien............................38
8.5 No Consent................................................38
8.6 Financial Condition.......................................38
8.7 Investments and Guaranties................................38
8.8 Liabilities and Litigation................................38
8.9 Taxes and Governmental Charges............................39
8.10 Title to Properties.......................................39
8.11 Defaults..................................................39
8.12 Location of Businesses and Offices........................39
8.13 Compliance with Law.......................................39
8.14 Margin Stock..............................................40
8.15 Subsidiaries..............................................40
8.16 ERISA.....................................................40
8.17 Investment Company Act....................................40
8.18 Public Utility Holding Company Act........................40
8.19 Environmental Matters.....................................41
8.20 Claims and Liabilities....................................42
8.21 Solvency..................................................42
Section 9. Affirmative Covenants.....................................42
9.1 Financial Statements and Reports..........................42
9.2 Officers' Certificates....................................44
9.3 Taxes and Other Liens.....................................44
9.4 Maintenance...............................................44
9.5 Further Assurances........................................45
9.6 Performance of Obligations................................45
9.7 Reimbursement of Expenses.................................45
(2)
|
9.8 Insurance.................................................46
9.9 Accounts and Records......................................46
9.10 Notice of Certain Events..................................47
9.11 ERISA Information and Compliance..........................48
Section 10. Negative Covenants........................................49
10.1 Debts, Guaranties and Other Obligations...................49
10.2 Liens.....................................................51
10.3 Guarantees................................................54
10.4 Dividend Payment Restrictions.............................54
10.5 Mergers and Sales of Assets...............................54
10.6 Proceeds of Loans.........................................55
10.7 ERISA Compliance..........................................55
10.8 Amendment of Certain Documents............................55
10.9 Total Debt/Capitalization Ratio...........................55
10.10 EBITDAX/Interest Ratio....................................55
10.11 Nature of Business........................................55
10.12 Covenants in Other Agreements.............................56
Section 11. Defaults..................................................56
11.1 Events of Default.........................................56
11.2 Collateral Account........................................59
11.3 Preservation of Security for Unmatured Reimbursement
Obligations..............................................59
11.4 Right of Setoff...........................................59
Section 12. Agents....................................................60
12.1 Appointment, Powers and Immunities........................60
12.2 Reliance by Agents........................................61
12.3 Defaults..................................................61
12.4 Rights as a Bank..........................................61
12.5 Indemnification...........................................62
12.6 Non-Reliance on Agents and Other Banks....................62
12.7 Failure to Act............................................63
12.8 Resignation or Removal of Administrative Agent............63
Section 13. Miscellaneous.............................................63
13.1 Waiver....................................................63
13.2 Notices...................................................64
13.3 Indemnification...........................................64
13.4 Amendments, Etc...........................................65
13.5 Successors and Assigns....................................65
13.6 Limitation of Interest....................................68
(3)
|
13.7 Survival..................................................69
13.8 Captions..................................................69
13.9 Counterparts..............................................69
13.10 Governing Law.............................................69
13.11 Severability..............................................70
13.12 Chapter 15 Not Applicable.................................70
13.13 Confidential Information..................................70
13.14 Tax Forms.................................................71
13.15 Amendment and Restatement.................................72
|
EXHIBITS:
Exhibit A Unrestricted Subsidiaries Exhibit B Form of Request for Extension of Credit Exhibit C Existing Competitive Loans Exhibit D Subsidiaries (with Addresses) Exhibit E Form of Compliance Certificate Exhibit F Assignment and Acceptance Exhibit G Form of Competitive Bid Request Exhibit H Form of Notice to Banks of Competitive Bid Request Exhibit I Form of Competitive Bid Exhibit J Form of Competitive Bid Administrative Questionnaire Exhibit K Continuing Letters of Credit |
AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December 24, 1997 (the "Effective Date"), is by and among SEAGULL ENERGY CORPORATION (the "Company"), a corporation duly organized and validly existing under the laws of the State of Texas; each of the banks which is or which may from time to time become a signatory hereto (individually, a "Bank" and, collectively, the "Banks"); MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("Morgan"), as Documentation Agent for the Banks (in such capacity, the "Documentation Agent"); NATIONSBANK OF TEXAS, N.A. ("NationsBank"), as Syndication Agent for the Banks (in such capacity, the "Syndication Agent"); and THE CHASE MANHATTAN BANK, as Administrative Agent for the Banks (in such capacity, together with its successors in such capacity, "Administrative Agent").
The parties hereto agree as follows:
Section 1. Definitions and Accounting Matters.
1.1 Certain Defined Terms. As used herein, the following terms shall have the following meanings (all terms defined in this Section 1.1 or in other provisions of this Agreement in the singular to have the same meanings when used in the plural and vice versa):
"Additional Costs" shall have the meaning ascribed to such term in Section 6.1 hereof.
"Affiliate" shall mean, as to any Person, any other Person which directly or indirectly controls, or is under common control with, or is controlled by, such Person and, if such Person is an individual, any member of the immediate family (including parents, siblings, spouse, children, stepchildren, grandchildren, nephews and nieces) of such individual and any trust whose principal beneficiary is such individual or one or more members of such immediate family and any Person who is controlled by any such member or trust. As used in this definition, "control" (including, with correlative meanings, "controlled by" and "under common control with") shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise).
"Agents" shall mean the Administrative Agent, the Documentation Agent and the Syndication Agent, together with any successors in any such capacities.
"Agreement" shall mean this Amended and Restated Credit Agreement, as the same may be amended, modified, restated or supplemented from time to time.
"Alternate Base Rate" shall mean, for any day, a rate per annum equal to the higher of (a) the Prime Rate in effect on such day or (b) 1/2 of 1% plus the
Federal Funds Rate in effect for such day (rounded upwards, if necessary, to the nearest 1/16th of 1%). For purposes hereof, "Federal Funds Rate" shall mean, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Administrative Agent from three Federal funds brokers of recognized standing selected by it. For purposes of this Agreement, any change in the Alternate Base Rate due to a change in the Federal Funds Rate shall be effective on the effective date of such change in the Federal Funds Rate. If for any reason Administrative Agent shall have determined (which determination shall be conclusive and binding, absent manifest error) that it is unable to ascertain the Federal Funds Rate for any reason, including, without limitation, the inability or failure of Administrative Agent to obtain sufficient bids or publications in accordance with the terms hereof, the Alternate Base Rate shall be the Prime Rate until the circumstances giving rise to such inability no longer exist. For the purposes hereof, "Prime Rate" shall mean the prime rate as announced from time to time by Administrative Agent, and thereafter entered in the minutes of Administrative Agent's Loan and Discount Committee. Without notice to the Company or any other Person, the Prime Rate shall change automatically from time to time as and in the amount by which said prime rate shall fluctuate. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Administrative Agent may make commercial loans or other loans at rates of interest at, above or below the Prime Rate. For purposes of this Agreement any change in the Alternate Base Rate due to a change in the Prime Rate shall be effective on the date such change in the Prime Rate is announced.
"Alternate Base Rate Loans" shall mean Loans which bear interest at a rate based upon the Alternate Base Rate.
"APC" shall mean Alaska Pipeline Company, an Alaska corporation, a Subsidiary of the Company.
"APC Long Term Financing Documents" shall mean that certain Inducement Agreement and that certain Note Agreement (together with the Notes, as defined therein), each dated as of May 14, 1992, by and among the Company, Aid Association for Lutherans, The Equitable Life Assurance Society of the United States, Equitable Variable Life Insurance Company, Provident Life and Accident Insurance Company and Teachers Insurance & Annuity Association of America, any documentation executed in connection with any renewal, extension or rearrangement of the Indebtedness that is the subject of the foregoing documents, the Gas Sales Contract, the Intercompany Mortgage, as defined in the above-mentioned Note Agreement, and any documents executed in replacement of any of the foregoing documents, if any, and only if Administrative Agent has received notice thereof pursuant to Section 10.8.
"Applicable Lending Office" shall mean, for each Bank and for each Type of Loan, such office of such Bank (or of an affiliate of such Bank) as such Bank
may from time to time specify to Administrative Agent and the Company as the office by which its Loans of such Type are to be made and/or issued and maintained.
"Applicable Margin" shall mean, on any day, (i) zero percent (0%) with respect to any Alternate Base Rate Loan and (ii) with respect to any Eurodollar Loan, the applicable per annum percentage set forth at the appropriate intersection in the table shown below, based on the Rating as of the close of business on the preceding Business Day:
Eurodollar Loan
Rating Applicable Margin
BBB/Baa2 and higher 0.20
BBB-/Baa3 0.275
BB+/Ba1 0.40
BB/Ba2 and lower 0.45
|
"Applications" shall mean all applications and agreements for Letters of Credit, or similar instruments or agreements, now or hereafter executed by any Person in connection with any Letter of Credit now or hereafter issued or to be issued.
"Bankruptcy Code" shall mean the United States Bankruptcy Code, as amended, and any successor statute.
"Beluga Financing Documents" shall mean that certain Inducement Agreement and that certain Note Agreement (together with the Notes, as defined therein), each dated June 17, 1985, and amended as of June 15, 1990, by and among the Company, The Equitable Life Assurance Society of the United States, and the Travelers Insurance Company, any documentation executed in connection with any renewal, extension or rearrangement of the Indebtedness that is the subject of the foregoing documents, the Gas Sales Contract, the Intercompany Mortgage, as defined in the above-mentioned Note Agreement, and any documents executed in replacement of any of the foregoing documents, if and only if Administrative Agent has received notice thereof pursuant to Section 10.8.
"Business Day" shall mean any day other than a day on which commercial
banks are authorized or required to close in Houston, Texas or New York, New
York, and where such term is used in the definition of "Quarterly Date" in this
Section 1.1 or if such day relates to a borrowing of, a payment or prepayment of
principal of or interest on, or an Interest Period for, a Eurodollar Loan or a
notice by the Company with respect to any such borrowing, payment, prepayment or
Interest Period, a day which is also a day on which dealings in Dollar deposits
are carried out in the relevant interbank market.
"Capital Expenditures" shall mean expenditures in respect of fixed or capital assets (calculated in accordance with GAAP) excluding expenditures for the restoration, repair or replacement of any fixed or capital asset which was destroyed or damaged, in whole or in part, to the extent financed by the proceeds of an insurance policy. Expenditures in respect of replacements and maintenance consistent with the business practices of the Company and its Subsidiaries in respect of plant facilities, machinery, fixtures and other like capital assets utilized in the ordinary course of business are not Capital Expenditures to the extent such expenditures are not capitalized in preparing a balance sheet of the Company in accordance with GAAP.
"Capital Lease Obligations" shall mean, as to any Person, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real and/or personal property which obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP.
"Capitalization" shall mean an amount equal to the sum of (a) Total Debt plus (b) the shareholder's equity of the Company and its Subsidiaries on a consolidated basis.
"Change of Control" shall mean a change resulting when any Unrelated Person
or any Unrelated Persons acting together which would constitute a Group together
with any Affiliates or Related Persons thereof (in each case also constituting
Unrelated Persons) shall at any time either (i) Beneficially Own more than 35%
of the aggregate voting power of all classes of Voting Stock of the Company or
(ii) during any period of two consecutive years ending on or after the Effective
Date, as determined as of the last day of each calendar quarter after the
Effective Date, the individuals (the "Incumbent Directors") who at the beginning
of such period constituted the Board of Directors of the Company (other than
additions thereto or removals therefrom from time to time thereafter approved by
a vote of the Board of Directors in accordance with the Company's by-laws) shall
cease for any reason to constitute 51% or more of the Board of Directors of the
Company. As used herein (a)"Beneficially Own" means "beneficially own" as
defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended, or any
successor provision thereto; provided, however, that, for purposes of this
definition, a Person shall not be deemed to Beneficially Own securities tendered
pursuant to a tender or exchange offer made by or on behalf of such Person or
any of such Person's Affiliates until such tendered securities are accepted for
purchase or exchange; (b)"Group" means a "group" for purposes of Section 13(d)
of the Securities Exchange Act of 1934, as amended; (c)"Unrelated Person" means
at any time any Person other than the Company or any Subsidiary and other than
any trust for any employee benefit plan of the Company or any Subsidiary of the
Company; (d) "Related Person" of any Person shall mean any other Person owning
(1) 5% or more of the outstanding common stock of such Person or (2) 5% or more
of the Voting Stock of such Person; and (e) "Voting Stock" of any Person shall
mean capital stock of such Person which ordinarily has voting power for the
election of directors (or persons performing similar functions) of such Person,
whether at all times or only so long as no senior class of securities has such
voting power by reason of any contingency.
"Chapter 1D" shall mean Chapter 1D of Article 5069 of the Texas Credit Title, Title 79, Vernon's Texas Civil Statutes, as amended (formerly Article 5069-1.04, Vernon's Texas Civil Statutes, as amended).
"Code" shall mean the Internal Revenue Code of 1986, as amended, or any successor statute, together with all regulations, rulings and interpretations thereof or thereunder by the Internal Revenue Service.
"Commitment Percentage" shall mean, as to any Bank, the percentage equivalent of a fraction the numerator of which is the amount of such Bank's Commitment and the denominator of which is the aggregate amount of the Commitments of all Banks.
"Commitment" shall mean, as to any Bank, the obligation, if any, of such Bank to make Committed Loans and incur Letter of Credit Liabilities in an aggregate principal amount at any one time outstanding up to but not exceeding the amount, if any, set forth opposite such Bank's name on the signature pages hereof under the caption "Commitment" (as the same may be reduced from time to time pursuant to Section 2.3).
"Committed Loans" shall mean the loans provided for in Section 2.1 hereof.
"Competitive Bid" shall mean an offer by a Bank to make a Competitive Loan pursuant to Section 2.9 hereof.
"Competitive Bid Administrative Questionnaire" shall mean a questionnaire substantially in the form of Exhibit J hereto.
"Competitive Bid Rate" shall mean, as to any Competitive Bid made by a Bank pursuant to Section 2.9 hereof, the fixed rate of interest, in each case, offered by the Bank making such Competitive Bid.
"Competitive Bid Request" shall have the meaning ascribed to such term in
Section 2.9 hereof.
"Competitive Loans" shall mean the Existing Competitive Loans and loans provided for in Section 2.9 hereof.
"Cover" for Letter of Credit Liabilities shall be effected by paying to Administrative Agent immediately available funds, to be held by Administrative Agent in a collateral account maintained by Administrative Agent at its Principal Office and collaterally assigned as security for the financial accommodations extended pursuant to this Agreement using documentation satisfactory to Administrative Agent, in an amount equal to any required prepayment. Such amount shall be retained by Administrative Agent in such collateral account until such time as (x) in the case of Cover being provided
pursuant to Section 2.2(a), the applicable Letter of Credit shall have expired and Reimbursement Obligations, if any, with respect thereto shall have been fully satisfied or (y) in the case of Cover being provided pursuant to Section 3.2(b)(1), the outstanding principal amount of all Revolving Credit Obligations is not greater than the aggregate amount of the Commitments.
"Current Maturities" shall mean, on any day on which Current Maturities are calculated, the sum of (a) scheduled principal payments on Funded Indebtedness which are payable within one (1) year after such day plus (b) the principal component of payments required to be made with respect to Capital Lease Obligations within one (1) year of said date plus (c), to the extent not included above, all items which in accordance with GAAP would be classified as current maturities of long term debt.
"Default" shall mean an Event of Default or an event which with notice or lapse of time or both would, unless cured or waived, become an Event of Default.
"Disclosure Statement" shall mean the Disclosure Statement dated December 31, 1992 delivered to Administrative Agent by the Company.
"Dividend Payment" shall mean, with respect to any Person, dividends (in cash, property or obligations) on, or other payments or distributions on account of, or the redemption of, or the setting apart of money for a sinking or other analogous fund for the purchase, redemption, retirement or other acquisition of, any shares of any class of capital stock of such Person, or the exchange or conversion of any shares of any class of capital stock of such Person for or into any obligations of or shares of any other class of capital stock of such Person or any other property, but excluding dividends to the extent payable in, or exchanges or conversions for or into, shares of common stock of the Company or options or warrants to purchase common stock of the Company.
"Dollars" and "$" shall mean lawful money of the United States of America.
"EBITDAX" shall mean net earnings (excluding material gains and losses on sales and retirement of assets, non-cash write downs, charges resulting from accounting convention changes and deductions for exploration expenses) before deduction for federal and state taxes, interest expense (including capitalized interest), operating lease rentals or depreciation, depletion and amortization expense, all determined in accordance with GAAP.
"EBITDAX/Interest Ratio" shall mean the ratio of (a) EBITDAX of the Company and its Restricted Subsidiaries on a consolidated basis to (b) operating lease rentals and cash interest expense on all Indebtedness of the Company and its Restricted Subsidiaries on a consolidated basis for any rolling four calendar quarter period ending on the last day of every calendar quarter during the period with respect to which the EBITDAX/Interest Ratio is to be calculated.
"ENSTAR Alaska" shall collectively mean (i) the gas distribution system in
south-central Alaska known as ENSTAR Natural Gas Company, a division of the
Company, and (ii) APC.
"Environmental Claim" means any third party (including Governmental
Authorities and employees) action, lawsuit, claim or proceeding (including
claims or proceedings at common law or under the Occupational Safety and Health
Act or similar laws relating to safety of employees) which seeks to impose
liability for (i) noise; (ii) pollution or contamination of the air, surface
water, ground water or land or the clean-up of such pollution or contamination;
(iii) solid, gaseous or liquid waste generation, handling, treatment, storage,
disposal or transportation; (iv) exposure to Hazardous Substances; (v) the
safety or health of employees or (vi) the manufacture, processing, distribution
in commerce or use of Hazardous Substances. An "Environmental Claim" includes,
but is not limited to, a common law action, as well as a proceeding to issue,
modify or terminate an Environmental Permit, or to adopt or amend a regulation
to the extent that such a proceeding attempts to redress violations of an
applicable permit, license, or regulation as alleged by any Governmental
Authority.
"Environmental Liabilities" includes all liabilities arising from any
Environmental Claim, Environmental Permit or Requirement of Environmental Law
under any theory of recovery, at law or in equity, and whether based on
negligence, strict liability or otherwise, including but not limited to:
remedial, removal, response, abatement, investigative, monitoring, personal
injury and damage to property or injuries to persons, and any other related
costs, expenses, losses, damages, penalties, fines, liabilities and obligations,
and all costs and expenses necessary to cause the issuance, reissuance or
renewal of any Environmental Permit including reasonable attorneys' fees and
court costs.
"Environmental Permit" means any permit, license, approval or other authorization under any applicable Legal Requirement relating to pollution or protection of health or the environment, including laws, regulations or other requirements relating to emissions, discharges, releases or threatened releases of pollutants, contaminants or hazardous substances or toxic materials or wastes into ambient air, surface water, ground water or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants or Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and all rules, regulations and interpretations by the Internal Revenue Service or the Department of Labor thereunder.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) which is a member of a group of which the Company is a member and
which is under common control within the meaning of the regulations under
Section 414 of the Code.
"Eurodollar Base Rate" shall mean, with respect to any Interest Period for any Eurodollar Loan, the lesser of (A) the rate per annum (rounded upwards, if necessary, to the nearest 1/16th of 1%) equal to 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 Administrative Agent and the Company) as of 11:00 a.m., Houston, Texas time (or
as soon thereafter as practicable) on the day two Business Days prior to the
first day of such Interest Period for Dollar deposits having a term comparable
to such Interest Period and in an amount comparable to the principal amount of
the Eurodollar Loan to which such Interest Period relates or (B) the Highest
Lawful Rate. If none of such Telerate Page 3750 nor any successor or similar
service is available, then the "Eurodollar Base Rate" shall mean, with respect
to any Interest Period for any applicable Eurodollar Loan, the lesser of (A) the
rate per annum (rounded upwards, if necessary, to the nearest 1/16th of 1%)
determined by Administrative Agent to be the average of the rates quoted by the
Reference Banks at approximately 11:00 a.m., Houston, Texas time (or as soon
thereafter as practicable) on the day two Business Days prior to the first day
of such Interest Period for the offering by such Reference Banks to leading
banks in the London interbank market of Dollar deposits having a term comparable
to such Interest Period and in an amount comparable to the principal amount of
the Eurodollar Loan to which such Interest Period relates or (B) the Highest
Lawful Rate. If any Reference Bank does not furnish a timely quotation,
Administrative Agent shall determine the relevant interest rate on the basis of
the quotation or quotations furnished by the remaining Reference Bank or Banks;
if none of such quotations is available on a timely basis, the provisions of
Section 6.2 shall apply. Each determination of the Eurodollar Base Rate shall be
conclusive and binding, absent manifest error, and may be computed using any
reasonable averaging and attribution method.
"Eurodollar Loans" shall mean Loans the interest on which is determined on the basis of rates referred to in the definition of "Eurodollar Base Rate" in this Section 1.1.
"Eurodollar Rate" shall mean, for any Interest Period for any Eurodollar Loan, a rate per annum determined by Administrative Agent to be equal to the Eurodollar Base Rate for such Loan for such Interest Period.
"Event of Default" shall have the meaning assigned to such term in Section 11 hereof.
"Existing Competitive Loans" shall mean the Competitive Loans described on Exhibit C hereto.
"Facility Amount" shall mean the aggregate amount of the Commitments (which amount shall initially be $500,000,000), as such amount may be reduced from time to time pursuant to the terms of this Agreement.
"Facility Fee Percentage" shall mean, on any date, the applicable per annum percentage set forth at the appropriate intersection in the table shown below, based on the Rating as of the close of business on the preceding Business Day:
Facility Fee
Rating Percentage
BBB/Baa2 and higher 0.125
(8)
|
BBB-/Baa3 0.150 BB+/Ba1 0.20 BB/Ba2 and lower 0.30 |
"Financial Statements" shall mean the financial statement or statements, together with the notes and schedules thereto, described or referred to in Sections 8.6 and 9.1.
"Funded Indebtedness" shall mean all Indebtedness which by its terms matures more than one (1) year from the date as of which any calculation of Funded Indebtedness is made, and any Indebtedness maturing within one (1) year from such date which is renewable at the option of the obligor to a date beyond one (1) year from such date (if any Indebtedness provides for amortization, only the amount of the principal payment required to be made within one (1) year from the date as of "Funded Indebtedness").
"GAAP" shall mean as to a particular Person, such accounting practice as, in the opinion of KPMG Peat Marwick or other independent accountants of recognized national standing retained by such Person and acceptable to the Majority Banks, conforms at the time to generally accepted accounting principles, consistently applied. Generally accepted accounting principles means those principles and practices (a) which are recognized as such by the Financial Accounting Standards Board, (b) which are applied for all periods after the date hereof in a manner consistent with the manner in which such principles and practices were applied to the most recent audited financial statements of the relevant Person furnished to the Banks, except only for such changes in principles and practices with which the applicable independent public accountants concur and which are disclosed to the Banks in writing, and (c) which are consistently applied for all periods after the date hereof so as to reflect properly the financial condition and results of operations of such Person.
"Gas Sale Contract" shall mean that certain Gas Sale Contract dated January 1, 1984, between APC, as Seller, and ENSTAR Natural Gas Company, as Purchaser, as amended on June 17, 1985, and from time to time thereafter, if and only if Administrative Agent has received notice thereof pursuant to Section 10.8. "Governmental Authority" shall mean any sovereign governmental authority, the United States of America, any State of the United States and any political subdivision of any of the foregoing, and any central bank, agency, instrumentality, department, commission, board, bureau, authority, court or other tribunal or quasi-governmental authority in each case whether executive, legislative, judicial, regulatory or administrative, having jurisdiction over the Company, any of its Subsidiaries, any of their respective property, Administrative Agent or any Bank.
"Guarantee" by any Person means any obligation, contingent or otherwise, of any such Person directly or indirectly guaranteeing any Indebtedness of any
other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise, other than agreements to purchase assets, goods, securities or services at an arm's length price in the ordinary course of business) or (ii) entered into for the purpose of assuring in any other manner the holder of such Indebtedness of the payment thereof or to protect such holder against loss in respect thereof (in whole or in part), provided that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning.
"Hazardous Substance" shall mean petroleum products, and any hazardous or toxic waste or substance defined or regulated as such from time to time by any law, rule, regulation or order described in the definition of "Requirements of Environmental Law".
"Highest Lawful Rate" shall mean, on any day, the maximum nonusurious rate of interest permitted for that day by whichever of applicable federal or Texas law permits the higher interest rate, stated as a rate per annum. On each day, if any, that Chapter 1D establishes the Highest Lawful Rate, the Highest Lawful Rate shall be the "applicable interest rate ceiling" (as defined in Chapter 1D) for that day.
"Hydrocarbons" shall mean oil, gas, casinghead gas, drip gasoline, natural gasoline, condensate and all other liquid or gaseous hydrocarbons and related minerals, in each case whether in a natural or a processed state.
"Indebtedness" shall mean, as to any Person: (i) indebtedness of such Person for borrowed money (whether by loan or the issuance and sale of debt securities) or for the deferred purchase or acquisition price of property or services, including, without limitation, obligations payable out of Hydrocarbon production; (ii) obligations, whether fixed or contingent, of such Person in respect of letters of credit, acceptances or similar instruments issued or accepted by banks and other financial institutions for the account of such Person or any other Person; (iii) Capital Lease Obligations of such Person; (iv) Redemption Obligations of such Person and other obligations of such Person to redeem or otherwise retire shares of capital stock of such Person or any other Person, in each case to the extent that the redemption obligations will arise prior to the stated maturity of the Obligations; (v) indebtedness of others of the type described in clause (i), (ii), (iii) or (iv) above secured by a Lien on the property of such Person, whether or not the respective obligation so secured has been assumed by such Person; and (vii) indebtedness of others of the type described in clause (i), (ii), (iii) or (iv) above Guaranteed by such Person.
"Interest Period" shall mean:
(a) With respect to any Eurodollar Loan, the period commencing on (i) the date such Loan is made or converted into or continued as a Eurodollar Loan or
(ii) in the case of a roll-over to a successive Interest Period, the last day of the immediately preceding Interest Period and ending on the numerically corresponding day in the first, second, third or sixth calendar month thereafter, as the Company may select as provided in Section 3.3 hereof, except that each such Interest Period which commences on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month shall end on the last Business Day of the appropriate subsequent calendar month.
(b) With respect to any Alternate Base Rate Loan, the period commencing on the date such Loan is made and ending on the next succeeding Quarterly Date.
(c) With respect to any Existing Competitive Loan, the applicable interest period specified on Exhibit C hereto, and with respect to any other Competitive Loan, the period commencing on the date such Loan is made and ending on the date specified in the Competitive Bid in which the offer to make the Competitive Loan was extended; provided, however, that each such period shall have a duration of not less than seven calendar days or more than 180 calendar days.
Notwithstanding the foregoing: (i) no Interest Period applicable to any Eurodollar Loan or any Competitive Loan may commence before and end after the date of any scheduled reduction in the Commitments if, after giving effect thereto, the aggregate principal amount of the Eurodollar Loans or Competitive Loans which have Interest Periods which end after such reduction date shall be greater than the aggregate principal amount of the Commitments scheduled to be in effect after such reduction date; (ii) each Interest Period which would otherwise end on a day which is not a Business Day shall end on the next succeeding Business Day (or, in the case of an Interest Period for Eurodollar Loans, if such next succeeding Business Day falls in the next succeeding calendar month, on the next preceding Business Day); (iii) no Interest Period applicable to any Eurodollar Loan or any Competitive Loan shall extend beyond the end of the scheduled Revolving Credit Availability Period, and (iv) no Interest Period for any Eurodollar Loans shall have a duration of less than one month and, if the Interest Period therefor would otherwise be a shorter period, such Loans shall not be available hereunder.
"Investments" shall mean with respect to any Person any advance, loan or other extension of credit or capital contribution (other than prepaid expenses in the ordinary course of business) to (by means of transfers of property or assets or otherwise) purchase or own any stocks, bonds, notes, debentures or other securities of, or incur contingent liability with respect to (except for the endorsement of checks in the ordinary course of business and except for the Indebtedness and Liens permitted under this Agreement), any other Person.
"Issuer" shall mean each Bank issuing a Letter of Credit hereunder.
"Legal Requirement" shall mean any law, statute, ordinance, decree, requirement, order, judgment, rule, regulation (or interpretation of any of the foregoing) of, and the terms of any license or permit issued by, any Governmental Authority, now or hereafter in effect.
"Letter of Credit" shall mean (i) any letter of credit issued by an Issuer
in the manner and subject to the terms and provisions of Section 2.2 hereof and
(ii) each letter of credit outstanding on the Effective Date listed on Exhibit K
hereto which letters of credit will be deemed to be issued and outstanding under
this Agreement as of the Effective Date.
"Letter of Credit Fee" shall mean a per annum rate equal to the Applicable Margin for Eurodollar Loans in effect from time to time.
"Letter of Credit Liabilities" shall mean, at any time and in respect of any Letter of Credit, the sum of (i) the amount available for drawings under such Letter of Credit plus (ii) the aggregate unpaid amount of all Reimbursement Obligations at the time due and payable in respect of previous drawings made under such Letter of Credit.
"Lien" shall mean, with respect to any asset, any mortgage, lien, pledge, charge, collateral assignment, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, a Person shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset.
"Loan Documents" shall mean this Agreement, all Applications, all instruments, certificates and agreements now or hereafter executed or delivered to Administrative Agent or any Bank pursuant to any of the foregoing, and all amendments, modifications, renewals, extensions, increases and rearrangements of, and substitutions for, any of the foregoing.
"Loans" shall mean Committed Loans and Competitive Loans.
"Majority Banks" shall mean (a) prior to the termination of the Commitments, Banks having greater than 50% of the aggregate amount of the Commitments and (b) after the termination of the Commitments, Banks having greater than 50% of the aggregate principal amount of the Loans and the Letter of Credit Liabilities. "Material Adverse Effect" shall mean a material adverse effect on the business, condition (financial or otherwise), operations or properties (including proven oil and gas reserves) of the Company and its Subsidiaries, taken as a whole, or on the ability of the Company to perform its material obligations under any Loan Document to which it is a party.
"Mesa Contract" shall mean that certain Purchase and Sale Agreement dated
February 6, 1991 executed by and among Mesa Limited Partnership, a Delaware
limited partnership, Mesa Operating Limited Partnership, a Delaware limited
partnership, and Mesa Midcontinent Limited Partnership, a Delaware limited
partnership, as Sellers, and the Company, as Buyer, as amended by that certain
First Amendment to Purchase and Sale Agreement dated February 22, 1991 and as
further amended by that certain Second Amendment to Purchase and Sale Agreement
dated March 8, 1991.
"Obligations" shall mean, as at any date of determination thereof, the sum of the following: (i) the aggregate principal amount of Loans outstanding hereunder plus (ii) the aggregate amount of the Letter of Credit Liabilities hereunder plus (iii) all other liabilities, obligations and indebtedness of the Company or any Subsidiary of the Company under any Loan Document.
"Organizational Documents" shall mean, with respect to a corporation, the certificate of incorporation, articles of incorporation and bylaws of such corporation; with respect to a partnership, the partnership agreement establishing such partnership; with respect to a joint venture, the joint venture agreement establishing such joint venture; with respect to a limited liability company, the certificate of formation and operating agreement (or comparable documents) of such limited liability company; and with respect to a trust, the instrument establishing such trust; in each case including any and all modifications thereof as of the date of the Loan Document referring to such Organizational Document.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.
"Person" shall mean an individual, a corporation, a company, a bank, a voluntary association, a partnership, a trust, an unincorporated organization, any Governmental Authority or any other entity.
"Plan" shall mean an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is either (a) maintained by the Company or any ERISA Affiliate for employees of the Company or any ERISA Affiliate or (b) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which the Company or any ERISA Affiliate is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions.
"Post-Default Rate" shall mean, in respect of any principal of any Loan,
any Reimbursement Obligation or any other amount payable by the Company under
this Agreement or any other Loan Document which is not paid when due (whether at
stated maturity, by acceleration, or otherwise), a rate per annum during the
period commencing on the due date until such amount is paid in full equal to the
lesser of (a) the sum of (x) with respect to Eurodollar Loans, 2% per annum plus
the applicable Eurodollar Rate then in effect plus the Applicable Margin for
Eurodollar Loans until the expiration of the applicable Interest Period, (y)
with respect to Competitive Loans, 2% per annum plus the applicable fixed rate
offered by the applicable Bank and accepted by the Company in accordance with
Section 2.9 hereof (or, in the case of the Existing Competitive Loans, the
applicable fixed rate specified on Exhibit C hereto), and (z) with respect to
Alternate Base Rate Loans and with respect to Eurodollar Loans after the
expiration of the applicable Interest Period (and also with respect to
indebtedness other than Loans), 2% plus the Alternate Base Rate as in effect
from time to time plus the Applicable Margin for Alternate Base Rate Loans or
(b) the Highest Lawful Rate.
"Principal Office" shall mean the principal office of Administrative Agent, presently located at 1 Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention: Agent Services.
"Quarterly Dates" shall mean the last day of each March, June, September and December, provided that, if any such date is not a Business Day, then the relevant Quarterly Date shall be the next succeeding Business Day.
"Rating" shall mean the senior debt rating for the Company publicly announced by Standard & Poor's Ratings Group or Moody's Investors Service, Inc. In the event the ratings are not equivalent, the higher rating shall be treated as the "Rating" hereunder; provided, that if such ratings differ by more than one (1) level, the Rating shall be the average, rounded upwards, of the two ratings.
"Redemption Obligations" shall mean with respect to any Person all mandatory redemption obligations of such Person with respect to preferred stock or other equity securities issued by such Person or put rights in favor of the holder of such preferred stock or other equity securities, to the extent that the redemption obligations will arise prior to the stated maturity of the Obligations.
"Reference Banks" shall mean Chase and such other Banks (up to a maximum of two (2) additional Banks) as the Company, with the approval of Administrative Agent (which approval shall not be unreasonably withheld), may from time to time designate.
"Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System as the same may be amended or supplemented from time to time and any successor or other regulation relating to reserve requirements.
"Regulatory Chang" shall mean, with respect to any Bank, any change on or after the date of this Agreement in Legal Requirements (including Regulation D) or the adoption or making on or after such date of any interpretation, directive or request applying to a class of banks including such Bank under any Legal Requirements (whether or not having the force of law) by any Governmental Authority.
"Reimbursement Obligations" shall mean, as at any date, the obligations of the Company then outstanding in respect of Letters of Credit under this Agreement, to reimburse Administrative Agent for the account of the applicable Issuer for the amount paid by the applicable Issuer in respect of any drawing under such Letter of Credit.
"Relevant Party" shall mean the Company and each other party to any of the Loan Documents other than (a) the Banks and (b) the Agents.
"Request for Extension of Credit" shall mean a request for extension of credit duly executed by any Responsible Officer of the Company, appropriately completed and substantially in the form of Exhibit B attached hereto.
"Requirements of Environmental Law" means all requirements imposed by any law (including for example and without limitation The Resource Conservation and Recovery Act and The Comprehensive Environmental Response, Compensation, and Liability Act), rule, regulation, or order of any federal, state or local executive, legislative, judicial, regulatory or administrative agency, board or authority in effect at the applicable time which relate to (i) noise; (ii) pollution, protection or clean-up of the air, surface water, ground water or land; (iii) solid, gaseous or liquid waste generation, treatment, storage, disposal or transportation; (iv) exposure to Hazardous Substances; (v) the safety or health of employees or (vi) regulation of the manufacture, processing, distribution in commerce, use, discharge or storage of Hazardous Substances.
"Reserve Requirement" shall mean, for any Eurodollar Loan for any Interest Period therefor, the stated maximum rate for all reserves (including any marginal, supplemental or emergency reserves) required to be maintained during such Interest Period under Regulation D by any member bank of the Federal Reserve System or any Bank against "Eurocurrency liabilities" (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement shall reflect and include any other reserves required to be maintained by such member banks by reason of any Regulatory Change against (i) any category of liabilities which includes deposits by reference to which the Eurodollar Rate is to be determined as provided in the definition of "Eurodollar Base Rate" in this Section 1.1 or (ii) any category of extensions of credit or other assets which include Eurodollar Loans. Any determination by Administrative Agent of the Reserve Requirement shall be conclusive and binding, absent manifest error, and may be made using any reasonable averaging and attribution method.
"Responsible Officer" shall mean the chairman of the board, the president, any executive vice president, the vice president of finance and administration, the chief executive officer or the chief operating officer or any equivalent officer (regardless of title) and in the case of the Company, any other vice president, and in respect of financial or accounting matters, shall also include the chief financial officer, the treasurer and the controller or any equivalent officer (regardless of title).
"Restricted Subsidiary" shall mean each Subsidiary of the Company that, at the particular time in question, (i) owns directly or indirectly any material assets or any interest in any other Restricted Subsidiary and (ii) has been designated as a Restricted Subsidiary by the Company or has not been designated as an Unrestricted Subsidiary by the Company either (a) on Exhibit A attached hereto or (b) in accordance with the terms and provisions of this Agreement. The Unrestricted Subsidiaries on the Effective Date are listed on Exhibit A attached hereto and each other Subsidiary of Company as of the Effective Date shall be a Restricted Subsidiary. A Restricted Subsidiary shall remain such (even if it no longer owns directly or indirectly any interest in any of the material assets or any interest in any other Restricted Subsidiary) until designated as an Unrestricted Subsidiary in accordance with the terms and provisions of this Agreement.
"Revolving Credit Availability Period" shall mean the period from and
including the date hereof to but not including December 31, 2002 or the date the
Commitments are terminated pursuant to Section 11.1, whichever is first to
occur.
"Revolving Credit Obligations" shall mean, as at any date of determination thereof, the sum of the following (determined without duplication): (i) the aggregate principal amount of Loans outstanding hereunder plus (ii) the aggregate amount of the Letter of Credit Liabilities hereunder.
"Subsidiary" shall mean, with respect to any Person (the "parent"), (a) any corporation of which at least a majority of the outstanding shares of stock having by the terms thereof ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether or not at the time stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by the parent or one or more of the Subsidiaries of the parent or by the parent and one or more of the Subsidiaries of the parent, and (b) any partnership, limited partnership, joint venture or other form of entity, the majority of the legal or beneficial ownership of which is at the time directly or indirectly owned or controlled by the parent or one or more of the Subsidiaries of the parent or by the parent and one or more of the Subsidiaries of the parent.
"Tangible Net Worth" shall mean with respect to any Person the sum of the redemption price of preferred stock, par value of common stock, capital in excess of par value of common stock (additional paid-in capital) and retained earnings, less treasury stock, goodwill, deferred development costs, franchises, licenses, patents, trademarks and copyrights and all other assets which are properly classified as intangible assets in accordance with GAAP less any Redemption Obligations.
"Total Debt" shall mean the sum, without duplication, of (i) Funded
Indebtedness of the Company and its Subsidiaries on a consolidated basis plus
(ii) Current Maturities of the Company and its Subsidiaries on a consolidated
basis plus (iii) borrowed money Indebtedness of the Company and its Subsidiaries
on a consolidated basis that is not Funded Indebtedness.
"Total Debt/Capitalization Ratio" shall mean the ratio of (a) Total Debt to
(b) Capitalization.
"Type" shall have the meaning assigned to such term in Section 1.3 hereof.
"Unfunded Liabilities" shall mean, with respect to any Plan, at any time, the amount (if any) by which (a) the present value of all benefits under such Plan exceeds (b) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent actuarial valuation report for such Plan, but only to the extent that such excess represents a potential liability of any ERISA Affiliate to the PBGC or a Plan under Title IV of ERISA.
"United States" or "U.S." shall mean the United States of America, its fifty states and the District of Columbia.
"Unrestricted Subsidiary" shall mean each Subsidiary of the Company which is (i) an entity undertaking oil and gas operations with all or substantially all of its business activities occurring outside the United States and (ii) (A) designated as an Unrestricted Subsidiary on Exhibit A attached hereto or (B)
designated as an Unrestricted Subsidiary by the Company at any time after the Effective Date and either (I) such Subsidiary has a Tangible Net Worth of less than $25,000,000 or (II) with the consent of the Administrative Agent and the Majority Banks. An Unrestricted Subsidiary shall remain such until designated as a Restricted Subsidiary in accordance with the terms and provisions of this Agreement.
1.2 Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all financial statements and certificates and reports as to financial matters required to be delivered hereunder shall be prepared, in accordance with GAAP. To enable the ready determination of compliance with the provisions hereof, the Company will not change from December 31 in each year the date on which its fiscal year ends, nor from March 31, June 30 and September 30 the dates on which the first three fiscal quarters in each fiscal year end.
1.3 Types of Loans. Loans hereunder are distinguished by "Type". The "Type" of a Loan refers to the determination whether such Loan is a Eurodollar Loan, a Competitive Loan or an Alternate Base Rate Loan.
1.4 Miscellaneous. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Any reference to Sections shall refer to Sections of this Agreement.
2.1 Section 2. Commitments; Competitive Bid Facility.
2.2 Committed Loans. From time to time on or after the date hereof and during the Revolving Credit Availability Period, each Bank shall make Committed Loans under this Section to the Company in an aggregate principal amount at any one time outstanding up to but not exceeding such Bank's Commitment Percentage of the amount by which the Facility Amount exceeds the aggregate unpaid principal balance of all Competitive Loans and Letter of Credit Liabilities from time to time outstanding. Subject to the conditions herein, any such Committed Loan repaid prior to the end of the Revolving Credit Availability Period may be reborrowed pursuant to the terms of this Agreement; provided, that any and all such Committed Loans shall be due and payable in full at the end of the Revolving Credit Availability Period.
Letters of Credit. of Credit
(a) Letters of Credit. Subject to the terms and conditions hereof, and on the condition that aggregate Letter of Credit Liabilities shall never exceed $100,000,000, the Company shall have the right, in addition to Committed Loans provided for in Section 2.1 hereof, to utilize the Commitments from time to time from and after the Effective Date through the expiration of the Revolving Credit Availability Period by obtaining the issuance of letters of credit for the account of the Company and on behalf of the Company by the applicable Issuer if the Company shall so request in the notice referred to in Section 2.2(b)(i).
Upon the date of the issuance of a Letter of Credit, the applicable Issuer shall be deemed, without further action by any party hereto, to have sold to each Bank, and each Bank shall be deemed, without further action by any party hereto, to have purchased from the applicable Issuer, a participation, to the extent of such Bank's Commitment Percentage, in such Letter of Credit and the related Letter of Credit Liabilities. Any Letter of Credit having an expiry date after the end of the Revolving Credit Availability Period shall have been fully Covered or shall be backed by a letter of credit in form and substance, and issued by an issuer, acceptable to Administrative Agent in its reasonably exercised discretion. Subject to the terms and conditions hereof, upon the request of the Company, if Chase is the designated Issuer, Chase shall issue the applicable Letter of Credit and if any other Bank is the designated Issuer, such Bank may, but shall not be obligated to, issue such Letter of Credit.
(b) Additional Provisions. The following additional provisions shall apply to each Letter of Credit:
(i) The Company shall give Administrative Agent at least three (3) Business Days' prior notice (effective upon receipt) specifying the proposed Issuer and the date such Letter of Credit is to be issued and describing the proposed terms of such Letter of Credit and the nature of the transaction proposed to be supported thereby, and shall furnish such additional information regarding such transaction as Administrative Agent or the applicable Issuer may reasonably request. Upon receipt of such notice Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's Commitment Percentage of the amount of such proposed Letter of Credit.
(ii) No Letter of Credit may be issued if after giving effect thereto the Revolving Credit Obligations would exceed the Facility Amount. On each day during the period commencing with the issuance of any Letter of Credit and until such Letter of Credit shall have expired or been terminated, the Commitment of each Bank shall be deemed to be utilized for all purposes hereof in an amount equal to such Bank's Commitment Percentage of the amount then available for drawings under such Letter of Credit.
(iii) Upon receipt from the beneficiary of any Letter of Credit of any
demand for payment thereunder, the applicable Issuer shall promptly notify
the Company and each Bank as to the amount to be paid as a result of such
demand and the payment date. If at any time the applicable Issuer shall
have made a payment to a beneficiary of a Letter of Credit in respect of a
drawing under such Letter of Credit, each Bank will pay to the applicable
Issuer immediately upon demand by the applicable Issuer at any time during
the period commencing after such payment until reimbursement thereof in
full by the Company, an amount equal to such Bank's Commitment Percentage
of such payment, together with interest on such amount for each day from
the date of demand for such payment (or, if such demand is made after 11:00
a.m. Houston, Texas time on such date, from the next succeeding Business
Day) to the date of payment by such Bank of such amount at a rate of
interest per annum equal to the Federal Funds Rate for such period.
(iv) The Company shall be irrevocably and unconditionally obligated
forthwith to reimburse the applicable Issuer for any amount paid by the
applicable Issuer upon any drawing under any Letter of Credit, without
presentment, demand, protest or other formalities of any kind. Such
reimbursement may, subject to satisfaction of any other applicable
conditions set forth in this Agreement be made by borrowing of Loans. In
the event any such reimbursement is not made by borrowing of Loans, the
Company shall make such reimbursement in immediately available funds within
five (5) days after demand therefor by the applicable Issuer. The
applicable Issuer will pay to each Bank such Bank's Commitment Percentage
of all amounts received from the Company for application in payment, in
whole or in part, of the Reimbursement Obligation in respect of any Letter
of Credit, but only to the extent such Bank has made payment to the
applicable Issuer in respect of such Letter of Credit pursuant to clause
(iii) above.
(v) The Company will pay to Administrative Agent at the Principal Office for the account of each Bank a fee on such Bank's Commitment Percentage of the daily average amount available for drawings under each Letter of Credit, in each case for the period from and including the date of issuance of such Letter of Credit to and including the date of expiration or termination thereof at a rate per annum equal to the Letter of Credit Fee in effect from time to time, such fee to be paid in arrears on the Quarterly Dates and on the date of the expiration or termination thereof. Administrative Agent will pay to each Bank, promptly after receiving any payment in respect of letter of credit fees referred to in the preceding sentence of this clause (v), an amount equal to such Bank's Commitment Percentage of such fees. The Company shall pay to the applicable Issuer an administration and issuance fee in an amount equal to 1/8 of 1% per annum of the daily average amount available for drawings under such Letter of Credit, in each case for the period from and including the date of issuance of such Letter of Credit to and including the date of expiration or termination thereof, such fee to be paid in arrears on the Quarterly Dates and on the date of the expiration or termination thereof. Such administration and issuance fee shall be retained by the applicable Issuer.
(vi) The issuance by the applicable Issuer of each Letter of Credit shall, in addition to the conditions precedent set forth in Section 7 hereof, be subject to the conditions precedent that such Letter of Credit shall be in such form and contain such terms as shall be reasonably satisfactory to the applicable Issuer and that the Company shall have executed and delivered such other instruments and agreements relating to such Letter of Credit as the applicable Issuer shall have reasonably requested and are not inconsistent with the terms of this Agreement including an Application therefor. In the event of a conflict between the terms of this Agreement and the terms of any Application, the terms of this Agreement shall control. Without limiting the generality of the foregoing sentence, in the event any such Application shall include requirements for Cover, it is agreed that there shall be no requirements for the Company to provide Cover except as expressly required in this Agreement.
(c) Indemnification. The Company hereby indemnifies and holds harmless the Agents, the applicable Issuer and each Bank from and against any and all claims and damages, losses, liabilities, costs or expenses which such Bank, the applicable Issuer or Agent may incur (or which may be claimed against such Bank, the applicable Issuer or any Agent by any Person whatsoever) in connection with
the execution and delivery or transfer of or payment or failure to pay under any Letter of Credit, including, without limitation, any claims, damages, losses, liabilities, costs or expenses which such Agent, the applicable Issuer or such Bank, as the case may be, may incur (WHETHER INCURRED AS A RESULT OF ITS OWN NEGLIGENCE OR OTHERWISE) by reason of or in connection with the failure of any other Bank (whether as a result of its own negligence or otherwise) to fulfill or comply with its obligations to such Agent, the applicable Issuer or such Bank, as the case may be, hereunder (but nothing herein contained shall affect any rights the Company may have against such defaulting Bank); provided that, the Company shall not be required to indemnify any Bank, the applicable Issuer or such Agent for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by (i) the willful misconduct or gross negligence of the party seeking indemnification, or (ii) by such Bank's, the applicable Issuer's or the applicable Agent's, as the case may be, failure to pay under any Letter of Credit after the presentation to it of a request required to be paid under applicable law. Nothing in this Section 2.2(c) is intended to limit the obligations of the Company under any other provision of this Agreement.
(d) Co-issuance or Separate Issuance of Letters of Credit. The Company may, at its option, request that any requested Letter of Credit which exceeds $1,000,000 be issued severally, but not jointly, by any two or more of the Banks or issued through separate Letters of Credit issued by any two or more of the Banks, respectively, each in an amount equal to a portion of the amount of the applicable Letter of Credit requested by the Company. In either such event, the Banks issuing such Letters of Credit shall each constitute an "Issuer" and the Letters of Credit so issued shall each constitute a "Letter of Credit" for all purposes hereunder and under the Loan Documents. Notwithstanding the foregoing, no Bank other than Chase shall have any obligation to issue any Letter of Credit, but may do so at its option.
2.3 Reductions and Changes of Commitments.ommitments
(a) Mandatory. On December 31, 2002, all Commitments shall be terminated in their entirety unless terminated at an earlier date pursuant to Section 11.1.
(b) Optional. The Company shall have the right to terminate or reduce the unused portion of the Commitments at any time or from time to time, provided that: (i) the Company shall give notice of each such termination or reduction to Administrative Agent as provided in Section 5.5 hereof and (ii) each such partial reduction shall be permanent and in an aggregate amount at least equal to $5,000,000.
(c) No Reinstatement. Any reduction in or termination of the Commitments may not be reinstated without the approval of Administrative Agent and any Bank whose Commitment (or the applicable part thereof) is to be so reinstated.
2.4 Fees.
(a) The Company shall pay to Administrative Agent for the account of each Bank a facility fee accruing from the Effective Date, computed for each day at a rate per annum equal to the Facility Fee Percentage times such Bank's pro rata share (based on its respective Commitment) of the Facility Amount on such day. Such facility fees shall be payable on the Quarterly Dates and on the earlier of the date the Commitments are terminated in their entirety or the last day of the Revolving Credit Availability Period.
(b) The Company agrees to pay to Administrative Agent fees as provided in the separate letter agreements executed by and between Administrative Agent and the Company.
2.5 Affiliates; Lending Offices.ng Offices
(a) Any Bank may, if it so elects, fulfill any obligation to make a Eurodollar Loan or Competitive Loan by causing a branch, foreign or otherwise, or Affiliate of such Bank to make such Loan and may transfer and carry such Loan at, to or for the account of any branch office or Affiliate of such Bank; provided that, in such event for the purposes of this Agreement such Loan shall be deemed to have been made by such Bank and the obligation of the Company to repay such Loan shall nevertheless be to such Bank and shall be deemed to be held by such Bank and, to the extent of such Loan, to have been made for the account of such branch or Affiliate.
(b) Notwithstanding any provision of this Agreement to the contrary, each Bank shall be entitled to fund and maintain its funding of all or any part of its Loans hereunder in any manner it sees fit, it being understood, however, that for the purposes of this Agreement all determinations hereunder shall be made as if such Bank had actually funded and maintained each Eurodollar Loan during each Interest Period through the purchase of deposits having a maturity corresponding to such Interest Period and bearing an interest rate equal to the Eurodollar Rate for such Interest Period.
2.6 Several Obligations. The failure of any Bank to make any Loan to be made by it on the date specified therefor shall not relieve any other Bank of its obligation to make its Loan on such date, but neither Administrative Agent nor any Bank shall be responsible for the failure of any other Bank to make a Loan to be made by such other Bank.
2.7 Repayment of Loans; Evidence of Debt.
(a) Each Bank shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of Company to such Bank resulting from each Loan made by such Bank, including the amounts of principal and interest payable and paid to such Bank from time to time hereunder.
(b) Administrative Agent shall maintain accounts in which it shall record
(i) the amount of each Loan made hereunder and the Interest Period applicable
thereto, (ii) the amount of any principal or interest due and payable or to
become due and payable from Company to each Bank hereunder and (iii) the amount of any sum received by Administrative Agent hereunder for the account of the Banks and each Bank's share thereof.
(c) The entries made in the accounts maintained pursuant to paragraph (a) or (b) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Bank or Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of Company to repay the Loans in accordance with the terms of this Agreement.
(d) Any Bank may request that Loans made by it be evidenced by a promissory note. In such event, Company shall prepare, execute and deliver to such Bank promissory notes payable to the order of such Bank (or, if requested by such Bank, to such Bank and its registered assigns and in a form approved by Administrative Agent). Thereafter, the Loans evidenced by such promissory notes and interest thereon may (including after assignment pursuant to Section 13.5) be represented by one or more promissory notes in such form payable to the order of the payee named therein.
2.8 Use of Proceeds. The proceeds of the Loans shall be used for general corporate purposes.
2.9 Competitive Bid Procedure. Procedure
(a) In order to request Competitive Bids, the Company shall hand deliver, telex or telecopy to Administrative Agent a duly completed request substantially in the form of Exhibit G, with the blanks appropriately completed (a "Competitive Bid Request"), to be received by Administrative Agent not later than 11:00 a.m., Houston, Texas time, five Business Days before the date specified for a proposed Competitive Loan. No Alternate Base Rate Loan shall be requested in, or, except pursuant to Section 6, made pursuant to, a Competitive Bid Request. A Competitive Bid Request that does not conform substantially to the format of Exhibit G may be rejected at Administrative Agent's sole discretion, and Administrative Agent shall promptly notify the Company of such rejection by telecopier. Each Competitive Bid Request shall in each case refer to this Agreement and specify (x) the date of such Competitive Loans (which shall be a Business Day) and the aggregate principal amount thereof (which shall not be less than $25,000,000 or greater than the unused portion of the Facility Amount on such date and shall be an integral multiple of $5,000,000) and (y) the Interest Period with respect thereto (which may not end after the termination of the Revolving Credit Availability Period). Promptly after its receipt of a Competitive Bid Request that is not rejected as aforesaid, Administrative Agent shall invite by telecopier (in substantially the form set forth in Exhibit H hereto) the Banks to bid, on the terms and conditions of this Agreement, to make Competitive Loans pursuant to such Competitive Bid Request. Notwithstanding the foregoing, Administrative Agent shall have no obligation to invite any Bank to make a Competitive Bid pursuant to this Section 2.9(a) until such Bank has delivered a properly completed Competitive Bid Administrative Questionnaire to Administrative Agent.
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(b) Each Bank may, in its sole discretion, make one or more Competitive Bids to the Company responsive to each Competitive Bid Request. Each Competitive Bid by a Bank must be received by Administrative Agent via telecopier, in the form of Exhibit I hereto, not later than 11:00 a.m., Houston, Texas time, four Business Days before the date specified for a proposed Competitive Loan. Competitive Bids that do not conform substantially to the format of Exhibit I may be rejected by Administrative Agent after conferring with, and upon the instruction of, the Company, and Administrative Agent shall notify the Bank of such rejection as soon as practicable. Each Competitive Bid shall refer to this Agreement and (x) specify the principal amount (which shall be in a minimum principal amount of $5,000,000 and in an integral multiple of $1,000,000 and which may equal the entire aggregate principal amount of the Competitive Loan requested by the Company) of the Competitive Loan that the Bank is willing to make to the Company, (y) specify the Competitive Bid Rate at which the Bank is prepared to make the Competitive Loan and (z) confirm the Interest Period with respect thereto specified by the Company in its Competitive Bid Request. A Competitive Bid submitted by a Bank pursuant to this paragraph (b) shall be irrevocable.
(c) Administrative Agent shall, by 2:00 p.m. four Business Days before the date specified for a proposed Competitive Loan, notify the Company by telecopier of all the Competitive Bids made, the Competitive Bid Rate and the maximum principal amount of each Competitive Loan in respect of which a Competitive Bid was made and the identity of the Bank that made each bid. Administrative Agent shall send a copy of all Competitive Bids to the Company for its records as soon as practicable after completion of the bidding process set forth in this Section 2.9.
(d) The Company may in its sole and absolute discretion, subject only to the provisions of this Section 2.9(d), accept or reject any Competitive Bid referred to in Section 2.9(c); provided, however, that the aggregate amount of the Competitive Bids so accepted by the Company may not exceed the principal amount of the Competitive Loan requested by the Company. The Company shall notify Administrative Agent by telecopier whether and to what extent it has decided to accept or reject any or all of the bids referred to in Section 2.9(c), not later than 11:00 a.m., Houston, Texas time, three Business Days before the date specified for a proposed Competitive Loan; provided, however, that (w) the failure by the Company to give such notice shall be deemed to be a rejection of all the bids referred to in Section 2.9(c) and (x) no bid shall be accepted for a Competitive Loan unless such Competitive Loan is in a minimum principal amount of $5,000,000 and an integral multiple of $1,000,000. Notwithstanding the foregoing, if the Company accepts more than one bid made in response to a Competitive Bid Request and the available principal amount of Competitive Loans to be allocated among the Banks is not sufficient to enable Competitive Loans to be allocated to each Bank in a minimum principal amount of $5,000,000 and in integral multiples of $1,000,000, then the Company shall select the Banks to be allocated such Competitive Loans and shall round allocations up or down to the next higher or lower multiple of $1,000,000 as it shall deem appropriate. In addition, the Company shall be permitted under the foregoing procedures to accept a bid or bids in a principal amount of less than $5,000,000 (i) in order to enable the Company to accept bids equal to (but not in excess of) the principal amount of the Competitive Loan requested by the Company or (ii) in order to enable the Company to accept all remaining bids, or
all remaining bids at a particular Competitive Bid Rate. A notice given by Company pursuant to this paragraph (d) shall be irrevocable.
(e) Administrative Agent shall promptly notify each bidding Bank whether or not its Competitive Bid has been accepted (and if so, in what amount and at what Competitive Bid Rate) by telex or telecopier sent by Administrative Agent, and each successful bidder will thereupon become bound, subject to the other applicable conditions hereof, to make the Competitive Loan in respect of which its bid has been accepted. After completing the notifications referred to in the immediately preceding sentence, Administrative Agent shall (i) notify Administrative Agent of each Competitive Bid that has been accepted, the amount thereof and the Competitive Bid Rate therefor and (ii) notify each Bank of the aggregate principal amount of all Competitive Bids accepted.
(f) No Competitive Loan shall be made within five Business Days of the date of any other Competitive Loan, unless the Company and Administrative Agent shall mutually agree otherwise.
(g) If Administrative Agent shall at any time have a Commitment hereunder and shall elect to submit a Competitive Bid in its capacity as a Bank, it shall submit such bid directly to the Company one quarter of an hour earlier than the latest time at which the other Banks are required to submit their bids to Administrative Agent pursuant to paragraph (b) above.
(h) All notices required by this Section 2.9 shall be made in accordance with Section 3.2 and the Competitive Bid Administrative Questionnaire most recently placed on file by each Bank with Administrative Agent.
Section 3. Borrowings, Prepayments and Selection of Interest Rates.
3.1 Borrowings. The Company shall give Administrative Agent notice of each borrowing to be made hereunder as provided in Sections 2.9 and 5.5 hereof. Not later than 2:00 p.m. Houston, Texas time on the date specified for each such borrowing hereunder, each Bank shall make available the amount of the Loan, if any, to be made by it on such date to Administrative Agent, at its Principal Office, in immediately available funds, for the account of the Company. The amount so received by Administrative Agent shall, subject to the terms and conditions of this Agreement, be made available to the Company by depositing the same, in immediately available funds, in an account designated by the Company maintained with Administrative Agent at the Principal Office.
3.2 Prepayments.
(a) Optional Prepayments. Subject to the provisions of Sections 4, 5 and 6, the Company shall have the right to prepay, on any Business Day, in whole or in part, without the payment of any penalty or fee, Loans at any time or from time to time, provided that, the Company shall give Administrative Agent notice of each such prepayment as provided in Section 5.5 hereof. Eurodollar Loans and Competitive Loans may be prepaid on the last day of an Interest Period
applicable thereto. Neither Eurodollar Loans nor Competitive Loans may be otherwise prepaid unless prepayment is accompanied by payment of all compensation required by Section 6.
(b) Mandatory Prepayments and Cover. The Company shall from time to time on
demand by Administrative Agent prepay the Loans (or provide Cover for Letter of
Credit Liabilities) in such amounts as shall be necessary so that at all times
the aggregate outstanding principal amount of all Revolving Credit Obligations
shall not be in excess of the sum of (i) the aggregate amount of the
Commitments, as reduced from time to time pursuant to Section 2.3 hereof plus
(ii) any Cover provided under this Section 3.2(b).
3.3 Selection of Interest Rates. Subject to the terms and provisions of this Agreement, the Company shall have the right either to convert any Loan (in whole or in part) into a Loan of another Type (provided that no such conversion of Eurodollar Loans or Competitive Loans shall be permitted other than on the last day of an Interest Period applicable thereto) or to continue such Loan (in whole or in part) as a Loan of the same Type. In the event the Company fails to so give such notice prior to the end of the applicable Interest Period with respect to any Eurodollar Loan or Competitive Loan, such Loan shall become an Alternate Base Rate Loan on the last day of such Interest Period.
Section 4. Payments of Principal and Interest.
4.1 Repayment of Loans and Reimbursement Obligations. The Company hereby
unconditionally promises to pay to Administrative Agent for the account of each
Bank (a) (i) each Loan in full at the end of the Interest Period applicable to
such Loan unless such Loan is continued in accordance with the terms hereof, and
(ii) the then unpaid principal amount of all outstanding Loans on the date of
the expiration of the Revolving Credit Availability Period, and (b) the amount
of each Reimbursement Obligation promptly upon its occurrence. The amount of any
Reimbursement Obligation may, if the applicable conditions precedent specified
in Section 7 hereof have been satisfied, be paid with the proceeds of Loans.
4.2 Interest.
(a) Subject to Section 13.6 hereof, the Company will pay to Administrative Agent for the account of each Bank interest on the unpaid principal amount of each Loan made by such Bank for the period commencing on the date of such Loan to but excluding the date such Loan shall be paid in full, at the lesser of (I) the following rates per annum:
(i) if such Loan is an Alternate Base Rate Loan, the Alternate Base Rate plus the Applicable Margin,
(ii) if such Loan is a Eurodollar Loan, the applicable Eurodollar Rate plus the Applicable Margin, and
(iii) if such Loan is a Competitive Loan, the applicable fixed rate offered by the applicable Bank and accepted by the Company in accordance with Section 2.9 hereof (or, in the case of Existing Competitive Loans, the applicable fixed rate specified on Exhibit C hereto),
or (II) the Highest Lawful Rate.
(b) Notwithstanding any of the foregoing but subject to Section 13.6 hereof, the Company will pay to Administrative Agent for the account of each Bank interest at the applicable Post-Default Rate on any principal of any Loan made by such Bank, on any Reimbursement Obligation and on any other amount payable by the Company hereunder to or for the account of such Bank (but, if such amount is interest, only to the extent legally allowed), which shall not be paid in full when due (whether at stated maturity, by acceleration or otherwise), for the period commencing on the due date thereof until the same is paid in full.
(c) Accrued interest on each Loan shall be payable on the last day of each
Interest Period for such Loan (and, if such Interest Period exceeds three
months' duration, quarterly, commencing on the first quarterly anniversary of
the first day of such Interest Period), except that (i) accrued interest payable
at the Post-Default Rate shall be due and payable from time to time on demand of
Administrative Agent or the Majority Banks (through Administrative Agent) and
(ii) accrued interest on any amount prepaid or converted pursuant to Section 6
hereof shall be paid on the amount so prepaid or converted.
Section 5. Payments; Pro Rata Treatment; Computations, Etc.
5.1 Payments.
(a) Except to the extent otherwise provided herein, all payments of principal, interest, Reimbursement Obligations and other amounts to be made by the Company hereunder shall be made in Dollars, in immediately available funds, to Administrative Agent at the Principal Office (or in the case of a successor Administrative Agent, at the principal office of such successor Administrative Agent in the United States), not later than 11:00 a.m. Houston, Texas time on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day).
(b) The Company shall, at the time of making each payment hereunder, specify to Administrative Agent the Loans or other amounts payable by the Company hereunder or thereunder to which such payment is to be applied. Each payment received by Administrative Agent hereunder or any other Loan Document for the account of a Bank shall be paid promptly to such Bank, in immediately available funds for the account of such Bank's Applicable Lending Office.
(c) If the due date of any payment hereunder or any other Loan Document falls on a day which is not a Business Day, the due date for such payment (subject to the definition of Interest Period) shall be extended to the next
succeeding Business Day and interest shall be payable for any principal so extended for the period of such extension.
5.2 Pro Rata Treatment. Except to the extent otherwise provided herein: (a) each borrowing from the Banks under Section 2.1 hereof shall be made ratably from the Banks on the basis of their respective Commitments and each payment of commitment or facility fees shall be made for the account of the Banks, and each termination or reduction of the Commitments of the Banks under Section 2.3 hereof shall be applied, pro rata, according to the Banks' respective Commitments; (b) each payment by the Company of principal of or interest on Loans of a particular Type shall be made to Administrative Agent for the account of the Banks pro rata in accordance with the respective unpaid principal amounts of such Loans held by the Banks; and (c) the Banks (other than the applicable Issuer) shall purchase from the applicable Issuer participations in the Letters of Credit to the extent of their respective Commitment Percentages.
5.3 Computations. Interest on Competitive Loans and interest based on the Eurodollar Base Rate or the Federal Funds Rate will be computed on the basis of a year of 360 days and actual days elapsed (including the first day but excluding the last day) occurring in the period for which payable, unless the effect of so computing shall be to cause the rate of interest to exceed the Highest Lawful Rate, in which case interest shall be calculated on the basis of the actual number of days elapsed in a year composed of 365 or 366 days, as the case may be. All other interest and fees shall be computed on the basis of a year of 365 (or 366) days and actual days elapsed (including the first day but excluding the last day) occurring in the period for which payable.
5.4 Minimum and Maximum Amounts. Except for prepayments made pursuant to
Section 3.2(b) hereof, and subject to the provisions of Section 2.9 hereof with
respect to Competitive Loans, each borrowing and repayment of principal of
Loans, each termination or reduction of Commitments, each optional prepayment
and each conversion of Type shall be in an aggregate principal amount at least
equal to (a) in the case of Eurodollar Loans and Competitive Loans, $5,000,000,
and (b) in the case of Alternate Base Rate Loans, $1,000,000 (borrowings or
prepayments of Loans of different Types or, in the case of Eurodollar Loans and
Competitive Loans, having different Interest Periods at the same time hereunder
to be deemed separate borrowings and prepayments for purposes of the foregoing,
one for each Type or Interest Period). Upon any mandatory prepayment that would
reduce Eurodollar Loans or Competitive Loans, respectively, having the same
Interest Period to less than $5,000,000 such Loans shall automatically be
converted into Alternate Base Rate Loans on the last day of the applicable
Interest Period. Notwithstanding anything to the contrary contained in this
Agreement, there shall not be, at any one time, more than eight (8) Interest
Periods in effect with respect to Eurodollar Loans or Competitive Loans, in the
aggregate.
5.5 Certain Actions, Notices, Etc. Notices to Administrative Agent of any termination or reduction of Commitments, of borrowings and prepayments, conversions and continuations of Loans and of the duration of Interest Periods shall be irrevocable and shall be effective only if received by Administrative Agent not later than 11:00 a.m. Houston, Texas time on the number of Business
Days prior to the date of the relevant termination, reduction, borrowing and/or repayment, conversion or continuance specified below:
Number of Business
Notice Days Prior
Termination or
Reduction of Commitments 2
Borrowing or prepayment
of or conversion into or
continuance of Alternate Base
Rate Loans same day
Borrowing or
prepayment of or conversion
into or continuance of
Eurodollar Loans 3
|
Each such notice of termination or reduction shall specify the amount of the
Commitments to be terminated or reduced. Each such notice of borrowing or
prepayment shall specify the amount and Type of the Loans to be borrowed or
prepaid (subject to Sections 3.2(a) and 5.4 hereof), the date of borrowing or
prepayment (which shall be a Business Day) and, in the case of Eurodollar Loans,
the duration of the Interest Period therefor (subject to the definition of
"Interest Period"). Each such notice of conversion of a Loan into a Loan of
another Type shall identify such Loan (or portion thereof) being converted and
specify the Type of Loan into which such Loan is being converted (subject to
Section 5.4 hereof) and the date for conversion (which shall be a Business Day)
and, unless such Loan is being converted into an Alternate Base Rate Loan, the
duration (subject to the definition of "Interest Period") of the Interest Period
therefor which is to commence as of the last day of the then current Interest
Period therefor (or the date of conversion, if such Loan is being converted from
an Alternate Base Rate Loan). Each such notice of continuation of a Loan (or
portion thereof) as the same Type of Loan shall identify such Loan (or portion
thereof) being continued (subject to Section 5.4 hereof) and, unless such Loan
is an Alternate Base Rate Loan, the duration (subject to the definition of
"Interest Period") of the Interest Period therefor which is to commence as of
the last day of the then current Interest Period therefor. Administrative Agent
shall promptly notify the affected Banks of the contents of each such notice.
Notice of any prepayment having been given, the principal amount specified in
such notice, together with interest thereon to the date of prepayment, shall be
due and payable on such prepayment date. Section 2.9 hereof shall control the
time periods applicable to Competitive Loans.
5.6 Non-Receipt of Funds by Administrative Agent. Unless Administrative Agent shall have been notified by a Bank or the Company (the "Payor") prior to the date on which such Bank is to make payment to Administrative Agent of the proceeds of a Loan to be made by it hereunder (or the payment of any amount by
such Bank to reimburse the applicable Issuer for a drawing under any Letter of Credit) or the Company is to make a payment to Administrative Agent for the account of one or more of the Banks, as the case may be (such payment being herein called the "Required Payment"), which notice shall be effective upon receipt, that the Payor does not intend to make the Required Payment to Administrative Agent, Administrative Agent may assume that the Required Payment has been made and may, in reliance upon such assumption (but shall not be required to), make the amount thereof available to the intended recipient on such date and, if the Payor has not in fact made the Required Payment to Administrative Agent on or before such date, the recipient of such payment (or, if such recipient is the beneficiary of a Letter of Credit, the Company and, if the Company fails to pay the amount thereof to Administrative Agent forthwith upon demand, the Banks ratably in proportion to their respective Commitment Percentages) shall, on demand, pay to Administrative Agent the amount made available to it together with interest thereon in respect of the period commencing on the date such amount was so made available by Administrative Agent until the date Administrative Agent recovers such amount at a rate per annum equal to the Federal Funds Rate for such period.
5.7 Sharing of Payments, Etc. If a Bank shall obtain payment of any principal of or interest on any Loan made by it under this Agreement, or on any Reimbursement Obligation or other obligation then due to such Bank hereunder, through the exercise of any right of set-off, banker's lien, counterclaim or similar right, or otherwise, it shall promptly purchase from the other Banks participations in the Loans made, or Reimbursement Obligations or other obligations held, by the other Banks in such amounts, and make such other adjustments from time to time as shall be equitable to the end that all the Banks shall share the benefit of such payment (net of any expenses which may be incurred by such Bank in obtaining or preserving such benefit) pro rata in accordance with the unpaid principal and interest on the Obligations then due to each of them (provided, however, that the foregoing shall not apply to payments of Competitive Loans made prior to the termination of the Commitments following the occurrence of an Event of Default). To such end all the Banks shall make appropriate adjustments among themselves (by the resale of participations sold or otherwise) if such payment is rescinded or must otherwise be restored. The Company agrees, to the fullest extent it may effectively do so under applicable law, that any Bank so purchasing a participation in the Loans made, or Reimbursement Obligations or other obligations held, by other Banks may exercise all rights of set-off, bankers' lien, counterclaim or similar rights with respect to such participation as fully as if such Bank were a direct holder of Loans and Reimbursement Obligations or other obligations in the amount of such participation. Nothing contained herein shall require any Bank to exercise any such right or shall affect the right of any Bank to exercise, and retain the benefits of exercising, any such right with respect to any other Indebtedness or obligation of the Company.
Section 6. Yield Protection and Illegality.
6.1 Additional Costs.
(a) Subject to Section 13.6, the Company shall pay to Administrative Agent, on demand for the account of each Bank from time to time such amounts as such Bank may determine to be necessary to compensate it for any costs incurred by such Bank which such Bank determines are attributable to its making or maintaining of any Eurodollar Loan or any Competitive Loan hereunder or its obligation to make any such Loan hereunder, or any reduction in any amount receivable by such Bank hereunder in respect of any of such Loans or such obligation (such increases in costs and reductions in amounts receivable being herein called "Additional Costs"), in each case resulting from any Regulatory Change which:
(i) subjects such Bank (or makes it apparent that such Bank is subject) to any tax (including without limitation any United States interest equalization tax), levy, impost, duty, charge or fee (collectively, "Taxes"), or any deduction or withholding for any Taxes on or from the payment due under any Eurodollar Loan or any Competitive Loan or other amounts due hereunder, other than income and franchise taxes of each jurisdiction (or any subdivision thereof) in which such Bank has an office or its Applicable Lending Office; or
(ii) changes the basis of taxation of any amounts payable to such Bank under this Agreement in respect of any of such Loans (other than changes which affect taxes measured by or imposed on the overall net income or franchise taxes of such Bank or of its Applicable Lending Office for any of such Loans by each jurisdiction (or any subdivision thereof) in which such Bank has an office or such Applicable Lending Office); or
(iii) imposes or modifies or increases or deems applicable any reserve, special deposit or similar requirements (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System) relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, such Bank or loans made by such Bank, or against any other funds, obligations or other property owned or held by such Bank (including any of such Loans or any deposits referred to in the definition of "Eurodollar Base Rate" in Section 1.1 hereof) and such Bank actually incurs such additional costs.
Each Bank (if so requested by the Company through Administrative Agent) will designate a different available Applicable Lending Office for the Eurodollar Loans or the Competitive Loans of such Bank or take such other action as the Company may request if such designation or action will avoid the need for, or reduce the amount of, such compensation and will not, in the sole opinion of such Bank exercised in good faith, be disadvantageous to such Bank (provided that such Bank shall have no obligation so to designate an Applicable Lending Office for Eurodollar Loans located in the United States of America). Each Bank will furnish the Company with a statement setting forth the basis and amount of each request by such Bank for compensation under this Section 6.1(a); subject to
Section 6.8, such certificate shall be conclusive, absent manifest error, and may be prepared using any reasonable averaging and attribution methods.
(b) Without limiting the effect of the foregoing provisions of this Section 6.1, in the event that, by reason of any Regulatory Change, any Bank either (i) incurs Additional Costs based on or measured by the excess above a specified level of the amount of a category of deposits or other liabilities of such Bank which includes deposits by reference to which the interest rate on Eurodollar Loans is determined as provided in this Agreement or a category of extensions of credit or other assets of such Bank which includes Eurodollar Loans or Competitive Loans or (ii) becomes subject to restrictions on the amount of such a category of liabilities or assets which it may hold, then, if such Bank so elects by notice to the Company (with a copy to Administrative Agent), the obligation of such Bank to make Eurodollar Loans or Competitive Loans, as the case may be, hereunder shall be suspended until the date such Regulatory Change ceases to be in effect (in which case the provisions of Section 6.4 hereof shall be applicable).
(c) Good faith determinations and allocations by any Bank for purposes of this Section 6.1 of the effect of any Regulatory Change on its costs of maintaining its obligations to make Loans or of making or maintaining Loans or on amounts receivable by it in respect of Loans, and of the additional amounts required to compensate such Bank in respect of any Additional Costs, shall be conclusive, absent manifest error.
(d) The Company's obligation to pay Additional Costs and compensation with regard to each Eurodollar Loan and each Competitive Loan shall survive termination of this Agreement.
6.2 Limitation on Types of Loans. Anything herein to the contrary notwithstanding, if, with respect to any Eurodollar Loans:
(a) Administrative Agent determines in good faith (which determination shall be conclusive) that quotations of interest rates for the relevant deposits referred to in the definition of "Eurodollar Base Rate" in Section 1.1 hereof are not being provided by the Reference Banks in the relevant amounts or for the relevant maturities for purposes of determining the rate of interest for such Loans for Interest Periods therefor as provided in this Agreement; or
(b) the Majority Banks determine in good faith (which determination shall be conclusive) and notify Administrative Agent that the relevant rates of interest referred to in the definition of "Eurodollar Base Rate" in Section 1.1
hereof upon the basis of which the rates of interest for such Loans are to be determined do not accurately reflect the cost to such Banks of making or maintaining such Loans for Interest Periods therefor; or
(c) Administrative Agent determines in good faith (which determination shall be conclusive) that by reason of circumstances affecting the interbank Dollar market generally, deposits in United States dollars in the relevant interbank Dollar market are not being offered for the applicable Interest Period and in an amount equal to the amount of the Eurodollar Loan requested by the Company;
then Administrative Agent shall promptly notify the Company and each Bank thereof, and, so long as such condition remains in effect, the Banks shall be under no obligation to make Eurodollar Loans (but shall maintain until the end of the Interest Period then in effect the Eurodollar Loans then outstanding).
6.3 Illegality. Notwithstanding any other provision of this Agreement to
the contrary, if (x) by reason of the adoption of any applicable Legal
Requirement or any change in any applicable Legal Requirement or in the
interpretation or administration thereof by any Governmental Authority or
compliance by any Bank with any request or directive (whether or not having the
force of law) of any central bank or other Governmental Authority or (y)
circumstances affecting the relevant interbank Dollar market or the position of
a Bank therein shall at any time make it unlawful or impracticable in the sole
discretion of a Bank exercised in good faith for such Bank or its Applicable
Lending Office to (a) honor its obligation to make Eurodollar Loans or
Competitive Loans hereunder, or (b) maintain Eurodollar Loans or Competitive
Loans hereunder, then such Bank shall promptly notify the Company thereof
through Administrative Agent and such Bank's obligation to make or maintain
Eurodollar Loans or Competitive Loans, as the case may be, hereunder shall be
suspended until such time as such Bank may again make and maintain Eurodollar
Loans or Competitive Loans, as the case may be (in which case the provisions of
Section 6.4 hereof shall be applicable). Before giving such notice pursuant to
this Section 6.3, such Bank will designate a different available Applicable
Lending Office for the Eurodollar Loans or the Competitive Loans, as the case
may be, of such Bank or take such other action as the Company may request if
such designation or action will avoid the need to suspend such Bank's obligation
to make Eurodollar Loans or Competitive Loans, as the case may be, hereunder and
will not, in the sole opinion of such Bank exercised in good faith, be
disadvantageous to such Bank (provided, that such Bank shall have no obligation
so to designate an Applicable Lending Office for Eurodollar Loans located in the
United States of America).
6.4 Substitute Alternate Base Rate Loans. If the obligation of any Bank to make or maintain Eurodollar Loans or Competitive Loans, as the case may be, shall be suspended pursuant to Section 6.1, 6.2 or 6.3 hereof, all Loans which would otherwise be made by such Bank as Eurodollar Loans or Competitive Loans, as the case may be, shall be made instead as Alternate Base Rate Loans (and, if an event referred to in Section 6.1(b) or 6.3 hereof has occurred and such Bank so requests by notice to the Company with a copy to Administrative Agent, each Eurodollar Loan or each Competitive Loan, as the case may be, of such Bank then outstanding shall be automatically converted into an Alternate Base Rate Loan on the date specified by such Bank in such notice) and, to the extent that Eurodollar Loans or Competitive Loans, as the case may be, are so made as (or converted into) Alternate Base Rate Loans, all payments of principal which would otherwise be applied to such Eurodollar Loans or such Competitive Loans, as the case may be, shall be applied instead to such Alternate Base Rate Loans.
6.5 Compensation. Subject to Section 13.6 hereof, the Company shall pay to Administrative Agent for the account of each Bank, within four (4) Business Days after demand therefor by such Bank through Administrative Agent, such amount or amounts as shall be sufficient (in the reasonable opinion of such Bank) to compensate it for any loss, cost or expense actually incurred by it (exclusive of any lost profits or opportunity costs) as a result of:
(a) any payment, prepayment or conversion of a Eurodollar Loan or a Competitive Loan made by such Bank on a date other than the last day of an Interest Period for such Loan; or
(b) any failure by the Company to borrow a Eurodollar Loan or a Competitive Loan to be made by such Bank on the date for such borrowing specified in the relevant notice of borrowing under Section 5.5 or Section 2.9 hereof;
such compensation to include, without limitation, any loss or expense actually incurred (exclusive of any lost profits or opportunity costs) by reason of the liquidation or reemployment of deposits or other funds acquired by the applicable Bank to fund or maintain its share of any Loan. Subject to Section 6.8, each determination of the amount of such compensation by a Bank shall be conclusive and binding, absent manifest error, and may be computed using any reasonable averaging and attribution method. No costs shall be payable under this Section solely by reason of the conversion of loans designated as "Eurodollar Loans" under that certain Credit Agreement referred to in Section 13.15 hereof into the Existing Competitive Loans.
6.6 Additional Costs in Respect of Letters of Credit. If as a result of any Regulatory Change there shall be imposed, modified or deemed applicable any tax, reserve, special deposit or similar requirement against or with respect to or measured by reference to Letters of Credit issued or to be issued hereunder or participations in such Letters of Credit, and the result shall be to increase the cost to any Bank of issuing or maintaining any Letter of Credit or any participation therein, or reduce any amount receivable by any Bank hereunder in respect of any Letter of Credit or any participation therein (which increase in cost, or reduction in amount receivable, shall be the result of such Bank's reasonable allocation of the aggregate of such increases or reductions resulting from such event), then such Bank shall notify the Company through Administrative Agent, and upon demand therefor by such Bank through Administrative Agent, the Company (subject to Section 13.6 hereof) shall pay to such Bank, from time to time as specified by such Bank, such additional amounts as shall be sufficient to compensate such Bank for such increased costs or reductions in amount. Before making such demand pursuant to this Section 6.6, such Bank will designate a different available Applicable Lending Office for the Letter of Credit of such Bank or take such other action as the Company may request, if such designation or action will avoid the need for, or reduce the amount of, such compensation and will not, in the sole opinion of such Bank exercised in good faith, be disadvantageous to such Bank. A statement as to such increased costs or reductions in amount incurred by such Bank, submitted by such Bank to the Company, shall be conclusive as to the amount thereof, absent manifest error.
6.7 Capital Adequacy. If any Bank shall have determined that a Regulatory
Change resulting in the adoption after the date hereof or effectiveness after
the date hereof (whether or not previously announced) of any applicable law,
rule, regulation or treaty regarding capital adequacy, or any change therein
after the date hereof, or any change in the interpretation or administration
thereof after the date hereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Applicable Lending Office) with any request or directive after the date hereof
regarding capital adequacy (whether or not having the force of law) of any such
Governmental Authority has or would have the effect of reducing the rate of
return on such Bank's capital as a consequence of such Bank's obligations
hereunder, under the Loans made by it and under the Letters of Credit to a level
below that which such Bank could have achieved but for such adoption, change or
compliance (taking into consideration such Bank's policies with respect to
capital adequacy) by an amount deemed by such Bank to be material, then from
time to time, upon satisfaction of the conditions precedent set forth in this
Section 6.7, upon demand by such Bank (with a copy to Administrative Agent), the
Company (subject to Section 13.6 hereof) shall pay to such Bank such additional
amount or amounts as will compensate such Bank for such reduction. A certificate
as to such amounts, submitted to the Company and Administrative Agent by such
Bank, setting forth the basis for such Bank's determination of such amounts,
shall constitute a demand therefor and shall be conclusive and binding for all
purposes, absent manifest error. The Company shall pay the amount shown as due
on any such certificate within four (4) Business Days after delivery of such
certificate. Subject to Section 6.8, in preparing such certificate, a Bank may
employ such assumptions and allocations of costs and expenses as it shall in
good faith deem reasonable and may use any reasonable averaging and attribution
method.
6.8 Limitation on Additional Charges; Substitute Banks; Non-Discrimination. Anything in this Section 6 notwithstanding:
(a) the Company shall not be required to pay to any Bank reimbursement with regard to any costs or expenses, unless such Bank notifies the Company of such costs or expenses within 90 days after the date paid or incurred;
(b) none of the Banks shall be permitted to pass through to the Company charges and costs under this Section 6 on a discriminatory basis (i.e., which are not also passed through by such Bank to other customers of such Bank similarly situated where such customer is subject to documents providing for such pass through); and
(c) if any Bank elects to pass through to the Company any material charge or cost under this Section 6 or elects to terminate the availability of Eurodollar Loans for any material period of time, the Company may, within 60 days after the date of such event and so long as no Default shall have occurred and be continuing, elect to terminate such Bank as a party to this Agreement; provided that, concurrently with such termination the Company shall (i) if Administrative Agent and each of the other Banks shall consent, pay that Bank all principal, interest and fees and other amounts owed to such Bank through such date of termination or (ii) have arranged for another financial institution approved by Administrative Agent (such approval not to be unreasonably withheld)
as of such date, to become a substitute Bank for all purposes under this Agreement in the manner provided in Section 13.5; provided further that, prior to substitution for any Bank, the Company shall have given written notice to Administrative Agent of such intention and the Banks shall have the option, but no obligation, for a period of 60 days after receipt of such notice, to increase their Commitments in order to replace the affected Bank in lieu of such substitution.
Section 7. Conditions Precedent.
7.1 Initial Loans. The obligation of each Bank or any applicable Issuer to make its initial Loans after the date hereof or issue or participate in a Letter of Credit after the date hereof (if such Letter of Credit is issued prior to the funding of the initial Loans after the date hereof) hereunder is subject to the following conditions precedent, each of which shall have been fulfilled or waived to the satisfaction of the Majority Banks:
(a) Corporate Action and Status. Administrative Agent shall have received from the appropriate Governmental Authorities certified copies of the Organizational Documents (other than bylaws) of the Company, and evidence satisfactory to Administrative Agent of all corporate action taken by the Company authorizing the execution, delivery and performance of the Loan Documents and all other documents related to this Agreement to which it is a party (including, without limitation, a certificate of the secretary of each such party setting forth the resolutions of its Board of Directors authorizing the transactions contemplated thereby and attaching a copy of its bylaws), together with such certificates as may be appropriate to demonstrate the qualification and good standing of and payment of taxes by the Company in each state in which such qualification is necessary.
(b) Incumbency. The Company and each Relevant Party shall have delivered to Administrative Agent a certificate in respect of the name and signature of each of the officers (i) who is authorized to sign on its behalf the applicable Loan Documents related to any Loan or the issuance of any Letter of Credit and (ii) who will, until replaced by another officer or officers duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with any Loan or the issuance of any Letter of Credit. Administrative Agent and each Bank may conclusively rely on such certificates until they receive notice in writing from the Company or the appropriate Relevant Party to the contrary.
(c) [Intentionally omitted].
(d) Loan Documents. The Company and each other Relevant Party shall have duly executed and delivered the other Loan Documents to which it is a party (in such number of copies as Administrative Agent shall have requested) and each such Loan Document shall be in form satisfactory to the Agents. Each such Loan Document shall be in substantially the form furnished to the Banks prior to their execution of this Agreement, together with such changes therein as the Agents may approve.
(e) Fees and Expenses. The Company shall have paid to Administrative Agent
for the account of each Bank all accrued and unpaid commitment fees and other
fees in the amounts previously agreed upon in writing among the Company and
Administrative Agent; and shall have in addition paid to each Agent all amounts
payable under the letter agreements referred to Section 2.4(b) hereof and under
Section 9.7 hereof on or before the date of this Agreement.
(f) Opinions of Counsel. Administrative Agent shall have received (1) an opinion of Vinson & Elkins L.L.P., counsel to the Company, in form and substance reasonably satisfactory to the Agents, and (2) such opinions of counsel to the Company and other Relevant Parties as the Agents shall reasonably request with respect to the Company and the Loan Documents.
(g) Execution by Banks and Agents. Administrative Agent shall have received counterparts of this Agreement executed and delivered by or on behalf of each of the Banks and the Agents or Administrative Agent shall have received evidence satisfactory to it of the execution and delivery by each of the Banks and Agents of a counterpart hereof.
(h) Consents. Administrative Agent shall have received evidence satisfactory to it that, except as disclosed in the Disclosure Statement, all material consents of each Governmental Authority and of each other Person, if any, reasonably required in connection with (a) the Loans and the Letters of Credit and (b) the execution, delivery and performance of this Agreement and the other Loan Documents have been satisfactorily obtained.
(i) Other Documents. Administrative Agent shall have received such other documents consistent with the terms of this Agreement and relating to the transactions contemplated hereby as Administrative Agent may reasonably request.
All provisions and payments required by this Section 7.1 are subject to the provisions of Section 13.6.
7.2 Initial and Subsequent Loans. The obligation of each Bank or any
applicable Issuer to make any Loan (including, without limitation, its initial
Loan) to be made by it hereunder or to issue or participate in any Letter of
Credit is subject to the additional conditions precedent that (i) Administrative
Agent shall have received a Request for Extension of Credit and such other
certifications as Administrative Agent may reasonably require, (ii) in the case
of Competitive Loans, the Company shall have complied with the provisions of
Section 2.9 hereof and (iii) as of the date of such Loan or such issuance, and
after giving effect thereto:
(a) no Default shall have occurred and be continuing;
(b) except for facts timely disclosed to Administrative Agent from time to time in writing, which facts (i) are not materially more adverse to the Company and its Subsidiaries, (ii) do not materially decrease the ability of the Banks to collect the Obligations as and when due and payable and (iii) do not
materially increase the liability of any Agent or any of the Banks, in each case compared to those facts existing on the date hereof and the material details of which have been set forth in the Financial Statements delivered to Administrative Agent prior to the date hereof or in the Disclosure Statement, and except for the representations set forth in the Loan Documents which, by their terms, are expressly (or by means of similar phrasing) made as of the Effective Date or as of the date hereof, as the case may be, only, the representations and warranties made in each Loan Document shall be true and correct in all material respects on and as of the date of the making of such Loan or such issuance, with the same force and effect as if made on and as of such date;
(c) the making of such Loan or the issuance of such Letter of Credit shall not violate any Legal Requirement applicable to any Bank.
Each Request for Extension of Credit by the Company hereunder or request for issuance of a Letter of Credit shall include a representation and warranty by the Company to the effect set forth in Subsections 7.2(a) and (b) (both as of the date of such notice and, unless the Company otherwise notifies Administrative Agent prior to the date of such borrowing or issuance, as of the date of such borrowing or issuance).
Section 8. Representations and Warranties. To induce the Banks to enter into this Agreement and to make the Loans and issue or participate in the Letters of Credit, the Company represents and warrants (such representations and warranties to survive any investigation and the making of the Loans and the issuance of the Letters of Credit) to the Banks and the Agents as follows:
8.1 Corporate Existence. The Company and each Subsidiary of the Company are corporations duly incorporated and organized, legally existing and in good standing under the laws of the respective jurisdictions in which they are incorporated, and are duly qualified as foreign corporations in all jurisdictions wherein the property owned or the business transacted by them makes such qualification necessary and the failure to so qualify could reasonably be expected to result in a Material Adverse Effect.
8.2 Corporate Power and Authorization. Each of the Company and each Subsidiary of the Company is duly authorized and empowered to execute, deliver, and perform this Agreement and the other Loan Documents to which it is a party; and all corporate action on the Company's part and on the part of each Subsidiary of the Company for the due execution, delivery, and performance of this Agreement and the other Loan Documents to which each of the Company and each such Subsidiary is a party has been duly and effectively taken.
8.3 Binding Obligations. This Agreement and the other Loan Documents constitute legal, valid and binding obligations of the Company and its Subsidiaries, to the extent each is a party thereto, enforceable against the Company and its Subsidiaries, to the extent each is a party thereto, in accordance with their respective terms, except as may be limited by any bankruptcy, insolvency, moratorium or other similar laws or judicial decisions affecting creditors' rights generally and general principles of equity whether considered at law or in equity.
8.4 No Legal Bar or Resultant Lien. The Company's and each of its Subsidiaries' creation, issuance, execution, delivery and performance of this Agreement and the other Loan Documents, to the extent they are parties thereto, do not and will not violate any provisions of the Organizational Documents of the Company or any Subsidiary of the Company or any Legal Requirement to which the Company or any Subsidiary of the Company is subject or by which its property may be presently bound or encumbered, or result in the creation or imposition of any Lien upon any properties of the Company or any Subsidiary of the Company, other than those permitted by this Agreement.
8.5 No Consent. Except as set forth in the Disclosure Statement, the Company's and each of its Subsidiaries' execution, delivery, and performance of this Agreement and the other Loan Documents to which they are parties do not and will not require the consent or approval of any Person other than such consents and/or approvals obtained by the Company contemporaneously with or prior to the execution of this Agreement, including, without limitation, any Governmental Authorities, other than those consents the failure to obtain which could not be reasonably expected to have a Material Adverse Effect.
8.6 Financial Condition. The audited consolidated annual financial statements of the Company and its Subsidiaries for the year ended December 31, 1996 and the unaudited consolidated interim financial statements of the Company and its Subsidiaries for the quarter and three-month period ended September 30, 1997, which have been delivered to the Banks, have been prepared in accordance with GAAP, and present fairly the financial condition and results of the operations of the Company and its Subsidiaries for the period or periods stated (subject only to normal year-end audit adjustments with respect to the unaudited interim statements). No material adverse change, either in any case or in the aggregate, has occurred since September 30, 1997 in the assets, liabilities, financial condition, business, operations, affairs or circumstances of the Company and its Subsidiaries taken as a whole, except as disclosed to the Banks in the Disclosure Statement.
8.7 Investments and Guaranties. As of the Effective Date, no Subsidiary of the Company had made Investments in or advances to, and neither the Company nor any Subsidiary of the Company had made Guarantees of, the obligations of any Person, except as (a) disclosed to the Banks in the Disclosure Statement or (b) not prohibited by applicable provisions of Section 10.
8.8 Liabilities and Litigation. Neither the Company nor any Subsidiary of
the Company has any material (individually or in the aggregate) liabilities,
direct or contingent, except as (a) disclosed or referred to in the Financial
Statements, (b) disclosed to the Banks in the Disclosure Statement, (c)
disclosed in a notice to Administrative Agent pursuant to Section 9.10 with
respect to such as could reasonably be expected to have a Material Adverse
Effect or (d) not prohibited by applicable provisions of Section 10. Except as
(a) described in the Financial Statements, (b) otherwise disclosed to the Banks
in the Disclosure Statement, (c) disclosed in a notice to Administrative Agent
pursuant to Section 9.10 with respect to such as could reasonably be expected to
have a Material Adverse Effect or (d) not prohibited by applicable provisions of
Section 10, no litigation, legal, administrative or arbitral proceeding,
investigation, or other action of any nature exists or (to the knowledge of the
Company) is threatened against or affecting the Company or any Subsidiary of the Company which could reasonably be expected to result in any judgment which could reasonably be expected to have a Material Adverse Effect, or which in any manner challenges or may challenge or draw into question the validity of this Agreement or any other Loan Document, or enjoins or threatens to enjoin or otherwise restrain any of the transactions contemplated by any of them.
8.9 Taxes and Governmental Charges. The Company and its Subsidiaries have filed, or obtained extensions with respect to the filing of, all material tax returns and reports required to be filed and have paid all material taxes, assessments, fees and other governmental charges levied upon any of them or upon any of their respective properties or income which are due and payable, including interest and penalties, or have provided adequate reserves for the payment thereof.
8.10 Title to Properties. The Company and its Subsidiaries have good and defensible title to their respective properties (including, without limitation, all fee and leasehold interests), free and clear of all Liens except (a) those referred to in the Financial Statements, (b) as disclosed to the Banks in the Disclosure Statement or (c) as permitted by Section 10.2.
8.11 Defaults. Neither the Company nor any Subsidiary of the Company is in default, which default could reasonably be expected to have a Material Adverse Effect, under any indenture, mortgage, deed of trust, agreement or other instrument to which the Company or any Subsidiary of the Company is a party or by which the Company or any Subsidiary of the Company or the property of the Company or any Subsidiary of the Company is bound, except as (a) disclosed to the Banks in the Disclosure Statement, (b) disclosed in a notice to Administrative Agent pursuant to Section 9.10 with respect to such as could reasonably be expected to have a Material Adverse Effect or (c) specifically permitted by applicable provisions of Section 10. No Default under this Agreement or any other Loan Document has occurred and is continuing.
8.12 Location of Businesses and Offices. Except to the extent that Administrative Agent has been furnished written notice to the contrary or of additional locations, pursuant to Section 9.10, the Company's principal place of business and chief executive offices are located at the address stated on the signature page hereof and the principal places of business and chief executive offices of each Subsidiary are described on Exhibit D hereto.
8.13 Compliance with Law. Neither the Company nor any Subsidiary of the Company (except as (a) disclosed to the Banks in the Disclosure Statement, (b) disclosed in a notice to Administrative Agent pursuant to Section 9.10 with respect to such as could reasonably be expected to have a Material Adverse Effect or (c) not prohibited by applicable provisions of Section 10):
(a) is in violation of any Legal Requirement; or
(b) has failed to obtain any license, permit, franchise or other governmental authorization necessary to the ownership of any of their respective properties or the conduct of their respective business;
which violation or failure could reasonably be expected to have a Material Adverse Effect.
8.14 Margin Stock. None of the proceeds of the Loans will be used for the purpose of, and neither the Company nor any Subsidiary of the Company is engaged in the business of extending credit for the purpose of (a) purchasing or carrying any "margin stock" as defined in Regulation U of the Board of Governors of the Federal Reserve System (12 C.F.R. Part 221) or (b) reducing or retiring any indebtedness which was originally incurred to purchase or carry margin stock, if such purpose under either (a) or (b) above would constitute this transaction a "purpose credit" within the meaning of said Regulation U, or for any other purpose which would constitute this transaction a "purpose credit". Neither the Company nor any Subsidiary of the Company is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stocks. Neither the Company nor any Subsidiary of the Company nor any Person acting on behalf of the Company or any Subsidiary of the Company has taken or will take any action which might cause any of the Loan Documents, including this Agreement, to violate Regulation U or any other regulation of the Board of Governors of the Federal Reserve System, or to violate any similar provision of the Securities Exchange Act of 1934 or any rule or regulation under any such provision thereof.
8.15 Subsidiaries. The Company has no Subsidiaries as of the date of this Agreement except those shown in Exhibit D hereto.
8.16 ERISA. With respect to each Plan, the Company and each ERISA Affiliate have fulfilled their obligations, including obligations under the minimum funding standards of ERISA and the Code, and are in compliance in all material respects with the provisions of ERISA and the Code. The Company has no knowledge of any event which could result in a liability of the Company or any ERISA Affiliate to the PBGC or a Plan (other than to make contributions in the ordinary course). Since the effective date of Title IV of ERISA, there have not been any nor are there now existing any events or conditions that would cause the Lien provided under Section 4068 of ERISA to attach to any property of the Company or any ERISA Affiliate. There are no Unfunded Liabilities with respect to any Plan other than those specifically described in the certificate delivered in accordance with Section 7.1(i). No "prohibited transaction" has occurred with respect to any Plan.
8.17 Investment Company Act. Neither the Company nor any of its Subsidiaries is an investment company within the meaning of the Investment Company Act of 1940, as amended, or, directly or indirectly, controlled by or acting on behalf of any Person which is an investment company, within the meaning of said Act.
8.18 Public Utility Holding Company Act. Neither the Company nor any of its Subsidiaries (i) is subject to regulation under the Public Utility Holding
Company Act of 1935, as amended (the "PUHC Act"), except as to Section 9(a)(2) thereof (15 U.S.C.A. 79(i)(a)(2)), or (ii) is in violation of any of the provisions, rules, regulations or orders of or under the PUHC Act. Further, none of the transactions contemplated under this Agreement, including without limitation, the making of the Loans and the issuance of the Letters of Credit, shall cause or constitute a violation of any of the provisions, rules, regulations or orders of or under the PUHC Act and the PUHC Act does not in any manner impair the legality, validity or enforceability of this Agreement. The Company has duly filed with the Securities and Exchange Commission good faith applications (each an "Application") under Section 2(a)(8) of the PUHC Act (15 U.S.C.A. 79(b)(a)(8)) for a declaration of non-subsidiary status pursuant to such Section 2(a)(8) with respect to each Person (each a "Specified Shareholder") which owns, controls or holds with power to vote, directly or indirectly, a sufficient quantity of the voting securities of the Company to be construed as a "holding company", as such term is defined in the PUHC Act, in respect of the Company. All of the information contained in such Applications, as amended, was true as of the most recent filing date with respect thereto (provided that the Company may, unless it has actual current knowledge to the contrary, rely solely upon written information furnished by any Specified Shareholder with respect to background information about the Specified Shareholder and the nature of the ownership by such Specified Shareholder or its Affiliates of the voting securities of the Company), and the Company knows of no reason why each such Application, if acted upon by the Securities and Exchange Commission, would not be approved. True and correct copies of each such Application and any amendments thereto, as filed, have been furnished to Administrative Agent. The Company has not received any written notice from the Securities and Exchange Commission with respect to any such Application other than as disclosed in writing to Administrative Agent.
8.19 Environmental Matters. Except as disclosed in the Disclosure Statement, (i) the Company and it Subsidiaries have obtained and maintained in effect all Environmental Permits (or has initiated the necessary steps to transfer the Environmental Permits into its name), the failure to obtain which could reasonably be expected to have a Material Adverse Effect, (ii) the Company and its Subsidiaries and their properties, assets, business and operations have been and are in compliance with all applicable Requirements of Environmental Law and Environmental Permits failure to comply with which could reasonably be expected to have a Material Adverse Effect, (iii) the Company and its Subsidiaries and their properties, assets, business and operations are not subject to any (A) Environmental Claims or (B) Environmental Liabilities, in either case direct or contingent, and whether known or unknown, arising from or based upon any act, omission, event, condition or circumstance occurring or existing on or prior to the date hereof which could reasonably be expected to have a Material Adverse Effect, and (iv) no Responsible Officer of the Company or any of its Subsidiaries has received any notice of any violation or alleged violation of any Requirements of Environmental Law or Environmental Permit or any Environmental Claim in connection with its assets, properties, business or operations which could reasonably be expected to have a Material Adverse Effect. The liability (including without limitation any Environmental Liability and any other damage to persons or property), if any, of the Company and its Subsidiaries and with respect to their properties, assets, business and operations which is reasonably expected to arise in connection with Requirements of Environmental Laws currently in effect and other environmental matters presently known by a Responsible Officer of the Company will not have a Material
Adverse Effect. No Responsible Officer of the Company knows of any event or condition with respect to Environmental Matters with respect to any of its properties or the properties of any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect. For purposes of this Section 8.19, "Environmental Matters" shall mean matters relating to pollution or protection of the environment, including, without limitation, emissions, discharges, releases or threatened releases of Hazardous Substances into the environment (including, without limitation, ambient air, surface water or ground water, or land surface or subsurface), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Substances.
8.20 Claims and Liabilities. Except as disclosed to the Banks in writing, neither the Company nor any of its Subsidiaries has accrued any liabilities under gas purchase contracts for gas not taken, but for which it is liable to pay if not made up and which, if not paid, would have a Material Adverse Effect. Except as disclosed to the Banks in writing, no claims exist against the Company or its Subsidiaries for gas imbalances which claims if adversely determined would have a Material Adverse Effect. No purchaser of product supplied by the Company or any of its Subsidiaries has any claim against the Company or any of its Subsidiaries for product paid for, but for which delivery was not taken as and when paid for, which claim if adversely determined would have a Material Adverse Effect.
8.21 Solvency. Neither the Company nor the Company and its Subsidiaries, on a consolidated basis, is "insolvent", as such term is used and defined in (i) the Bankruptcy Code and (ii) the Texas Uniform Fraudulent Transfer Act, Tex. Bus. & Com. Code Ann. 24.001 et seq.
Section 9. Affirmative Covenants. A deviation from the provisions of this
Section 9 will not constitute a Default under this Agreement if such deviation
is consented to in writing by the Majority Banks. Without the prior written
consent of the Majority Banks, the Company agrees with the Banks and the Agents
that, so long as any of the Commitments is in effect and until payment in full
of all Loans hereunder, the termination or expiry of all Letters of Credit and
payment in full of Letter of Credit Liabilities, all interest thereon and all
other amounts payable by the Company hereunder:
9.1 Financial Statements and Reports. The Company will promptly furnish to any Bank from time to time upon request such information regarding the business and affairs and financial condition of the Company and its Subsidiaries as such Bank may reasonably request, and will furnish to the Agents and each of the Banks:
(a) Annual Reports - promptly after becoming available and in any event within 100 days after the close of each fiscal year of the Company:
(i) the audited consolidated balance sheet of the Company and its Subsidiaries as of the end of such year;
(ii) the audited consolidated statement of earnings of the Company and its Subsidiaries for such year;
(iii) the audited consolidated statement of cash flows of the Company and its Subsidiaries for such year;
setting forth in each case in comparative form the corresponding figures for the preceding fiscal year, and, in the case of the audited Financial Statements, audited and accompanied by the related opinion of KPMG Peat Marwick or other independent certified public accountants of recognized national standing acceptable to the Majority Banks, which opinion shall state that such audited balance sheets and statements have been prepared in accordance with GAAP consistently followed throughout the period indicated and fairly present the consolidated financial condition and results of operations of the applicable Persons as at the end of, and for, such fiscal year; and
(b) Quarterly Reports - as soon as available and in any event within 50 days after the end of each of the first three quarterly periods in each fiscal year of the Company:
(i) the unaudited consolidated balance sheet of the Company and its Subsidiaries as of the end of such quarter;
(ii) the unaudited consolidated statement of earnings of the Company and its Subsidiaries for such quarter and for the period from the beginning of the fiscal year to the close of such quarter;
(iii) the unaudited consolidated statement of cash flows of the Company and its Subsidiaries for such quarter and for the period from the beginning of the fiscal year to the close of such quarter;
all of items (i) through (iii) above prepared on substantially the same accounting basis as the annual reports described in Subsection 9.1(a), subject to normal changes resulting from year-end adjustments; and
(c) [Intentionally omitted]; and
(d) SEC and Other Reports - promptly upon their becoming publicly available, one copy of each financial statement, report, notice or definitive proxy statement sent by the Company or any Subsidiary to shareholders generally, and of each regular or periodic report and any registration statement, prospectus or written communication (other than transmittal letters) in respect thereof filed by the Company or any of its Subsidiaries with, or received by the Company or any of its Subsidiaries in connection therewith from, any securities exchange or the Securities and Exchange Commission or any successor agency.
All of the balance sheets and other financial statements referred to in this Section 9.1 will be in such detail as any Bank may reasonably request and will conform to GAAP applied on a basis consistent with those of the Financial Statements as of December 31, 1996. In addition, if GAAP shall change with respect to any matter relative to determination of compliance with this Agreement, the Company will also provide financial information necessary for the Banks to determine compliance with this Agreement.
9.2 Officers' Certificates.
(a) Concurrently with the furnishing of the annual financial statements pursuant to Subsection 9.1(a), commencing with the annual financial statements required to be delivered in 1998, the Company will furnish or cause to be furnished to Administrative Agent certificates of compliance, as follows:
(i) a certificate signed by the principal financial officer of the Company in the form of Exhibit E; and
(ii) a certificate from the independent public accountants stating that their audit has not disclosed the existence of any condition which constitutes a Default, or if their audit has disclosed the existence of any such condition, specifying the nature and period of existence.
(b) Concurrently with the furnishing of the quarterly financial statements pursuant to Subsection 9.1(b), the Company will furnish to Administrative Agent a principal financial officer's certificate in the form of Exhibit E.
9.3 Taxes and Other Liens. The Company will and will cause each Subsidiary of the Company to pay and discharge promptly all taxes, assessments and governmental charges or levies imposed upon the Company or such Subsidiary, or upon the income or any property of the Company or such Subsidiary, as well as all claims of any kind (including claims for labor, materials, supplies, rent and payment of proceeds attributable to Hydrocarbon production) which, if unpaid, might result in or become a Lien upon any or all of the property of the Company or such Subsidiary; provided, however, that neither the Company nor such Subsidiary will be required to pay any such tax, assessment, charge, levy or claims if the amount, applicability or validity thereof will currently be contested in good faith by appropriate proceedings diligently conducted and if the Company or such Subsidiary will have set up reserves therefor adequate under GAAP.
9.4 Maintenance. Except as referred to in Sections 8.1 and 8.13 and except as permitted under Section 10.5 the Company will and will cause each Subsidiary of the Company to: (i) maintain its corporate existence; (ii) maintain its rights and franchises, except for any mergers or consolidations otherwise permitted by this Agreement and except to the extent failure to so maintain the same would not have a Material Adverse Effect; (iii) observe and comply (to the extent that any failure would have a Material Adverse Effect) with all valid Legal Requirements (including without limitation Requirements of Environmental
Law); and (iv) maintain (except to the extent failure to so maintain the same would not have a Material Adverse Effect) its properties (and any properties leased by or consigned to it or held under title retention or conditional sales contracts) consistent with the standards of a reasonably prudent operator at all times and make all repairs, replacements, additions, betterments and improvements to its properties consistent with the standards of a reasonably prudent operator.
9.5 Further Assurances. The Company will and will cause each Subsidiary of the Company to cure promptly any defects in the execution and delivery of the Loan Documents, including this Agreement. The Company at its expense will promptly execute and deliver to Administrative Agent upon request all such other and further documents, agreements and instruments (or cause any of its Subsidiaries to take such action) in compliance with or accomplishment of the covenants and agreements of the Company or any of its Subsidiaries in the Loan Documents, including this Agreement, or to correct any omissions in the Loan Documents, or to make any recordings, to file any notices, or obtain any consents, all as may be necessary or appropriate in connection therewith.
9.6 Performance of Obligations. The Company will pay the Loans according to the reading, tenor and effect of this Agreement; and the Company will do and perform every act and discharge all of the obligations provided to be performed and discharged by the Company under this Agreement and the other Loan Documents at the time or times and in the manner specified, and cause each of its Subsidiaries to take such action with respect to their obligations to be performed and discharged under the Loan Documents to which they respectively are parties.
9.7 Reimbursement of Expenses. Whether or not any Loan is ever made or any Letter of Credit is ever issued, the Company agrees to pay or reimburse Administrative Agent for paying the reasonable fees and expenses of Mayer, Brown & Platt, special counsel to the Agents, together with the reasonable fees and expenses of local counsel engaged by the Agents, in connection with the negotiation of the terms and structure of the Obligations, the preparation, execution and delivery of this Agreement and the other Loan Documents and the making of the Loans and the issuance of Letters of Credit hereunder, as well as any modification, supplement or waiver of any of the terms of this Agreement and the other Loan Documents. The Company will promptly upon request and in any event within 30 days from the date of receipt by the Company of a copy of a bill for such amounts, reimburse any Bank or any Agent for all amounts reasonably expended, advanced or incurred by such Bank or such Agent to satisfy any obligation of the Company under this Agreement or any other Loan Document, to protect the properties or business of the Company or any Subsidiary of the Company, to collect the Obligations, or to enforce the rights of such Bank or such Agent under this Agreement or any other Loan Document, which amounts will include without limitation all court costs, attorneys' fees (but not including allocated costs of in-house counsel), any engineering fees and expenses, fees of auditors, accountants and appraisers, investigation expenses, all transfer, stamp, documentary or similar taxes, assessments or charges levied by any governmental or revenue authority in respect of any of the Loan Documents or any other document referred to therein, all costs, expenses, taxes, assessments and other charges incurred in connection with any filing, registration, recording or
perfection of any lien contemplated by any of the Loan Documents or any document referred to therein, fees and expenses incurred in connection with such Bank's participation as a member of a creditors' committee in a case commenced under the Bankruptcy Code or other similar law of the United States or any state thereof, fees and expenses incurred in connection with lifting the automatic stay prescribed in 362 Title 11 of the United States Code, and fees and expenses incurred in connection with any action pursuant to 1129 Title 11 of the United States Code and all other customary out-of-pocket expenses incurred by such Bank or such Agent in connection with such matters, together with interest after the expiration of the 30-day period stated above in this Section if no Event of Default has occurred and is continuing, or from the date of the request to the Company if an Event of Default has occurred and is continuing, at either (i) the Post-Default Rate on each such amount until the date of reimbursement to such Bank or such Agent, or (ii) if no Event of Default will have occurred and be continuing, the Alternate Base Rate plus the highest Applicable Margin for Alternate Base Rate Loans (not to exceed the Highest Lawful Rate) on each such amount until the date of the Company's receipt of written demand or request by such Bank or such Agent for the reimbursement of same, and thereafter at the applicable Post-Default Rate until the date of reimbursement to such Bank or such Agent. The obligations of the Company under this Section are compensatory in nature, shall be deemed liquidated as to amount upon receipt by the Company of a copy of any invoice therefor, and will survive the non-assumption of this Agreement in a case commenced under the Bankruptcy Code or other similar law of the United States or any state thereof, and will remain binding on the Company and any trustee, receiver, or liquidator of the Company appointed in any such case.
9.8 Insurance. The Company and its Subsidiaries will maintain, with
financially sound and reputable insurers, insurance with respect to their
respective properties and business against such liabilities, casualties, risks
and contingencies and in such types and amounts as is customary in the case of
corporations engaged in the same or similar businesses and similarly situated.
Upon the request of Administrative Agent acting at the instruction of the
Majority Banks, the Company will furnish or cause to be furnished to
Administrative Agent from time to time a summary of the insurance coverage of
the Company and its Subsidiaries in form and substance satisfactory to the
Majority Banks in their reasonable judgment, and if requested will furnish
Administrative Agent copies of the applicable policies. Subject to the terms of
Section 3 hereof, in the case of any fire, accident or other casualty causing
loss or damage to any properties of the Company or any of its Subsidiaries, the
proceeds of such policies will be used (i) to repair or replace the damaged
property or (ii) to prepay the Obligations, at the election of the Company.
9.9 Accounts and Records. The Company will keep and will cause each Subsidiary of the Company to keep books of record and account which fairly reflect all dealings or transactions in relation to their respective businesses and activities, in accordance with GAAP, which books of record and account will be maintained, to the extent necessary to enable compliance with all provisions of this Agreement, separately for each such Subsidiary, the Company and any division of the Company.
9.10 Notice of Certain Events. The Company will promptly notify Administrative Agent (and Administrative Agent will then notify all of the Banks and other Agents) if a Responsible Officer of the Company learns of the occurrence of, or if the Company causes or intends to cause, as the case may be:
(i) any event which constitutes a Default, together with a detailed statement by a Responsible Officer of the Company of the steps being taken to cure the effect of such Default; or
(ii) the receipt of any notice from, or the taking of any other action by, the holder of any promissory note, debenture or other evidence of indebtedness of the Company or any Subsidiary of the Company or of any security (as defined in the Securities Act of 1933, as amended) of the Company or any Subsidiary of the Company with respect to a claimed default, together with a detailed statement by a Responsible Officer of the Company specifying the notice given or other action taken by such holder and the nature of the claimed default and what action the Company or such Subsidiary is taking or proposes to take with respect thereto; or
(iii) any legal, judicial or regulatory proceedings affecting the Company or any Subsidiary of the Company or any of the properties of the Company or any Subsidiary of the Company in which the amount involved is materially adverse to the Company and its Subsidiaries taken as a whole, and is not covered by insurance or which, if adversely determined, would have a Material Adverse Effect; or
(iv) any dispute between the Company or any Subsidiary of the Company and any Governmental Authority or any other Person which, if adversely determined, could reasonably be expected to have a Material Adverse Effect; or
(v) the occurrence of a default or event of default by the Company or any Subsidiary of the Company under any other agreement to which it is a party, which default or event of default could reasonably be expected to have a Material Adverse Effect; or
(vi) any change in the accuracy of the representations and warranties of the Company or any Subsidiary contained in this Agreement or any other Loan Document; or
(vii) any material violation or alleged material violation of any Requirements of Environmental Law or Environmental Permit or any Environmental Claim or any Environmental Liability; or
(viii) any tariff and rate cases and other material reports filed by the Company or any of its Subsidiaries with any Governmental Authority and any notice to the Company or any of its Subsidiaries from any Governmental Authority concerning noncompliance with any applicable Legal Requirement; or
(ix) within 10 days after the date on which a Responsible Officer of the Company has actual knowledge thereof, the receipt of any notice by the Company or any of its Subsidiaries of any claim of nonpayment of, or any attempt to collect or enforce, accounts payable of the Company or any of its Subsidiaries exceeding, in the case of any one account payable at one time outstanding, $1,000,000 and in the case of all accounts payable in the aggregate at any one time outstanding, $3,000,000; or
(x) any requirement for the payment of all or any portion of any Indebtedness of the Company or any of its Subsidiaries prior to the stated maturity thereof (whether by acceleration or otherwise) or as the result of any failure to maintain or the reaching of any threshold amount provided in any promissory note, bond, debenture, or other evidence of Indebtedness or under any credit agreement, loan agreement, indenture or similar agreement executed in connection with any of the foregoing; or
(xi) any notice from the Securities and Exchange Commission with respect to any Application (as defined in Section 8.18 hereof).
9.11 ERISA Information and Compliance. The Company will promptly furnish to Administrative Agent (i) immediately upon receipt, a copy of any notice of complete or partial withdrawal liability under Title IV of ERISA and any notice from the PBGC under Title IV of ERISA of an intent to terminate or appoint a trustee to administer any Plan, (ii) if requested by Administrative Agent, acting on the instruction of the Majority Banks, promptly after the filing thereof with the United States Secretary of Labor or the PBGC or the Internal Revenue Service, copies of each annual and other report with respect to each Plan or any trust created thereunder, (iii) immediately upon becoming aware of the occurrence of any "reportable event", as such term is defined in Section 4043 of ERISA, for which the disclosure requirements of Regulation Section 2615.3 promulgated by the PBGC have not been waived, or of any "prohibited transaction", as such term is defined in Section 4975 of the Code, in connection with any Plan or any trust created thereunder, a written notice signed by the President or the principal financial officer of the Company or the applicable ERISA Affiliate specifying the nature thereof, what action the Company or the applicable ERISA Affiliate is taking or proposes to take with respect thereto, and, when known, any action taken by the PBGC, the Internal Revenue Service or the Department of Labor with respect thereto, (iv) promptly after the filing or receiving thereof by the Company or any ERISA Affiliate of any notice of the institution of any proceedings or other actions which may result in the termination of any Plan, and (v) each request for waiver of the funding standards or extension of the amortization periods required by Sections 303 and 304 of ERISA or Section 412 of the Code promptly after the request is submitted by the Company or any ERISA Affiliate to the Secretary of the Treasury, the Department of Labor or the Internal Revenue Service, as the case may be. To the extent required under applicable statutory funding requirements, the Company will fund, or will cause each ERISA Affiliate to fund, all current service pension liabilities as they are incurred under the provisions of all Plans from time to time in effect, and comply with all applicable provisions of ERISA, except to the extent that any such failure to comply could not reasonably be expected to have a Material Adverse Effect. The Company covenants that it shall and shall cause each ERISA Affiliate to (1) make contributions to each
Plan in a timely manner and in an amount sufficient to comply with the contribution obligations under such Plan and the minimum funding standards requirements of ERISA; (2) prepare and file in a timely manner all notices and reports required under the terms of ERISA including but not limited to annual reports; and (3) pay in a timely manner all required PBGC premiums, in each case, to the extent failure to do so would have a Material Adverse Effect.
Section 10. Negative Covenants. A deviation from the provisions of this
Section 10 will not constitute a Default under this Agreement if such deviation
is consented to in writing by the Majority Banks. The Company agrees with the
Banks and the Agents that, so long as any of the Commitments is in effect and
until payment in full of all Loans hereunder, the termination or expiry of all
Letters of Credit and payment in full of Letter of Credit Liabilities, all
interest thereon and all amounts payable by the Company hereunder:
10.1 Debts, Guaranties and Other Obligations. (i) The Company will not permit any of its Restricted Subsidiaries (other than APC) to incur, create, assume or in any manner become or be liable in respect of any Indebtedness (including obligations for the payment of rentals); and the Company will not permit any of its Restricted Subsidiaries (other than APC) to Guarantee or otherwise in any way become or be responsible for obligations of any other Person, whether by agreement to purchase the Indebtedness of any other Person or agreement for the furnishing of funds to any other Person through the purchase or lease of goods, supplies or services (or by way of stock purchase, capital contribution, advance or loan) for the purpose of paying or discharging the Indebtedness of any other Person, or otherwise, except that the foregoing restrictions will not apply to:
(a) liabilities, direct or contingent, of any Restricted Subsidiary existing on the date of this Agreement which are reflected in the Financial Statements or the Disclosure Statement and all renewals, extensions, refinancings and rearrangements, but not increases, thereof;
(b) endorsements of negotiable or similar instruments for collection or deposit in the ordinary course of business;
(c) trade payables, lease acquisition and lease maintenance obligations, extensions of credit from suppliers or contractors, liabilities incurred in exploration, development and operation of any Restricted Subsidiary's oil and gas properties or similar obligations from time to time incurred in the ordinary course of business, other than for borrowed money, which are paid within 90 days after the invoice date (inclusive of applicable grace periods) or (i) are being contested in good faith, if such reserve as required by GAAP has been made therefor or (ii) trade accounts payable of any Restricted Subsidiaries (with respect to which no legal proceeding to enforce collection has been commenced or, to the knowledge of any Responsible Officer of the
Company, threatened) not exceeding, in the aggregate at any time outstanding, $25,000,000;
(d) taxes, assessments or other government charges which are not yet due or are being contested in good faith by appropriate action promptly initiated and diligently conducted, if such reserve as will be required by GAAP will have been made therefor;
(e) intercompany Indebtedness owed to the Company by any Restricted Subsidiary and intercompany Indebtedness owed to any Restricted Subsidiary by any other Restricted Subsidiary which is fully subordinated to the Obligations;
(f) any Guarantee by any Restricted Subsidiary of payment or performance
by any Restricted Subsidiary under any agreement so long as the
obligation guaranteed does not constitute Indebtedness for borrowed
money; (g) any Guarantee by any Restricted Subsidiary permitted by
Section 10.3;
(h) obligations of any Restricted Subsidiary under gas purchase contracts for gas not taken, as to which such Restricted Subsidiary is liable to pay if not made up;
(i) obligations of any Restricted Subsidiary under any contract for sale for future delivery of oil or gas (whether or not the subject oil or gas is to be delivered), hedging contract, forward contract, swap agreement, futures contract or other similar agreement;
(j) obligations of any Restricted Subsidiary under any interest rate swap agreement, or any contract implementing any interest rate cap, collar or floor, or any similar interest hedging contract;
(k) obligations in connection with gas imbalances arising in the ordinary course of business;
(l) Indebtedness not exceeding $1,000,000 in the aggregate borrowed from the Amarillo Economic Development Commission and related Guarantees and related obligations of any Restricted Subsidiary;
(m) liabilities under leases and lease agreements which do not cover oil and gas properties to the extent the incurrence and existence of such liabilities will still enable each Restricted Subsidiary to comply with all requirements of this Agreement; and
(n) in addition to Indebtedness permitted by clauses (a) through (m) above, Indebtedness of any Restricted Subsidiary in an aggregate principal amount not exceeding $10,000,000 at any time outstanding.
(ii) The Company will not permit any of its Unrestricted Subsidiaries to
(a) incur, create, assume or in any manner become or be liable in respect of any
Indebtedness (including obligations for the payment of rentals), or (b)
Guarantee or otherwise in any way become or be responsible for obligations of
any other Person, whether by agreement to purchase the Indebtedness of any other
Person or agreement for the furnishing of funds to any other Person through the
purchase or lease of goods, supplies or services (or by way of stock purchase,
capital contribution, advance or loan) for the purpose of paying or discharging
the Indebtedness of any other Person, or otherwise, except that the foregoing
restrictions will not apply to any Indebtedness not exceeding $200,000,000 in
the aggregate for all Unrestricted Subsidiaries.
10.2 Liens. The Company will not and will not permit any of its Restricted Subsidiaries to create, incur, assume or permit to exist any Lien on any of its or their properties (now owned or hereafter acquired), except:
(a) Liens securing the Loans or other Indebtedness under the Loan Documents;
(b) Liens for taxes, assessments or other governmental charges or levies not yet due or which are being contested in good faith by appropriate action promptly initiated and diligently conducted, if such reserve as will be required by GAAP will have been made therefor;
(c) Liens of landlords, vendors, contractors, subcontractors, carriers, warehousemen, mechanics, laborers or materialmen or other like Liens arising by law in the ordinary course of business for sums not yet due or being contested in good faith by appropriate action promptly initiated and diligently conducted, if such reserve as will be required by GAAP will have been made therefor;
(d) Liens existing on property owned by the Company or any of its Restricted Subsidiaries on the date of this Agreement which have been disclosed to the Banks in the Disclosure Statement, together with any renewals, extensions, amendments, refinancings, rearrangements, modifications, restatements or supplements, but not increases, thereof from time to time;
(e) pledges or deposits made in the ordinary course of business in connection with worker's compensation, unemployment insurance, social security and other like laws;
(f) inchoate liens arising under ERISA to secure the contingent liability of the Company permitted by Section 9.11;
(g) Liens in the ordinary course of business, not to exceed in the aggregate $10,000,000 as to the Company and its Restricted Subsidiaries at any time in effect, regarding (i) the performance of bids, tenders, contracts (other than for the repayment of borrowed money or the deferred purchase price of property or services) or leases, (ii) statutory obligations, (iii) surety appeal bonds or (iv) Liens to secure progress or partial payments made to the Company or any of its Restricted Subsidiaries and other Liens of like nature;
(h) covenants, restrictions, easements, servitudes, permits, conditions, exceptions, reservations, minor rights, minor encumbrances, minor irregularities in title or conventional rights of reassignment prior to abandonment which do not materially interfere with the occupation, use and enjoyment by the Company or any Restricted Subsidiary of its respective assets in the normal course of business as presently conducted, or materially impair the value thereof for the purpose of such business;
(i) Liens of operators under joint operating agreements or similar contractual arrangements with respect to the relevant entity's proportionate share of the expense of exploration, development and operation of oil, gas and mineral leasehold or fee interests owned jointly with others, to the extent that same relate to sums not yet due or which are being contested in good faith by appropriate action promptly initiated and diligently conducted, if such reserve as will be required by GAAP will have been made therefor;
(j) Liens created pursuant to the creation of trusts or other arrangements funded solely with cash, cash equivalents or other marketable investments or securities of the type customarily subject to such arrangements in customary financial practice with respect to long-term or medium-term indebtedness for borrowed money, the sole purpose of which is to make provision for the retirement or defeasance, without prepayment, of Indebtedness permitted under Section 10.1;
(k) Liens on the assets or properties of ENSTAR Alaska;
(l) the Vendor Financing Arrangements (as defined in the Mesa Contract);
(m) purchase money Liens securing an aggregate amount of Indebtedness which shall not exceed $25,000,000 at any one time outstanding;
(n) any Lien existing on any real or personal property of any corporation or partnership at the time it becomes a Restricted Subsidiary or of any other Restricted Subsidiary, or existing prior to the time of acquisition upon any real or personal property acquired by the Company or any of its Restricted Subsidiaries;
(o) legal or equitable encumbrances deemed to exist by reason of the existence of any litigation or other legal proceeding or arising out of a judgment or award with respect to which an appeal is being prosecuted in good faith by appropriate action promptly initiated and diligently conducted, if such reserve as will be required by GAAP will have been made therefor;
(p) any Liens securing Indebtedness neither assumed nor guaranteed by the Company or any of its Restricted Subsidiaries nor on which it customarily pays interest, existing upon real estate or rights in or relating to real estate acquired by the Company or any of its Restricted Subsidiaries for substation, metering station, pump station, storage, gathering line, transmission line, transportation line, distribution line or right-of-way purposes, and any Liens reserved in leases for rent and full compliance with the terms of the leases in the case of leasehold estates, to the extent that any such Lien referred to in this clause arises in the normal course of business as presently conducted and does not materially impair the use of the property covered by such Lien for the purposes for which such property is held by the Company or its applicable Restricted Subsidiary;
(q) rights reserved to or vested in any municipality or governmental, statutory or public authority by the terms of any right, power, franchise, grant, license or permit, or by any provision of law, to terminate such right, power, franchise, grant, license or permit or to purchase, condemn, expropriate or recapture or to designate a purchaser of any of the property of the Company or any of its Restricted Subsidiaries;
(r) rights reserved to or vested in any municipality or governmental, statutory or public authority to control or regulate any property of the Company or any of its Restricted Subsidiaries, or to use such property in a manner which does not materially impair the use of such property for the purposes for which it is held by the Company or its applicable Restricted Subsidiary;
(s) any obligations or duties affecting the property of the Company or any of its Restricted Subsidiaries to any municipality, governmental, statutory or public authority with respect to any franchise, grant, license or permit;
(t) rights of a common owner of any interest in real estate, rights-of-way or easements held by the Company or any of its Restricted Subsidiaries and such common owner as tenants in common or through other common ownership;
(u) any Liens arising from the matters described in Schedule 3.19 of the Mesa Contract;
(v) as to assets located in Canada, reservations, limitations, provisos and conditions in any original grant from the Crown or freehold lessor of any of the properties of the Company or its Subsidiaries;
(w) other Liens securing Indebtedness not exceeding, in the aggregate, $10,000,000 at any one time outstanding; and
(x) Liens (i) granted to or existing in favor of third parties on margin accounts of the Company or any of its Restricted Subsidiaries relating to exchange traded contracts for the delivery of natural gas pursuant to which the Company or any such Restricted Subsidiary intends to take actual delivery of such natural gas within forty (40) days from the then current date in the ordinary course of business and not for speculative purposes, and (ii) on margin accounts of the Company or any of its Restricted Subsidiaries relating to exchange traded contracts for the delivery of natural gas, provided, however, the aggregate balance of the margin accounts subject to the Liens permitted by this clause (ii) shall not exceed from time to time $10,000,000.
10.3 Guarantees. The Company will not and will not permit any of its Restricted Subsidiaries to enter into any Guarantees of the payment or performance by any Unrestricted Subsidiary under any agreement in an aggregate amount for all such Guarantees relating to such Unrestricted Subsidiaries in excess of $50,000,000.
10.4 Dividend Payment Restrictions. The Company will not declare or make any Dividend Payment if any Default or Event of Default has occurred and is continuing.
10.5 Mergers and Sales of Assets. The Company will not (a) merge or consolidate with, or sell, assign, lease or otherwise dispose of, whether in one transaction or in a series of transactions, more than ten percent (10%) in the aggregate of the Company's and its Restricted Subsidiaries' consolidated total assets (whether now owned or hereafter acquired) to any Person or Persons during any twelve month period, or permit any Restricted Subsidiary to do so (other than to the Company or another Restricted Subsidiary or the issuance by any Restricted Subsidiary of any stock to the Company or another Restricted Subsidiary), or (b) sell, assign, lease or otherwise dispose of, whether in one transaction or in a series of transactions, any other properties if receiving therefor consideration other than cash or other consideration readily convertible to cash or which is less than the fair market value of the relevant properties, or permit any Restricted Subsidiary to do so; provided that the Company or any Restricted Subsidiary may merge or consolidate with any other Person and any Restricted Subsidiary may transfer properties to any other Restricted Subsidiary or to the Company so long as, in each case, (i) immediately thereafter and giving effect thereto, no event will occur and be continuing which constitutes a Default, (ii) in the case of any such merger or consolidation to which the Company is a party, the Company is the surviving Person, (iii) in the case of any such merger or consolidation to which any Restricted Subsidiary is a party (but not the Company), after giving effect to all transactions closing concurrently relating to such merger or consolidation,
the surviving Person is a Restricted Subsidiary and (iv) the surviving Person ratifies each applicable Loan Document and provided further that any Restricted Subsidiary may merge or consolidate with any other Restricted Subsidiary so long as, in each case (i) immediately thereafter and giving effect thereto, no event will occur and be continuing which constitutes a Default and (ii) the surviving Person ratifies each applicable Loan Document.
10.6 Proceeds of Loans. The Company will not permit the proceeds of the Loans to be used for any purpose other than those permitted by this Agreement.
10.7 ERISA Compliance. The Company will not at any time permit any Plan maintained by it or any Restricted Subsidiary to:
(a) engage in any "prohibited transaction" as such term is defined in
Section 4975 of the Code;
(b) incur any "accumulated funding deficiency" as such term is defined in
Section 302 of ERISA; or
(c) terminate or be terminated in a manner which could result in the imposition of a Lien on the property of the Company or any Restricted Subsidiary pursuant to Section 4068 of ERISA,
in each case, to the extent that permitting the Plan to do so would have a Material Adverse Effect.
10.8 Amendment of Certain Documents. The Company will not amend, modify or obtain or grant a waiver of (except for waivers only of cross-defaults created by a Default under this Agreement), or allow APC to enter into any amendment or modification or obtain or grant any waiver of (except for waivers only of cross-defaults created by a Default under this Agreement), any provision of those documents relating to or constituting the Beluga Financing Documents or the APC Long Term Financing Documents, without prior written notification to Administrative Agent.
10.9 Total Debt/Capitalization Ratio. The Company will not permit its Total Debt/Capitalization Ratio to be, at any time, more than 60%.
10.10 EBITDAX/Interest Ratio. The Company will not permit the EBITDAX/Interest Ratio to be, at any time, less than 3.75:1.00 for any rolling four calendar quarter period ending on the last day of any calendar quarter.
10.11 Nature of Business. The Company will not engage in, and will not permit any Restricted Subsidiary to engage in, businesses other than oil and gas exploration and production, gas processing, transmission, distribution, marketing and storage and gas and liquids pipeline operations and activities related or ancillary thereto; provided, that if the Company acquires one or more Restricted Subsidiaries in transactions otherwise permitted by the terms hereof, any such Restricted Subsidiary may be engaged in businesses other than those
listed in this Section so long as the assets of such Restricted Subsidiaries which are used in the conduct of such other businesses do not constitute more than five percent (5%) of the consolidated total assets of the Company (inclusive of the assets of the Restricted Subsidiary so acquired).
10.12 Covenants in Other Agreements. The Company will not and will not permit any of its Restricted Subsidiaries to become a party to or to agree that it or any of its property is bound by any agreement, indenture, mortgage, deed of trust or any other instrument directly or indirectly
(i) restricting any loans, advances or any other Investments to or in the Company by any of its Restricted Subsidiaries;
(ii) restricting the ability of any Restricted Subsidiary to make tax payments or management fee payments;
(iii)restricting the capitalization structure of any Restricted Subsidiary; or
(iv) restricting the ability or capacity of any Restricted Subsidiary to make Dividend Payments;
Notwithstanding the foregoing, either of ENSTAR Alaska or APC may become a party to, or grant a Lien in any of its property by way of, or agree that it will be bound by, any indenture, mortgage, deed of trust or other instrument containing provisions of the types described above in this Section 10.12 so long as the terms and provisions thereof are not materially more restrictive than the terms or provisions which are legally binding on ENSTAR Alaska or APC on the Effective Date.
Section 11. Defaults.
11.1 Events of Default. If one or more of the following events (herein called "Events of Default") shall occur and be continuing:
(a) Payments - (i) the Company or any other Relevant Party fails to make any payment or prepayment of any installment of principal on the Loans or any Reimbursement Obligation payable under this Agreement or the other Loan Documents when due or (ii) the Company or any other Relevant Party fails to make any payment or prepayment of interest with respect to the Loans, any Reimbursement Obligation or any other fee or amount under this Agreement or the other Loan Documents and such failure to pay continues unremedied for a period of five (5) Business Days; or
(b) Representations and Warranties - any representation or warranty made by the Company or any other Relevant Party in this Agreement or in any other Loan Document or in any instrument executed in connection herewith or therewith proves to have been incorrect in any material respect as of the date thereof; or any representation, statement (including Financial Statements), certificate or data furnished or made by the Company or any other Relevant Party (or any
officer of the Company or any other Relevant Party) under or in connection with this Agreement or any other Loan Document, including without limitation in the Disclosure Statement, proves to have been untrue in any material respect, as of the date as of which the facts therein set forth were stated or certified; or
(c) Affirmative Covenants - (i) default shall be made in the due observance or performance of any of the covenants or agreements contained in Sections 9.10 (or in Section 9.6 to the extent such default is considered an Event of Default under the other Subsections of this Section 11.1) or (ii) default is made in the due observance or performance of any of the other covenants or agreements contained in Section 9 of this Agreement or any other affirmative covenant of the Company or any other Relevant Party contained in this Agreement or any other Loan Document and such default continues unremedied for a period of 30 days after (x) notice thereof is given by Administrative Agent to the Company or (y) such default otherwise becomes known to the Company, whichever is earlier; or
(d) Negative Covenants - (i) default shall be made in the observance or
performance of any of the covenants or agreements contained in Section 10.8 and
such default continues unremedied for a period of five (5) Business Days after
(x) notice thereof is given by Administrative Agent to the Company or (y) such
default otherwise becomes known to the Company, whichever is earlier, or (ii)
default is made in the due observance or performance by the Company of any of
the other covenants or agreements contained in Section 10 of this Agreement or
of any other negative covenant of the Company or any other Relevant Party
contained in this Agreement or any other Loan Document; or
(e) Other Obligations - default is made in the due observance or performance by the Company or any of its Subsidiaries (as principal or guarantor or other surety) of any of the covenants or agreements contained in any bond, debenture, note or other evidence of Indebtedness in excess of $25,000,000 (singly or aggregating several such bonds, debentures, notes or other evidence of Indebtedness) which default gives the holder the right to accelerate the maturity of such Indebtedness, other than the Loan Documents, or under any credit agreement, loan agreement, indenture, promissory note or similar agreement or instrument executed in connection with any of the foregoing, to which it (respectively) is a party and such default is unwaived or continues unremedied beyond the expiration of any applicable grace period which may be expressly allowed under such instrument or agreement; or
(f) Involuntary Bankruptcy or Receivership Proceedings - a receiver, conservator, liquidator or trustee of the Company or of any of its property is appointed by the order or decree of any court or agency or supervisory authority having jurisdiction, and such decree or order remains in effect for more than 60 days; or the Company is adjudicated bankrupt or insolvent; or any of its property is sequestered by court order and such order remains in effect for more than 60 days; or a petition is filed against the Company under any state or federal bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution, liquidation or receivership law of any jurisdiction, whether
now or hereafter in effect, and is not dismissed within 60 days after such filing; or
(g) Voluntary Petitions or Consents - the Company commences a voluntary case or other proceeding seeking liquidation, reorganization, arrangement, insolvency, readjustment of debt, dissolution, liquidation or other relief with respect to itself or its debt or other liabilities under any bankruptcy, insolvency or other similar law nor or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or consents to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or fails generally to, or cannot, pay its debts generally as they become due or takes any corporate action to authorize or effect any of the foregoing; or
(h) Assignments for Benefit of Creditors or Admissions of Insolvency - the Company makes an assignment for the benefit of its creditors, or admits in writing its inability to pay its debts generally as they become due, or consents to the appointment of a receiver, trustee, or liquidator of the Company or of all or any part of its property; or
(i) Undischarged Judgments - judgments (individually or in the aggregate) for the payment of money in excess of $10,000,000 is rendered by any court or other governmental body against the Company or any of its Subsidiaries and the Company or such Subsidiary does not discharge the same or provide for its discharge in accordance with its terms, or procure a stay of execution thereof within 60 days from the date of entry thereof, and within said period of 60 days from the date of entry thereof or such longer period during which execution of such judgment will have been stayed, the Company or such Subsidiary fails to appeal therefrom and cause the execution thereof to be stayed during such appeal while providing such reserves therefor as may be required under GAAP; or
(j) Subsidiary Defaults - any Subsidiary of the Company takes, suffers, or permits to exist any of the events or conditions referred to in Subsections 11.1(f), (g) or (h); or
(k) Change in Control - there should occur any Change of Control.
THEREUPON: Administrative Agent may (and, if directed by the Majority Banks,
shall) (a) declare the Commitments terminated (whereupon the Commitments shall
be terminated) and/or (b) terminate any Letter of Credit providing for such
termination by sending a notice of termination as provided therein and/or (c)
declare the principal amount then outstanding of and the accrued interest on the
Loans and Reimbursement Obligations and all fees and all other amounts payable
hereunder to be forthwith due and payable, whereupon such amounts shall be and
become immediately due and payable, without notice (including without limitation
notice of acceleration and notice of intent to accelerate), presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Company; provided that in the case of the occurrence of an Event
of Default with respect to the Company referred to in clause (f) or (g) of this
Section 11.1 or in clause (j) of this Section 11.1 to the extent it refers to
clauses (f) or (g), the Commitments shall be automatically terminated and the principal amount then outstanding of and the accrued interest on the Loans and Reimbursement Obligations and all fees and all other amounts payable hereunder shall be and become automatically and immediately due and payable, without notice (including but not limited to notice of intent to accelerate and notice of acceleration) and without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by the Company and/or (d) exercise any and all other rights available to it under the Loan Documents, at law or in equity.
11.2 Collateral Account. The Company hereby agrees, in addition to the provisions of Section 11.1 hereof, that upon the occurrence and during the continuance of any Event of Default, it shall, if requested by Administrative Agent or the Majority Banks (through Administrative Agent), pay to Administrative Agent an amount in immediately available funds equal to the then aggregate amount available for drawings under all Letters of Credit issued for the account of the Company, which funds shall be held by Administrative Agent as Cover.
11.3 Preservation of Security for Unmatured Reimbursement Obligations. In the event that, following (i) the occurrence of an Event of Default and the exercise of any rights available to Administrative Agent under the Loan Documents, and (ii) payment in full of the principal amount then outstanding of and the accrued interest on the Loans and Reimbursement Obligations and fees and all other amounts payable hereunder and under any Letters of Credit shall remain outstanding and undrawn upon, Administrative Agent shall be entitled to hold (and the Company hereby grants and conveys to Administrative Agent a security interest in and to) all cash or other property ("Proceeds of Remedies") realized or arising out of the exercise by Administrative Agent of any rights available to it under the Loan Documents, at law or in equity, including, without limitation, the proceeds of any foreclosure, as collateral for the payment of any amounts due or to become due under or in respect of such Letters of Credit. Such Proceeds of Remedies shall be held for the ratable benefit of the applicable Issuers. The rights, titles, benefits, privileges, duties and obligations of Administrative Agent with respect thereto shall be governed by the terms and provisions of this Agreement. Administrative Agent may, but shall have no obligation to, invest any such Proceeds of Remedies in such manner as Administrative Agent, in the exercise of its sole discretion, deems appropriate. Such Proceeds of Remedies shall be applied to Reimbursement Obligations arising in respect of any such Letters of Credit and/or the payment of any Issuer's obligations under any such Letter of Credit when such Letter of Credit is drawn upon. The Company hereby agrees to execute and deliver to the Agents and the Banks such security agreements, pledges or other documents as any of the Agents or any of the Banks may, from time to time, require to perfect the pledge, lien and security interest in and to any such Proceeds of Remedies provided for in this Section 11.3.
11.4 Right of Setoff. Upon (i) the occurrence and during the continuance of
any Event of Default referred to in clauses (f), (g) or (h) of Section 11.1, or
in clause (j) of Section 11.1 to the extent it refers to clauses (f), (g) or
(h), or upon (ii) the occurrence and continuance of any other Event of Default
and upon the making of the notice specified in Section 11.1 to authorize
Administrative Agent to declare the Loans due and payable pursuant to the
provisions of this Agreement, or if (iii) the Company or any of its Subsidiaries
becomes insolvent, however evidenced, the Banks are hereby authorized at any
time and from time to time, without notice to the Company or any of its Subsidiaries (any such notice being expressly waived by the Company and its Subsidiaries), to setoff and apply any and all deposits (general or special, time or demand, provisional or final, whether or not such setoff results in any loss of interest or other penalty, and including without limitation all certificates of deposit) at any time held, and any other funds or property at any time held, and other Indebtedness at any time owing by any Bank to or for the credit or the account of the Company against any and all of the Obligations irrespective of whether or not such Bank will have made any demand under this Agreement and although such obligations may be unmatured. Should the right of any Bank to realize funds in any manner set forth hereinabove be challenged and any application of such funds be reversed, whether by court order or otherwise, the Banks shall make restitution or refund to the Company pro rata in accordance with their Commitments. The Banks agree promptly to notify the Company and Administrative Agent after any such setoff and application, provided that the failure to give such notice will not affect the validity of such setoff and application. The rights of the Agents and the Banks under this Section are in addition to other rights and remedies (including without limitation other rights of setoff) which the Agents or the Banks may have.
Section 12. Agents.
12.1 Appointment, Powers and Immunities. Each Bank hereby irrevocably appoints and authorizes each Agent to act as its agent hereunder and under the Letters of Credit and the other Loan Documents with such powers as are specifically delegated to such Agent by the terms hereof and thereof, together with such other powers as are reasonably incidental thereto. Each Agent (which term as used in this Section 12 shall include reference to its affiliates and its own and their affiliates' officers, directors, employees and agents) shall not (a) have any duties or responsibilities except those expressly set forth in this Agreement, the Letters of Credit, and the other Loan Documents, or shall by reason of this Agreement or any other Loan Document be a trustee or fiduciary for any Bank; (b) be responsible to any Bank for any recitals, statements, representations or warranties contained in this Agreement, the Letters of Credit or any other Loan Document, or in any certificate or other document referred to or provided for in, or received by any of them under, this Agreement, the Letters of Credit or any other Loan Document, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, the Letters of Credit, or any other Loan Document or any other document referred to or provided for herein or therein or any property covered thereby or for any failure by any Relevant Party or any other Person to perform any of its obligations hereunder or thereunder; (c) be required to initiate or conduct any litigation or collection proceedings hereunder or under the Letters of Credit or any other Loan Document except to the extent such Agent is so requested by the Majority Banks, or (d) be responsible for any action taken or omitted to be taken by it hereunder or under the Letters or Credit or any other Loan Document or any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith, INCLUDING, WITHOUT LIMITATION, PURSUANT TO THEIR OWN NEGLIGENCE, except for its own gross negligence or willful misconduct. Each Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. Without in any way
limiting any of the foregoing, each Bank acknowledges that neither any Agent nor any Issuer shall have any greater responsibility in the operation of the Letters of Credit than is specified in the Uniform Customs and Practice for Documentary Credits (1993 Revision, International Chamber of Commerce Publication No. 500). In any foreclosure proceeding concerning any collateral for the Loans, each holder of a Loan if bidding for its own account or for its own account and the accounts of other Banks is prohibited from including in the amount of its bid an amount to be applied as a credit against Obligations owing to such Bank or the Obligations owing to the other Banks; instead, such holder must bid in cash only; provided that this provision is for the sole benefit of the Agents and the Banks and shall not inure to the benefit of the Company or any of its Subsidiaries. However, in any such foreclosure proceeding, Agent may (but shall not be obligated to) submit a bid for all Banks (including itself) in the form of a credit against the Obligations of all of the Banks, and Administrative Agent or its designee may (but shall not be obligated to) accept title to such collateral for and on behalf of all Banks.
12.2 Reliance by Agents. Each Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telex, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel (which may be counsel for the Company), independent accountants and other experts selected by such Agent. As to any matters not expressly provided for by this Agreement, the Letters of Credit, or any other Loan Document, each Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and thereunder in accordance with instructions of the Majority Banks (or, where unanimous consent is required by the terms hereof or of the other Loan Documents, all of the Banks), and any action taken or failure to act pursuant thereto shall be binding on all of the Banks. Pursuant to instructions of the Majority Banks (except as otherwise provided in Section 13.4 hereof), Administrative Agent shall have the authority to execute releases of security documents on behalf of the Banks without the joinder of any Bank.
12.3 Defaults. Administrative Agent shall not be deemed to have knowledge of the occurrence of a Default (other than the non-payment of principal of or interest on Loans or Reimbursement Obligations) unless it has received notice from a Bank or the Company specifying such Default and stating that such notice is a "Notice of Default". In the event that Administrative Agent receives such a notice of the occurrence of a Default, Administrative Agent shall give prompt notice thereof to the Banks (and shall give each Bank prompt notice of each such non-payment). Administrative Agent shall (subject to Section 12.7 hereof) take such action with respect to such Default as shall be directed by the Majority Banks and within its rights under the Loan Documents and at law or in equity, provided that, unless and until Administrative Agent shall have received such directions, Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, permitted hereby with respect to such Default as it shall deem advisable in the best interests of the Banks and within its rights under the Loan Documents, at law or in equity.
12.4 Rights as a Bank. With respect to its Commitments and the Loans made and Letter of Credit Liabilities, Chase, Morgan and NationsBank, respectively,
each in its capacity as a Bank hereunder, shall have the same rights and powers hereunder as any other Bank and may exercise the same as though it were not acting as an Agent and the term "Bank" or "Banks" shall, unless the context otherwise indicates, include Chase, Morgan and NationsBank, respectively, each in its individual capacity. Administrative Agent may (without having to account therefor to any Bank) accept deposits from, lend money to and generally engage in any kind of banking, trust, letter of credit, agency or other business with the Company (and any of its Affiliates) as if it were not acting as Administrative Agent, and Administrative Agent may accept fees and other consideration from the Company and its Affiliates (in addition to the fees heretofore agreed to between the Company and Administrative Agent) for services in connection with this Agreement or otherwise without having to account for the same to the Banks.
12.5 Indemnification. The Banks agree to indemnify each Agent (to the extent not reimbursed under Section 2.2(c), Section 9.7 or Section 13.3 hereof, but without limiting the obligations of the Company under said Sections 2.2(c), 9.7 and 13.3), ratably in accordance with their respective Commitments, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever (INCLUDING, BUT NOT LIMITED TO, THE CONSEQUENCES OF THE NEGLIGENCE OF AGENT) which may be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of this Agreement, the Letters of Credit or any other Loan Document or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (including, without limitation, the costs and expenses which the Company is obligated to pay under Sections 2.2(c), 9.8 and 13.3 hereof but excluding, unless a Default has occurred and is continuing, normal administrative costs and expenses incident to the performance of their respective agency duties hereunder) or the enforcement of any of the terms hereof or thereof or of any such other documents, provided that no Bank shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the party to be indemnified. The obligations of the Banks under this Section 12.5 shall survive the termination of this Agreement and the repayment of the Obligations.
12.6 Non-Reliance on Agents and Other Banks. Each Bank agrees that it has received current financial information with respect to the Company and that it has, independently and without reliance on any Agent or any other Bank and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Company and decision to enter into this Agreement and that it will, independently and without reliance upon any Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any of the other Loan Documents. Each Agent shall not be required to keep itself informed as to the performance or observance by any Relevant Party of this Agreement, the Letters of Credit or any of the other Loan Documents or any other document referred to or provided for herein or therein or to inspect the properties or books of the Company or any Relevant Party. Except for notices, reports and other documents and information expressly required to be furnished to the Banks by Administrative Agent hereunder, under the Letters of Credit or the other Loan Documents, the Agents shall not have any duty or responsibility to provide any Bank with any credit or
other information concerning the affairs, financial condition or business of the Company or any other Relevant Party (or any of their affiliates) which may come into the possession of such Agent.
12.7 Failure to Act. Except for action expressly required of Administrative Agent hereunder, under the Letters of Credit and under the other Loan Documents, Administrative Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction by the Banks of their indemnification obligations under Section 12.5 hereof against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action.
12.8 Resignation or Removal of Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided below, Administrative Agent may resign at any time by giving notice thereof to the Banks and the Company, and Administrative Agent may be removed at any time with or without cause by the Majority Banks. Upon any such resignation or removal, the Majority Banks shall have the right to appoint a successor Administrative Agent, provided deposits with a successor Administrative Agent shall be insured by the Federal Deposit Insurance Corporation or its successor. If no successor Administrative Agent shall have been so appointed by the Majority Banks and shall have accepted such appointment within 30 days after the retiring Administrative Agent's giving of notice of resignation or the Majority Banks' removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent. Any successor Administrative Agent shall be a bank which has an office in the United States and a combined capital and surplus of at least $250,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. A successor Administrative Agent shall promptly specify by notice to the Company and the Banks its Principal Office referred to in Sections 3.1 and 5.1. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Section 12 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as an Administrative Agent.
Section 13. Miscellaneous.
13.1 Waiver. No waiver of any Default shall be a waiver of any other Default. No failure on the part of any Agent or any Bank to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege thereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided in the Loan Documents are cumulative and not exclusive of any remedies provided by law or in equity.
13.2 Notices. All notices and other communications provided for herein
(including, without limitation, any modifications of, or waivers or consents
under, this Agreement) shall be given or made by telex, telegraph, telecopy
(confirmed by mail), cable, mail or other writing and telexed, telecopied,
telegraphed, cabled, mailed or delivered to the intended recipient at the
"Address for Notices" specified below its name on the signature pages hereof;
or, as to any party, at such other address as shall be designated by such party
in a notice to the Company, Administrative Agent given in accordance with this
Section 13.2. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly received when transmitted by
telex or telecopier during regular business hours, delivered to the telegraph or
cable office or personally delivered or, in the case of a mailed notice, three
(3) days after deposit in the United States mails, postage prepaid, certified
mail with return receipt requested (or upon actual receipt, if earlier), in each
case given or addressed as aforesaid.
13.3 Indemnification. The Company shall indemnify the Agents, the Banks,
and each Affiliate thereof and their respective directors, officers, employees
and agents from, and hold each of them harmless against, any and all losses,
liabilities, claims or damages to which any of them may become subject
(REGARDLESS OF WHETHER CAUSED IN WHOLE OR IN PART BY THE SIMPLE (BUT NOT GROSS)
NEGLIGENCE OF THE PERSON INDEMNIFIED), insofar as such losses, liabilities,
claims or damages arise out of or result from any (i) actual or proposed use by
the Company of the proceeds of any extension of credit (whether a Loan or a
Letter of Credit) by any Bank hereunder, (ii) breach by the Company of this
Agreement or any other Loan Document, (iii) violation by the Company or any of
its Subsidiaries of any Legal Requirement, including but not limited to those
relating to Hazardous Substances, (iv) Liens or security interests previously or
hereafter granted on any real or personal property, to the extent resulting from
any Hazardous Substance located in, on or under any such property, (v) ownership
by the Banks or the Agents of any real or personal property following
foreclosure, to the extent such losses, liabilities, claims or damages arise out
of or result from any Hazardous Substance located in, on or under such property,
including, without limitation, losses, liabilities, claims or damages which are
imposed upon Persons under laws relating to or regulating Hazardous Substances
solely by virtue of ownership, (vi) Bank's or Agent's being deemed an operator
of any such real or personal property by a court or other regulatory or
administrative agency or tribunal in circumstances in which neither any of the
Agents nor any of the Banks is generally operating or generally exercising
control over such property, to the extent such losses, liabilities, claims or
damages arise out of or result from any Hazardous Substance located in, on or
under such property, (vii) investigation, litigation or other proceeding
(including any threatened investigation or proceeding) relating to any of the
foregoing, and the Company shall reimburse each Agent, each Bank, and each
Affiliate thereof and their respective directors, officers, employees and
agents, upon demand, for any expenses (including legal fees) incurred in
connection with any such investigation or proceeding or (viii) taxes (excluding
income taxes and franchise taxes) payable or ruled payable by any Governmental
Authority in respect of any Loan Document, together with interest and penalties,
if any; provided, however, that the Company shall not have any obligations
pursuant to this Section 13.3 with respect to any losses, liabilities, claims,
damages or expenses (a) arising from or relating solely to events, conditions or
circumstances which, as to clauses (iv), (v) or (vi) above, first came into
existence or which first occurred after the date on which the Company or any of
its Subsidiaries conveyed to an unrelated third party all of the Company's or the applicable Subsidiary's rights, titles and interests to the applicable real or personal property (whether by deed, deed-in-lieu, foreclosure or otherwise) other than a conveyance made in violation of any Loan Document or (b) incurred by the Person seeking indemnification by reason of the gross negligence or willful misconduct of such Person. If the Company ever disputes a good faith claim for indemnification under this Section 13.3 on the basis of the proviso set forth in the preceding sentence, the full amount of indemnification provided for shall nonetheless be paid, subject to later adjustment or reimbursement at such time (if any) as a court of competent jurisdiction enters a final judgment as to the applicability of any such exceptions.
13.4 Amendments, Etc. No amendment or waiver of any provision of this
Agreement or any other Loan Document, nor any consent to any departure by the
Company therefrom, shall in any event be effective unless the same shall be
agreed or consented to by the Majority Banks and the Company, and each such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, that no amendment, waiver or consent
shall, unless in writing and signed by each Bank affected thereby, do any of the
following: (a) increase the Commitment of such Bank (it being understood that
the waiver of any reduction in the Commitments or any mandatory repayment other
than (x) the repayment of all Loans at the end of the Revolving Credit
Availability Period and (y) the mandatory reductions of the Commitments provided
for in Section 2.3(a) and (z) the mandatory prepayments required by the terms of
Section 3.2(b), shall not be deemed to be an increase in any Commitment) or
subject the Banks to any additional obligation; (b) reduce the principal of, or
interest on, any Loan, Reimbursement Obligation or fee hereunder; (c) postpone
any scheduled date fixed for any payment or mandatory prepayment of principal
of, or interest on, any Loan, Reimbursement Obligation, fee or other sum to be
paid hereunder; (d) change the percentage of any of the Commitments or of the
aggregate unpaid principal amount of any of the Loans and Letter of Credit
Liabilities, or the number of Banks, which shall be required for the Banks or
any of them to take any action under this Agreement; (e) change any provision
contained in Sections 2.2(c), 9.7 or 13.3 hereof or this Section 13.4 or Section
6.7 hereof, or (f) release all or substantially all of any security for the
obligations of the Company under this Agreement or all or substantially all of
the personal liability of any obligor created under any of the Loan Documents.
Anything in this Section 13.4 to the contrary, no amendment, waiver or consent
shall be made with respect to Section 12 without the consent of Administrative
Agent.
13.5 Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the benefit of the Company, the Agents and the Banks and their respective successors and assigns. The Company may not assign or transfer any of its rights or obligations hereunder without the prior written consent of all of the Banks. Each Bank may sell participations to any Person in all or part of any Loan or Letter of Credit, or all or part of its Commitments, in which event, without limiting the foregoing, the provisions of Section 6 shall inure to the benefit of each purchaser of a participation and the pro rata treatment of payments, as described in Section 5.2, shall be determined as if such Bank had not sold such
participation. In the event any Bank shall sell any participation, such Bank shall retain the sole right and responsibility to enforce the obligations of the Company relating to the Loans or Letters of Credit, including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement other than amendments, modifications or waivers with respect to (i) any fees payable hereunder to the Banks and (ii) the amount of principal or the rate of interest payable on, or the dates fixed for the scheduled repayment of principal of, the Loans.
(b) Each Bank may assign to one or more Banks or any other Person all or a portion of its interests, rights and obligations under this Agreement, provided, however, that (i) other than in the case of an assignment to another Bank that is, at the time of such assignment, a party hereto or an Affiliate of such Bank, the Company must give its prior written consent, which consent will not be unreasonably withheld, (ii) the aggregate amount of the Commitment and/or Loans or Letters of Credit of the assigning Bank subject to each such assignment (determined as of the date the Assignment and Acceptance (as defined below) with respect to such assignment is delivered to Administrative Agent) shall in no event be less than $10,000,000 (or $5,000,000 in the case of an assignment to an Affiliate of a Bank or between Banks), (iii) no assignment shall have the effect of reducing the pro rata share of the Loans or Letters of Credit and the Commitments held by the assignor and its Affiliates below $10,000,000, (iv) notwithstanding any other term or provision of this Agreement, unless the Company shall have otherwise consented in writing (such consent not to be unreasonably withheld), each such assignment shall be pro rata with respect to the Loans, the Letters of Credit and the Commitment of the assignor, and (v) the parties to each such assignment shall execute and deliver to Administrative Agent, for its acceptance and recording in the Register (as defined below), an Assignment and Acceptance in the form of Exhibit F hereto (each an "Assignment and Acceptance") with blanks appropriately completed, together with any note or notes subject to such assignment and a processing and recordation fee of $2,500 paid by the assignee (for which the Company shall have no liability). Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five Business Days after the execution thereof, (A) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Bank hereunder and (B) the Bank thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement. Notwithstanding anything contained in this Agreement to the contrary, any Bank may at any time assign all or any portion of its rights under this Agreement and the notes issued to it as collateral to a Federal Reserve Bank; provided, that no such assignment shall release the assigning Bank from any of its obligations hereunder.
(c) By executing and delivering an Assignment and Acceptance, the Bank assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, such Bank assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any of the other Loan Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant thereto; (ii) such Bank assignor makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Company or the performance or observance by the Company of any of its obligations under this Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 8.6 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon any Agent, such Bank assignor or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents; (v) such assignee appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to such Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vi) such assignee agrees that it will perform in accordance with their terms all obligations that by the terms of this Agreement and the other Loan Documents are required to be performed by it as a Bank.
(d) Administrative Agent shall maintain at its office a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Banks and the Commitments of, and principal amount of the Loans owing to, each Bank from time to time (the "Register"). The entries in the Register shall be conclusive, in the absence of manifest error, and the Company, the Agents and the Banks may treat each person the name of which is recorded in the Register as a Bank hereunder for all purposes of this Agreement and the other Loan Documents. The Register shall be available for inspection by the Company or any Bank at any reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an assigning Bank and the assignee thereunder together with any note or notes subject to such assignment, the written consent to such assignment executed by the Company and the fee payable in respect thereto, Administrative Agent shall, if such Assignment and Acceptance has been completed with blanks appropriately filled, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Company. If applicable, within five Business Days after receipt of notice, the Company, at its own expense, shall execute and deliver to Administrative Agent in exchange for the surrendered notes new notes to the order of such assignee in an amount equal to the Commitments and/or Loans or Letters of Credit assumed by it pursuant to such Assignment and Acceptance and, if the assigning Bank has retained Commitments and/or Loans hereunder, new notes to the order of the assigning Bank in an amount equal to the Commitment and/or Loans retained by it hereunder. Such new notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of the respective note. Thereafter, such surrendered
notes, if any, shall be marked renewed and substituted and the originals delivered to the Company (with copies, certified by the Company as true, correct and complete, to be retained by Administrative Agent).
(f) Any Bank may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 13.5, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Company furnished to such Bank by or on behalf of the Company; provided, however, that, prior to any such disclosure, the Company shall have consented thereto, which consent shall not be unreasonably withheld, and each such assignee or participant, or proposed assignee or participant, shall execute an agreement whereby such assignee or participant shall agree to preserve the confidentiality of any Confidential Information (defined in Section 13.13) on terms substantially the same as those provided in Section 13.13.
(g) The Company will have the right to consent to any material intercreditor arrangements in connection with an assignment by any Bank of any interest, right or obligation under this Agreement which is not pro rata with respect to the Loans, the Letters of Credit and the Commitment of the assignor and the Company may deny its consent to any such arrangements which, in the reasonable judgement of the Company, would adversely affect the Company in a material respect.
(h) The provisions of this Section shall not apply to the assignment and pledge of a Bank's rights hereunder or under any note to any Federal Reserve Bank for collateral purposes pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank; provided that such assignment and pledge shall not relieve such Bank of any of its obligations hereunder.
13.6 Limitation of Interest. The Company, the Agents and the Banks intend to strictly comply with all applicable laws, including applicable usury laws. Accordingly, the provisions of this Section 13.6 shall govern and control over every other provision of this Agreement or any other Loan Document which conflicts or is inconsistent with this Section, even if such provision declares that it controls. As used in this Section, the term "interest" includes the aggregate of all charges, fees, benefits or other compensation which constitute interest under applicable law, provided that, to the maximum extent permitted by applicable law, (a) any non-principal payment shall be characterized as an expense or as compensation for something other than the use, forbearance or detention of money and not as interest, and (b) all interest at any time contracted for, reserved, charged or received shall be amortized, prorated, allocated and spread, in equal parts during the full term of the Obligations. In no event shall the Company or any other Person be obligated to pay, or any Bank have any right or privilege to reserve, receive or retain, (a) any interest in excess of the maximum amount of nonusurious interest permitted under the laws of the State of Texas or the applicable laws (if any) of the United States or of any other applicable state, or (b) total interest in excess of the amount which such Bank could lawfully have contracted for, reserved, received, retained or charged had the interest been calculated for the full term of the Obligations at the Highest Lawful Rate. On each day, if any, that the interest rate (the "Stated Rate") called for under this Agreement or any other Loan Document exceeds the Highest Lawful Rate, the rate at which interest shall accrue shall
automatically be fixed by operation of this sentence at the Highest Lawful Rate for that day, and shall remain fixed at the Highest Lawful Rate for each day thereafter until the total amount of interest accrued equals the total amount of interest which would have accrued if there were no such ceiling rate as is imposed by this sentence. Thereafter, interest shall accrue at the Stated Rate unless and until the Stated Rate again exceeds the Highest Lawful Rate when the provisions of the immediately preceding sentence shall again automatically operate to limit the interest accrual rate. The daily interest rates to be used in calculating interest at the Highest Lawful Rate shall be determined by dividing the applicable Highest Lawful Rate per annum by the number of days in the calendar year for which such calculation is being made. None of the terms and provisions contained in this Agreement or in any other Loan Document which directly or indirectly relate to interest shall ever be construed without reference to this Section 13.6, or be construed to create a contract to pay for the use, forbearance or detention of money at an interest rate in excess of the Highest Lawful Rate. If the term of any Obligation is shortened by reason of acceleration of maturity as a result of any Default or by any other cause, or by reason of any required or permitted prepayment, and if for that (or any other) reason any Bank at any time, including but not limited to, the stated maturity, is owed or receives (and/or has received) interest in excess of interest calculated at the Highest Lawful Rate, then and in any such event all of any such excess interest shall be canceled automatically as of the date of such acceleration, prepayment or other event which produces the excess, and, if such excess interest has been paid to such Bank, it shall be credited pro tanto against the then-outstanding principal balance of the Company's obligations to such Bank, effective as of the date or dates when the event occurs which causes it to be excess interest, until such excess is exhausted or all of such principal has been fully paid and satisfied, whichever occurs first, and any remaining balance of such excess shall be promptly refunded to its payor. Chapter 346 of the Texas Finance Code (which regulates certain revolving credit accounts (formerly Tex. Rev. Civ. Stat. Ann. Art. 5069, Ch. 15)) shall not apply to this Agreement.
13.7 Survival. The obligations of the Company under Sections 2.2(c), 6, 9.7 and 13.3 hereof and the obligations of the Banks under Section 13.6 hereof shall survive the repayment of the Loans and Reimbursement Obligations and the termination of the Commitments and the Letters of Credit.
13.8 Captions. Captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement.
13.9 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same agreement and any of the parties hereto may execute this Agreement by signing any such counterpart.
13.10 Governing Law. This Agreement and (except as therein provided) the other Loan Documents are performable in Harris County, Texas, which shall be a proper place of venue for suit on or in respect thereof. The Company irrevocably agrees that any legal proceeding in respect of this Agreement or the other Loan
Documents shall be brought in the district courts of Harris County, Texas or the United States District Court for the Southern District of Texas, Houston Division (collectively, the "Specified Courts"). The Company hereby irrevocably submits to the nonexclusive jurisdiction of the state and federal courts of the State of Texas. The Company hereby irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to any Loan Document brought in any Specified Court, and hereby further irrevocably waives any claims that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. The Company further (1) agrees to designate and maintain an agent for service of process in the City of Houston in connection with any such suit, action or proceeding and to deliver to Administrative Agent evidence thereof and (2) irrevocably consents to the service of process out of any of the aforementioned courts in any such suit, action or proceeding by the mailing of copies thereof by certified mail, return receipt requested, postage prepaid, to the Company at its address as provided in this Agreement or as otherwise provided by Texas law. Nothing herein shall affect the right of any Agent or any Bank to commence legal proceedings or otherwise proceed against the Company in any jurisdiction or to serve process in any manner permitted by applicable law. The Company agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. THIS AGREEMENT AND (EXCEPT AS THEREIN PROVIDED) THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS (OTHER THAN THE CONFLICT OF LAWS RULES) OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN EFFECT.
13.11 Severability. Whenever possible, each provision of the Loan Documents shall be interpreted in such manner as to be effective and valid under applicable law. If any provision of any Loan Document shall be invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality and enforceability of the remaining provisions of such Loan Document shall not be affected or impaired thereby.
13.12 Chapter 15 Not Applicable. Chapter 15, Subtitle 3, Title 79, Revised Civil Statutes of Texas, 1925, as amended, shall not apply to this Agreement or to any Loan or Letter of Credit, nor shall this Agreement or any Loan or Letter of Credit be governed by or be subject to the provisions of such Chapter 15 in any manner whatsoever.
13.13 Confidential Information. Each Agent and each Bank separately agrees that:
(a) As used herein, the term "Confidential Information" means written information about the Company or the transactions contemplated herein furnished by the Company to the Agents and/or the Banks which is specifically designated as confidential by the Company; Confidential Information, however, shall not include information which (i) was publicly known or available, or otherwise available on a non-confidential basis to any Bank, at the time of disclosure from a source other than the Company, (ii) subsequently becomes publicly known through no act or omission by such Bank, (iii) otherwise becomes available on a non-confidential basis to any Bank other than through disclosure by the Company
or (iv) has been in the possession of any Bank for a period of more than two years from the date on which such information originally was furnished to such Bank by the Company, unless the Company shall have requested the Agents and the Banks in writing, at least 30 days prior to the end of such two-year period, to maintain the confidentiality of such information for another two (2) year period (or for successive two (2) year periods); provided that the Company shall not unreasonably withhold its consent to a request made after the initial two (2) year period to eliminate information from "Confidential Information".
(b) Each Agent and each Bank agrees that it will take normal and reasonable
precautions to maintain the confidentiality of any Confidential Information
furnished to such Person; provided, however, that such Person may disclose
Confidential Information (i) upon the Company's consent; (ii) to its auditors;
(iii) when required by any Legal Requirement; (iv) as may be required or
appropriate in any report, statement or testimony submitted to any Governmental
Authority having or claiming to have jurisdiction over it; (v) to such Person's
and its Subsidiaries' or Affiliates' officers, directors, employees, agents,
representatives and professional consultants in connection with this Agreement
or administration of the Loans and Letters of Credit; (vi) as may be required or
appropriate, should such Bank elect to assign or grant participations in any of
the Obligations in connection with (1) the enforcement of the Obligations to any
such Person under any of the Loan Documents or related agreements, or (2) any
potential transfer pursuant to this Agreement of any Obligation owned by any
Bank (provided any potential transferee has been approved by the Company if
required by this Agreement, which approval shall not be unreasonably withheld,
and has agreed in writing to be bound by substantially the same provisions
regarding Confidential Information contained in this Section); (vii) as may be
required or appropriate in response to any summons or subpoena or in connection
with any litigation or administrative proceeding; (viii) to any other Bank; (ix)
to the extent reasonably required in connection with the exercise of any remedy
hereunder or under the other Loan Documents; or (x) to correct any false or
misleading information which may become public concerning such Person's
relationship to the Company.
13.14 Tax Forms. With respect to each Bank which is organized under the laws of a jurisdiction outside the United States, on the day of the initial borrowing hereunder and from time to time thereafter if requested by the Company or Administrative Agent, such Bank shall provide Administrative Agent and the Company with the forms prescribed by the Internal Revenue Service of the United States certifying as to such Bank's status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to such Bank hereunder or other documents satisfactory to the Bank and Administrative Agent indicating that all payments to be made to such Bank hereunder are subject to such tax at a rate reduced by an applicable tax treaty. Unless the Company and Administrative Agent shall have received such forms or such documents indicating that payments hereunder are not subject to United States withholding tax or are subject to such tax at a rate reduced by an applicable tax treaty, the Company or Administrative Agent shall withhold taxes from such payments at the applicable statutory rate in the case of payments to or for any Bank organized under the laws of a jurisdiction outside the United States.
13.15 Amendment and Restatement. This Agreement amends and restates in its entirety that certain Credit Agreement dated as of June 17, 1997 executed by and among the Company, the Banks and Administrative Agent, as amended.
[SIGNATURES BEGIN ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written.
SEAGULL ENERGY CORPORATION, a Texas corporation
By: /s/ Stephen A. Thorington Name: Stephen A. Thorington Title: Vice President - Finance and Treasurer |
Addresses for Notices:
1001 Fannin, Suite 1700
Houston, Texas 77002
Attention: Steve Thorington
THE CHASE MANHATTAN BANK, as a Bank and as Administrative Agent
By:
Name:
Title:
Commitment:
Address for Notices:
$50,000,000
1 Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention: Ms. Lisa Pucciarelli
Phone: (212) 552-7886 Fax: (212) 552-5777
with a copy to:
Texas Commerce Bank National Association 712 Main Street Houston, Texas 77002 Attention: Manager, Energy Division
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as a
Bank and as Documentation Agent
By: /s/John Kowalczuk
Commitment: Name: John Kowalczuk
Title: Vice President
$50,000,000
Address for Notices:
|
60 Wall Street New York, N.Y. 10260-0060 Attention: Mr. John Kowalczuk Phone: (212) 648-7612 Fax: (212) 648-5967 |
with further notice to:
Sandra H. Doherty 500 Christiana Stanton Road Newark, DE 19713-2107 Phone: (302) 634-8122 Fax: (302) 634-1092
NATIONSBANK OF TEXAS, N.A., as a Bank and as Syndication Agent
By: /s/ James V. Ducote
Commitment: Name: James V. Ducote
Title: Vice President
$50,000,000
Address for Notices:
|
700 Louisiana, 8th Floor Houston, Texas 77002 Attention: Jo A. Tamalis Phone: (713) 247-6856 Fax: (713) 247-6568 |
BANKBOSTON, N.A., as a Bank
By: /s/ Terrence Ronan
Commitment: Name: Terrence Ronan
Title: Vice President
$30,000,000
Address for Notices:
|
100 Federal Street Energy & Utilities 01-08-04 Boston, Massachusetts 02110
Attention: Terrence Ronan
Phone: (617) 434-5472 Fax: (617) 434-3652
ABN AMRO BANK N.V., HOUSTON AGENCY, as a Bank
By: /s/C. Lipshutz
Commitment: Name: Cheryl Lipshutz
Title: Group Vice President
$11,250,000
By: /s/Stephanie Ballete
Name: Stephanie Ballete
Title: Credit Officer
|
Address for Notices:
Three Riverway, Suite 1700
Houston, Texas 77056
Attention: Ms. Cheryl Lipshutz
Phone: (713) 964-3351
Fax: (713) 629-7533
THE BANK OF NEW YORK, as a Bank
By: /s/Ian K. Stewart
Commitment: Name: Ian K. Stewart
Title: Senior Vice President
$20,000,000
Address for Notices:
|
One Wall Street, 19th Floor New York, New York 10286 Attention: Ms. Felicia LaForgia Phone: (212) 635-7861 Fax: (212) 635-7923 |
BANQUE PARIBAS HOUSTON AGENCY, as a Bank
By: /s/Marian Livingston
Commitment: Name: Marian Livingston
Title: Vice President
$20,000,000
By: /s/Barton D. Schonest
Name: Barton D. Schonest
Title: Managing Director
|
Address for Notices: 1200 Smith, Suite 3100 Houston, Texas 77002 Attention: Marian Livingston Phone: (713) 659-4811 Fax: (713) 659-6915 |
CREDIT LYONNAIS NEW YORK BRANCH, as a Bank
By: /s/ Pascal Poupeller
Commitment: Name: Pascal Poupeller
Title: Executive Vice President
$20,000,000
|
Address for Notices: 1000 Louisiana, Suite #5360 Houston, Texas 77002 Attention: Mr. John Falbo Phone: (713) 753-8704 Fax: (713) 751-0307 |
THE FUJI BANK, LIMITED HOUSTON AGENCY, as
a Bank
By: /s/ Yoshaki Imoue
Commitment: Name: Yoshaki Imoue
Title: Vice President and Manager
$11,250,000
Address for Notices:
|
One Houston Center Suite 4100 1221 McKinney Street Houston, Texas 77010 Attention: Mr. Tommy Watts Phone: (713) 650-7868 Fax: (713) 659-0048 |
THE FIRST NATIONAL BANK OF CHICAGO, as a Bank
By: /s/ Dixon P. Schultz
Commitment: Name: Dixon P. Schultz
Title: Vice President
$30,000,000
Address for Notices:
|
One First National Plaza 10th Floor, Mail Suite 0634 Chicago, Illinois 60670
Attention: Mr. John Beirne
with a copy to:
1100 Louisiana, Suite 3200 Houston, Texas 77002 Attention: Ms. Dixon Schultz Phone: (713) 654-7239 Fax: (713) 654-7370 |
SOCIETE GENERALE, SOUTHWEST AGENCY, as
a Bank
By: /s/ Paul E. Cornell
Commitment: Name: Paul E. Cornell
Title: First Vice President
$30,000,000
Address for Notices:
|
2001 Ross Avenue, Suite 4800 Dallas, Texas 75201
Attention: Mr. Mark Ghent
Phone: (214) 979-2792 Fax: (214) 979-1104
with a copy to:
1111 Bagby, Suite 2020 Houston, Texas 77002 Attention: Mr. Richard Erbert Phone: (713) 759-6318 Fax: (713) 650-0824 |
THE BANK OF TOKYO-MITSUBISHI, LTD., as
a Bank
By: /s/ Michael G. Meiss
Commitment: Name: Michael G. Meiss
Title: Vice President
$11,250,000
Address for Notices:
|
1100 Louisiana, Suite 2800 Houston, Texas 770002-5216 Attention: Mr. John M. McIntyre Phone: (713) 655-3845 Fax: (713) 655-3855 |
BANK OF SCOTLAND, as a Bank
By: /s/ Annie Chintat
Commitment: Name: Annie Chintat
Title: Vice President
$11,250,000
Address for Notices:
|
565 Fifth Avenue New York, New York 10017 Attention: Ms. Annie Chintat Phone: (212) 450-0871 Fax: (212) 557-9460 |
CREDIT AGRICOLE INDOSUEZ, as a Bank
By: /s/ W. Leroy Startz
Commitment: Name: W. Leroy Startz
Title: First Vice President
$11,250,000
By: /s/ David Eouhl, FVP
Name: David Eouhl, FVP
Title: Head of Corporate Banking - Chicago
|
Address for Notices: 600 Travis, Suite 2340 Houston, Texas 77002 Attention: Mr. Brian Knezeak Phone: (713) 223-7001 Fax: (713) 223-7029 |
CHRISTIANIA BANK OG KREDITKASSE, as a Bank
By: /s/ William S. Phillips
Commitment: Name: William S. Phillips
Title: Vice President
$11,250,000
By: /s/ Peter Dodge
Name: Peter Dodge
Title: First Vice President
|
Address for Notices: 11 West 42nd Street 7th Floor New York, New York 10036 Attention: Mr. Peter Dodge Phone: (212) 827-4835 Fax: (212) 827-4888 |
DEN NORSKE BANK AS, as a Bank
By: /s/ Byron L. Cooley
Commitment: Name: Byron L. Cooley
Title: Senior Vice President
$11,250,000
By: /s/ Morten Bjornsen
Name: Morten Bjornsen
Title: Senior Vice President
|
Address for Notices: 333 Clay Suite 4890 Houston, Texas 77002 Attention: Mr. Byron L. Cooley Phone: (713) 844-9258 Fax: (713) 757-1167 |
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION, as a Bank
By: /s/ Alan Alexander
Commitment: Name: Alan Alexander
Title: Vice President
$20,000,000
Address for Notices:
|
1000 Louisiana Street 3rd Floor/MAC 5002-031 Houston, Texas 77002 Attention: Mr. Alan Alexander Phone: (713) 250-1651 Fax: (713) 250-7912 |
THE BANK OF NOVA SCOTIA, as a Bank
By: /s/ FCH Ashby
Commitment: Name: FCH Ashby
Title: Senior Manager Loan Operations
$30,000,000
Address for Notices:
|
600 Peachtree Street, Suite 2700 Atlanta, Georgia 30308 Attention: Mr. Cleve Bushey Phone: (404) 877-1500 Fax: (404) 888-8998 |
CIBC INC., as a Bank
By: /s/ Aleksandra K. Dymanus
Commitment: Name: Aleksandra K. Dymanus
Title: Authorized Signatory
$30,000,000
|
Address for Notices:
Two Paces West
2727 Paces Ferry Road
Suite 1200
Atlanta, Georgia 30339
Attention: Loan Operations
with a copy to:
Canadian Imperial Bank of Commerce Two Houston Center 909 Fannin Street Houston, Texas 77010 Attention: Mr. Brian Myers Phone: (713) 655-5230 Fax: (713) 650-3727 |
MELLON BANK N.A., as a Bank
By: /s/ Roger E. Howard
Commitment: Name: Roger E. Howard
Title: Vice President
$11,250,000
Address for Notices:
|
Mellon Bank N.A. One Mellon Bank Center Room 151-4425 Pittsburgh, Pennsylvania 15258-0001 Attention: Manager, Energy Services Group Phone: (412) 236-2785 Fax: (412) 236-1840 |
BANK OF MONTREAL, as a Bank
By: /s/ Melissa A. Bauman
Commitment: Name: Melissa A. Bauman
Title: Director
$30,000,000
|
Address for Notices:
700 Louisiana, Suite 4400
Houston, Texas 77002
Attention: Mr. Brian Otis
Phone: (713) 546-9720
Fax: (713) 223-4007
Exhibit A
Unrestricted Subsidiaries
1. Seagull UK Ltd.
2. SGO Isle of Man Ltd.
3. Seagull Energy International, Inc.
4. SGO Southeast Asia, Inc.
5. Seagull Ireland Ltd.
6. Seagull International Holdings Ltd.
7. Seagull East Zeit Petroleum Ltd.
8. Seagull South Hurghada Petroleum Ltd.
9. Seagull (Cote D'Ivoire) Ltd.
10. Seagull (Cote D'Ivoire) CI-12 Ltd.
11. Seagull (Cote D'Ivoire) CI-104 Ltd.
12. Seagull (Egypt) Ltd.
13. Seagull (Egypt) Darag, Ltd.
14. Seagull (Egypt) East Beni Suef, Ltd.
15. GNR International (Argentina), Inc.
16. Seagull (Malaysia) Ltd.
17. Texneft Inc.
18. GNR International (Turkey), Inc.
19. Seagull WAG Petroleum Ltd.
Exhibit A-1
Exhibit B
Form of Request for Extension of Credit
[SEAGULL ENERGY CORPORATION LETTERHEAD]
REQUEST FOR EXTENSION OF CREDIT
________________, 199____
The Chase Manhattan Bank,
as Administrative Agent
1 Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention: Agent Services
Gentlemen:
The undersigned hereby certifies that he is the __________________ of SEAGULL ENERGY CORPORATION, a Texas corporation (the "Company"), and that as such he is authorized to execute this Request for Extension of Credit (the "Request") on behalf of the Company pursuant to the Amended and Restated Credit Agreement (as it may be amended, supplemented or restated from time to time, the "Agreement") dated as of December 24, 1997, by and among the Company, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Documentation Agent for the Banks, NATIONSBANK OF TEXAS, N.A., as Syndication Agent for the Banks, and THE CHASE MANHATTAN BANK, as Administrative Agent for the Banks ("Administrative Agent"), and the Banks therein named. The Loan being requested hereby is to be in the amount set forth in (b) below and is requested to be made on ________________, 199___, which is a Business Day. The Loan is to be (check one) [___] a Eurodollar Loan [___] an Alternate Base Rate Loan. If the Loan is to be a Eurodollar Loan, the Interest Period is to be (check one) [__] 1, [__] 2, [__] 3 or [__] 6 months. On behalf of the Company, the undersigned further certifies, represents and warrants that to his knowledge, after due inquiry (each capitalized term used herein having the same meaning given to it in the Agreement unless otherwise specified herein):
(a) As of the date hereof:
(1) The Facility Amount [COMPLETE WITH THE AGGREGATE COMMITMENTS) is:
$----------
(2) Aggregate outstanding amount of Revolving Credit Obligations is:
$----------
Exhibit B-1
(3) Amount currently available under the Agreement (the amount in (a)(1) above minus the amount in (a)(2) above is: $__________
(b) If and only if the amount shown in Line (a)(3) above is positive, the Company hereby requests under this Request a Loan in the amount of $__________ (which is no more than the positive amount set forth in Line (a)(3) above).
(c) Except for the facts heretofore disclosed to the Administrative Agent in writing, which facts (I) are not materially more adverse to the Company and its Subsidiaries, (II) do not materially decrease the ability of the Banks to collect the Obligations as and when due and payable and (III) do not materially increase the liability of any Agent or any of the Banks, in each case compared to those facts existing on the date hereof and the material details of which have been set forth in the Financial Statements delivered to the Administrative Agent prior to the date hereof or in the Disclosure Statement, and except for the representations set forth in the Loan Documents which, by their terms, are expressly (or by means of similar phrasing) made as of the date of the Agreement, only, the representations and warranties made in each Loan Document are true and correct in all material respects on and as of the time of delivery hereof, with the same force and effect as if made on and as of the time of delivery hereof.
(d) The interest rate and Interest Period selected above comply with all applicable provisions of the Agreement.
(e) No Default has occurred and is continuing.
Thank you for your attention to this matter.
Very truly yours,
SEAGULL ENERGY CORPORATION,
a Texas corporation
By: _
Name:
Title:
Exhibit B-2
Exhibit C
Existing Competitive Loans
Interest
Institution Issue Date Maturity Rate Amount
NONE
Exhibit C-1
Exhibit D
Subsidiaries (with Addresses)
1. Seagull Energy E&P Inc.
2. Seagull Midcon Inc.
3. Seagull Mid-South Inc.
4. Seagull Energy Canada Holding Company
5. Seagull UK Ltd.
6. SGO Isle of Man Ltd.
7. Seagull Energy International, Inc.
8. SGO Southeast Asia, Inc.
9. Seagull Ireland Ltd.
10. Seagull International Holdings Ltd.
11. Seagull East Zeit Petroleum Ltd.
12. Seagull South Hurghada Petroleum Ltd.
13. Global Natural Resources Inc.
14. Global Natural Resources Corporation of Nevada
15. Seagull (Cote D'Ivoire) Ltd.
16. Seagull (Cote D'Ivoire) CI-12 Ltd.
17. Seagull (Cote D'Ivoire) CI-104 Ltd
18. Seagull (Egypt) Ltd.
19. Seagull (Egypt) Darag, Ltd.
20. Seagull (Egypt) East Beni Suef, Ltd.
21. GNR International (Argentina), Inc.
22. Seagull (Malaysia) Ltd.
23. Texneft Inc.
24. GNR Eastern
25. GNR International (Turkey), Inc.
26. Thousand Oaks Development Corporation
27. Seagull Pipeline & Marketing Company
28. Seagull Marketing Services, Inc.
29. Seagull Power Services Inc.
30. Seagull Products Pipeline Corporation
31. Seagull Field Services Company
32. Seagull Pipeline Company
33. Alaska Pipeline Company
34. Seagull WAG Petroleum Ltd.
In each case, the address for notice is: c/o Seagull Energy Corporation
1001 Fannin, Suite 1700
Houston, Texas 77002
|
Exhibit D-1
Exhibit E
Form of
Compliance Certificate
The undersigned, the ___________________ of SEAGULL ENERGY CORPORATION, a Texas corporation (the "Company"), hereby certifies that he is authorized to execute this certificate on behalf of the Company, pursuant to the Amended and Restated Credit Agreement (the "Credit Agreement") dated as of December 24, 1997, by and among the Company, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Documentation Agent for the Banks, NATIONSBANK OF TEXAS, N.A., as Syndication Agent for the Banks, and THE CHASE MANHATTAN BANK, as Administrative Agent for the Banks ("Administrative Agent"), and the Banks therein named, as amended; and that a review of the Company and its Subsidiaries has been made under his supervision with a view to determining whether the Company and its Subsidiaries have fulfilled all of their respective obligations under the Credit Agreement and the other Loan Documents; and on behalf of the Company further certifies, represents and warrants that to his knowledge, after due inquiry (each capitalized term used herein having the same meaning given to it in the Credit Agreement unless otherwise specified):
As of ___________________, 199___:
(a) The Company and its Subsidiaries have fulfilled their respective obligations under the Credit Agreement and the other Loan Documents as each applies after giving effect to any amendments, consents and/or waivers that may be in effect from time to time.
(b) Except for the facts heretofore disclosed to the Administrative Agent
under the Credit Agreement in writing, which facts (I) are not materially more
adverse to the Company and its Subsidiaries, (II) do not materially decrease the
ability of the Banks to collect the Obligations as and when due and payable and
(III) do not materially increase the liability of the Agents or any of the
Banks, in each case compared to those facts existing on the date hereof and the
material details of which have been set forth in the Financial Statements
delivered to the Administrative Agent under the Credit Agreement prior to the
date hereof or in the Disclosure Statements provided for in the Credit
Agreement, and except for the representations set forth in the Loan Documents
which, by their terms, are expressly (or by means of similar phrasing) made as
of the date of the Credit Agreement, only, the representations and warranties
made in each Loan Document are true and correct in all material respects on and
as of the time of delivery hereof, with the same force and effect as if made on
and as of the time of delivery hereof.
(c) The Financial Statements delivered to the Administrative Agent under the Credit Agreement concurrently with this Compliance Certificate have been prepared in accordance with GAAP consistently followed throughout the period indicated and fairly present the consolidated financial condition and results of
Exhibit E-1
operations of the applicable Persons as at the end of, and for, the period indicated (subject, in the case of quarterly Financial Statements, to normal changes resulting from year-end adjustments).
(d) No Default has occurred and is continuing. In this regard the compliance with the provisions of Sections 10.9 and 10.10 of the Credit Agreement is as follows:
(i) Section 10.9 of the Credit Agreement - Total Debt/Capitalization Ratio]
Revolving Credit Obligations (including Competitive Loans)] $__________
Other Current Maturities and borrowed money Indebtedness $__________
Total Debt (1) $__________ Total Shareholders Equity $__________ Total Capitalization (2) $__________ Total Debt/Capitalization Ratio (1) (2) ______% |
Note: Must be no greater than 60%
(ii) Section 10.10 of the Credit Agreement - EBITDAX/Interest Ratio (For the rolling four calendar quarter period ended _________________, 199____)
Earnings Applicable to Common Stock1 $__________
Interest Expense (including capitalized interest) $__________
Income Tax Expense $__________
Material Gains/Losses $__________
Depreciation, Depletion & Amortization $__________
Exploration Expenses $__________
Operating Lease Rentals $__________
1 Excludes Cumulative Effect of Changes in Accounting Methods
Exhibit E-2
|
EBITDAX (the sum of the foregoing) (1) $__________
Operating Lease Rentals (a) $__________
Cash Interest Expense (b) $__________
Total [(a) plus (b)] (2) $__________
EBITDAX/Interest (1)/(2) __________
|
Note: Must be no less than 3.75:1.
(e) There has occurred no material adverse change, either in any case or in the aggregate, in the assets, liabilities, financial condition, business, operations, affairs or circumstances of the Company and its Subsidiaries taken as a whole since the date of the most recent Financial Statements delivered to the Banks.
DATED as of ____________________, 199___.
SEAGULL ENERGY CORPORATION
By:
Name:
Title:
Exhibit E-3
Exhibit F
Form of
Assignment and Acceptance
Dated: _______________.199____
Reference is made to the Amended and Restated Credit Agreement dated as of December 24, 1997 (as restated, amended, modified, supplemented and in effect from time to time, the "Credit Agreement"), among SEAGULL ENERGY CORPORATION, a Texas corporation (the "Company"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Documentation Agent for the Banks, NATIONSBANK OF TEXAS, N.A., as Syndication Agent for the Banks, and THE CHASE MANHATTAN BANK, as Administrative Agent for the Banks ("Administrative Agent"), and the Banks therein named. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Credit Agreement. This Assignment and Acceptance, between the Assignor (as defined and set forth on Schedule I hereto and made a part hereof) and the Assignee (as defined and set forth on Schedule I hereto and made a part hereof) is dated as of the Effective Date (as set forth on Schedule I hereto and made a part hereof).
1. The Assignor hereby irrevocably sells and assigns to the Assignee without recourse to the Assignor, and the Assignee hereby irrevocably purchases and assumes from the Assignor without recourse to the Assignor, as of the Effective Date, an undivided interest (the "Assigned Interest") in and to all the Assignor's rights and obligations under the Credit Agreement respecting those, and only those, credit facilities contained in the Credit Agreement as are set forth on Schedule 1 (collectively, the "Assigned Facilities," individually, an "Assigned Facilities"), in a principal amount for each Assigned Facility as set forth on Schedule I.
2. The Assignor (i) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, any other Loan Document or any other instrument or document furnished pursuant thereto, other than that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Company or its Subsidiaries or the performance or observance by the Company or its Subsidiaries of any of its respective obligations under the Credit Agreement, any other Loan Document or any other instrument or document furnished pursuant thereto; and (iii) if applicable, attaches the note(s) held by it evidencing the Assigned Facility or Facilities, as the case may be, and requests that the Administrative Agent exchange such note(s) for a new note or notes payable to the Assignor (if the Assignor has retained any interest in the Assigned Facility or Facilities) and a new note or notes payable to the Assignee in the respective amounts which reflect the assignment being made hereby (and
Exhibit F-1
after giving effect to any other assignments which have become effective on the Effective Date).
3. The Assignee (i) represents and warrants that it is legally authorized to enter into this Assignment and Acceptance and that it is a permitted assignee under Section 13.5 of the Credit Agreement; (ii) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 8.6, or if later, the most recent financial statements delivered pursuant to Section 9.1 thereof, and such other documents and information as it has deemed appropriate to make its own credit analysis; (iii) agrees that it will, independently and without reliance upon the Administrative Agent, the Assignor or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iv) appoints and authorizes the each Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to such Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (v) agrees that it will be bound by the provisions of the Credit Agreement and will perform in accordance with its terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Bank; (vi) if the Assignee is organized under the laws of a jurisdiction outside the United States, attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assignee's exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Credit Agreement or such other documents as are necessary to indicate that all such payments are subject to such tax at a rate reduced by an applicable tax treaty, and (vii) has supplied the information requested on the administrative questionnaire attached hereto as Exhibit A.
4. Following the execution of this Assignment and Acceptance, it will be delivered to the Administrative Agent for acceptance by it and the Company and recording by the Administrative Agent pursuant to Section 13.5(e) of the Credit Agreement, effective as of the Effective Date (which Effective Date shall, unless otherwise agreed to by the Administrative Agent, be at least five Business Days after the execution of this Assignment and Acceptance).
5. Upon such acceptance and recording, from and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignee, whether such amounts have accrued prior to the Effective Date or accrue subsequent to the Effective Date. The Assignor and Assignee shall make all appropriate adjustments in payments for periods prior to the Effective Date by the Administrative Agent or with respect to the making of this assignment directly between themselves.
6. From and after the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Bank thereunder, and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement.
Exhibit F-2
7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed by their respective duly authorized officers on Schedule I hereto.
Exhibit F-3
Schedule I to Assignment and Acceptance
Legal Name of Assignor: ____________________________________
Legal Name of Assignee: ____________________________________
Effective Date of Assignment:_______________________, 199___
Percentage Assigned of Each
Facility (to at least 8
Principal decimals) (Shown as a
Amount (or, percentage of aggregate
with respect original principal amount
to Letters [or, with respect to Letters
Assigned of Credit, face Credit, fact amount]
Facilities amount) Assigned of all Banks
Committed Loans: $_______________ __________%
Letter of Credit $_______________ __________%
participation
interests:
Competitive Loans: $_______________
|
Accepted:
THE CHASE MANHATTAN BANK, ____________________________
as Administrative Agent as Assignor
By:______________________ By:_________________________
Name: Name:
Title: Title:
Exhibit F-4
|
SEAGULL ENERGY CORPORATION ____________________________
as Assignee
By:______________________ By:_________________________
Name: Name:
Title: Title:
Exhibit F-5
|
Exhibit G
Form of
Competitive Bid Request
The Chase Manhattan Bank,
as Administrative Agent
1 Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention: Agent Services
Dear Sirs:
Reference is made to the Amended and Restated Credit Agreement dated as of December 24, 1997, as modified and amended (the "Credit Agreement"), among the undersigned, the Banks named therein, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Documentation Agent for the Banks, NATIONSBANK OF TEXAS, N.A., as Syndication Agent for the Banks, and THE CHASE MANHATTAN BANK, as Administrative Agent for the Banks ("Administrative Agent"). Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The undersigned hereby gives you notice pursuant to Section 2.9 of the Credit Agreement that it requests a Competitive Loan under the Credit Agreement, and in that connection sets forth below the terms on which such Competitive Loan is requested to be made:
(A) Borrowing Date of Competitive Loan
(which is a Business Day) ____________________
(B) Principal Amount of Competitive Loan 1 ____________________
(C) Interest Period and the last day thereof 2 ____________________
|
Exhibit G-1
By each of the delivery of this Request for Competitive Bids and the acceptance of any or all of the Loans offered by the Banks in response to this Competitive Bid Request, the undersigned represents and warrants that the applicable conditions to lending specified in the Credit Agreement have been satisfied with respect to the Competitive Loan requested hereby.
Very truly yours,
SEAGULL ENERGY CORPORATION
By:_______________________
Name:
Title:
Exhibit G-2
Exhibit H
Form of
Notice to Banks of Competitive Bid Request
[Name of Bank]
[Address of Bank]
Attention:________________ _______________, 199___
Dear Sirs:
Reference is made to the Amended and Restated Credit Agreement dated as of December 24, 1997, as modified and amended (the "Credit Agreement"), among Seagull Energy Corporation (the "Company"), the Banks named therein, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Documentation Agent for the Banks, NATIONSBANK OF TEXAS, N.A., as Syndication Agent for the Banks, and THE CHASE MANHATTAN BANK, as Administrative Agent for the Banks ("Administrative Agent"). Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The Company delivered a Request for Competitive Bid by [Date] /Time].1 Your Competitive Bid must comply with Section 2.9 of the Credit Agreement and the terms set forth below on which the Notice of Competitive Loan was made:
(A) Date of Competitive Loan _____________________________
(B) Principal Amount of Competitive Loan _____________________________
(C) Interest Period and the last day thereof _____________________________
Very truly yours,
THE CHASE MANHATTAN BANK
By:__________________________
Name:
Title:
Exhibit H-1
Exhibit I
Form of
Competitive Bid
The Chase Manhattan Bank,
as Administrative Agent
1 Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention: Agent Services __________, 199___
Dear Sirs:
The undersigned, [Name of Bank], referred to in the Amended and Restated Credit Agreement dated as of December 24, 1997, as modified and amended (the "Credit Agreement"), among Seagull Energy Corporation (the "Company"), the Banks named therein, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Documentation Agent for the Banks, NATIONSBANK OF TEXAS, N.A., as Syndication Agent for the Banks, and THE CHASE MANHATTAN BANK, as Administrative Agent for the Banks ("Administrative Agent"). Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement. The undersigned hereby makes a Competitive Bid pursuant to Section 2.9 of the Credit Agreement, in response to the Request for Competitive Bids (the "Competitive Bid Request") made by the Company on _______________, 19___, and in that connection sets forth below the terms on which such Competitive Bid is made:
(A) Principal Amount1 _____________________________ (B) Competitive Bid Rate2 _____________________________ (C) Interest Period and the last day thereof3 _____________________________ |
Exhibit I-1
The undersigned hereby confirms that it is prepared to extend credit to the Company upon acceptance by the Company of this bid in accordance with Section 2.9 of the Credit Agreement.
Very truly yours,
[NAME OF BANK]
By:
Name:
Title:
Exhibit I-2
Exhibit J
Form of
Competitive Bid Administrative Questionnaire
Primary Contact
Competitive Auctions
Bank Name: ___________________________________________________________________ Address: ___________________________________________________________________
Primary Contact: ______________________________________________________________ Title: ___________________________________________________________________ Department: ___________________________________________________________________ Telephone Number:______________________________________________________________ Telecopier Number:_____________________________________________________________
Alternate Contact Competitive Auctions
Alternate Contact:_____________________________________________________________ Title: __________________________________________________________________ Department: __________________________________________________________________ Telephone Number:______________________________________________________________ Telecopier Number:_____________________________________________________________
Exhibit J-1
Exhibit K
Continuing Letters of Credit
1. Issuer: The Chase Manhattan Bank
Beneficiary: Insurance Company of North America
L/C No.: P259686
Amount: $300,000
Date of Issue: 03/08/91
Expiration: 01/30/99
2. Issuer: The Chase Manhattan Bank
Beneficiary: American Home Assurance Co.
L/C No.: P753483
Amount: $998,000
Date of Issue: 01/30/95
Expiration: 01/30/98
3. Issuer: The Chase Manhattan Bank
Beneficiary: American Home Assurance Co.
L/C No.: P770604
Amount: $662,000
Date of Issue: 12/01/95
Expiration: 12/01/99
4. Issuer: NationsBank of Texas, N.A.
Beneficiary: UMC Petroleum
L/C No.: NBLC2 (150039)
Amount: $50,000
Date of Issue: 06/26/95
Expiration: 01/01/98
5. Issuer: NationsBank of Texas, N.A.
Beneficiary: Michigan Dept. of Natural Resources
L/C No.: NBLC3 (413425)
Amount: $50,000
Date of Issue: 09/03/93
Expiration: 11/01/98
Exhibit K-1
|
6. Issuer: NationsBank of Texas, N.A.
Beneficiary: Hambros Channel Island Trust
|
L/C No.: NBLC4 (913560)
Amount: $16,645,954.91
Date of Issue: 08/08/96
Expiration: 08/11/98
1/ Excludes Cumulative Effect of Changes in Accounting Methods
1/ Not less than $25,000,000 or greater than the unused Total Commitment and in integral multiples of $5,000,000.
2/ Which, subject to the Credit Agreement, shall have a duration of not less than seven calendar days nor more than 180 calendar days, and which shall end not later than the Termination Date.
1/ The Competitive Bid must be received by the Auction Agent not later than 11:00 a.m., Houston, Texas time, four Business Days before the date of the proposed Competitive Loan.
1/ Not less than $10,000,000 or greater than the available Total Commitment and in integral multiples of $1,000,000. Multiple bids will be accepted by the Auction Agent.
2/ Expressed as a percentage
3/ The Interest Period must be the Interest Period specified in the Competitive Bid Request.
Exhibit K-2
SEAGULL ENERGY CORPORATION
AND
THE BANK OF NEW YORK
Senior Indenture
Dated as of September 1, 1997
CROSS REFERENCE SHEET*
Provisions of Trust Indenture Act of 1939 and Indenture to be dated as of September 1, 1997 between SEAGULL ENERGY CORPORATION and The Bank of New York,
Trustee:
Section of the Act Section of Indenture
310(a)(1), (2) and (5)................................ 6.9
310(a)(3) and (4)..................................... Inapplicable
310(b)................................................ 6.8 and 6.10(a),
(b) and (d)
310(c)................................................ Inapplicable
311(a)................................................ 6.13(a) and (c)
311(b)................................................ 6.13(b) and (c)
311(c)................................................ Inapplicable
312(a)................................................ 4.1 and 4.2(a)
312(b)................................................ 4.2(a) and (b)(i)
and (ii)
312(c)................................................ 4.2(c)
313(a)................................................ 4.4(a)(i), (ii),
(iii), (iv), (v),
(vi) and (vii)
313(a)(5)............................................. Inapplicable
313(b)(1)............................................. Inapplicable
313(b)(2)............................................. 4.4(b)
313(c)................................................ 4.4(c)
313(d)................................................ 4.4(d)
314(a)................................................ 4.3
314(b)................................................ Inapplicable
314(c)(1) and (2)..................................... 11.5
314(c)(3)............................................. Inapplicable
314(d)................................................ Inapplicable
314(e)................................................ 11.5
314(f)................................................ Inapplicable
315(a), (c) and (d)................................... 6.1
315(b)................................................ 5.8
315(e)................................................ 5.9
316(a)(1)............................................. 5.7
316(a)(2)............................................. Not required
316(a) (last sentence)................................ 7.4
316(b)................................................ 5.4
317(a)................................................ 5.2
317(b)................................................ 3.5(a)
318(a)................................................ 11.7
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ARTICLE ONE
DEFINITIONS
Affiliate.........................................................................................................1
Authenticating Agent..............................................................................................1
Bankruptcy Code...................................................................................................2
Board of Directors................................................................................................2
Board Resolution..................................................................................................2
Business Day......................................................................................................2
Commission........................................................................................................2
Consolidated Net Tangible Assets..................................................................................2
Corporate Trust Office............................................................................................2
Depositary........................................................................................................2
ENSTAR Alaska.....................................................................................................2
Event of Default..................................................................................................2
Global Security...................................................................................................2
Holder............................................................................................................2
Holder of Securities..............................................................................................2
Securityholder....................................................................................................2
Indenture.........................................................................................................2
Interest..........................................................................................................3
Issuer............................................................................................................3
Issuer Order......................................................................................................3
Officers' Certificate.............................................................................................3
Opinion of Counsel................................................................................................3
Original Issue Date...............................................................................................3
Original Issue Discount...........................................................................................3
Original Issue Discount Security..................................................................................3
Outstanding.......................................................................................................3
Periodic Offering.................................................................................................4
Person............................................................................................................4
Place of Payment..................................................................................................4
Principal.........................................................................................................4
Principal Amount..................................................................................................4
Principal Property................................................................................................4
Record Date.......................................................................................................4
Responsible Officer...............................................................................................4
Restricted Subsidiary.............................................................................................4
Sale and Leaseback Transaction....................................................................................5
Secured Debt......................................................................................................5
Security..........................................................................................................5
Securities........................................................................................................5
Subsidiary........................................................................................................5
Trust Indenture Act of 1939.......................................................................................5
Trustee...........................................................................................................5
Unrestricted Subsidiary...........................................................................................5
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U.S. Government Obligations.......................................................................................5
Vice President....................................................................................................5
Yield to Maturity.................................................................................................5
ARTICLE TWO
SECURITIES
SECTION 2.1 Forms Generally.................................................................................6
SECTION 2.2 Form of Trustee's Certificate of Authentication.................................................6
SECTION 2.3 Amount Unlimited, Issuable in Series............................................................6
SECTION 2.4 Authentication and Delivery of Securities.......................................................8
SECTION 2.5 Execution of Securities........................................................................10
SECTION 2.6 Certificate of Authentication..................................................................10
SECTION 2.7 Denomination and Date of Securities; Payments of Inerest.......................................10
SECTION 2.8 Registration Transfer and Exchange.............................................................11
SECTION 2.9 Mutilated, Defaced, Destroyed, Lost and Stolen Securities......................................12
SECTION 2.10 Cancellation of Securities; Disposition Thereof................................................13
SECTION 2.11 Temporary Securities...........................................................................13
SECTION 2.12 CUSIP Numbers..................................................................................13
ARTICLE THREE
COVENANTS OF THE ISSUER
SECTION 3.1 Payment of Principal and Interest..............................................................14
SECTION 3.2 Offices for Notices and Payments, etc..........................................................14
SECTION 3.3 No Interest Extension..........................................................................14
SECTION 3.4 Appointments to Fill Vacancies in Trustee's Office.............................................14
SECTION 3.5 Provision as to Paying Agent...................................................................14
SECTION 3.6 Restriction on Creation of Secured Debt........................................................15
SECTION 3.7 Restriction on Sale and Leaseback Transactions.................................................16
ARTICLE FOUR
SECURITYHOLDERS LISTS AND REPORTS BY THEISSUER AND THE TRUSTEE
SECTION 4.1 Issuer to Furnish Trustee Information as to Names and Addresses of Securityholders.............17
SECTION 4.2 Preservation and Disclosure of Securityholders Lists...........................................17
SECTION 4.3 Reports by the Issuer..........................................................................18
SECTION 4.4 Reports by the Trustee.........................................................................19
ARTICLE FIVE
REMEDIES OF THE TRUSTEE AND SECURITY HOLDERSON EVENT OF DEFAULT
SECTION 5.1 Events of Default..............................................................................20
SECTION 5.2 Payment of Securities on Default; Suit Therefor................................................21
SECTION 5.3 Application of Moneys Collected by Trustee.....................................................22
SECTION 5.4 Proceedings by Securityholders.................................................................23
SECTION 5.5 Proceedings by Trustee.........................................................................23
SECTION 5.6 Remedies Cumulative and Continuing.............................................................23
SECTION 5.7 Direction of Proceedings; Waiver of Defaults by Majority of Securityholders....................23
SECTION 5.8 Notice of Defaults.............................................................................24
SECTION 5.9 Undertaking to Pay Costs.......................................................................24
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ARTICLE SIX
CONCERNING THE TRUSTEE
SECTION 6.1 Duties and Responsibilities of the Trustee; During Default; Prior to Default...................24
SECTION 6.2 Certain Rights of the Trustee..................................................................25
SECTION 6.3 Trustee Not Responsible for Recitals, Disposition of Securities or Application of Proceeds
Thereof...............................................................................26
SECTION 6.4 Trustee and Agents May Hold Securities; Collections, etc.......................................26
SECTION 6.5 Moneys Held by Trustee.........................................................................26
SECTION 6.6 Compensation and Indemnification of Trustee and Its Prior Claim................................26
SECTION 6.7 Right of Trustee to Rely on Officers' Certificate, etc.........................................27
SECTION 6.8 Qualification of Trustee; Conflicting Interests................................................27
SECTION 6.9 Persons Eligible for Appointment as Trustee....................................................31
SECTION 6.10 Resignation and Removal; Appointment of Successor Trustee......................................31
SECTION 6.11 Acceptance of Appointment by Successor Trustee.................................................32
SECTION 6.12 Merger, Conversion, Consolidation or Succession to Business of Trustee.........................33
SECTION 6.13 Preferential Collection of Claims Against the Issuer...........................................33
SECTION 6.14 Appointment of Authenticating Agent............................................................35
ARTICLE SEVEN
CONCERNING THE SECURITYHOLDERS
SECTION 7.1 Evidence of Action Taken by Securityholders....................................................36
SECTION 7.2 Proof of Execution of Instruments and of Holding of Securities.................................36
SECTION 7.3 Holders to be Treated as Owners................................................................36
SECTION 7.4 Securities Owned by Issuer Deemed Not Outstanding..............................................37
SECTION 7.5 Right of Revocation of Action Taken............................................................37
SECTION 7.6 Record Date for Consents and Waivers...........................................................37
ARTICLE EIGHT
SUPPLEMENTAL INDENTURES
SECTION 8.1 Supplemental Indentures Without Consent of Securityholders.....................................37
SECTION 8.2 Supplemental Indentures with Consent of Securityholders........................................38
SECTION 8.3 Effect of Supplemental Indenture...............................................................39
SECTION 8.4 Documents to Be Given to Trustee...............................................................39
SECTION 8.5 Notation on Securities in Respect of Supplemental Indentures...................................39
ARTICLE NINE
CONSOLIDATION, MERGER, SALE, LEASE, EXCHANGE OR DISPOSITION
SECTION 9.1 Issuer May Consolidate, etc....................................................................40
SECTION 9.2 Securities to be Secured in Certain Events.....................................................40
SECTION 9.3 Successor Corporation to be Substituted........................................................40
SECTION 9.4 Opinion of Counsel to be Given Trustee.........................................................41
ARTICLE TEN
SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS
SECTION 10.1 Satisfaction and Discharge of Indenture........................................................41
SECTION 10.2 Application by Trustee of Funds Deposited for Payment of Securities............................43
SECTION 10.3 Repayment of Moneys Held by Paying Agent.......................................................43
SECTION 10.4 Return of Moneys Held by Trustee and Paying Agent Unclaimed for Two Years......................43
SECTION 10.5 Indemnity for U.S. Government Obligations......................................................43
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ARTICLE ELEVE
MISCELLANEOUS PROVISIONS
SECTION 11.1 Partners, Incorporators, Stockholders, Officers and Directors of Issuer Exempt from Individual
Liability.............................................................................43
SECTION 11.2 Provisions of Indenture for the Sole Benefit of Parties and Holders of Securities..............44
SECTION 11.3 Successors and Assigns of Issuer Bound by Indenture............................................44
SECTION 11.4 Notices and Demands on Issuer, Trustee and Holders of Securities...............................44
SECTION 11.5 Officers' Certificates and Opinions of Counsel; Statements to Be Contained Therein.............44
SECTION 11.6 Payments Due on Saturdays, Sundays and Holidays................................................45
SECTION 11.7 Conflict of Any Provision of Indenture with Trust Indenture Act of 1939........................45
SECTION 11.8 GOVERNING LAW..................................................................................45
SECTION 11.9 Counterparts...................................................................................45
SECTION 11.10 Effect of Headings................................................................................45
ARTICLE TWELVEREDEMPTION OF SECURITIES AND SINKING FUNDS
SECTION 12.1 Applicability of Article.......................................................................45
SECTION 12.2 Notice of Redemption; Partial Redemptions......................................................45
SECTION 12.3 Payment of Securities Called for Redemption....................................................46
SECTION 12.4 Exclusion of Certain Securities from Eligibility for Selection for Redemption..................47
SECTION 12.5 Mandatory and Optional Sinking Funds...........................................................47
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THIS SENIOR INDENTURE, dated as of September 1, 1997 between SEAGULL ENERGY CORPORATION, a Texas corporation (the "Issuer"), and The Bank of New York, a New York banking corporation, as trustee (the "Trustee"),
W I T N E S S E T H:
WHEREAS, the Issuer has duly authorized the issuance from time to time of its unsecured debentures, notes or other evidences of indebtedness to be issued in one or more series (the "Securities") up to such principal amount or amounts as may from time to time be authorized in accordance with the terms of this Indenture;
WHEREAS, the Issuer has duly authorized the execution and delivery of this Indenture to provide, among other things, for the authentication, delivery and administration of the Securities; and
WHEREAS, all things necessary to make this Indenture a valid indenture and agreement according to its terms have been undertaken and completed;
NOW, THEREFORE:
In consideration of the premises and the purchases of the Securities by the Holders (as hereinafter defined) thereof, the Issuer and the Trustee mutually covenant and agree for the equal and proportionate benefit of the respective Holders from time to time of the Securities as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.1 For all purposes of this Indenture and of any indenture supplemental hereto the following terms shall have the respective meanings specified in this Section 1.1 (except as otherwise expressly provided or unless the context otherwise clearly requires). All other terms used in this Indenture that are defined in the Trust Indenture Act of 1939, including terms defined therein by reference to the Securities Act of 1933, as amended, shall have the meanings assigned to such terms in said Trust Indenture Act and in said Securities Act as in force at the date of this Indenture (except as herein otherwise expressly provided or unless the context otherwise clearly requires).
All accounting terms used herein and not expressly defined shall have the meanings assigned to such terms in accordance with generally accepted accounting principles, and the term "generally accepted accounting principles" means such accounting principles as are generally accepted at the time of any computation.
The words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision. The expressions "date of this Indenture", "date
hereof", "date as of which this Indenture is dated" and "date of execution and
delivery of this Indenture" and other expressions of similar import refer to the
effective date of the original execution and delivery of this Indenture, viz.
September 1, 1997.
The terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular.
"Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Authenticating Agent" shall have the meaning set forth in Section 6.14.
"Bankruptcy Code" means the United States Bankruptcy Code, 11 United States Codess.ss.101 et seq., or any successor statute thereto.
"Board of Directors" means either the Board of Directors of the Issuer or any committee of such Board duly authorized to act on its behalf.
"Board of Resolution" means one or more resolutions, certified by the secretary or an assistant secretary of the Issuer to have been duly adopted or consented to by the Board of Directors and to be in full force and effect.
"Business Day" means, with respect to any Security, a day that (a) in the Place of Payment (or in any of the Places of Payment, if more than one) in which amounts are payable, as specified in the form of such Security, and (b) in the city in which the Corporate Trust Office is located, is not a day on which banking institutions are authorized or required by law or regulation to close.
"Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, as amended, or, if at any time after the execution and delivery of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act of 1939, then the body performing such duties on such date.
"Consolidated Net Tangible Assets" means the aggregate amount of assets included on the most recent consolidated balance sheet of the Issuer and its Restricted Subsidiaries, less applicable reserves and other properly deductible items and after deducting therefrom (a) all current liabilities and (b) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles, all in accordance with generally accepted accounting principles consistently applied.
"Corporate Trust Office" means the office of the Trustee at which the corporate trust business of the Trustee shall, at any particular time, be principally administered, which office is, at the date as of which this Indenture is dated, located in New York, New York.
"Depositary" means, with respect to the Securities of any series issuable or issued in the form of one or more Global Securities, the Person designated as Depositary by the Issuer pursuant to Section 2.3 until a successor Depositary shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Depositary" shall mean or include each Person who is then a Depositary hereunder, and, if at any time there is more than one such Person, "Depositary" as used with respect to the Securities of any such series shall mean the Depositary with respect to the Global Securities of such series.
"ENSTAR Alaska" means (i) the division of the Issuer known on the date of this Indenture as ENSTAR Natural Gas Company, which owns on the date of this Indenture the gas distribution system in south-central Alaska, and (ii) Alaska Pipeline Company, an Alaska corporation and a Subsidiary of the Issuer, in each case together with successors and assigns.
"Event of Death" means any event or condition specified as such in Section 5.1.
"Global Security" means a Security evidencing all or a part of a series of Securities issued to the Depositary for such series in accordance with Section 2.3 and bearing the legend prescribed in Section 2.4.
"Holder", "Holder of Securities", "Securityholder" or other similar terms mean, in the case of any Security, the person in whose name such Security is registered in the security register kept by the Issuer for that purpose in accordance with the terms hereof.
"Indenture" means this instrument as originally executed and delivered or, if amended or supplemented as herein provided, as so amended or supplemented or both, including, for all purposes of this instrument and any such supplement, the provisions of the Trust Indenture Act of 1939 that are deemed to be a part of and govern this instrument and any such supplement, respectively, and shall include the forms and terms of particular series of Securities established as contemplated hereunder.
The term "interest" means, when used with respect to non-interest bearing Securities (including, without limitation, any Original Issue Discount Security that by its terms bears interest only after maturity or upon default in any other payment due on such Security), interest payable after maturity (whether at stated maturity, upon acceleration or redemption or otherwise) or after the date, if any, on which the Issuer becomes obligated to acquire a Security, whether upon conversion, by purchase or otherwise.
"Issurer" means (except as otherwise provided in Section 6.8) Seagull Energy Corporation, a Texas corporation, and, subject to Article Nine, its successors and assigns.
"Issuer Order" means a written statement, request or order of the Issuer which is signed in its name by the chairman of the Board of Directors, the president or any vice president of the Issuer.
"Officer Certificate", when used with respect to the Issuer, means a
certificate signed by the chairman of the Board of Directors, the president, or
any vice president and by the treasurer, any assistant treasurer, the
controller, any assistant controller, the secretary or any assistant secretary
of the Issuer. Each such certificate shall include the statements provided for
in Section 11.5 if and to the extent required by the provisions of such Section
11.5. One of the officers signing an Officers' Certificate given pursuant to
Section 4.3 shall be the principal executive, financial or accounting officer of
the Issuer.
"Opinion of Counsel" means an opinion in writing signed by the chief counsel of the Issuer or by such other legal counsel who may be an employee of or counsel to the Issuer and who shall be satisfactory to the Trustee. Each such opinion shall include the statements provided for in Section 11.5, if and to the extent required by the provisions of such Section 11.5.
The term "orginial issue date" of any Security (or portion thereof) means the earlier of (a) the date of such Security or (b) the date of any Security (or portion thereof) for which such Security was issued (directly or indirectly) on registration of transfer, exchange or substitution.
The term "orginal issue discount" of any debt security, including any Original Issue Discount Security, means the difference between the principal amount of such debt security and the initial issue price of such debt security (as set forth in the case of an Original Issue Discount Security on the face of such Security).
"Original Issue Discount Security" means any Security that provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the maturity thereof pursuant to Section 5.1.
"Oustanding" (except as otherwise provided in Section 6.8), when used with reference to Securities, shall, subject to the provisions of Section 7.4, mean, as of any particular time, all Securities authenticated and delivered by the Trustee under this Indenture, except:
(a) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation;
(b) Securities (other than Securities of any series as to which the provisions of Article Ten hereof shall not be applicable), or portions thereof, for the payment or redemption of which moneys or U.S. Government Obligations (as provided for in Section 10.1) in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Issuer) or shall have been set aside, segregated and held in trust by the Issuer for the Holders of such Securities (if the Issuer shall act as its own paying agent), provided that, if such Securities, or portions thereof, are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as herein provided, or provision satisfactory to the Trustee shall have been made for giving such notice; and
(c) Securities which shall have been paid or in substitution for which other Securities shall have been authenticated and delivered pursuant to the terms of Section 2.9 (except with respect to any such Security as to which proof satisfactory to the Trustee is presented that such Security is held by a person in whose hands such Security is a legal, valid and binding obligation of the Issuer).
In determining whether the Holders of the requisite aggregate principal amount of Outstanding Securities of any or all series have given any request, demand, authorization, direction, notice, consent or waiver hereunder, the principal amount of an Original Issue Discount Security that shall be deemed to be Outstanding for such purposes shall be the portion of the principal amount thereof that would be due and payable as of the date of such determination (as certified by the Issuer to the Trustee) upon a declaration of acceleration of the maturity thereof pursuant to Section 5.1.
"Periodic Offering" means an offering of Securities of a series from time to time, the specific terms of which Securities, including, without limitation, the rate or rates of interest, if any, thereon, the stated maturity or maturities thereof and the redemption provisions, if any, with respect thereto, are to be determined by the Issuer or its agents upon the issuance of such Securities.
"Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, estate, unincorporated organization or government or any agency or political subdivision thereof.
"Place of Payment", when used with respect to the Securities of any series, means the place or places where the principal of and interest, if any, on the Securities of such series are payable as determined in accordance with Section 2.3.
The term "principal" of a debt security, including any Security, means the amount (including, without limitation, if and to the extent applicable, any premium and, in the case of an Original Issue Discount Security, any accrued original issue discount, but excluding interest) that is payable with respect to such debt security as of any date and for any purpose (including, without limitation, in connection with any sinking fund, upon any redemption at the option of the Issuer, upon any purchase or exchange at the option of the Issuer or the holder of such debt security and upon any acceleration of the maturity of such debt security).
The term "principal amount" of a debt security, including any Security, means the principal amount as set forth on the face of such debt security.
"Principal Property" means any real property, manufacturing plant, processing plant, pipeline, office building, warehouse or other physical facility, or any other like depreciable or depletable asset of the Issuer or any Restricted Subsidiary whether owned at September 1, 1997 or thereafter acquired (other than any facility thereafter acquired for the control or abatement of
atmospheric pollutants or contaminants or water, noise, odor or other pollution) which in the opinion of the Board of Directors is of material importance to the total business conducted by the Issuer and its Restricted Subsidiaries, as a whole; provided, however, that any such property shall not be deemed a Principal Property if such property does not have a fair value in excess of 3% of the total assets included on a consolidated balance sheet of the Issuer and its Restricted Subsidiaries prepared in accordance with generally accepted accounting principles consistently applied.
The term "record date" shall have the meaning set forth in Section 2.7.
"Responsible Officer", when used with respect to the Trustee, means any officer assigned by the Trustee to administer its corporate trust matters.
"Restricted Subisdiary" means (a) any Subsidiary other than an Unrestricted Subsidiary, and (b) any Subsidiary which was an Unrestricted Subsidiary but which, subsequent to the date hereof, is designated by the Issuer (by certified resolution of the Board of Directors delivered to the Trustee) to be a Restricted Subsidiary; provided, however, that the Issuer may not designate any such Subsidiary to be a Restricted Subsidiary if the Issuer would thereby breach any covenant or agreement herein contained (on the assumptions that any outstanding indebtedness of such Subsidiary was incurred at the time of such designation and that any Sale and Leaseback Transaction to which such Subsidiary is then a party was entered into at the time of such designation).
"Sale and Leaseback Transaction" shall have the meaning set forth in
Section 3.7.
"Secured Debt" means indebtedness for money borrowed by the Issuer or a Restricted Subsidiary and any other indebtedness of the Issuer or a Restricted Subsidiary on which interest is paid or payable (other than indebtedness owed by a Restricted Subsidiary to the Issuer, by a Restricted Subsidiary to another Restricted Subsidiary or by the Issuer to a Restricted Subsidiary), that in any such case is secured by (a) a mortgage or other lien on any Principal Property of the Issuer or a Restricted Subsidiary, or (b) a pledge, lien or other security interest on any shares of stock or indebtedness of a Restricted Subsidiary, or (c) in the case of any such indebtedness of the Issuer, a guaranty by any Restricted Subsidiary. The amount of Secured Debt at any time outstanding shall be the amount then owing thereon by the Issuer or a Restricted Subsidiary.
"Security" or "Securities" (except as otherwise provided in Section 6.8) has the meaning stated in the first recital of this Indenture or, as the case may be, Securities that have been authenticated and delivered pursuant to this Indenture.
"Subsidiary" means any corporation of which the Issuer, or the Issuer and one or more Subsidiaries, or any one or more Subsidiaries, directly or indirectly own voting securities entitling any one or more of the Issuer and its Subsidiaries to elect a majority of the directors, either at all times or, so long as there is no default or contingency which permits the holders of any
other class or classes of securities to vote for the election of one or more directors.
"Trust Indenture Act of 1939" (except as otherwise provided in Sections 8.1 and 8.2) means the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990, as in force at the date as of which this Indenture is originally executed.
"Trustee" means the Person identified as "Trustee" in the first paragraph hereof and, subject to the provisions of Article Six, shall also include any successor trustee. "Trustee" shall also mean or include each Person who is then a trustee hereunder and, if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean the trustee with respect to the Securities of such series.
"Unrestricted Subsidiary" means (a) any Subsidiary acquired or organized
after the date hereof, provided, however, that such Subsidiary shall not be a
successor, directly or indirectly, to any Restricted Subsidiary, and (b) any
Subsidiary whose principal business and assets are located outside the United
States of America, its territories and possessions and Canada or are located in
Puerto Rico, and (c) any Subsidiary the principal business of which consists of
financing or assisting in financing the acquisition or disposition of products
of the Issuer or a Subsidiary by dealers, distributors or other customers, and
(d) any Subsidiary the principal business of which is owning, leasing, dealing
in or developing real property, and (e) any Subsidiary substantially all the
assets of which consist of stock or other securities of a Subsidiary or
Subsidiaries of the character described in clauses (a) through (d) of this
paragraph, unless and until such Subsidiary shall have been designated to be a
Restricted Subsidiary pursuant to clause (b) of the definition of "Restricted
Subsidiary".
"U.S. Government Obligations" shall have the meaning set forth in Section 10.1(B).
The term "vice president", when used with respect to the Issuer or the Trustee, means any vice president, regardless of whether designated by a number or a word or words added before or after the title "vice president."
"Yield to Maturity" means the yield to maturity on a series of Securities, calculated at the time of issuance of such series, or, if applicable, at the most recent redetermination of interest on such series, and calculated in accordance with generally accepted financial practice or as otherwise provided in the terms of such series of Securities.
ARTICLE TWO
SECURITIES
SECTION 2.1 Forms Generally. The Securities of each series shall be substantially in such form (not inconsistent with this Indenture) as shall be established by or pursuant to one or more Board Resolutions (as set forth in a Board Resolution or, to the extent established pursuant to rather than set forth in a Board Resolution, an Officers' Certificate detailing such establishment) or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have imprinted or otherwise
reproduced thereon such legend or legends or endorsements, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto, or with any rules of any securities exchange or to conform to general usage, all as may be determined by the officers executing such Securities, as evidenced by their execution of such Securities.
The definitive Securities shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities as evidenced by their execution of such Securities.
SECTION 2.2 Form of Trustee's Certificate of Authentication. The Trustee's certificate of authentication on all Securities shall be substantially as follows:
This is one of the Securities of the series designated herein referred to in the within mentioned Indenture.
The Bank of New York, as Trustee
By:____________________________
Authorized Signatory
If at any time there shall be an Authenticating Agent appointed with respect to any series of Securities, then the Securities of such series shall bear, in addition to the Trustee's certificate of authentication, an alternate Certificate of Authentication which shall be substantially as follows:
This is one of the Securities of the series designated herein referred to in the within mentioned Indenture.
The Bank of New York, as Trustee
By:____________________________
as Authenticating Agent
By:____________________________
Authorized Signatory
SECTION 2.3 Amount Unlimited, Issuable in Series. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series and the Securities of each such series shall rank equally and pari passu with the Securities of each other series and with all other unsecured and unsubordinated debt of the Issuer. There shall be established in or pursuant to one or more Board Resolutions (and, to the extent established pursuant to rather than set forth in a Board Resolution, in an Officers' Certificate detailing such establishment) or established in one or more indentures supplemental hereto, prior to the initial issuance of Securities of any series:
(1) the designation of the Securities of the series, which shall distinguish the Securities of such series from the Securities of all other series;
(2) any limit upon the aggregate principal amount of the Securities of the series that may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Section 2.8, 2.9, 2.11, 8.5 or 12.3);
(3) the date or dates on which the principal of the Securities of the series is payable;
(4) the rate or rates at which the Securities of the series shall bear interest, if any, the date or dates from which any such interest shall accrue, on which any such interest shall be payable and on which a record shall be taken for the determination of Holders to whom any such interest is payable or the method by which such rate or rates or date or dates shall be determined or both;
(5) the place or places where and the manner in which the principal of and interest, if any, on Securities of the series shall be payable (if other than as provided in Section 3.2) and the office or agency for the Securities of the series maintained by the Issuer pursuant to Section 3.2;
(6) the right, if any, of the Issuer to redeem, purchase or repay Securities of the series, in whole or in part, at its option and the period or periods within which, the price or prices (or the method by which such price or prices shall be determined or both) at which, the form or method of payment therefor if other than in cash and any terms and conditions upon which and the manner in which (if different from the provisions of Article Twelve) Securities of the series may be so redeemed, purchased or repaid, in whole or in part, pursuant to any sinking fund or otherwise;
(7) the obligation, if any, of the Issuer to redeem, purchase or repay Securities of the series in whole or in part pursuant to any mandatory redemption, sinking fund or analogous provisions or at the option of a Holder thereof and the period or periods within which the price or prices (or the method by which such price or prices shall be determined or both) at which, the form or method of payment therefor if other than in cash and any terms and conditions upon which and the manner in which (if different from the provisions of Article Twelve) Securities of the series shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligation;
(8) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which Securities of the series shall be issuable; (9) if other than the principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon acceleration of the maturity thereof;
(10) whether Securities of the series will be issuable as Global Securities;
(11) if the Securities of such series are to be issuable in definitive form (whether upon original issue or upon exchange of a temporary Security of such series) only upon receipt of certain certificates or other documents or satisfaction of other conditions, the form and terms of such certificates, documents or conditions;
(12) any trustees, depositaries, authenticating or paying agents, transfer agents or registrars or any other agents with respect to the Securities of such series;
(13) any deleted, modified or additional events of default, remedies or covenants with respect to the Securities of such series;
(14) whether the provisions of Section 10.1(C) will be applicable to Securities of such series;
(15) any provision relating to the issuance of Securities of such series at an original issue discount (including, without limitation, the issue price thereof, the rate or rates at which such original issue discount shall accrue, if any, and the date or dates from or to which or period or periods during which such original issue discount shall accrue at such rate or rates);
(16) if the amounts of payments of principal of and interest on the Securities of such series are to be determined with reference to an index, the manner in which such amounts shall be determined; and
(17) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture).
All Securities of any one series shall be substantially identical, except as to denomination and except as may otherwise be provided by or pursuant to the Board Resolution or Officers' Certificate referred to above or as set forth in any such indenture supplemental hereto. All Securities of any one series need not be issued at the same time and may be issued from time to time, consistent with the terms of this Indenture, if so provided by or pursuant to such Board Resolution, such Officers' Certificate or in any such indenture supplemental hereto.
Any such Board Resolution or Officers' Certificate referred to above with respect to Securities of any series filed with the Trustee on or before the initial issuance of the Securities of such series shall be incorporated herein by reference with respect to Securities of such series and shall thereafter be
deemed to be a part of the Indenture for all purposes relating to Securities of such series as fully as if such Board Resolution or Officers' Certificate were set forth herein in full.
SECTION 2.4 Authentication and Delivery of Securities. The Issuer may
deliver Securities of any series executed by the Issuer to the Trustee for
authentication together with the applicable documents referred to below in this
Section 2.4, and the Trustee shall thereupon authenticate and deliver such
Securities to, or upon the order of, the Issuer (contained in the Issuer Order
referred to below in this Section 2.4) or pursuant to such procedures acceptable
to the Trustee and to such recipients as may be specified from time to time by
an Issuer Order. The maturity date, original issue date, interest rate, if any,
and any other terms of the Securities of such series shall be determined by or
pursuant to such Issuer Order and procedures. If provided for in such procedures
and agreed to by the Trustee, such Issuer Order may authorize authentication and
delivery pursuant to oral instructions from the Issuer or its duly authorized
agent, which instructions shall be promptly confirmed in writing. In
authenticating the Securities of such series and accepting the additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive (in the case of subparagraphs (2), (3) and
(4) below only at or before the time of the first request of the Issuer to the
Trustee to authenticate Securities of such series) and (subject to Section 6.1)
shall be fully protected in relying upon, unless and until such documents have
been superseded or revoked:
(1) an Issuer Order requesting such authentication and setting
forth delivery instructions if the Securities of such series are not to
be delivered to the Issuer, provided that, with respect to Securities
of a series subject to a Periodic Offering, (a) such Issuer Order may
be delivered by the Issuer to the Trustee prior to the delivery to the
Trustee of such Securities for authentication and delivery, (b) the
Trustee shall authenticate and deliver Securities of such series for
original issue from time to time, in an aggregate principal amount not
exceeding the aggregate principal amount established for such series,
pursuant to an Issuer Order or pursuant to procedures acceptable to the
Trustee as may be specified from time to time by an Issuer Order, (c)
the maturity date or dates, original issue date or dates, interest rate
or rates, if any, and any other terms of Securities of such series
shall be determined by an Issuer Order or pursuant to such procedures,
(d) if provided for in such procedures, such Issuer Order may authorize
authentication and delivery pursuant to oral or electronic instructions
from the Issuer or its duly authorized agent or agents, which oral
instructions shall be promptly confirmed in writing and (e) after the
original issuance of the first Security of such series to be issued,
any separate request by the Issuer that the Trustee authenticate
Securities of such series for original issuance will be deemed to be a
certification by the Issuer that it is in compliance with all
conditions precedent provided for in this Indenture relating to the
authentication and delivery of such Securities;
(2) the Board Resolution, Officers' Certificate or executed supplemental indenture referred to in Sections 2.1 and 2.3 by or pursuant to which the forms and terms of the Securities of such series were established;
(3) an Officers' Certificate setting forth the form or forms and terms of the Securities stating that the form or forms and terms of the Securities have been established pursuant to Sections 2.1 and 2.3 and comply with this Indenture and covering such other matters as the Trustee may reasonably request; and
(4) at the option of the Issuer, either an Opinion of Counsel, or a letter from legal counsel addressed to the Trustee permitting it to rely on an Opinion of Counsel, substantially to the effect that:
(a) the form or forms of the Securities of such series have been duly authorized and established in conformity with the provisions of this Indenture;
(b) in the case of an underwritten offering, the terms of the Securities of such series have been duly authorized and established in conformity with the provisions of this Indenture, and, in the case of an offering that is not underwritten, certain terms of the Securities of such series have been established pursuant to a Board Resolution, an Officers' Certificate or a supplemental indenture in accordance with this Indenture, and when such other terms as are to be established pursuant to procedures set forth in an Issuer Order shall have been established, all such terms will have been duly authorized by the Issuer and will have been established in conformity with the provisions of this Indenture;
(c) when the Securities of such series have been executed by the Issuer and authenticated by the Trustee in accordance with the provisions of this Indenture and delivered to and duly paid for by the purchasers thereof, they will have been duly issued under this Indenture and will be valid and legally binding obligations of the Issuer, enforceable in accordance with their respective terms, and will be entitled to the benefits of this Indenture; and
(d) the execution and delivery by the Issuer of, and the performance by the Issuer of its obligations under, the Securities of such series will not contravene any provision of applicable law or the articles of incorporation or bylaws of the Issuer or any agreement or other instrument binding upon the Issuer or any of its Subsidiaries that is material to the Issuer and its Subsidiaries, considered as one enterprise, or, to such counsel's knowledge after the inquiry indicated therein, any judgment, order or decree of any governmental agency or any court having jurisdiction over the Issuer or any Subsidiary, and no consent, approval or authorization of any governmental body or agency is required for the performance by the Issuer of its obligations under the Securities, except such as are specified and have been obtained and such as may be required by the securities or blue sky laws of the various states in connection with the offer and sale of the Securities.
In rendering such opinions, such counsel may qualify any opinions as to enforceability by stating that such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium and other similar laws affecting the rights and remedies of creditors and is subject to general
principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Such counsel may rely, as to all matters governed by the laws of jurisdictions other than the State of Texas and the federal law of the United States, upon opinions of other counsel (copies of which shall be delivered to the Trustee), who shall be counsel reasonably satisfactory to the Trustee, in which case the opinion shall state that such counsel believes that both such counsel and the Trustee are entitled so to rely. Such counsel may also state that, insofar as such opinion involves factual matters, such counsel has relied, to the extent such counsel deems proper, upon certificates of officers of the Issuer and its Subsidiaries and certificates of public officials.
The Trustee shall have the right to decline to authenticate and deliver any Securities of any series under this Section 2.4 if the Trustee, being advised by counsel, determines that such action may not lawfully be taken by the Issuer or if the Trustee in good faith by its board of directors or board of trustees, executive committee or a trust committee of directors or trustees or Responsible Officers shall determine that such action would expose the Trustee to personal liability to existing Holders or would adversely affect the Trustee's own rights, duties or immunities under the Securities, this Indenture or otherwise.
If the Issuer shall establish pursuant to Section 2.3 that the Securities of a series are to be issued in the form of one or more Global Securities, then the Issuer shall execute and the Trustee shall, in accordance with this Section 2.4 and the Issuer Order with respect to such series, authenticate and deliver one or more Global Securities that (i) shall represent and shall be denominated in an amount equal to the aggregate principal amount of all of the Securities of such series to be issued in the form of Global Securities and not yet canceled, (ii) shall be registered in the name of the Depositary for such Global Security or Securities or the nominee of such Depositary, (iii) shall be delivered by the Trustee to such Depositary or pursuant to such Depositary's instructions, and (iv) shall bear a legend substantially to the following effect: "Unless and until it is exchanged in whole or in part for Securities in definitive registered form, this Security may not be transferred except as a whole by the Depositary to the nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary."
Each Depositary designated pursuant to Section 2.3 must, at the time of its designation and at all times while it serves as Depositary, be a clearing agency registered under the Securities Exchange Act of 1934, as amended, and any other applicable statute or regulation.
SECTION 2.5 Execution of Securities. The Securities shall be signed on behalf of the Issuer by the chairman of the Board of Directors, the president, any vice president or the treasurer of the Issuer, under its corporate seal which may, but need not, be attested by its secretary or one of its assistant secretaries. Such signatures may be the manual or facsimile signatures of the present or any future such officers. The seal of the Issuer may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise
reproduced on the Securities. Typographical and other minor errors or defects in any such reproduction of the seal or any such signature shall not affect the validity or enforceability of any Security that has been duly authenticated and delivered by the Trustee.
In case any officer of the Issuer who shall have signed any of the Securities shall cease to be such officer before the Security so signed shall be authenticated and delivered by the Trustee or disposed of by the Issuer, such Security nevertheless may be authenticated and delivered or disposed of as though the person who signed such Security had not ceased to be such officer of the Issuer; and any Security may be signed on behalf of the Issuer by such persons as, at the actual date of the execution of such Security, shall be the proper officers of the Issuer, although at the date of the execution and delivery of this Indenture any such person was not such an officer.
SECTION 2.6 Certificate of Authentication. Only such Securities as shall bear thereon a certificate of authentication substantially in the form hereinbefore recited, executed by the Trustee by the manual signature of one of its authorized signatories, or its Authenticating Agent, shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. The execution of such certificate by the Trustee or its Authenticating Agent upon any Security executed by the Issuer shall be conclusive evidence that the Security so authenticated has been duly authenticated and delivered hereunder and that the Holder is entitled to the benefits of this Indenture. Each reference in this Indenture to authentication by the Trustee includes authentication by an agent appointed pursuant to Section 6.14.
SECTION 2.7 Denomination and Date of Securities; Payments of Interest. The Securities of each series shall be issuable in registered form in denominations established as contemplated by Section 2.3 or, with respect to the Securities of any series, if not so established, in denominations of $1,000 and any integral multiple thereof. The Securities of each series shall be numbered, lettered or otherwise distinguished in such manner or in accordance with such plan as the officers of the Issuer executing the same may determine with the approval of the Trustee, as evidenced by the execution and authentication thereof.
Each Security shall be dated the date of its authentication. The
Securities of each series shall bear interest, if any, from the date, and such
interest, if any, shall be payable on the dates, established as contemplated by
Section 2.3.
The Person in whose name any Security of any series is registered at the close of business on any record date applicable to a particular series with respect to any interest payment date for such series shall be entitled to receive the interest, if any, payable on such interest payment date notwithstanding any transfer or exchange of such Security subsequent to the record date and prior to such interest payment date, except if and to the extent the Issuer shall default in the payment of the interest due on such interest payment date for such series, in which case such defaulted interest shall be paid to the Persons in whose names Outstanding Securities for such series are registered (a) at the close of business on a subsequent record date (which shall be not less than five Business Days prior to the date of payment of such defaulted interest) established by notice given by mail by or on behalf of the Issuer to the Holders of Securities not less than 15 days preceding such subsequent record date or (b) as determined by such other procedure as is mutually acceptable to the Issuer and the Trustee. The term "record date" as used with respect to any interest payment date (except a date for payment of defaulted interest) for the Securities of any series shall mean the date
specified as such in the terms of the Securities of such series established as contemplated by Section 2.3, or, if no such date is so established, if such interest payment date is the first day of a calendar month, the fifteenth day of the next preceding calendar month or, if such interest payment date is the fifteenth day of a calendar month, the first day of such calendar month, whether or not such record date is a Business Day.
SECTION 2.8 Registration Transfer and Exchange. The Issuer will keep at each office or agency to be maintained for the purpose as provided in Section 3.2 for each series of Securities a register or registers in which, subject to such reasonable regulations as it may prescribe, it will provide for the registration of Securities of each series and the registration of transfer of Securities of such series. Each such register shall be in written form in the English language or in any other form capable of being converted into such form within a reasonable time. At all reasonable times such register or registers shall be open for inspection and available for copying by the Trustee.
Upon due presentation for registration of transfer of any Security of any series at any such office or agency to be maintained for the purpose as provided in Section 3.2, the Issuer shall execute and the Trustee shall authenticate and deliver in the name of the transferee or transferees a new Security or Securities of the same series, maturity date, interest rate, if any, and original issue date in authorized denominations for a like aggregate principal amount.
All Securities presented for registration of transfer shall (if so required by the Issuer or the Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Issuer and the Trustee duly executed by, the Holder or his attorney duly authorized in writing.
At the option of the Holder thereof, Securities of any series (other than a Global Security, except as set forth below) may be exchanged for a Security or Securities of such series having authorized denominations and an equal aggregate principal amount, upon surrender of such Securities to be exchanged at the agency of the Issuer that shall be maintained for such purpose in accordance with Section 3.2. All Securities surrendered upon any exchange or transfer provided for in this Indenture shall be promptly canceled and returned to the Issuer.
The Issuer may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer of Securities. No service charge shall be made for any such transaction or for any exchange of Securities of any series as contemplated by the immediately preceding paragraph.
The Issuer shall not be required to exchange or register a transfer of
(a) any Securities of any series for a period of 15 days next preceding the
first mailing or publication of notice of redemption of Securities of such
series to be redeemed, (b) any Securities selected, called or being called for
redemption, in whole or in part, except, in the case of any Security to be
redeemed in part, the portion thereof not so to be redeemed or (c) any Security
if the Holder thereof has exercised his right, if any, to require the Issuer to
repurchase such Security in whole or in part, except the portion of such
Security not required to be repurchased.
Notwithstanding any other provision of this Section 2.8, unless and until it is exchanged in whole or in part for Securities in definitive registered form, a Global Security representing all or a part of the Securities of a series may not be transferred except as a whole by the Depositary for such series to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary or by such Depositary or any such nominee to a successor Depositary for such series or a nominee of such successor Depositary.
If at any time the Depositary for any Securities of a series
represented by one or more Global Securities notifies the Issuer that it is
unwilling or unable to continue as Depositary for such Securities or if at any
time the Depositary for such Securities shall no longer be eligible under
Section 2.4, the Issuer shall appoint a successor Depositary with respect to
such Securities. If a successor Depositary for such Securities is not appointed
by the Issuer within 90 days after the Issuer receives such notice or becomes
aware of such ineligibility, the Issuer's election pursuant to Section 2.3 that
such Securities be represented by one or more Global Securities shall no longer
be effective and the Issuer shall execute, and the Trustee, upon receipt of an
Issuer Order for the authentication and delivery of definitive Securities of
such series, will authenticate and deliver Securities of such series in
definitive registered form, in any authorized denominations, in an aggregate
principal amount equal to the principal amount of the Global Security or
Securities representing such Securities in exchange for such Global Security or
Securities.
The Issuer may at any time and in its sole discretion determine that the Securities of any series issued in the form of one or more Global Securities shall no longer be represented by a Global Security or Securities. In such event the Issuer shall execute, and the Trustee, upon receipt of an Issuer Order for the authentication and delivery of definitive Securities of such series, shall authenticate and deliver, Securities of such series in definitive registered form, in any authorized denominations, in an aggregate principal amount equal to the principal amount of the Global Security or Securities representing such Securities, in exchange for such Global Security or Securities.
If specified by the Issuer pursuant to Section 2.3 with respect to Securities represented by a Global Security, the Depositary for such Global Security may surrender such Global Security in exchange in whole or in part for Securities of the same series in definitive registered form on such terms as are acceptable to the Issuer and such Depositary. Thereupon, the Issuer shall execute, and the Trustee shall authenticate and deliver, without service charge,
(i) to the Person specified by such Depositary, a new Security or Securities of the same series, of any authorized denominations as requested by such Person, in an aggregate principal amount equal to and in exchange for such Person's beneficial interest in the Global Security; and
(ii) to such Depositary a new Global Security in a denomination equal to the difference, if any, between the principal amount of the surrendered Global Security and the aggregate principal amount of Securities authenticated and delivered pursuant to clause (i) above.
Upon the exchange of a Global Security for Securities in definitive registered form in authorized denominations, such Global Security shall be canceled by the Trustee or an agent of the Issuer or the Trustee. Securities in definitive registered form issued in exchange for a Global Security pursuant to this Section 2.8 shall be registered in such names and in such authorized denominations as the Depositary for such Global Security, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee or an agent of the Trustee or the Issuer or an agent of the Issuer. The Trustee or such agent shall deliver at its office such Securities to or as directed by the Persons in whose names such Securities are so registered.
All Securities issued upon any transfer or exchange of Securities shall be valid and legally binding obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such transfer or exchange.
SECTION 2.9 Mutilated, Defaced, Destroyed, Lost and Stolen Securities. In case any temporary or definitive Security shall become mutilated, defaced or be destroyed, lost or stolen, the Issuer in its discretion may execute, and upon the written request of any officer of the Issuer, the Trustee shall authenticate and deliver a new Security of the same series, maturity date, interest rate, if any, and original issue date, bearing a number or other distinguishing symbol not contemporaneously outstanding, in exchange and substitution for the mutilated or defaced Security, or in lieu of and in substitution for the Security so destroyed, lost or stolen. In every case the applicant for a substitute Security shall furnish to the Issuer and to the Trustee and any agent of the Issuer or the Trustee such security or indemnity as may be required by the Trustee or the Issuer to indemnify and defend and to save each of the Trustee and the Issuer harmless and, in every case of destruction, loss or theft, evidence to their satisfaction of the destruction, loss or theft of such Security and of the ownership thereof and in the case of mutilation or defacement, shall surrender the Security to the Trustee or such agent.
Upon the issuance of any substitute Security, the Issuer may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee or its agent) connected therewith. In case any Security which has matured or is about to mature or has been called for redemption in full shall become mutilated or defaced or be destroyed, lost or stolen, the Issuer may instead of issuing a substitute Security, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated or defaced Security), if the applicant for such payment shall furnish to the Issuer and to the Trustee and any agent of the Issuer or the Trustee such security or indemnity as any of them may require to hold each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Issuer and the Trustee and any agent of the Issuer or the Trustee evidence to the Trustee's satisfaction of the destruction, loss or theft of such Security and of the ownership thereof.
Every substitute Security of any series issued pursuant to the provisions of this Section by virtue of the fact that any such Security is destroyed, lost or stolen shall constitute an additional contractual obligation of the Issuer, whether or not the destroyed, lost or stolen Security shall be at
any time enforceable by anyone and shall be entitled to all the benefits of (but shall be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Securities of such series duly authenticated and delivered hereunder. All Securities shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, defaced, destroyed, lost or stolen Securities and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender.
SECTION 2.10 Cancellation of Securities; Disposition Thereof. All Securities surrendered for payment, redemption, registration of transfer or exchange, or for credit against any payment in respect of a sinking or analogous fund, if surrendered to the Issuer or any agent of the Issuer or the Trustee or any agent of the Trustee, shall be delivered to the Trustee or its agent for cancellation or, if surrendered to the Trustee, shall be canceled by it; and no Securities shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Trustee or its agent shall return canceled Securities to the Issuer. If the Issuer or its agent shall acquire any of the Securities, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Securities unless and until the same are delivered to the Trustee or its agent for cancellation.
SECTION 2.11 Temporary Securities. Pending the preparation of definitive Securities for any series, the Issuer may execute and the Trustee shall authenticate and deliver temporary Securities for such series (printed, lithographed, typewritten or otherwise reproduced, in each case in form satisfactory to the Trustee). Temporary Securities of any series shall be issuable in any authorized denomination, and substantially in the form of the definitive Securities of such series but with such omissions, insertions and variations as may be appropriate for temporary Securities, all as may be determined by the Issuer with the concurrence of the Trustee as evidenced by the execution and authentication thereof. Temporary Securities may contain such references to any provisions of this Indenture as may be appropriate. Every temporary Security shall be executed by the Issuer and be authenticated by the Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Securities. Without unreasonable delay the Issuer shall execute and shall furnish definitive Securities of such series and thereupon temporary Securities of such series may be surrendered in exchange therefor without charge at each office or agency to be maintained by the Issuer for that purpose pursuant to Section 3.2 and the Trustee shall authenticate and deliver in exchange for such temporary Securities of such series an equal aggregate principal amount of definitive Securities of the same series having authorized denominations. Until so exchanged, the temporary Securities of any series shall be entitled to the same benefits under this Indenture as definitive Securities of such series, unless otherwise established pursuant to Section 2.3.
SECTION 2.12 CUSIP Numbers. The Issuer in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Issuer shall notify the Trustee of any change in the "CUSIP" numbers.
ARTICLE THREE
COVENANTS OF THE ISSUER
SECTION 3.1 Payment of Principal and Interest. The Issuer covenants and agrees that it will duly and punctually pay or cause to be paid the principal of and interest, if any, on each of the Securities at the place, at the respective times and in the manner provided in the Securities.
SECTION 3.2 Offices for Notices and Payments, etc. So long as any of the Securities are Outstanding, the Issuer will maintain in each Place of Payment, an office or agency where the Securities may be presented for payment, an office or agency where the Securities may be presented for registration of transfer and for exchange as in this Indenture provided, and an office or agency where notices and demands to or upon the Issuer in respect of the Securities or of this Indenture may be served. In case the Issuer shall at any time fail to maintain any such office or agency, or shall fail to give notice to the Trustee of any change in the location thereof, presentation may be made and notice and demand may be served in respect of the Securities or of this Indenture at the Corporate Trust Office. The Issuer hereby initially designates the Corporate Trust Office for each such purpose and appoints the Trustee as registrar and paying agent and as the agent upon whom notices and demands may be served with respect to the Securities.
SECTION 3.3 No Interest Extension. In order to prevent any accumulation of claims for interest after maturity thereof, the Issuer will not directly or indirectly extend or consent to the extension of the time for the payment of any claim for interest on any of the Securities and will not directly or indirectly be a party to or approve any such arrangement by the purchase or funding of said claims or in any other manner; provided, however, that this Section 3.3 shall not apply in any case where an extension shall be made pursuant to a plan proposed by the Issuer to the Holders of all Securities of any series then Outstanding.
SECTION 3.4 Appointments to Fill Vacancies in Trustee's Office. The Issuer, whenever necessary to avoid or fill a vacancy in the office of the Trustee, will appoint, in the manner provided in Section 6.10, a Trustee, so that there shall at all times be a Trustee hereunder.
SECTION 3.5 Provision as to Paying Agent. (a) If the Issuer shall appoint a paying agent other than the Trustee, it will cause such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provisions of this Section 3.5,
(1) that it will hold all sums held by it as such agent for the payment of the principal of or interest, if any, on the Securities (whether such sums have been paid to it by the Issuer or by any other obligor on the Securities) in trust for the benefit of the Holders of the Securities and the Trustee; and
(2) that it will give the Trustee notice of any failure by the Issuer (or by any other obligor on the Securities) to make any payment of the principal of or interest, if any, on the Securities when the same shall be due and payable; and
(3) that it will, at any time during the continuance of any such failure, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such paying agent.
(b) If the Issuer shall act as its own paying agent, it will, on or before each due date of the principal of or interest, if any, on the Securities, set aside, segregate and hold in trust for the benefit of the Holders of the Securities a sum sufficient to pay such principal or interest, if any, so becoming due and will notify the Trustee of any failure to take such action and of any failure by the Issuer (or by any other obligor under the Securities) to make any payment of the principal of or interest, if any, on the Securities when the same shall become due and payable.
(c) Anything in this Section 3.5 to the contrary notwithstanding, the Issuer may, at any time, for the purpose of obtaining a satisfaction and discharge of this Indenture, or for any other reason, pay or cause to be paid to the Trustee all sums held in trust by it, or any paying agent hereunder, as required by this Section 3.5, such sums to be held by the Trustee upon the trusts herein contained.
(d) Anything in this Section 3.5 to the contrary notwithstanding, any agreement of the Trustee or any paying agent to hold sums in trust as provided in this Section 3.5 is subject to Sections 10.3 and 10.4.
(e) Whenever the Issuer shall have one or more paying agents, it will, on or before each due date of the principal of or interest, if any, on any Securities, deposit with a paying agent a sum sufficient to pay the principal or interest, if any, so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal or interest, if any, and (unless such paying agent is the Trustee) the Issuer will promptly notify the Trustee of its action or failure so to act.
SECTION 3.6 Restriction on Creation of Secured Debt. So long as any of the Securities are outstanding, the Issuer shall not at any time create, incur, assume or guarantee, and shall not cause, suffer or permit a Restricted Subsidiary to create, incur, assume or guarantee, any Secured Debt without making effective provision (and the Issuer covenants that in such case it will make or cause to be made such effective provision) whereby the Securities then Outstanding and any other indebtedness of or guaranteed by the Issuer or such Restricted Subsidiary then entitled thereto, subject to applicable priorities of payment, shall be secured by such mortgage, security interest, pledge, lien or encumbrance equally and ratably with any and all other obligations and indebtedness thereby secured, so long as any such other obligations and
indebtedness shall be so secured; provided, that if any such mortgage, security interest, pledge, lien or encumbrance securing such indebtedness ceases to exist, such equal and ratable security for the benefit of the Holders of Securities shall automatically cease to exist without any further action; provided further that if such indebtedness is expressly subordinated to the Securities, the mortgage, security interest, pledge, lien or encumbrance securing such indebtedness shall be subordinate and junior to the mortgage, security interest, pledge, lien or encumbrance securing the Securities with the same relative priority as such indebtedness shall have with respect to the Securities; provided further, that the foregoing covenants shall not be applicable to the following:
(a)(i) Any mortgage, security interest, pledge, lien or encumbrance on any property hereafter acquired (including acquisition through merger or consolidation) or constructed by the Issuer or a Restricted Subsidiary and created contemporaneously with, or within twelve months after, such acquisition or the completion of construction to secure or provide for the payment of all or any part of the purchase price of such property or the cost of construction thereof, as the case may be; or (ii) any mortgage on property (including any unimproved portion of partially improved property) of the Issuer or a Restricted Subsidiary created within twelve months of completion of construction of a new plant or plants on such property to secure all or part of the cost of such construction if, in the opinion of the Board of Directors, such property or such portion thereof was prior to such construction substantially unimproved for the use intended by the Issuer; or (iii) the acquisition of property subject to any mortgage, security interest, pledge, lien or encumbrance upon such property existing at the time of acquisition thereof, whether or not assumed by the Issuer or such Restricted Subsidiary; or (iv) any mortgage, security interest, pledge, lien or encumbrance existing on the property or on the outstanding shares or indebtedness of a corporation or other entity at the time such corporation or other entity shall become a Restricted Subsidiary; or (v) any mortgage, security interest, pledge, lien or encumbrance on property of a corporation or other entity existing at the time such corporation or other entity is merged into or consolidated with the Issuer or a Restricted Subsidiary or at the time of a sale, lease or other disposition of the properties of a corporation or other entity as an entirety or substantially as an entirety to the Issuer or a Restricted Subsidiary; or
(b) Mortgages on property of the Issuer or a Restricted Subsidiary in favor of the United States of America or any State thereof or any foreign government, or any department, agency or instrumentality or political subdivision of any thereof, to secure partial, progress, advance or other payments pursuant to any contract or statute or to secure any indebtedness incurred for the purpose of financing all or any part of the purchase price or the cost of construction of the property subject to such mortgages; or
(c) Any mortgage, security interest, pledge, lien or encumbrance existing on property owned by the Issuer or any of its Subsidiaries on the date of this Indenture; or
(d) Any mortgage, security interest, pledge, lien or encumbrance created pursuant to the creation of trusts or other arrangements funded solely with cash, cash equivalents or other marketable investments or securities of the type customarily subject to such arrangements in customary financial practice with respect to long-term or medium-term indebtedness for money borrowed, the sole purpose of which is to make provision for the retirement or defeasance, without prepayment of indebtedness; or
(e) Any mortgage, security interest, pledge, lien or encumbrance on the assets or properties of ENSTAR Alaska; or
(f) Any mortgage, security interest, pledge, lien or encumbrance securing (i) all or part of the cost of exploring, producing, gathering, processing, marketing, drilling or developing any properties of the Company or any of its Subsidiaries, or securing indebtedness incurred to provide funds therefor, or (ii) indebtedness incurred to finance all or part of the cost of acquiring, constructing, altering, improving or repairing any such property or assets, or securing indebtedness incurred to provide funds therefor; or
(g) Any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part of any mortgage, security
interest, pledge, lien or encumbrance referred to in the foregoing subparagraphs
(a) through (f); provided, however, that the principal amount of Secured Debt
secured thereby shall not exceed the principal amount outstanding at the time of
such extension, renewal or replacement, and that such extension, renewal or
replacement shall be limited to the property which secured the mortgage,
security interest, pledge, lien or encumbrance so extended, renewed or replaced
and additions to such property.
Notwithstanding the foregoing provisions of this Section 3.6, the Issuer and any one or more Restricted Subsidiaries may create, incur, assume or guarantee Secured Debt which would otherwise be subject to the foregoing restrictions in an aggregate amount that, without duplication, together with all other Secured Debt of the Issuer and its Restricted Subsidiaries which would otherwise be subject to the foregoing restrictions (not including Secured Debt permitted to be secured under subparagraphs (a) through (g) above) and the aggregate value of the Sale and Leaseback Transactions (as defined in Section 3.7) in existence at such time (not including Sale and Leaseback Transactions the proceeds of which have been or will be applied in accordance with clause (b) of Section 3.7) does not at the time exceed 10% of Consolidated Net Tangible Assets (excluding ENSTAR Alaska). Solely for purposes of subparagraphs (a) through (g) above, the term "mortgage" shall include any arrangements in connection with a production payment or similar financing arrangement.
SECTION 3.7 Restriction on Sale and Leaseback Transactions. The Issuer will not, and will not permit any Restricted Subsidiary to, sell or transfer (except to the Issuer or to one or more Restricted Subsidiaries, or both) any Principal Property owned by it and which has been in full operation for more than 120 days prior to such sale or transfer with the intention (i) of taking back a lease on such property (other than a lease for a period not exceeding 36 months) and (ii) that the use by the Issuer or such Restricted Subsidiary of such property will be discontinued on or before the expiration of the term of such lease (any such transaction being herein referred to as a "Sale and Leaseback Transaction"), unless (a) the Issuer or such Restricted Subsidiary would be entitled, pursuant to the provisions of Section 3.6, to incur Secured Debt equal in amount to the amount realized or to be realized upon such sale or transfer secured by a mortgage on the property to be leased without equally and ratably securing the Securities, or (b) the Issuer or a Restricted Subsidiary
shall apply an amount equal to the value of the property so leased to the retirement (other than any mandatory retirement), within 120 days of the effective date of any such arrangement, of indebtedness for money borrowed by the Issuer or any Restricted Subsidiary (other than such indebtedness owned by the Issuer or any Restricted Subsidiary) which was recorded as funded debt as of the date of its creation and which, in the case of such indebtedness of the Issuer, is not subordinate and junior in right of payment to the prior payment of the Securities; provided, however, that the amount to be so applied to the retirement of such indebtedness shall be reduced by (i) the aggregate principal amount of any Securities delivered within 120 days of the effective date of any such arrangement to the Trustee for retirement and cancellation, and (ii) the aggregate principal amount of such indebtedness (other than the Securities) retired by the Issuer or a Restricted Subsidiary within 120 days of the effective date of any such arrangement.
The term "value" shall mean, with respect to a Sale and Leaseback Transaction, as of any particular time, the amount equal to the greater of (i) the net proceeds of the sale of the property leased pursuant to such Sale and Leaseback Transaction, or (ii) the fair value of such property at the time of entering into such Sale and Leaseback Transaction, as determined by the Board of Directors, in either case divided first by the number of full years of the term of the lease and then multiplied by the number of full years of such term remaining at the time of determination, without regard to any renewal or extension options contained in the lease.
ARTICLE FOUR
SECURITYHOLDERS LISTS AND REPORTS BY THE
ISSUER AND THE TRUSTEE
SECTION 4.1 Issuer to Furnish Trustee Information as to Names and Addresses of Securityholders. The Issuer and any other obligor on the Securities covenant and agree that they will furnish or cause to be furnished to the Trustee a list in such form as the Trustee may reasonably require of the names and addresses of the Holders of the Securities of each series:
(a) semiannually and not more than 15 days after each March 1 and September 1, and
(b) at such other times as the Trustee may request in writing, within 30 days after receipt by the Issuer of any such request,
provided that if and so long as the Trustee shall be the registrar for such series, such list shall not be required to be furnished.
SECTION 4.2 Preservation and Disclosure of Securityholders Lists. (a)
The Trustee shall preserve, in as current a form as is reasonably practicable,
all information as to the names and addresses of the Holders of each series of
Securities (i) contained in the most recent list furnished to it as provided in
Section 4.1, and (ii) received by it in the capacity of registrar or paying
agent for such series, if so acting. The Trustee may destroy any list furnished
to it as provided in Section 4.1 upon receipt of a new list so furnished.
(b) In case three or more Holders of Securities (hereinafter referred to as "applicants") apply in writing to the Trustee and furnish to the Trustee reasonable proof that each such applicant has owned a Security for a period of at least six months preceding the date of such application, and such application states that the applicants desire to communicate with other Holders of Securities of a particular series (in which case the applicants must all hold Securities of such series) or with Holders of all Securities with respect to their rights under this Indenture or under such Securities and such application is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall, within five Business Days after the receipt of such application, at its election, either
(i) afford to such applicants access to the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2, or
(ii) inform such applicants as to the approximate number of Holders of Securities of such series or of all Securities, as the case may be, whose names and addresses appear in the information preserved at the time by the Trustee, in accordance with the provisions of subsection (a) of this Section 4.2, and as to the approximate cost of mailing to such Securityholders the form of proxy or other communication, if any, specified in such application.
If the Trustee shall elect not to afford to such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Securityholder of such series or all Holders of Securities, as the case may be, whose name and address appears in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.2 a copy of the form of proxy or other communication which is specified in such request, with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five days after such tender, the Trustee shall mail to such applicants and file with the Commission, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interests of the Holders of Securities of such series or of all Securities, as the case may be, or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If the Commission, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, the Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met, and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Securityholders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application.
(c) Each and every Holder of Securities, by receiving and holding the same, agrees with the Issuer and the Trustee that neither the Issuer nor the Trustee nor any agent of the Issuer or the Trustee shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders of Securities in accordance with the provisions of subsection (b)
of this Section 4.2, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under such subsection (b).
SECTION 4.3 Reports by the Issuer. The Issuer covenants:
(a) to file with the Trustee, within 15 days after the Issuer is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Issuer may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended; or, if the Issuer is not required to file information, documents or reports pursuant to either of such Sections, then to file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934, as amended, in respect of a debt security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations;
(b) to file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Issuer with the conditions and covenants provided for in this Indenture as may be required from time to time by such rules and regulations;
(c) if there are any Original Issue Discount Securities Outstanding, to
file with the Trustee promptly after the end of each calendar year (i) a written
notice specifying the amount of original issue discount (including daily rates
and accrual periods) accrued on such Securities as of the end of such year and
(ii) such other specific information relating to such original issue discount as
may then be relevant under the Internal Revenue Code of 1986, as amended from
time to time;
(d) to transmit by mail to the Holders of Securities within 30 days
after the filing thereof with the Trustee, in the manner and to the extent
provided in Section 4.4(c), such summaries of any information, documents and
reports required to be filed by the Issuer pursuant to subsections (a), (b) and
(c) of this Section 4.3 as may be required to be transmitted to such Holders by
rules and regulations prescribed from time to time by the Commission; and
(e) furnish to the Trustee, not less than annually, a brief certificate
from the principal executive officer, principal financial officer or principal
accounting officer as to his knowledge of the Issuer's compliance with all
conditions and covenants under this Indenture. For purposes of this subsection
(e), such compliance shall be determined without regard to any period of grace
or requirement of notice provided under this Indenture.
Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Issuer's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates).
SECTION 4.4 Reports by the Trustee. (a) Within 60 days after January 1 of each year commencing with the year 1998, the Trustee shall transmit by mail to the Holders of Securities, as provided in subsection (c) of this Section, a brief report dated as of such January 1 with respect to any of the following events which may have occurred within the last 12 months (but if no such event has occurred within such period, no report need be transmitted):
(i) any change to its eligibility under Section 6.9 and its qualification under Section 6.8;
(ii) the creation of, or any material change to, a relationship specified in paragraph (i) through (x) of Section 6.8 (c);
(iii) the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee (as such) which remain unpaid on the date of such report and for the reimbursement of which it claims or may claim a lien or charge, prior to that of the Securities of any series, on any property or funds held or collected by it as Trustee, except that the Trustee shall not be required (but may elect) to report such advances if such advances so remaining unpaid aggregate not more than 1/2 of 1% of the principal amount of all Securities Outstanding on the date of such report;
(iv) the amount, interest rate, if any, and maturity date of all
other indebtedness owing by the Issuer (or by any other obligor on the
Securities) to the Trustee in its individual capacity on the date of
such report, with a brief description of any property held as
collateral security therefor, except any indebtedness based upon a
creditor relationship arising in any manner described in Section
6.13(b) (2), (3), (4) or (6);
(v) any change to the property and funds, if any, physically in the possession of the Trustee (as such) on the date of such report;
(vi) any additional issue of Securities which the Trustee has not previously reported; and
(vii) any action taken by the Trustee in the performance of its duties under this Indenture which it has not previously reported and which in its opinion materially affects the Securities, except action in respect of a default, notice of which has been or is to be withheld by it in accordance with the provisions of Section 5.8.
(b) The Trustee shall transmit to the Securityholders of each series, as provided in subsection (c) of this Section 4.4, a brief report with respect
to the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee, as such, since the date of the last report transmitted pursuant to the provisions of subsection (a) of this Section 4.4 (or if no such report has yet been so transmitted, since the date of this Indenture) for the reimbursement of which it claims or may claim a lien or charge prior to that of the Securities of such series on property or funds held or collected by it as Trustee and which it has not previously reported pursuant to this subsection (b), except that the Trustee shall not be required (but may elect) to report such advances if such advances remaining unpaid at any time aggregate 10% or less of the principal amount of all Securities Outstanding at such time, such report to be transmitted within 90 days after such time.
(c) Reports pursuant to this Section shall be transmitted by mail:
(i) to all Holders of Securities, as the names and addresses of such Holders appear upon the registry books of the Issuer; and
(ii) to all other Persons to whom such reports are required to be transmitted pursuant to Section 313(c) of the Trust Indenture Act of 1939.
(d) A copy of each such report shall, at the time of such transmission to Securityholders, be furnished to the Issuer and be filed by the Trustee with each stock exchange upon which the Securities of any applicable series are listed and also with the Commission. The Issuer agrees to promptly notify the Trustee with respect to any series when and as the Securities of such series become admitted to trading on any national securities exchange or any delisting from trading thereon.
ARTICLE FIVE
REMEDIES OF THE TRUSTEE AND SECURITY HOLDERS
ON EVENT OF DEFAULT
SECTION 5.1 Events of Default. "Event of Default", wherever used herein with respect to Securities of any series, means any one or more of the following events (whatever the reason for such Event of Default), unless it is either inapplicable to a particular series or it is specifically deleted or modified in or pursuant to the Board Resolution or supplemental indenture establishing such series of Securities or in the form of Security, for such series:
(a) default in the payment of any installment of interest upon any of the Securities of such series as and when the same shall become due and payable, and continuance of such default for a period of 30 days; or
(b) default in the payment of the principal of or premium, if any, of the Securities of such series as and when the same shall become due and payable either at maturity, upon redemption, by declaration or otherwise; or
(c) default in the payment or satisfaction of any sinking fund or other purchase obligation with respect to Securities of such series, as and when such obligation shall become due and payable as in this Indenture expressed; or
(d) failure on the part of the Issuer duly to observe or perform any other of the covenants or agreements on the part of the Issuer in the Securities of such series or in this Indenture continued for a period of 60 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Issuer by the Trustee by certified or registered mail, or to the Issuer and the Trustee by the Holders of at least 25% in aggregate principal amount of the Securities of such series then Outstanding; or
(e) without the consent of the Issuer a court having jurisdiction shall enter an order for relief with respect to the Issuer under the Bankruptcy Code or without the consent of the Issuer a court having jurisdiction shall enter a judgment, order or decree adjudging the Issuer a bankrupt or insolvent, or enter an order for relief for reorganization, arrangement, adjustment or composition of or in respect of the Issuer under the Bankruptcy Code or applicable state insolvency law and the continuance of any such judgment, order or decree is unstayed and in effect for a period of 90 consecutive days; or
(f) the Issuer shall institute proceedings for entry of an order for relief with respect to the Issuer under the Bankruptcy Code or for an adjudication of insolvency, or shall consent to the institution of bankruptcy or insolvency proceedings against it, or shall file a petition seeking, or seek or consent to reorganization, arrangement, composition or relief under the Bankruptcy Code or any applicable state law, or shall consent to the filing of such petition or to the appointment of a receiver, custodian, liquidator, assignee, trustee, sequestrator or similar official of the Issuer or of substantially all of its property, or the Issuer shall make a general assignment for the benefit of creditors as recognized under the Bankruptcy Code; or
(g) any other Event of Default provided with respect to the Securities of such series.
If an Event of Default with respect to Securities of any series then Outstanding occurs and is continuing, then and in each and every such case, unless the principal of all of the Securities of such series shall have already become due and payable, either the Trustee or the Holders of not less than 25% in aggregate principal amount of the Securities of such series then Outstanding, by notice in writing to the Issuer (and to the Trustee if given by Securityholders), may declare the principal (or, if the Securities of such series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of such series) of all the Securities of such series and the interest, if any, accrued thereon to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, notwithstanding anything to the contrary contained in this Indenture or in the Securities of such series. This provision, however, is subject to the condition that, if at any time after the unpaid principal amount (or such specified amount) of the Securities of such series shall have been so declared due and payable and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the Issuer shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest, if any, upon all of the Securities of such series and the principal of any and all Securities of such
series which shall have become due otherwise than by acceleration (with interest on overdue installments of interest, if any, to the extent that payment of such interest is enforceable under applicable law and on such principal at the rate borne by the Securities of such series to the date of such payment or deposit) and the reasonable compensation, disbursements, expenses and advances of the Trustee, and any and all defaults under this Indenture, other than the nonpayment of such portion of the principal amount of and accrued interest, if any, on Securities of such series which shall have become due by acceleration, shall have been cured or shall have been waived in accordance with Section 5.7 or provision deemed by the Trustee to be adequate shall have been made therefor, then and in every such case the Holders of a majority in aggregate principal amount of the Securities of such series then Outstanding, by written notice to the Issuer and to the Trustee, may rescind and annul such declaration and its consequences; but no such rescission and annulment shall extend to or shall affect any subsequent default, or shall impair any right consequent thereon. If any Event of Default with respect to the Issuer specified in Section 5.1(e) or 5.1(f) occurs, all unpaid principal amount (or, if the Securities of any series then Outstanding are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of each such series) and accrued interest on all Securities of each series then Outstanding shall ipso facto become and be immediately due and payable without any declaration or other act by the Trustee or any Securityholder.
If the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned because of such rescission or annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Issuer, the Trustee and the Securityholders shall be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Issuer, the Trustee and the Securityholders shall continue as though no such proceeding had been taken.
Except with respect to an Event of Default pursuant to Section 5.1 (a),
(b) or (c), the Trustee shall not be charged with knowledge of any Event of
Default unless written notice thereof shall have been given to a Responsible
Officer by the Issuer, a paying agent or any Securityholder.
SECTION 5.2 Payment of Securities on Default; Suit Therefor. The Issuer covenants that (a) if default shall be made in the payment of any installment of interest upon any of the Securities of any series then Outstanding as and when the same shall become due and payable, and such default shall have continued for a period of 30 days, or (b) if default shall be made in the payment of the principal of any of the Securities of such series as and when the same shall have become due and payable, whether at maturity of the Securities of such series or upon redemption or by declaration or otherwise, then, upon demand of the Trustee, the Issuer will pay to the Trustee, for the benefit of the Holders of the Securities, the whole amount that then shall have become due and payable on all such Securities of such series for principal or interest, if any, or both, as the case may be, with interest upon the overdue principal and (to the extent that payment of such interest is enforceable under applicable law) upon the overdue installments of interest, if any, at the rate borne by the Securities of such series; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including a reasonable compensation to the Trustee, its agents, attorneys and counsel, and any expenses or liabilities incurred by the Trustee hereunder other than through its negligence or bad faith.
If the Issuer shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any actions or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Issuer or any other obligor on the Securities of such series and collect in the manner provided by law out of the property of the Issuer or any other obligor on the Securities of such series, wherever situated, the moneys adjudged or decreed to be payable.
If there shall be pending proceedings for the bankruptcy or for the reorganization of the Issuer or any other obligor on the Securities of any series then Outstanding under any bankruptcy, insolvency or other similar law now or hereafter in effect, or if a receiver or trustee or similar official shall have been appointed for the property of the Issuer or such other obligor, or in the case of any other similar judicial proceedings relative to the Issuer or other obligor upon the Securities of such series, or to the creditors or property of the Issuer or such other obligor, the Trustee, irrespective of whether the principal of the Securities of such series shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 5.2, shall be entitled and empowered by intervention in such proceedings or otherwise to file and prove a claim or claims for the whole amount of principal and interest, if any, owing and unpaid in respect of the Securities of such series, and, in case of any judicial proceedings, to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and of the Securityholders allowed in such judicial proceedings relative to the Issuer or any other obligor on the Securities of such series, its or their creditors, or its or their property, and to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute the same after the deduction of its charges and expenses, and any receiver, assignee or trustee or similar official in bankruptcy or reorganization is hereby authorized by each of the Securityholders to make such payments to the Trustee, and, if the Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Trustee any amount due it for compensation and expenses, including counsel fees and expenses incurred by it up to the date of such distribution. To the extent that such payment of reasonable compensation, expenses and counsel fees and expenses out of the estate in any such proceedings shall be denied for any reason, payment of the same shall be secured by a lien on, and shall be paid out of, any and all distributions, dividends, moneys, securities and other property which the Holders of the Securities of such series may be entitled to receive in such proceedings, whether in liquidation or under any plan of reorganization or arrangement or otherwise.
All rights of action and of asserting claims under this Indenture, or under any of the Securities, may be enforced by the Trustee without the possession of any of the Securities, or the production thereof at any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall be for the ratable benefit of the Holders of the Securities of the series in respect of which such judgment has been recovered.
SECTION 5.3 Application of Moneys Collected by Trustee. Any moneys collected by the Trustee pursuant to Section 5.2 with respect to Securities of any series then Outstanding shall be applied in the order following, at the date or dates fixed by the Trustee for the distribution of such moneys, upon presentation of the several Securities of such series, and stamping thereon the payment, if only partially paid, and upon surrender thereof, if fully paid:
FIRST: To the payment of costs and expenses of collection and reasonable compensation to the Trustee, its agents, attorneys and counsel, and of all other expenses and liabilities incurred, and all advances made, by the Trustee pursuant to Section 6.6 except as a result of its negligence or bad faith;
SECOND: If the principal of the Outstanding Securities of such series shall not have become due and be unpaid, to the payment of interest, if any, on the Securities of such series, in the order of the maturity of the installments of such interest, if any, with interest (to the extent that such interest has been collected by the Trustee) upon the overdue installments of interest, if any, at the rate borne by the Securities of such series, such payment to be made ratably to the Persons entitled thereto;
THIRD: If the principal of the Outstanding Securities of such series shall have become due, by declaration or otherwise, to the payment of the whole amount then owing and unpaid upon the Securities of such series for principal and interest, if any, with interest on the overdue principal and (to the extent that such interest has been collected by the Trustee) upon overdue installments of interest, if any, at the rate borne by the Securities of such series; and in case such moneys shall be insufficient to pay in full the whole amounts so due and unpaid upon the Securities of such series, then to the payment of such principal and interest, if any, without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Security over any other Security, ratably to the aggregate of such principal and accrued and unpaid interest; and
FOURTH: To the payment of any surplus then remaining to the Issuer, its successors or assigns, or to whomsoever may be lawfully entitled to receive the same.
No claim for interest which in any manner at or after maturity shall have been transferred or pledged separate or apart from the Securities to which it relates, or which in any manner shall have been kept alive after maturity by an extension (otherwise than pursuant to an extension made pursuant to a plan proposed by the Issuer to the Holders of all Securities of any series then Outstanding), purchase, funding or otherwise by or on behalf or with the consent or approval of the Issuer shall be entitled, in case of a default hereunder, to any benefit of this Indenture, except after prior payment in full of the principal of all Securities of any series then Outstanding and of all claims for interest not so transferred, pledged, kept alive, extended, purchased or funded.
SECTION 5.4 Proceedings by Securityholders. No Holder of any Securities of any series then Outstanding shall have any right by virtue of or by availing of any provision of this Indenture to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Indenture or for the appointment of a receiver or trustee or similar official, or for any other remedy hereunder, unless such Holder previously shall have given to the Trustee written notice of default and of the continuance thereof, as hereinbefore provided, and unless the Holders of not less than 25% in aggregate principal amount of the Securities of such series then Outstanding shall have made written request to the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee for 60 days after its receipt of such notice, request and offer of indemnity, shall have neglected or refused to institute any such action, suit or proceeding, it being understood and intended, and being expressly covenanted by the Holder of every Security of such series with every other taker and Holder and the Trustee, that no one or more Holders of Securities of such series shall have any right in any manner whatever by virtue of or by availing of any provision of this Indenture or of the Securities to affect, disturb or prejudice the rights of any other Holder of such Securities of such series, or to obtain or seek to obtain priority over or preference as to any other such Holder, or to enforce any right under this Indenture or the Securities, except in the manner herein provided and for the equal, ratable and common benefit of all Holders of Securities of such series.
Notwithstanding any other provisions in this Indenture, however, the right of any Holder of any Security to receive payment of the principal of and interest, if any, on such Security, on or after the respective due dates expressed in such Security, or to institute suit for the enforcement of any such payment on or after such respective dates shall not be impaired or affected without the consent of such Holder.
SECTION 5.5 Proceedings by Trustee. In case of an Event of Default hereunder, the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either by suit in equity or by action at law or by proceedings in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law.
SECTION 5.6 Remedies Cumulative and Continuing. All powers and remedies given by this Article Five to the Trustee or to the Securityholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any thereof or of any other powers and remedies available to the Trustee or the Securityholders, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture, and no delay or omission of the Trustee or of any Securityholder to exercise any right or power accruing upon any default occurring and continuing as aforesaid shall impair any such right or power, or shall be construed to be a waiver of any such default or an acquiescence therein; and, subject to the provisions of Section 5.4, every power and remedy given by this Article Five or by law to the Trustee or to the Securityholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Securityholders.
SECTION 5.7 Direction of Proceedings; Waiver of Defaults by Majority of Securityholders. The Holders of a majority in aggregate principal amount of the Securities of any series then Outstanding shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to Securities of such series; provided, however, that (subject to the provisions of Section 6.1) the Trustee shall have the right to decline to follow any such direction if the Trustee shall determine upon advice of counsel that the action or proceeding so directed may not lawfully be taken or if the Trustee in good faith by its board of directors, its executive committee, or a trust committee of directors or Responsible Officers or both shall determine that the action or proceeding so directed would involve the Trustee in personal liability. The Holders of a majority in aggregate principal amount of the Securities of any series then Outstanding may on behalf of the Holders of all of the Securities of such series waive any past default or Event of Default hereunder and its consequences except a default in the payment of interest, if any, on, or the principal of, the Securities of such series. Upon any such waiver the Issuer, the Trustee and the Holders of the Securities of such series shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Whenever any default or Event of Default hereunder shall have been waived as permitted by this Section 5.7, said default or Event of Default shall for all purposes of the Securities and this Indenture be deemed to have been cured and to be not continuing.
SECTION 5.8 Notice of Defaults. The Trustee shall, within 90 days after the occurrence of a default, with respect to Securities of any series then Outstanding, mail to all Holders of Securities of such series, as the names and the addresses of such Holders appear upon the Securities register, notice of all defaults known to the Trustee with respect to such series, unless such defaults shall have been cured before the giving of such notice (the term "defaults" for the purpose of this Section 5.8 being hereby defined to be the events specified in clauses (a), (b), (c), (d), (e), (f) and (g) of Section 5.1, not including periods of grace, if any, provided for therein and irrespective of the giving of the written notice specified in said clause (d) but in the case of any default of the character specified in said clause (d) no such notice to Securityholders shall be given until at least 60 days after the giving of written notice thereof to the Issuer pursuant to said clause (d), as the case may be); provided, however, that, except in the case of default in the payment of the principal of or interest, if any, on any of the Securities, or in the payment or satisfaction of any sinking fund or other purchase obligation, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors or Responsible Officers or both of the Trustee in good faith determines that the withholding of such notice is in the best interests of the Securityholders.
SECTION 5.9 Undertaking to Pay Costs. All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the cost of such suit, and that such court may in its discretion assess reasonable costs, including
reasonable attorney's fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.9 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Securityholder, or group of Securityholders, holding in the aggregate more than 10% in principal amount of the Securities of any series then Outstanding, or to any suit instituted by any Securityholders for the enforcement of the payment of the principal of or interest, if any, on any Security against the Issuer on or after the due date expressed in such Security.
ARTICLE SIX
CONCERNING THE TRUSTEE
SECTION 6.1 Duties and Responsibilities of the Trustee; During Default; Prior to Default. With respect to the Holders of any series of Securities issued hereunder, the Trustee, prior to the occurrence of an Event of Default with respect to the Securities of a particular series and after the curing or waiving of all Events of Default which may have occurred with respect to such series, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Event of Default with respect to the Securities of a series has occurred (which has not been cured or waived) the Trustee shall exercise with respect to such series of Securities such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that
(a) prior to the occurrence of an Event of Default with respect to the Securities of any series and after the curing or waiving of all such Events of Default with respect to such series which may have occurred:
(i) the duties and obligations of the Trustee with respect to the Securities of any series shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any statements, certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such statements, certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein);
(b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and
(c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders pursuant to Section 5.7 relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there shall be reasonable ground for believing that the repayment of such funds or adequate indemnity against such liability is not reasonably assured to it.
SECTION 6.2 Certain Rights of the Trustee. Subject to Section 6.1:
(a) the Trustee may rely conclusively and shall be protected in acting or refraining from acting upon any resolution, Officers' Certificate or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note, coupon, security or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Issuer mentioned herein shall be sufficiently evidenced by an Officers' Certificate or Issuer Order (unless other evidence in respect thereof be herein specifically prescribed); and any resolution of the Board of Directors may be evidenced to the Trustee by a copy thereof certified by the secretary or an assistant secretary of the Issuer;
(c) the Trustee may consult with counsel of its selection and any advice of such counsel promptly confirmed in writing shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in reliance thereon in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the Securityholders pursuant to the provisions of this Indenture (including, without limitation, pursuant to Section 5.1), unless such Securityholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture;
(f) prior to the occurrence of an Event of Default hereunder and after the curing or waiving of all Events of Default, the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document unless requested in writing so to do by the Holders of not less than a majority in aggregate principal amount of the Securities of all series affected then Outstanding; provided that, if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such expenses or liabilities as a condition to proceeding; the reasonable expenses of every such investigation shall be paid by the Issuer or, if paid by the Trustee or any predecessor Trustee, shall be repaid by the Issuer upon demand;
(g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys not regularly in its employ and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder; and
(h) the Trustee shall not be deemed to have notice of any Default of Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Securities and this Indenture.
SECTION 6.3 Trustee Not Responsible for Recitals, Disposition of Securities or Application of Proceeds SECTION 6.3 Trustee Not Responsible for Recitals, Disposition of Securities or Application of Proceeds Thereof. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Issuer, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representation as to the validity or sufficiency of this Indenture, of the Securities or of any prospectus used to sell the Securities. The Trustee shall not be accountable for the use or application by the Issuer of any of the Securities or of the proceeds thereof.
SECTION 6.4 Trustee and Agents May Hold Securities; Collections, etc. The Trustee or any agent of the Issuer or the Trustee, in its individual or any other capacity, may become the owner or pledgee of Securities with the same rights it would have if it were not the Trustee or such agent and, subject to Sections 6.8 and 6.13, may otherwise deal with the Issuer and receive, collect, hold and retain collections from the Issuer with the same rights it would have if it were not the Trustee or such agent.
SECTION 6.5 Moneys Held by Trustee. Subject to the provisions of Section 10.4 hereof, all moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by mandatory provisions of law. Neither the Trustee nor any agent of the Issuer or the Trustee shall be under any liability for interest on any moneys received by it hereunder.
SECTION 6.6 Compensation and Indemnification of Trustee and Its Prior Claim. The Issuer covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, such compensation as shall be agreed to in writing between the Issuer and the Trustee (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) and the Issuer covenants and agrees to pay or reimburse the Trustee and each predecessor Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by or on behalf of it in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all agents and other persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or bad faith. The Issuer also covenants to indemnify the Trustee and each predecessor Trustee for, and to hold it harmless against, any and all loss, liability, damage, claim or expense, including taxes (other than taxes based on the income of the Trustee), incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this Indenture or the trusts hereunder and its duties hereunder, including the costs and expenses of defending itself against or investigating any claim or liability in the premises. The obligations of the Issuer under this Section 6.6 to compensate and indemnify the Trustee and each predecessor Trustee and to pay or reimburse the Trustee and each predecessor Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture or the resignation or removal of the Trustee. Such additional indebtedness shall be a senior claim to that of the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the Holders of particular Securities, and the Securities are hereby subordinated to such senior claim. When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 5.1 or in connection with Article Five hereof, the expenses (including the reasonable fees and expenses of its counsel) and the compensation for the service in connection therewith are intended to constitute expenses of administration under any bankruptcy law.
SECTION 6.7 Right of Trustee to Rely on Officers' Certificate, etc. Subject to Sections 6.1 and 6.2, whenever in the administration of the trusts of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or bad faith on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Trustee, and such certificate, in the absence of negligence or bad faith on the part of the Trustee, shall be full warrant to the Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof.
SECTION 6.8 Qualification of Trustee; Conflicting Interests. (a) If the
Trustee has or shall acquire any conflicting interest (as defined in subsection
(c)), then within 90 days after ascertaining that it has such conflicting
interest, and if the default (as defined in subsection (c)) to which such
conflicting interest relates has not been cured or duly waived or otherwise
eliminated before the end of such 90-day period, the Trustee shall either
eliminate such conflicting interest or, except as otherwise provided below,
resign, and the Issuer shall take prompt steps to have a successor appointed in
the manner provided in Section 6.10.
(b) If the Trustee shall fail to comply with the provisions of subsection
(a), the Trustee shall, within 10 days after the expiration of such 90-day
period, transmit notice of such failure to the Securityholders in the manner and
to the extent provided in Section 4.4 and, subject to the provisions of Section
5.9, unless the Trustee's duty to resign is stayed as provided below, any
Securityholder who has been a bona fide Holder of Securities for at least six
months may, on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the removal of the Trustee, and the
appointment of a successor, if the Trustee fails, after written request thereof
by such Securityholder, to comply with the provisions of subsection (a).
Except in the case of a default in the payment of the principal of or
interest on any Security, or in the payment of any sinking or purchase fund
installment, the Trustee shall not be required to resign as provided by this
Section 6.8 if the Trustee shall have sustained the burden of proving, on
application to the Commission and after opportunity for hearing thereon, that
(i) the default under the Indenture may be cured or waived during a reasonable period and under the procedures described in such application, and
(ii) a stay of the Trustee's duty to resign will not be inconsistent with the interests of Holders of the Securities.
The filing of such an application shall automatically stay the performance of the duty to resign until the Commission orders otherwise. Any resignation of the Trustee shall become effective only upon the appointment of a successor trustee in accordance with the provisions of Section 6.10 and such successor's acceptance of such an appointment.
(c) For the purposes of this Section 6.8, the Trustee shall be deemed to have a conflicting interest with respect to Securities of any series if the Securities of such series are in default (as determined in accordance with the provisions of Section 5.1, but exclusive of any period of grace or requirement of notice) and
(i) the Trustee is trustee under this Indenture with respect to the Outstanding securities of any other series or is a trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of the Issuer are outstanding, unless such other indenture is a collateral trust indenture under which the only collateral consists of Securities issued under this Indenture; provided that there shall be excluded from the operation of this paragraph (i), this Indenture with respect to the Securities of any other series and there shall also be so excluded any other indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Issuer are outstanding if (x) this Indenture is and, if applicable, this Indenture and any series issued pursuant to this Indenture and such other indenture or indentures are wholly unsecured and rank equally and such other indenture or indentures are hereafter qualified under the Trust Indenture Act of 1939, unless the Commission shall have found and declared by order pursuant to Section 305(b) or Section 307(c) of the Trust Indenture Act of 1939 that
differences exist between the provisions of this Indenture with respect to Securities of such series and one or more other series, or the provisions of this Indenture and the provisions of such other indenture or indentures which are so likely to involve a material conflict of interest as to make it necessary in the public interest or for the protection of investors to disqualify the Trustee from acting as such under this Indenture with respect to Securities of such series and such other series, or under this Indenture or such other indenture or indentures, or (y) the Issuer shall have sustained the burden of proving, on application to the Commission and after opportunity for hearing thereon, that trusteeship under this Indenture with respect to Securities of such series and such other series, or under this Indenture and such other indenture or indentures is not so likely to involve a material conflict of interest as to make it necessary in the public interest or for the protection of investors to disqualify the Trustee from acting as such under this Indenture with respect to Securities of such series and such other series, or under this Indenture and such other indentures;
(ii) the Trustee or any of its directors or executive officers is an underwriter for the Issuer;
(iii) the Trustee directly or indirectly controls or is directly or indirectly controlled by or is under direct or indirect common control with an underwriter for the Issuer;
(iv) the Trustee or any of its directors or executive officers is a director, officer, partner, employee, appointee, or representative of the Issuer, or of an underwriter (other than the Trustee itself) for the Issuer who is currently engaged in the business of underwriting, except that (x) one individual may be a director or an executive officer, or both, of the Trustee and a director or an executive officer, or both, of the Issuer, but may not be at the same time an executive officer of both the Trustee and the Issuer; (y) if and so long as the number of directors of the Trustee in office is more than nine, one additional individual may be a director or an executive officer, or both, of the Trustee and a director of the Issuer; and (z) the Trustee may be designated by the Issuer or by any underwriter for the Issuer to act in the capacity of transfer agent, registrar, custodian, paying agent, fiscal agent, escrow agent, or depositary, or in any other similar capacity, or, subject to the provisions of subsection (c) (i) of this Section, to act as trustee, whether under an indenture or otherwise;
(v) 10% or more of the voting securities of the Trustee is beneficially owned either by the Issuer or by any director, partner or executive officer thereof, or 20% or more of such voting securities is beneficially owned, collectively, by any two or more of such persons; or 10% or more of the voting securities of the Trustee is beneficially owned either by an underwriter for the Issuer or by any director, partner, or executive officer thereof, or is beneficially owned, collectively, by any two or more such persons;
(vi) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default, (x) 5% or more of the voting securities or 10% or more of any other class of
security of the Issuer, not including the Securities issued under this Indenture and securities issued under any other indenture under which the Trustee is also trustee, or (y) 10% or more of any class of security of an underwriter for the Issuer;
(vii) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default, 5% or more of the voting securities of any person who, to the knowledge of the Trustee, owns 10% or more of the voting securities of, or controls directly or indirectly or is under direct or indirect common control with, the Issuer;
(viii) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default, 10% or more of any class security of any person who, to the knowledge of the Trustee, owns 50% or more of the voting securities of the Issuer;
(ix) the Trustee owns on the date of default (as determined in accordance with the provisions of Section 5.1, but exclusive of any period of grace or requirement of notice) or on any anniversary of such default while such default remains outstanding, in the capacity of executor, administrator, testamentary or inter vivos trustee, guardian, committee or conservator, or in any other similar capacity, an aggregate of 25% or more of the voting securities, or of any class of security, of any Person, the beneficial ownership of a specified percentage of which would have constituted a conflicting interest under paragraphs (vi), (vii) or (viii) of this subsection. As to any such securities of which the Trustee acquired ownership through becoming executor, administrator, or testamentary trustee of an estate which included them, the provisions of the preceding sentence shall not apply, for a period of two years from the date of such acquisition, to the extent that such securities included in such estate do not exceed 25% of such voting securities or 25% of any such class of security. Promptly after the dates of any such default and annually in each succeeding year that the Securities remain in default, the Trustee shall make a check of its holdings of such securities in any of the above-mentioned capacities as of such dates. If the Issuer fails to make payment in full of principal of or interest on any of the Securities when and as the same becomes due and payable, and such failure continues for 30 days thereafter, the Trustee shall make a prompt check of its holdings of such Securities in any of the above-mentioned capacities as of the date of the expiration of such 30-day period, and after such date, notwithstanding the foregoing provisions of this paragraph, all such Securities so held by the Trustee, with sole or joint control over such Securities vested in it, shall, but only so long as such failure shall continue, be considered as though beneficially owned by the Trustee for the purposes of paragraphs (vi), (vii) and (viii) of this subsection; or
(x) except under the circumstances described in paragraphs (1),
(3), (4), (5) or (6) of Section 6.13(b), the Trustee shall be or shall
become a creditor of the Issuer.
For purposes of subsection (c) (i), the term "series of securities" or "series" means a series, class or group of securities issuable under an indenture pursuant to the terms of which holders of one such series may vote to direct the Trustee, or otherwise take action pursuant to a vote of such holders,
separately from holders of another such series; provided that "series of securities" or "series" shall not include any series of securities issuable under an indenture if all such series rank equally and are wholly unsecured.
The specification of percentages in subsections (c) (v) to (ix) inclusive of this Section 6.8 shall not be construed as indicating that the ownership of such percentages of the securities of a person is or is not necessary or sufficient to constitute direct or indirect control for the purposes of subsections (c) (iii) or (vii) of this Section.
For the purposes of subsections (c) (vi), (vii), (viii) and (ix), of this
Section 6.8, only,
(A) the terms "security" and "securities" shall include only such securities as are generally known as corporate securities, but shall not include any note or other evidence of indebtedness issued to evidence an obligation to repay moneys lent to a person by one or more banks, trust companies, or banking firms, or any certificate of interest or participation in any such note or evidence of indebtedness;
(B) an obligation shall be deemed to be in default when a default in payment of principal shall have continued for 30 days or more and shall not have been cured; and
(C) the Trustee shall not be deemed to be the owner or holder of
(x) any security which it holds as collateral security, as trustee or
otherwise, for an obligation which is not in default as defined in
clause (B) above, or (y) any security which it holds as collateral
security under this Indenture, irrespective of any default hereunder,
or (z) any security which it holds as agent for collection, or as
custodian, escrow agent, or depositary, or in any similar
representative capacity.
Except as provided above, the word "security" or "securities" as used in this Section 6.8 shall mean any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas or other mineral rights, or, in general, any interest or instrument commonly known as a "security", or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.
(d) For purposes of this Section 6.8:
(i) the term "underwriter" when used with reference to the Issuer shall mean every person who, within a one year period prior to the time as of which the determination is made, was an underwriter of any security of the Issuer outstanding at the time of the determination;
(ii) the term "director" shall mean any director of a corporation or any individual performing similar functions with respect to any organization whether incorporated or unincorporated;
(iii) the term "person" shall mean an individual, a corporation, a partnership, an association, a joint-stock company, a trust, an unincorporated organization, or a government or political subdivision thereof; as used in this paragraph, the term "trust" shall include only a trust where the interest or interests of the beneficiary or beneficiaries are evidenced by a security;
(iv) the term "voting security" shall mean any security presently entitling the owner or holder thereof to vote in the direction or management of the affairs of a person, or any security issued under or pursuant to any trust, agreement or arrangement whereby a trustee or trustees or agent or agents for the owner or holder of such security are presently entitled to vote in the direction or management of the affairs of a person;
(v) the term "Issuer" shall mean any obligor upon the Securities; and
(vi) the term "executive officer" shall mean the president, every vice president, every trust officer, the cashier, the secretary, and the treasurer of a corporation, and any individual customarily performing similar functions with respect to any organization whether incorporated or unincorporated, but shall not include the chairman of the board of directors.
(e) The percentages of voting securities and other securities specified in this Section 6.8 shall be calculated in accordance with the following provisions:
(i) a specified percentage of the voting securities of the Trustee, the Issuer or any other person referred to in this Section (each of whom is referred to as a "person" in this paragraph) means such amount of the outstanding voting securities of such person as entitles the holder or holders thereof to cast such specified percentage of the aggregate votes which the holders of all the outstanding voting securities of such person are entitled to cast in the direction or management of the affairs of such person;
(ii) a specified percentage of a class of securities of a person means such percentage of the aggregate amount of securities of the class outstanding;
(iii) the term "amount", when used in regard to securities, means the principal amount if relating to evidences of indebtedness, the number of shares if relating to capital shares, and the number of units if relating to any other kind of security;
(iv) the term "outstanding" means issued and not held by or for the account of the issuer; the following securities shall not be deemed outstanding within the meaning of this definition:
(A) securities of an issuer held in a sinking fund relating to securities of the issuer of the same class;
(B) securities of an issuer held in a sinking fund relating to another class of securities of the issuer, if the obligation evidenced by such other class of securities is not in default as to principal or interest or otherwise;
(C) securities pledged by the issuer thereof as security for an obligation of the issuer not in default as to principal or interest or otherwise; and
(D) securities held in escrow if placed in escrow by the issuer thereof;
provided, that any voting securities of an issuer shall be deemed outstanding if any person other than the issuer is entitled to exercise the voting rights thereof; and
(v) a security shall be deemed to be of the same class as another security if both securities confer upon the holder or holders thereof substantially the same rights and privileges; provided, that, in the case of secured evidences of indebtedness, all of which are issued under a single indenture, differences in the interest rates or maturity dates of various series thereof shall not be deemed sufficient to constitute such series different classes and provided, further, that, in the case of unsecured evidences of indebtedness, differences in the interest rates or maturity dates thereof shall not be deemed sufficient to constitute them securities of different classes, whether or not they are issued under a single indenture.
SECTION 6.9 Persons Eligible for Appointment as Trustee. The Trustee for each series of Securities hereunder shall at all times be a corporation organized and doing business under the laws of the United States of America or of any state or the District of Columbia having a combined capital and surplus of at least $50,000,000, and which is authorized under such laws to exercise corporate trust powers and is subject to supervision or examination by federal, state or District of Columbia authority, or a corporation or other Person permitted to act as trustee by the Commission. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. No obligor upon the Securities or any Affiliate of such obligor shall serve as trustee upon the Securities. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.9, the Trustee shall resign immediately in the manner and with the effect specified in Section 6.10.
SECTION 6.10 Resignation and Removal; Appointment of Successor Trustee. (a) The Trustee, or any trustee or trustees hereafter appointed, may at any time resign with respect to one or more or all series of Securities by giving written notice of resignation to the Issuer. Upon receiving such notice of resignation, the Issuer shall promptly appoint a successor trustee or trustees with respect to the applicable series by written instrument in duplicate, executed by authority of the Board of Directors, one copy of which instrument shall be
delivered to the resigning Trustee and one copy to the successor trustee or trustees. If no successor trustee shall have been so appointed with respect to any series and have accepted appointment within 30 days after the mailing of such notice of resignation, the resigning trustee may, at the expense of the Issuer, petition any court of competent jurisdiction for the appointment of a successor trustee, or any Securityholder who has been a bona fide Holder of a Security or Securities of the applicable series for at least six months may, subject to the provisions of Section 5.9, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(i) the Trustee shall fail to comply with the provisions of
Section 6.8 with respect to any series of Securities after written
request therefor by the Issuer or by any Securityholder who has been a
bona fide Holder of a Security or Securities of such series for at
least six months; or
(ii) the Trustee shall cease to be eligible in accordance with the provisions of Section 6.9 and shall fail to resign after written request therefor by the Issuer or by any such Securityholder; or
(iii) the Trustee shall become incapable of acting with respect to any series of Securities, or shall be adjudged a bankrupt or insolvent, or a receiver or liquidator of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation;
then, in any such case, the Issuer may remove the Trustee with respect
to the applicable series of Securities and appoint a successor trustee for such
series by written instrument, in duplicate, executed by order of the Board of
Directors one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor trustee, or, subject to the provisions of
Section 5.9, any Securityholder who has been a bona fide Holder of a Security or
Securities of such series for at least six months may on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor trustee with
respect to such series. Such court may thereupon, after such notice, if any, as
it may deem proper and prescribe, remove the Trustee and appoint a successor
trustee.
(c) The Holders of a majority in aggregate principal amount of the Securities of each series then Outstanding may at any time remove the Trustee with respect to Securities of such series and appoint a successor trustee with respect to the Securities of such series by delivering to the Trustee so removed, to the successor trustee so appointed and to the Issuer the evidence provided for in Section 7.1 of the action in that regard taken by the Securityholders. If no successor trustee shall have been so appointed with respect to any series and have accepted appointment within 30 days after the
delivery of such evidence of removal, the Trustee may, at the expense of the Issuer, petition any court of competent jurisdiction for the appointment of a successor trustee, or any Securityholder who has been a bona fide Holder of a Security or Securities of the applicable series for at least six months may, subject to the provisions of Section 5.9, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee.
(d) Any resignation or removal of the Trustee with respect to any series and any appointment of a successor trustee with respect to such series pursuant to any of the provisions of this Section 6.10 shall become effective upon acceptance of appointment by the successor trustee as provided in Section 6.11.
SECTION 6.11 Acceptance of Appointment by Successor Trustee. Any successor trustee appointed as provided in Section 6.10 shall execute and deliver to the Issuer and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee with respect to all or any applicable series shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, duties and obligations with respect to such series of its predecessor hereunder, with like effect as if originally named as trustee for such series hereunder; but, nevertheless, on the written request of the Issuer or of the successor trustee, upon payment of its charges then unpaid, the trustee ceasing to act shall, subject to Section 10.4, pay over to the successor trustee all moneys at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor trustee all such rights, powers, duties and obligations. Upon request of any such successor trustee, the Issuer shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a prior claim upon all property or funds held or collected by such trustee to secure any amounts then due it pursuant to the provisions of Section 6.6.
If a successor trustee is appointed with respect to the Securities of one or more (but not all) series, the Issuer, the predecessor Trustee and each successor trustee with respect to the Securities of any applicable series shall execute and deliver an indenture supplemental hereto which shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the predecessor Trustee with respect to the Securities of any series as to which the predecessor Trustee is not retiring shall continue to be vested in the predecessor Trustee, and shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such trustees co-trustees of the same trust and that each such trustee shall be trustee of a trust or trusts under separate indentures.
No successor trustee with respect to any series of Securities shall
accept appointment as provided in this Section 6.11 unless at the time of such
acceptance such successor trustee shall be qualified under the provisions of
Section 6.8 and eligible under the provisions of Section 6.9.
Upon acceptance of appointment by any successor trustee as provided in this
Section 6.11, the Issuer shall give notice thereof to the Holders of Securities
of each series affected, by mailing such notice to such Holders at their
addresses as they shall appear on the registry books. If the Issuer fails to
give such notice within ten days after acceptance of appointment by the
successor trustee, the successor trustee shall cause such notice to be given at
the expense of the Issuer.
SECTION 6.12 Merger, Conversion, Consolidation or Succession to Business of
Trustee. Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided that such corporation shall be qualified under the provisions of
Section 6.8 and eligible under the provisions of Section 6.9, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.
In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture any of the Securities of any series shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee and deliver such Securities so authenticated; and, in case at that time any of the Securities of any series shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor Trustee; and in all such cases such certificate shall have the full force which it is anywhere in the Securities of such series or in this Indenture provided that the certificate of the Trustee shall have; provided, that the right to adopt the certificate of authentication of any predecessor Trustee or to authenticate Securities of any series in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation.
SECTION 6.13 Preferential Collection of Claims Against the Issuer. (a)
Subject to the provisions of this Section, if the Trustee shall be or shall
become a creditor, directly or indirectly, secured or unsecured, of the Issuer
within three months prior to a default, as defined in subsection (c) of this
Section 6.13, or subsequent to such a default, then, unless and until such
default shall be cured, the Trustee shall set apart and hold in a special
account for the benefit of the Trustee individually, the Holders of the
Securities and the holders of other indenture securities (as defined in this
Section 6.13):
(1) an amount equal to any and all reductions in the amount due and owing upon any claim as such creditor in respect of principal or interest, effected after the beginning of such three month period and valid as against the Issuer and its other creditors, except any such reduction resulting from the receipt or disposition of any property described in subsection (a) (2) of this section, or from the exercise of any right of set-off which the Trustee could have exercised if a petition in bankruptcy had been filed by or against the Issuer upon the date of such default; and
(2) all property received by the Trustee in respect of any claim as such creditor, either as security therefor, or in satisfaction or composition thereof, or otherwise, after the beginning of such three month period, or an amount equal to the proceeds of any such property, if disposed of, subject, however, to the rights, if any, of the Issuer and its other creditors in such property or such proceeds. Nothing herein contained, however, shall affect the right of the Trustee:
(A) to retain for its own account (i) payments made on account of any such claim by any Person (other than the Issuer) who is liable thereon, (ii) the proceeds of the bona fide sale of any such claim by the Trustee to a third Person, and (iii) distributions made in cash, securities or other property in respect of claims filed against the Issuer in bankruptcy or receivership or in proceedings for reorganization pursuant to the Bankruptcy Code or applicable state law;
(B) to realize, for its own account, upon any property held by it as security for any such claim, if such property was so held prior to the beginning of such three month period;
(C) to realize, for its own account, but only to the extent of the claim hereinafter mentioned, upon any property held by it as security for any such claim, if such claim was created after the beginning of such three month period and such property was received as security therefor simultaneously with the creation thereof, and if the Trustee shall sustain the burden of proving that at the time such property was so received the Trustee had no reasonable cause to believe that a default as defined in subsection (c) of this Section would occur within three months; or
(D) to receive payment on any claim referred to in paragraph (B) or (C), against the release of any property held as security for such claim as provided in such paragraph (B) or (C), as the case may be, to the extent of the fair value of such property.
For the purposes of paragraphs (B), (C) and (D), property substituted after the beginning of such three month period for property held as security at the time of such substitution shall, to the extent of the fair value of the property released, have the same status as the property released, and, to the extent that any claim referred to in any of such paragraphs is created in renewal of or in substitution for or for the purpose of repaying or refunding any preexisting claim of the Trustee as such creditor, such claim shall have the same status as such pre-existing claim.
If the Trustee shall be required to account, the funds and property held in such special account and the proceeds thereof shall be apportioned between the Trustee, the Securityholders and the holders of other indenture securities in such manner that the Trustee, such Securityholders and the holders of other indenture securities realize, as a result of payments from such special account and payments of dividends on claims filed against the Issuer in bankruptcy or receivership or in proceedings for reorganization pursuant to the Bankruptcy Code or applicable state law, the same percentage of their respective claims, figured before crediting to the claim of the Trustee anything on account of the receipt by it from the Issuer of the funds and property in such special account, and before crediting to the respective claims of the Trustee, such Securityholders and the holders of other indenture securities, dividends on claims filed against the Issuer in bankruptcy or receivership or in proceedings for reorganization pursuant to the Bankruptcy Code or applicable state law, but after crediting thereon receipts on account of the indebtedness represented by their respective claims from all sources other than from such dividends and from the funds and property so held in such special account. As used in this paragraph, with respect to any claim, the term "dividends" shall include any
distribution with respect to such claim, in bankruptcy or receivership or in
proceedings for reorganization pursuant to the Bankruptcy Code or applicable
state law, whether such distribution is made in cash, securities or other
property, but shall not include any such distribution with respect to the
secured portion, if any, of such claim. The court in which such bankruptcy,
receivership or proceeding for reorganization is pending shall have jurisdiction
(i) to apportion between the Trustee, such Securityholders and the holders of
other indenture securities, in accordance with the provisions of this paragraph,
the funds and property held in such special account and the proceeds thereof, or
(ii) in lieu of such apportionment, in whole or in part, to give to the
provisions of this paragraph due consideration in determining the fairness of
the distributions to be made to the Trustee, such Securityholders and the
holders of other indenture securities with respect to their respective claims,
in which event it shall not be necessary to liquidate or to appraise the value
of any securities or other property held in such special account or as security
for any such claim, or to make a specific allocation of such distributions as
between the secured and unsecured portions of such claims, or otherwise to apply
the provisions of this paragraph as a mathematical formula.
Any Trustee who has resigned or been removed after the beginning of such three month period shall be subject to the provisions of this subsection (a) as though such resignation or removal had not occurred. If any Trustee has resigned or been removed prior to the beginning of such three month period, it shall be subject to the provisions of this subsection (a) if and only if the following conditions exist:
(i) the receipt of property or reduction of claim which would have given rise to the obligation to account, if such Trustee had continued as trustee, occurred after the beginning of such three month period; and
(ii) such receipt of property or reduction of claim occurred within three months after such resignation or removal.
(b) There shall be excluded from the operation of this Section 6.13 a creditor relationship arising from:
(1) the ownership or acquisition of securities issued under any indenture or any security or securities having a maturity of one year or more at the time of acquisition by the Trustee;
(2) advances authorized by a receivership or bankruptcy court of competent jurisdiction or by this Indenture for the purpose of preserving any property which shall at any time be subject to the lien of this Indenture or of discharging tax liens or other prior liens or encumbrances thereon, if notice of such advance and of the circumstances surrounding the making thereof is given to the Securityholders at the time and in the manner provided in this Indenture;
(3) disbursements made in the ordinary course of business in the capacity of trustee under an indenture, transfer agent, registrar, custodian, paying agent, fiscal agent or depositary, or other similar capacity;
(4) an indebtedness created as a result of services rendered or premises rented or an indebtedness created as a result of goods or securities sold in a cash transaction as defined in subsection (c)(2) of this Section;
(5) the ownership of stock or of other securities of a corporation organized under the provisions of Section 25 (a) of the Federal Reserve Act, as amended, which is directly or indirectly a creditor of the Issuer; or
(6) the acquisition, ownership, acceptance or negotiation of any drafts, bills of exchange, acceptances or obligations which fall within the classification of self-liquidating paper as defined in subsection (c) (3) of this Section.
(c) As used in this Section 6.13:
(1) the term "default" shall mean any failure to make payment in full of the principal of or interest on any of the Securities when and as such principal or interest becomes due and payable;
(2) the term "cash transaction" shall mean any transaction in which full payment for goods or securities sold is made within seven days after delivery of the goods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand;
(3) the term "self-liquidating paper" shall mean any draft, bill of exchange, acceptance or obligation which is made, drawn, negotiated or incurred by the Issuer for the purpose of financing the purchase, processing, manufacture, shipment, storage or sale of goods, wares or merchandise and which is secured by documents evidencing title to, possession of, or a lien upon the goods, wares or merchandise or the receivables or proceeds arising from the sale of the goods, wares or merchandise previously constituting the security, provided the security is received by the Trustee simultaneously with the creation of the creditor relationship with the Issuer arising from the making, drawing, negotiating or incurring of the draft, bill of exchange, acceptance or obligation; and
(4) the term "Issuer" shall mean any obligor upon the Securities.
SECTION 6.14 Appointment of Authenticating Agent. As long as any Securities of a series remain Outstanding, the Trustee may, by an instrument in writing, appoint with the approval of the Issuer an authenticating agent (the "Authenticating Agent") which shall be authorized to act on behalf of the Trustee to authenticate Securities, including Securities issued upon exchange, registration of transfer, partial redemption or pursuant to Section 2.9.
Securities of each such series authenticated by such Authenticating Agent shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee. Whenever reference is made in this Indenture to the authentication and delivery of Securities of any series by the Trustee or to the Trustee's Certificate of Authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent for such series and a Certificate of Authentication executed on behalf of the Trustee by such Authenticating Agent. Such Authenticating Agent shall at all times be a corporation organized and doing business under the laws of the United States of America or of any state or the District of Columbia, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 (determined as provided in Section 6.9 with respect to the Trustee) and subject to supervision or examination by federal or state authority.
Any corporation into which any Authenticating Agent may be merged or converted, or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which any Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency business of any Authenticating Agent, shall continue to be the Authenticating Agent with respect to all series of Securities for which it served as Authenticating Agent without the execution or filing of any paper or any further act on the part of the Trustee or such Authenticating Agent. Any Authenticating Agent may at any time, and if it shall cease to be eligible shall, resign by giving written notice of resignation to the Trustee and to the Issuer. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Issuer.
Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 6.14 with respect to one or more series of Securities, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Issuer and the Issuer shall provide notice of such appointment to all Holders of Securities of such series in the manner and to the extent provided in Section 11.4. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all rights, powers, duties and responsibilities of its predecessor hereunder, with like effect as if originally named as Authenticating Agent. The Issuer agrees to pay to the Authenticating Agent for such series from time to time reasonable compensation. The Authenticating Agent for the Securities of any series shall have no responsibility or liability for any action taken by it as such at the direction of the Trustee.
Sections 6.2, 6.3, 6.4 and 7.3 shall be applicable to any Authenticating Agent.
ARTICLE SEVEN
CONCERNING THE SECURITYHOLDERS
SECTION 7.1 Evidence of Action Taken by Securityholders. Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by a specified percentage in
principal amount of the Securityholders of any or all series may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such specified percentage of Securityholders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee. Proof of execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Sections 6.1 and 6.2) conclusive in favor of the Trustee and the Issuer, if made in the manner provided in this Article Seven.
SECTION 7.2 Proof of Execution of Instruments and of Holding of Securities. Subject to Sections 6.1 and 6.2, the execution of any instrument by a Securityholder or his agent or proxy may be proved in the following manner:
(a) The fact and date of the execution by any Holder of any instrument may be proved by the certificate of any notary public or other officer of any jurisdiction authorized to take acknowledgments of deeds or administer oaths that the person executing such instruments acknowledged to him the execution thereof, or by an affidavit of a witness to such execution sworn to before any such notary or other such officer. Where such execution is by or on behalf of any legal entity other than an individual, such certificate or affidavit shall also constitute sufficient proof of the authority of the person executing the same.
(b) The ownership of Securities shall be proved by the Security register or by a certificate of the Security registrar.
SECTION 7.3 Holders to be Treated as Owners. The Issuer, the Trustee and any agent of the Issuer or the Trustee may deem and treat the Person in whose name any Security shall be registered upon the Security register for such series as the absolute owner of such Security (whether or not such Security shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of or on account of the principal of and, subject to the provisions of this Indenture, interest, if any, on such Security and for all other purposes; and neither the Issuer nor the Trustee nor any agent of the Issuer or the Trustee shall be affected by any notice to the contrary.
SECTION 7.4 Securities Owned by Issuer Deemed Not Outstanding. In determining whether the Holders of the requisite aggregate principal amount of Outstanding Securities of any or all series have concurred in any direction, consent or waiver under this Indenture, Securities which are owned by the Issuer or any other obligor on the Securities with respect to which such determination is being made or by any Affiliate of the Issuer or any other obligor on the Securities with respect to which such determination is being made shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, except that for the purpose of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver only securities which a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Issuer or any other obligor upon the Securities or any Affiliate of the Issuer or any other obligor on the Securities. In case of a dispute as to such right, the advice of counsel shall be full protection in respect of any decision made by the Trustee in accordance with such advice. Upon request of the Trustee, the Issuer shall furnish to the Trustee promptly an Officers' Certificate listing and identifying all Securities, if any, known by the Issuer to be owned or held by or for the account of any of the above-described Persons; and, subject to Sections 6.1 and 6.2, the Trustee shall be entitled to accept such Officers' Certificate as conclusive evidence of the facts therein set forth and of the fact that all Securities not listed therein are Outstanding for the purpose of any such determination.
SECTION 7.5 Right of Revocation of Action Taken. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 7.1, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Securities of any or all series, as the case may be, specified in this Indenture in connection with such action, any Holder of a Security the serial number of which is shown by the evidence to be included among the serial numbers of the Securities the Holders of which have consented to such action may, by filing written notice at the Corporate Trust Office and upon proof of holding as provided in this Article Seven, revoke such action so far as concerns such Security provided that such revocation shall not become effective until three business days after such filing. Except as aforesaid any such action taken by the Holder of any Security shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Security and of any Securities issued in exchange or substitution therefor or on registration of transfer thereof, irrespective of whether or not any notation in regard thereto is made upon any such Security. Any action taken by the Holders of the percentage in aggregate principal amount of the Securities of any or all series, as the case may be, specified in this Indenture in connection with such action shall be conclusively binding upon the Issuer, the Trustee and the Holders of all the Securities affected by such action.
SECTION 7.6 Record Date for Consents and Waivers. The Issuer may, but shall not be obligated to, direct the Trustee to establish a record date for the purpose of determining the Persons entitled to (i) waive any past default with respect to the Securities of such series in accordance with Section 5.7 of the Indenture, (ii) consent to any supplemental indenture in accordance with Section 8.2 of the Indenture or (iii) waive compliance with any term, condition or provision of any covenant hereunder. If a record date is fixed, the Holders on such record date, or their duly designated proxies, and any such Persons, shall be entitled to waive any such past default, consent to any such supplemental indenture or waive compliance with any such term, condition or provision, whether or not such Holder remains a Holder after such record date; provided, however, that unless such waiver or consent is obtained from the Holders, or duly designated proxies, of the requisite principal amount of Outstanding Securities of such series prior to the date which is the 180th day after such record date, any such waiver or consent previously given shall automatically and without further action by any Holder be canceled and of no further effect.
ARTICLE EIGHT
SUPPLEMENTAL INDENTURES
SECTION 8.1 Supplemental Indentures Without Consent of Securityholders. The Issuer, when authorized by a resolution of its Board of Directors (which resolution may provide general terms or parameters for such action and may provide that the specific terms of such action may be determined in accordance with or pursuant to an Issuer Order), and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act of 1939 as in force at the date of the execution thereof) for one or more of the following purposes:
(a) to convey, transfer, assign, mortgage or pledge to the Trustee as security for the Securities of one or more series any property or assets;
(b) to evidence the succession of another corporation to the Issuer, or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Issuer pursuant to Article Nine;
(c) to add to the covenants of the Issuer such further covenants, restrictions, conditions or provisions as the Issuer and the Trustee shall consider to be for the protection of the Holders of all or any series of Securities (and if such covenants, restrictions, conditions or provisions are to be for the protection of less than all series of Securities, stating that the same are expressly being included solely for the protection of such series), and to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions, conditions or provisions an Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth; provided, however, that in respect of any such additional covenant, restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such an Event of Default or may limit the remedies available to the Trustee upon such an Event of Default or may limit the right of the Holders of a majority in aggregate principal amount of the Securities of such series to waive such an Event of Default;
(d) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture, or to make any other provisions as the Issuer may deem necessary or desirable, provided, however, that no such action shall adversely affect the interests of the Holders of the Securities;
(e) to establish the form or terms of Securities of any series as permitted by Sections 2.1 and 2.3; and
(f) to evidence and provide for the acceptance of appointment hereunder by a successor trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one trustee, pursuant to the requirements of Section 6.11.
The Trustee is hereby authorized to join with the Issuer in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section may be executed without the consent of the Holders of any of the Securities then Outstanding, notwithstanding any of the provisions of Section 8.2.
SECTION 8.2 Supplemental Indentures with Consent of Securityholders. With the consent (evidenced as provided in Article Seven) of the Holders of not less than a majority in aggregate principal amount of the Securities then Outstanding of any series affected by such supplemental indenture, the Issuer, when authorized by a resolution of its Board of Directors (which resolution may provide general terms or parameters for such action and may provide that the specific terms of such action may be determined in accordance with or pursuant to an Issuer Order), and the Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act of 1939 as in force at the date of execution thereof) for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders of the Securities of such series; provided, that no such supplemental indenture shall (a) extend the stated final maturity of the principal of any Security, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest, if any, thereon (or, in the case of an Original Issue Discount Security, reduce the rate of accrual of original issue discount thereon), or reduce or alter the method of computation of any amount payable on redemption, repayment or purchase by the Issuer thereof (or the time at which any such redemption, repayment or purchase may be made), or make the principal thereof (including any amount in respect of original issue discount), or interest, if any, thereon payable in any coin or currency other than that provided in the Securities or in accordance with the terms of the Securities, or reduce the amount of the principal of an Original Issue Discount Security that would be due and payable upon an acceleration of the maturity thereof pursuant to Section 5.1 or the amount thereof provable in bankruptcy pursuant to Section 5.2, or impair or affect the right of any Securityholder to institute suit for the payment thereof or, if the Securities provide therefor, any right of repayment or purchase at the option of the Securityholder, in each case without the consent of the Holder of each Security so affected, or (b) reduce the aforesaid percentage of Securities of any series, the consent of the Holders of which is required for any such supplemental indenture, without the consent of the Holders of each Security so affected. No consent of any Holder of any Security shall be necessary under this Section 8.2 to permit the Trustee and the Issuer to execute supplemental indentures pursuant to Sections 8.1 and 9.2.
A supplemental indenture which changes or eliminates any covenant, Event of Default or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of Holders of Securities of such series, with respect to such covenant or provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series.
Upon the request of the Issuer, accompanied by a copy of a resolution of the Board of Directors (which resolution may provide general terms or parameters for such action and may provide that the specific terms of such action may be determined in accordance with or pursuant to an Issuer Order) certified by the secretary or an assistant secretary of the Issuer authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of the Holders of the Securities as aforesaid and other documents, if any, required by Section 7.1, the Trustee shall join with the Issuer in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture.
It shall not be necessary for the consent of the Securityholders under this
Section 8.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
Promptly after the execution by the Issuer and the Trustee of any supplemental indenture pursuant to the provisions of this Section 8.2, the Trustee shall give notice thereof to the Holders of then Outstanding Securities of each series affected thereby, as provided in Section 11.4. Any failure of the Issuer to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.
SECTION 8.3 Effect of Supplemental Indenture. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and shall be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Issuer and the Holders of Securities of each series affected thereby shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and shall be deemed to be part of the terms and conditions of this Indenture for any and all purposes.
SECTION 8.4 Documents to Be Given to Trustee. The Trustee, subject to the provisions of Sections 6.1 and 6.2, shall be entitled to receive an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant to this Article Eight complies with the applicable provisions of this Indenture.
SECTION 8.5 Notation on Securities in Respect of Supplemental Indentures. Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article Eight may bear a notation in form approved by the Trustee for such series as to any matter provided for by such supplemental indenture or as to any action taken by Securityholders. If the Issuer or the Trustee shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Issuer, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Issuer, authenticated by the Trustee and delivered in exchange for the Securities of such series then Outstanding.
ARTICLE NINE
CONSOLIDATION, MERGER, SALE, LEASE, EXCHANGE OR DISPOSITION
SECTION 9.1 Issuer May Consolidate, etc., on Certain Terms. Subject to the provisions of Section 9.3, nothing contained in this Indenture or in any of the Securities shall prevent any consolidation or merger of the Issuer with or into any other corporation or corporations (whether or not affiliated with the Issuer), or successive consolidations or mergers in which the Issuer or its successor or successors shall be a party or parties, or shall prevent any sale, lease, exchange or other disposition of all or substantially all the property and assets of the Issuer to any other corporation (whether or not affiliated with the Issuer) authorized to acquire and operate the same; provided, however, and the Issuer hereby covenants and agrees, that any such consolidation, merger, sale, lease, exchange or other disposition shall be upon the conditions that (a) immediately after such consolidation, merger, sale, lease, exchange or other disposition of the corporation (whether the Issuer or such other corporation) formed by or surviving any such consolidation or merger, or to which such sale, lease, exchange or other disposition shall have been made, shall not be in default in the performance or observance of any of the terms, covenants and conditions of this Indenture to be kept or performed by the Issuer; (b) the corporation (if other than the Issuer) formed by or surviving any such consolidation or merger, or to which such sale, lease, exchange or other disposition shall have been made, shall be a corporation organized under the laws of the United States of America, any state thereof or the District of Columbia; and (c) the due and punctual payment of the principal of and interest, if any, on all the Securities, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed by the Issuer, shall be expressly assumed, by supplemental indenture satisfactory in form to the Trustee executed and delivered to the Trustee, by the corporation (if other than the Issuer) formed by such consolidation, or into which the Issuer shall have been merged, or by the corporation which shall have acquired or leased such property.
SECTION 9.2 Securities to be Secured in Certain Events. If, upon any such consolidation, merger, or upon any such sale, lease, exchange or other disposition, or upon any acquisition by the Issuer by purchase or otherwise of all or any part of the properties of any other corporation, any Principal Property owned by the Issuer or a Restricted Subsidiary immediately prior thereto would thereupon become subject to any mortgage, security interest, pledge, lien or encumbrance, not permitted by Section 3.6 hereof, the Issuer, prior to such consolidation, merger, sale, lease, exchange or other disposition or acquisition, will by indenture supplemental hereto secure the due and punctual payment of the principal of and interest, if any, on the Securities then outstanding (equally and ratably, or with such other relative priority specified in Section 3.6, with any other indebtedness of or guaranteed by the Issuer then entitled thereto) by a direct lien on such Principal Property, together with any other properties and assets of the Issuer or of any such Restricted Subsidiary, whichever shall be the owner of any such Principal Property, which would thereupon become subject to any such mortgage, security interest, pledge, lien or encumbrance, prior to all liens other than any theretofore existing thereon.
SECTION 9.3 Successor Corporation to be Substituted. In case of any such consolidation or merger or any sale, conveyance or lease of all or substantially all of the property of the Issuer and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the due and punctual payment of the principal of and interest, if any, on all of the Securities and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Issuer, such successor corporation shall succeed to and be substituted for the Issuer, with the same effect as if it had been named herein as the party of the first part, and the Issuer (including any intervening successor to the Issuer which shall have become the obligor hereunder) shall be relieved of any further obligation under this Indenture and the Securities; provided, however, that in the case of a sale, lease, exchange or other disposition of the property and assets of the Issuer (including any such intervening successor), the Issuer (including any such intervening successor) shall continue to be liable on its obligations under this Indenture and the Securities to the extent, but only to the extent, of liability to pay the principal of and interest, if any, on the Securities at the time, places and rate prescribed in this Indenture and the Securities. Such successor corporation thereupon may cause to be signed, and may issue either in its own name or in the name of the Issuer, any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Issuer and delivered to the Trustee; and, upon the order of such successor corporation instead of the Issuer and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities which previously shall have been signed and delivered by the officers of the Issuer to the Trustee for authentication, and any Securities which such successor corporation thereafter shall cause to be signed and delivered to the Trustee for that purpose. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof.
In case of any such consolidation or merger or any sale, lease, exchange or other disposition of all or substantially all of the property and assets of the Issuer, such changes in phraseology and form (but not in substance) may be made in the Securities, thereafter to be issued, as may be appropriate.
SECTION 9.4 Opinion of Counsel to be Given Trustee. The Trustee, subject to Sections 6.1 and 6.2, may receive an Officers' Certificate and Opinion of Counsel as conclusive evidence that any such consolidation, merger, sale, lease, exchange or other disposition and any such assumption complies with the provisions of this Article Nine.
ARTICLE TEN
SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS
SECTION 10.1 Satisfaction and Discharge of Indenture.
(A) If at any time (a) the Issuer shall have paid or caused to be paid the principal of and interest, if any, on all the Securities Outstanding (other than Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.9) as and when the same shall have become due and payable, or (b) the Issuer shall have delivered to the Trustee for cancellation all Securities theretofore authenticated (other than Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.9); and if, in any such case, the Issuer shall also pay or cause to be paid all other sums payable hereunder by the Issuer, then this Indenture shall cease to be of further effect, and the Trustee, on demand of the Issuer accompanied by an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the satisfaction and discharge contemplated by this provision have been complied with, and at the cost and expense of the Issuer, shall execute proper instruments acknowledging such satisfaction and discharging this Indenture. The Issuer agrees to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred, and to compensate the Trustee for any services thereafter reasonably and properly rendered, by the Trustee in connection with this Indenture or the Securities.
(B) If at any time (a) the Issuer shall have paid or caused to
be paid the principal of, premium, if any, and interest, if any, on all
the Securities of any series Outstanding (other than Securities of such
series which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 2.9) as and when the same shall
have become due and payable, or (b) the Issuer shall have delivered to
the Trustee for cancellation all Securities of any series theretofore
authenticated (other than any Securities of such series which have been
destroyed, lost or stolen and which have been replaced or paid as
provided in Section 2.9), or (c) in the case of any series of
Securities with respect to which the exact amount described in clause
(ii) below can be determined at the time of making the deposit referred
to in such clause (ii), (i) all the Securities of such series not
theretofore delivered to the Trustee for cancellation shall have become
due and payable, or are by their terms to become due and payable within
one year or are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption, and (ii) the Issuer shall have irrevocably deposited or
caused to be deposited with the Trustee as funds in trust, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of Securities of such series, cash in an amount (other than
moneys repaid by the Trustee or any paying agent to the Issuer in
accordance with Section 10.4) or direct obligations of the United
States of America, backed by its full faith and credit ("U.S.
Government Obligations"), maturing as to principal and interest, if
any, at such times and in such amounts as will insure the availability
of cash, or a combination thereof, sufficient in the opinion of a
nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee, to pay (A)
the principal of, premium, if any, and interest, if any, on all
Securities of such series on each date that such principal of, premium,
if any, or interest, if any, is due and payable, and (B) any mandatory
sinking fund payments on the dates on which such payments are due and payable in accordance with the terms of the Indenture and the Securities of such series; then the Issuer shall be deemed to have paid and discharged the entire indebtedness on all the Securities of such series on the date of the deposit referred to in clause (ii) above and the provisions of this Indenture with respect to the Securities of such series shall no longer be in effect (except, in the case of clause (c) of this Section 10.1(B), as to (i) rights of registration of transfer and exchange of Securities of such series, (ii) rights of substitution of mutilated, defaced, destroyed, lost or stolen Securities of such series, (iii) rights of Holders of Securities of such series to receive payments of principal thereof and premium, if any, and interest, if any, thereon upon the original stated due dates therefor (but not upon acceleration), and remaining rights of the Holders of Securities of such series to receive mandatory sinking fund payments thereon, if any, when due, (iv) the rights, obligations, duties and immunities of the Trustee hereunder, (v) the rights of the Holders of Securities of such series as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them and (vi) the obligations of the Issuer under Section 3.2 with respect to Securities of such series) and the Trustee, on demand of the Issuer accompanied by an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent contemplated by this provision have been complied with, and at the cost and expense of the Issuer, shall execute proper instruments acknowledging the same.
(C) The following provisions shall apply to the Securities of each series unless specifically otherwise provided in a Board Resolution, Officers' Certificate or indenture supplemental hereto provided pursuant to Section 2.3. In addition to discharge of the Indenture pursuant to the next preceding paragraph, in the case of any series of Securities with respect to which the exact amount described in subparagraph (a) below can be determined at the time of making the deposit referred to in such subparagraph (a), the Issuer shall be deemed to have paid and discharged the entire indebtedness on all the Securities of such a series on the 91st day after the date of the deposit referred to in subparagraph (a) below, and the provisions of this Indenture with respect to the Securities of such series shall no longer be in effect (except as to (i) rights of registration of transfer and exchange of Securities of such series, (ii) substitution of mutilated, defaced, destroyed, lost or stolen Securities of such series, (iii) rights of Holders of Securities of such series to receive payments of principal thereof, premium, if any, and interest, if any, thereon upon the original stated due dates therefor (but not upon acceleration), and remaining rights of the Holders of Securities of such series to receive mandatory sinking fund payments, if any, (iv) the rights, obligations, duties and immunities of the Trustee hereunder, (v) the rights of the Holders of Securities of such series as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them and (vi) the obligations of the Issuer under Section 3.2 with respect to Securities of such series) and the Trustee, on demand of the Issuer accompanied by an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent contemplated by this provision have been complied with, and at the cost and expense of the Issuer, shall execute proper instruments acknowledging the same, if
(a) with reference to this provision the Issuer has irrevocably deposited or caused to be irrevocably deposited with the Trustee as funds in trust, specifically pledged as
security for, and dedicated solely to, the benefit of the Holders of Securities of such series (i) cash in an amount, or (ii) U.S. Government Obligations, maturing as to principal and interest, if any, at such times and in such amounts as will insure the availability of cash, or (iii) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay (A) the principal of, premium, if any, and interest, if any, on all Securities of such series on each date that such principal or interest, if any, is due and payable, and (B) any mandatory sinking fund payments on the dates on which such payments are due and payable in accordance with the terms of the Indenture and the Securities of such series;
(b) such deposit will not result in a breach or violation of, or constitute a default under, any agreement or instrument to which the Issuer is a party or by which it is bound; and
(c) the Issuer has delivered to the Trustee an Opinion of Counsel based on the fact that (x) the Issuer has received from, or there has been published by, the Internal Revenue Service a ruling or (y), since the date hereof, there has been a change in the applicable United States federal income tax law, in either case to the effect that, and such opinion shall confirm that, the Holders of the Securities of such series will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to Federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such deposit, defeasance and discharge had not occurred.
SECTION 10.2 Application by Trustee of Funds Deposited for Payment of Securities. Subject to Section 10.4, all moneys and U.S. Government Obligations deposited with the Trustee pursuant to Section 10.1 shall be held in trust, and such moneys and all moneys from such U.S. Government Obligations shall be applied by it to the payment, either directly or through any paying agent (including the Issuer acting as its own paying agent), to the Holders of the particular Securities of such series for the payment or redemption of which such moneys and U.S. Government Obligations have been deposited with the Trustee, of all sums due and to become due thereon for principal and interest, if any, but such moneys and U.S. Government Obligations need not be segregated from other funds except to the extent required by law.
SECTION 10.3 Repayment of Moneys Held by Paying Agent. In connection with the satisfaction and discharge of this Indenture with respect to Securities of any series, all moneys then held by any paying agent under the provisions of this Indenture with respect to such series of Securities shall, upon demand of the Issuer, be repaid to it or paid to the Trustee and thereupon such paying agent shall be released from all further liability with respect to such moneys.
SECTION 10.4 Return of Moneys Held by Trustee and Paying Agent Unclaimed for Two Years. Any moneys deposited with or paid to the Trustee or any paying agent for the payment of the principal of or interest, if any, on any Security of any series and not applied but remaining unclaimed for two years
after the date upon which such principal or interest, if any, shall have become due and payable, shall, upon the written request of the Issuer and unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, be repaid to the Issuer by the Trustee for such series or such paying agent, and the Holder of the Securities of such series shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property laws, thereafter look only to the Issuer for any payment which such Holder may be entitled to collect, and all liability of the Trustee or any paying agent with respect to such moneys shall thereupon cease.
SECTION 10.5 Indemnity for U.S. Government Obligations. The Issuer
shall pay and indemnify the Trustee against any tax, fee or other charge imposed
on or assessed against the U.S. Government Obligations deposited pursuant to
Section 10.1 or the principal or interest received in respect of such
obligations.
ARTICLE ELEVEN
MISCELLANEOUS PROVISIONS
SECTION 11.1 Partners, Incorporators, Stockholders, Officers and Directors of Issuer Exempt from IndividuaSECTION 11.1 Partners, Incorporators, Stockholders, Officers and Directors of Issuer Exempt from Individual Liability. No recourse under or upon any obligation, covenant or agreement contained in this Indenture, or in any Security, or because of any indebtedness evidenced thereby, shall be had against any incorporator, as such or against any past, present or future stockholder, officer or director, as such, of the Issuer, or any partner of the Issuer or of any successor, either directly or through the Issuer or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of the Securities by the Holders thereof and as part of the consideration for the issue of the Securities.
SECTION 11.2 Provisions of Indenture for the Sole Benefit of Parties and Holders of Securities. Nothing in this Indenture or in the Securities, expressed or implied, shall give or be construed to give to any Person, other than the parties hereto and their successors and the Holders of the Securities, any legal or equitable right, remedy or claim under this Indenture or under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the parties hereto and their successors and of the Holders of the Securities.
SECTION 11.3 Successors and Assigns of Issuer Bound by Indenture. All the covenants, stipulations, promises and agreements in this Indenture contained by or on behalf of the Issuer shall bind its successors and assigns, whether so expressed or not.
SECTION 11.4 Notices and Demands on Issuer, Trustee and Holders of Securities. Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the Holders of Securities to or on the Issuer, or as required pursuant to the Trust Indenture Act of 1939, may be given or served by being deposited postage prepaid, first-class mail (except as otherwise specifically provided herein) addressed
(until another address of the Issuer is filed by the Issuer with the Trustee) to
Seagull Energy Corporation, 1001 Fannin, Suite 1700, Houston, Texas 77002,
Attention: Chairman of the Board. Any notice, direction, request or demand by
the Issuer or any Holder of Securities to or upon the Trustee shall be deemed to
have been sufficiently given or served by being deposited postage prepaid,
first-class mail (except as otherwise specifically provided herein) addressed
(until another address of the Trustee is filed by the Trustee with the Issuer)
to The Bank of New York, 101 Barclay Street, Floor 21 West, New York, New York
10286, Attention:
Corporate Trust Trustee Administration.
Where this Indenture provides for notice to Holders of Securities, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder entitled thereto, at his last address as it appears in the Security register. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.
In case, by reason of the suspension of or irregularities in regular mail service, it shall be impracticable to mail notice to the Issuer when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be reasonably satisfactory to the Trustee shall be deemed to be sufficient notice.
SECTION 11.5 Officers' Certificates and Opinions of Counsel; Statements to Be Contained Therein. Upon any application or demand by the Issuer to the Trustee to take any action under any of the provisions of this Indenture, or as required pursuant to the Trust Indenture Act of 1939, the Issuer shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished.
Each certificate or opinion provided for in this Indenture (other than a certificate provided pursuant to Section 4.3(d)) and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall include (a) a statement that the person making such certificate or opinion has read such covenant or condition, (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based, (c) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an opinion as to whether or not such covenant or condition has been complied with, and (d) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with.
Any certificate, statement or opinion of an officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of counsel may be based, insofar as it relates to factual matters, information with respect to which is in the possession of the Issuer, upon the certificate, statement or opinion of or representations by an officer or officers of the Issuer, unless such counsel knows that the certificate, statement or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous.
Any certificate, statement or opinion of an officer of the Issuer or of counsel may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an accountant or firm of accountants in the employ of the Issuer, unless such officer or counsel, as the case may be, knows that the certificate or opinion or representations with respect to the accounting matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous.
Any certificate or opinion of any independent firm of public accountants filed with and directed to the Trustee shall contain a statement that such firm is independent.
SECTION 11.6 Payments Due on Saturdays, Sundays and Holidays. If the date of maturity of principal of or interest, if any, on the Securities of any series or the date fixed for redemption, purchase or repayment of any such Security shall not be a Business Day, then payment of interest, if any, or principal need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date of maturity or the date fixed for redemption, purchase or repayment, and, in the case of payment, no interest shall accrue for the period after such date.
SECTION 11.7 Conflict of Any Provision of Indenture with Trust Indenture Act of 1939. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with another provision included in this Indenture which is required to be included herein by any of Sections 310 to 317, inclusive, or is deemed applicable to this Indenture by virtue of the provisions, of the Trust Indenture Act of 1939, such required provision shall control.
SECTION 11.8 GOVERNING LAW. THIS INDENTURE AND EACH SECURITY SHALL BE DEEMED TO BE A CONTRACT UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE.
SECTION 11.9 Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument.
SECTION 11.10 Effect of Headings. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.
ARTICLE TWELVE
REDEMPTION OF SECURITIES AND SINKING FUNDS
SECTION 12.1 Applicability of Article. The provisions of this Article shall be applicable to the Securities of any series which are redeemable before their maturity or to any sinking fund for the retirement of Securities of a series except as otherwise specified, as contemplated by Section 2.3 for Securities of such series.
SECTION 12.2 Notice of Redemption; Partial Redemptions. Notice of redemption to the Holders of Securities of any series to be redeemed as a whole or in part at the option of the Issuer shall be given by mailing notice of such redemption by first class mail, postage prepaid, at least 30 days and not more than 60 days prior to the date fixed for redemption to such Holders of Securities of such series at their last addresses as they shall appear in the Security register. Any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives the notice. Failure to give notice by mail, or any defect in the notice to the Holder of any Security of a series designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Security of such series.
The notice of redemption to each such Holder shall specify the principal amount of each Security of such series held by such Holder to be redeemed, the date fixed for redemption, the redemption price, the place or places of payment, the CUSIP number relating to such Securities, that payment will be made upon presentation and surrender of such Securities, that such redemption is pursuant to the mandatory or optional sinking fund, or both, if such be the case, that interest, if any, (or, in the case of Original Issue Discount Securities, original issue discount) accrued to the date fixed for redemption will be paid as specified in such notice and that on and after said date interest, if any, (or, in the case of Original Issue Discount Securities, original issue discount) thereon or on the portions thereof to be redeemed will cease to accrue. In case any Security of a series is to be redeemed in part only, the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the date fixed for redemption, upon surrender of such Security, a new Security or Securities of such series in principal amount equal to the unredeemed portion thereof will be issued.
The notice of redemption of Securities of any series to be redeemed at the option of the Issuer shall be given by the Issuer or, at the Issuer's request, by the Trustee in the name and at the expense of the Issuer.
On or before the redemption date specified in the notice of redemption given as provided in this Section 12.2, the Issuer will deposit with the Trustee
or with one or more paying agents (or, if the Issuer is acting as its own paying agent, set aside, segregate and hold in trust as provided in Section 3.5) an amount of money sufficient to redeem on the redemption date all the Securities of such series so called for redemption at the appropriate redemption price, together with accrued interest, if any, to the date fixed for redemption. The Issuer will deliver to the Trustee at least 45 days prior to the date fixed for redemption (unless a shorter notice period shall be satisfactory to the Trustee) an Officers' Certificate stating the aggregate principal amount of Securities to be redeemed. In case of a redemption at the election of the Issuer prior to the expiration of any restriction on such redemption, the Issuer shall deliver to the Trustee, prior to the giving of any notice of redemption to Holders pursuant to this Section, an Officers' Certificate stating that such restriction has been complied with.
If less than all the Securities of a series are to be redeemed, the Trustee shall select, in such manner as it shall deem appropriate and fair, Securities of such series to be redeemed. Securities may be redeemed in part in multiples equal to the minimum authorized denomination for Securities of such series or any multiple thereof. The Trustee shall promptly notify the Issuer in writing of the Securities of such series selected for redemption and, in the case of any Securities of such series selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities of any series shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed.
SECTION 12.3 Payment of Securities Called for Redemption. If notice of redemption has been given as above provided, the Securities or portions of Securities specified in such notice shall become due and payable on the date and at the place or places stated in such notice at the applicable redemption price, together with interest, if any, accrued to the date fixed for redemption, and on and after said date (unless the Issuer shall default in the payment of such Securities at the redemption price, together with interest, if any, accrued to said date) interest (or, in the case of Original Issue Discount Securities, original issue discount) on the Securities or portions of Securities so called for redemption shall cease to accrue, and such Securities shall cease from and after the date fixed for redemption (unless an earlier date shall be specified in a Board Resolution, Officers' Certificate or executed supplemental indenture referred to in Sections 2.1 and 2.3 by or pursuant to which the form and terms of the Securities of such series were established) except as provided in Sections 6.5 and 10.4, to be entitled to any benefit or security under this Indenture, and the Holders thereof shall have no right in respect of such Securities except the right to receive the redemption price thereof and unpaid interest to the date fixed for redemption. On presentation and surrender of such Securities at a place of payment specified in said notice, said Securities or the specified portions thereof shall be paid and redeemed by the Issuer at the applicable redemption price, together with interest, if any, accrued thereon to the date fixed for redemption; provided that payment of interest, if any, becoming due on or prior to the date fixed for redemption shall be payable to the Holders of Securities registered as such on the relevant record date subject to the terms and provisions of Sections 2.3 and 2.7 hereof.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the redemption price shall, until paid or duly provided for, bear interest from the date fixed for redemption at the rate of interest or Yield to Maturity (in the case of an Original Issue Discount Security) borne by such Security.
Upon presentation of any Security redeemed in part only, the Issuer shall execute and the Trustee shall authenticate and deliver to or on the order of the Holder thereof, at the expense of the Issuer, a new Security or Securities of such series, and of like tenor, of authorized denominations, in principal amount equal to the unredeemed portion of the Security so presented.
SECTION 12.4 Exclusion of Certain Securities from Eligibility for Selection for Redemption. Securities shall be excluded from eligibility for selection for redemption if they are identified by registration and certificate number in an Officers' Certificate delivered to the Trustee at least 45 days prior to the last date on which notice of redemption may be given as being owned of record and beneficially by, and not pledged or hypothecated by either (a) the Issuer, or (b) a Person specifically identified in such written statement as an Affiliate of the Issuer.
SECTION 12.5 Mandatory and Optional Sinking Funds. The minimum amount of any sinking fund payment provided for by the terms of the Securities of any series is herein referred to as a "mandatory sinking fund payment", and any payment in excess of such minimum amount provided for by the terms of the Securities of any series is herein referred to as an "optional sinking fund payment". The date on which a sinking fund payment is to be made is herein referred to as the "sinking fund payment date".
In lieu of making all or any part of any mandatory sinking fund payment
with respect to any series of Securities in cash, the Issuer may at its option
(a) deliver to the Trustee Securities of such series theretofore purchased or
otherwise acquired (except upon redemption pursuant to the mandatory sinking
fund) by the Issuer or receive credit for Securities of such series (not
previously so credited) theretofore purchased or otherwise acquired (except as
aforesaid) by the Issuer and delivered to the Trustee for cancellation pursuant
to Section 2.10, (b) receive credit for optional sinking fund payments (not
previously so credited) made pursuant to this Section 12.5, or (c) receive
credit for Securities of such series (not previously so credited) redeemed by
the Issuer through any optional redemption provision contained in the terms of
such series. Securities so delivered or credited shall be received or credited
by the Trustee at the sinking fund redemption price specified in such
Securities.
On or before the 60th day next preceding each sinking fund payment date
for any series, the Issuer will deliver to the Trustee an Officers' Certificate
(a) specifying the portion of the mandatory sinking fund payment to be satisfied
by payment of cash and the portion to be satisfied by credit of Securities of
such series and the basis for such credit, (b) stating that none of the
Securities of such series to be so credited has theretofore been so credited,
(c) stating that no defaults in the payment of interest or Events of Default
with respect to such series have occurred (which have not been waived or cured
or otherwise ceased to exist) and are continuing, and (d) stating whether or not
the Issuer intends to exercise its right to make an optional sinking fund payment with respect to such series and, if so, specifying the amount of such optional sinking fund payment which the Issuer intends to pay on or before the next succeeding sinking fund payment date. Any Securities of such series to be credited and required to be delivered to the Trustee in order for the Issuer to be entitled to credit therefor as aforesaid which have not theretofore been delivered to the Trustee shall be delivered for cancellation pursuant to Section 2.10 to the Trustee with such Officers' Certificate (or reasonably promptly thereafter if acceptable to the Trustee). Such Officers' Certificate shall be irrevocable and upon its receipt by the Trustee the Issuer shall become unconditionally obligated to make all the cash payments or payments therein referred to, if any, on or before the next succeeding sinking fund payment date. Failure of the Issuer, on or before any such 60th day, to deliver such Officers' Certificate and Securities (subject to the parenthetical clause in the second preceding sentence) specified in this paragraph, if any, shall not constitute a default but shall constitute, on and as of such date, the irrevocable election of the Issuer (i) that the mandatory sinking fund payment for such series due on the next succeeding sinking fund payment date shall be paid entirely in cash without the option to deliver or credit Securities of such series in respect thereof, and (ii) that the Issuer will make no optional sinking fund payment with respect to such series as provided in this Section 12.5.
If the sinking fund payment or payments (mandatory or optional or both) to be made in cash on the next succeeding sinking fund payment date plus any unused balance of any preceding sinking fund payments made in cash shall exceed $50,000, or a lesser sum if the Issuer shall so request with respect to the Securities of any particular series, such cash shall be applied on the next succeeding sinking fund payment date to the redemption of Securities of such series at the sinking fund redemption price together with accrued interest, if any, to the date fixed for redemption. If such amount shall be $50,000 or less and the Issuer makes no such request, then it shall be carried over until a sum in excess of $50,000 is available. The Trustee shall select, in the manner provided in Section 12.2, for redemption on such sinking fund payment date a sufficient principal amount of Securities of such series to absorb said cash, as nearly as may be, and shall (if requested in writing by the Issuer) inform the Issuer of the serial numbers of the Securities of such series (or portions thereof) so selected. The Trustee, in the name and at the expense of the Issuer (or the Issuer, if it shall so request the Trustee in writing) shall cause notice of redemption of the Securities of such series to be given in substantially the manner provided in Section 12.2 (and with the effect provided in Section 12.3) for the redemption of Securities of such series in part at the option of the Issuer. The amount of any sinking fund payments not so applied or allocated to the redemption of Securities of such series shall be added to the next cash sinking fund payment for such series and, together with such payment, shall be applied in accordance with the provisions of this Section 12.5. Any and all sinking fund moneys held on the stated maturity date of the Securities of any particular series (or earlier, if such maturity is accelerated), which are not held for the payment or redemption of particular Securities of such series shall be applied, together with other moneys, if necessary, sufficient for the purpose, to the payment of the principal of, and interest, if any, on, the Securities of such series at maturity.
On or before each sinking fund payment date, the Issuer shall pay to the Trustee in cash or shall otherwise provide for the payment of all interest, if any, accrued to the date fixed for redemption on Securities to be redeemed on such sinking fund payment date.
The Trustee shall not redeem or cause to be redeemed any Securities of a series with sinking fund moneys or give any notice of redemption of Securities for such series by operation of the sinking fund during the continuance of a default in payment of interest on such Securities or of any Event of Default with respect to such series except that, where the giving of notice of redemption of any Securities shall theretofore have been made, the Trustee shall redeem or cause to be redeemed such Securities, provided that it shall have received from the Issuer a sum sufficient for such redemption. Except as aforesaid, any moneys in the sinking fund for such series at the time when any such default or Event of Default shall occur, and any moneys thereafter paid into the sinking fund, shall, during the continuance of such default or Event of Default, be deemed to have been collected under Article Five and held for the payment of all such Securities. In case such Event of Default shall have been waived as provided in Section 5.7 or the default cured on or before the 60th day preceding the sinking fund payment date in any year, such moneys shall thereafter be applied on the next succeeding sinking fund payment date in accordance with this Section to the redemption of such Securities.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of September 1, 1997.
SEAGULL ENERGY CORPORATION
By:
Title:
THE BANK OF NEW YORK, as Trustee
By:
Title:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE REGISTERED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO THE NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Company or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
SEAGULL ENERGY CORPORATION
7 1/2% Senior Notes due September 15, 2027
No. BE-1 CUSIP No. 812007AE2
SEAGULL ENERGY CORPORATION, a corporation duly organized and existing
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under the laws of the State of Texas (herein called the "Company," which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to Cede & Co., or registered assigns, the principal sum of ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000) on September 15, 2027, and to pay interest thereon from September 30, 1997 or from the most recent interest payment date to which interest has been paid or duly provided for, semiannually in arrears on March 15 and September 15 in each year, commencing March 15, 1998, at the rate of 7 1/2% per annum, until the principal hereof is fully paid or made available for full payment. The interest so payable, and punctually paid or duly provided for, on any interest payment date will, as provided in such Indenture, be paid to the Person in whose name this Security is registered at the close of business on the March 1 or September 1 (whether or not a Business Day), as the case may be, next preceding such interest payment date (a "Regular Record Date"). Notwithstanding the foregoing, if and to the extent the Company shall default in the payment of the interest due on such interest payment date, any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and such defaulted interest shall instead be paid to the Person in whose name this Security is registered (a) at the close of business on a subsequent record date (which shall be not less than five Business Days prior
to the date of payment of such defaulted interest) established by notice given by mail by or on behalf of the Company to the Holders of Securities not less than 15 days preceding such subsequent record date or (b) as determined by such other procedure as is mutually acceptable to the Company and the Trustee, all as more fully described in the Indenture.
Payment of the principal of (and premium, if any) and interest on this Security shall be made at the Corporate Trust Office of the Trustee in New York, New York, or at such other office or agency of the Company as it may designate for such purpose pursuant to the Indenture hereinafter referred to, in such immediately available funds of the United States of America as at the time of payment are legal tender for payment of public and private debts.
Reference is hereby made to the further provisions of this Security set forth below, which further provisions shall for all purposes have the same effect as if set forth in this place.
Unless the certificate of authentication hereon has been executed by the Trustee referred to below by manual signature of an authorized officer, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal.
Dated: September 30, 1997
SEAGULL ENERGY CORPORATION
By:_______________________
Barry J. Galt
Chairman of the Board and
Chief Executive Officer
ATTEST:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK
as Trustee
By:________________________________
Authorized Officer
REVERSE OF SECURITY
This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under the Senior Indenture, dated as of September 1, 1997 (herein called the "Indenture"), between the Company and The Bank of New York, as Trustee (herein called the "Trustee," which term includes any additional successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitation of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. Capitalized terms used but not defined herein are defined in the Indenture and used herein with the same meanings ascribed to them therein. This Security is a Global Security representing the entire principal amount of the series designated on the face hereof, limited in aggregate principal amount to $150,000,000.
The Securities of this series are not redeemable prior to stated maturity.
The Securities of this series shall not be subject to a sinking fund requirement.
The Indenture contains provisions for defeasance of (a) the entire indebtedness of this Security and (b) certain restrictive covenants upon compliance by the Company with certain conditions set forth therein.
If an Event of Default with respect to the Securities of this series shall occur and be continuing, the unpaid principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee with the consent of the Holders of not less than a majority in aggregate principal amount of each series of Securities then Outstanding under the Indenture and affected thereby, evidenced as provided in the Indenture, to execute supplemental indentures adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or modifying in any manner the rights of the Holders of the Securities of such series; provided, however, that no such supplemental indenture shall (i) extend the stated final maturity of any Security, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest hereon, or reduce or alter the method of computation of any amount payable on redemption, repayment or purchase by the Company, or change the coin or currency in which payments are to be made, or impair or affect the right of any Holder to institute suit for enforcement of any payment hereof or (ii) reduce the aforesaid percentage of any series of such Securities, without the consent of the Holders of each Security of any series so affected. It is also provided in the Indenture that the Holders of a majority in aggregate principal amount of the Securities of any series then Outstanding may on behalf of the Holders of all of the Securities of such series waive any past default or Event of Default under the Indenture and its consequences except a default in the payment of the principal of or interest on any of the Securities of such Series.
Any such consent or waiver by the Holder of this Security (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Security and any Securities which may be issued in exchange or substitution herefor, irrespective of whether or not any notation thereof is made upon this Security or such other Securities.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest on this Security at the place, at the respective times, and at the rates and in the coin or currency herein provided.
As set forth in, and subject to, the provisions of the Indenture, no Holder of any Security of this series shall have any right to institute any proceeding with respect to the Indenture or for any remedy thereunder, unless such Holder shall have previously given to the Trustee written notice of default and the continuance thereof, as provided in the Indenture, and unless the Holders of not less than 25% in principal amount of the Securities of this series then Outstanding shall have made written request, and offered reasonable indemnity, to the Trustee to institute such proceeding as trustee, and the Trustee shall have failed to institute such proceeding within 60 days; provided, however, that such limitations shall not impair the right of a Holder hereof to institute suit for the enforcement of payment of the principal of or interest on this Security on or after the respective due dates expressed herein without the consent of such Holder.
This Security shall be exchangeable for Securities of this series registered in the names of Persons other than the Depository with respect to such series or its nominee only as provided in this paragraph. This Security shall be so exchangeable if (i) such Depository notifies the Company that it is unwilling, unable or ineligible to continue as Depository for this Security and a successor Depository is not appointed by the Company within 90 days or (ii) the Company executes and delivers to the Trustee a written order providing that this Security shall be so exchangeable. Securities so issued in exchange for this Security shall be of the same series and of like tenor, in authorized denominations and in the aggregate having the same unpaid principal amount as this Security and registered in such names as such Depository shall direct. Individual Securities of this series so issued will be issued in registered form and denominations, unless otherwise specified by the Company, of $1,000 and integral multiples thereof.
As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the security register maintained for that purpose, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of (and premium, if any) and interest on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder hereof or its attorney duly authorized in writing, and thereupon on or more new Securities of this series, and of like tenor, of authorized denominations and for the same aggregate unpaid principal amount, shall be issued to the
designated transferee or transferees. At the date of the original issuance of this Security, such office or agency of the Company is maintained by the Trustee at its Corporate Trust Office, 101 Barclay Street, Floor 21 West, New York, New York.
No service charge shall be made for any such exchange or registration of transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. All payments made to or upon the order of such registered Holder shall, to the extent of the sum or sums so paid, satisfy and discharge the liability for moneys payable on this Security.
Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused a CUSIP number to be printed on this Security as a convenience to the Holder hereof. No representation is made as to the accuracy of such number and reliance may be placed only on the other identifying information printed hereon.
Interest on this Security shall be computed on the basis of a 360-day year comprised of twelve 30-day months.
All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.
The Indenture and this Security shall be governed by and construed in accordance with the laws of the State of New York.
ASSIGNMENT FORM
I or we assign and transfer this Security to
(Print or type name, address and zip code of assignee or transferee)
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him.
Dated: _______ Signed:_______________________
(Sign exactly as name appears
above or on the other side of
this Security)
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Signature Guarantee:________________________________ Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee)
CONSENT AND AGREEMENT
CONSENT AND AGREEMENT, dated as of April 15, 1991, between the lender whose name appears on the signature page hereof (the "Lender") and ALASKA PIPELINE COMPANY, an Alaska corporation (the "Company").
WHEREAS, the Company has outstanding on the date hereof, (i) $144,000 aggregate principal amount of its 8 3/8% Series A Notes due January 1, 1993 (the "Series A Notes"), (ii) $460,000 aggregate principal amount of its 10 1/4% Series B Notes due January 1, 1995 (the "Series B Notes"), (iii) $2,100,000 aggregate principal amount of its 9.95% Series D Notes due April 1, 1997 (the "Series D Notes"), (iv) $14,500,000 aggregate principal amount of its 12.70% Series F Notes due July 1, 1995 (the "Series F Notes"), (v) $3,000,000 aggregate principal amount of its 12.80% Series G Notes due July 1, 2000 (the "Series G Notes"), and (vi) $8,000,000 aggregate principal amount of its 12.75% Series H Notes due July 1, 2000 (the "Series H Notes" and, together with the Series A Notes, the Series B Notes, the Series D Notes, the Series F Notes and the Series G Notes, the "Notes");
WHEREAS, the Series A Notes and the Series B Notes were originally issued pursuant to a Note Agreement dated as of August 15, 1972 (as heretofore amended, the "1972 Note Agreement");
WHEREAS, the Series D Notes were originally issued pursuant to a Note Agreement dated as of March 15, 1977 (as heretofore amended, the "1977 Note Agreement");
WHEREAS, the Series F Notes, the Series G Notes and the Series H Notes were originally issued pursuant to separate Note Agreements dated as of June 17, 1985 (as heretofore amended, the "1985 Agreement" and, together with the 1972 Note Agreement, the 1975 Note Agreement and the 1977 Note Agreement, the "Note Agreements");
WHEREAS, the Lender is the owner and holder of certain of the Notes (the "Lender Notes");
WHEREAS, the Company and the Lender desire to amend in certain respects the Note Agreements pursuant to which the Lender Notes were originally issued (the "Lender Notes");
WHEREAS, as of the date hereof, Seagull Energy Corporation ("Seagull") has outstanding $66,951,512 aggregate principal amount of Intercompany Notes (as defined in the Lender Note Agreements), such Intercompany Notes (the "Existing Intercompany Notes") being more particularly described in Exhibit A attached hereto;
WHEREAS, the Company and Seagull have requested the consent of the Lender to the execution and delivery by Seagull of new Intercompany Notes, in exchange for and in replacement of the Existing Intercompany Notes, such new Intercompany Notes (the "Replacement Intercompany Notes") to be identical in form and substance to the respective Existing Intercompany Notes being replaced thereby except that each Replacement Intercompany Note shall include the additional provision set forth in Exhibit B attached hereto; and
WHEREAS, the Company and Seagull have requested the consent of the Lender to the execution and delivery by the Company and Seagull of a Ninth Supplemental Mortgage in the form of Exhibit C attached hereto (the "Ninth Supplemental Mortgage") for the purpose of supplementing and amending the Intercompany Mortgage (as defined in the Lender Note Agreements) so as to (i) permit the inclusion of the provision set forth in Exhibit B attached hereto in all Intercompany Notes issued after the date hereof and (ii) cause Section 3.02 of the Intercompany Mortgage to be consistent with the provision set forth in Exhibit B attached hereto;
NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Lender and the Company hereby consent and agree as follows:
1. The Company and the Lender hereby agree that clause (a) of the definition of "Consolidated Adjusted Net Earnings" contained in Section 14 of each Lender Note Agreement is amended to read in its entirely as follows:
"(a) there shall be deducted an amount equal to the excess, if any, of (i) the sum of (x) the aggregate amount applied by the Company during such period to the payment, redemption, retirement and purchase of Funded Debt of the Company (other than any amount payable at the scheduled maturity of any such Funded Debt or on account of any mandatory or required sinking, purchase or other analogous fund with respect to any such Funded Debt) and (y) the aggregate amount applied by the Company during such period to the repayment during such period of advances to the Company by Seagull over (ii) the sum of (x) the aggregate amount of depreciation and amortization deducted during such period in determining Consolidated Net Income as Reported, (y) the aggregate principal amount of Funded Debt incurred by the Company during such period for the purpose of renewing, extending, refinancing, refunding, rearranging or replacing any Funded Debt taken into account under subclause (i) (x) above and (z) the sinking fund payments made by Seagull to the Company during such period in accordance with indebtedness of the Division to the Company evidenced by the Intercompany Notes;".
2. The Company and the Lender hereby agree that, except as hereinabove amended and modified, each Lender Note Agreement shall continue in full force and effect.
3. The Lender hereby consents to (a) the execution and delivery by Seagull of the Replacement Intercompany Notes in exchange for and in replacement of the Existing Intercompany Notes and (b) the execution and delivery by the Company and Seagull of the Ninth Supplemental Mortgage.
IN WITNESS WHEREOF, the Company and the Lender have caused this Consent and Agreement to be executed as of the date first above written.
ALASKA PIPELINE COMPANY
By:____________________________________
THE TRAVELERS INSURANCE COMPANY
By:____________________________________
Intercompany Notes Outstanding as of April 15, 1991
Original Outstanding
Principal Principal
Date Amount Amount
----------------- ---------------------- -----------------------
01/01/85 $ 245,000 $ 35,000
01/01/85 320,000 80,000
12/31/84 900,000 300,000
01/01/85 760,000 304,000
01/01/85 165,000 66,000
01/01/85 1,620,000 810,000
04/01/85 300,000 150,000
04/01/85 660,000 330,000
06/01/85 2,332,650 2,332,650
01/01/85 2,150,000 2,150,000
07/01/85 24,300,000 18,900,000
12/31/85 3,000,000 2,350,000
12/31/86 10,650,000 8,290,000
12/31/88 8,000,000 6,220,000
12/31/89 8,300,000 7,263,000
12/31/90 12,300,000 12,300,000
12/31/84 5,070,862 5,070,862
====================== =======================
$ 81,073,512 $ 66,951,512
====================== =======================
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Anything in this Note, the Mortgage or elsewhere to the contrary notwithstanding, Seagull shall not be personally liable for the payment of the principal of, premium (if any) or interest on this Note, it being expressly understood and agreed that the sole recourse of the holder of this Note for the payment hereof shall be against the Mortgaged Property and that no recourse (whether under rule of law, statute or constitution or by the enforcement of any assessment or penalty or otherwise) shall be had against Seagull or any other Person for the payment of the principal of, premium (if any) or interest on this Note or for any claim based hereon or otherwise in respect hereof; provided, however, that nothing in this paragraph shall (i) affect the validity of the indebtedness evidenced by this Note or the rights of any holder of this Note to proceed against the Mortgaged Property in accordance with the Mortgage, (ii) constitute a waiver of any indebtedness or obligation evidenced by this Note (but the same shall continue until paid or discharged), (iii) limit or otherwise prejudice in any way the right of any holder of this Note to name Seagull or any owner, holder or transferee of any interest in the Mortgaged Property as a party defendant in any action or suit for judicial foreclosure of, or in the exercise of any other remedy available to such holder with respect to, the Mortgaged Property so long as no judgment in the nature of a deficiency or seeking personally liability shall be asked of or (if obtained) enforced against Seagull.
SEAGULL ENERGY CORPORATION
As Mortgagor
TO
ALASKA PIPELINE COMPANY
As Mortgagee
NINTH SUPPLEMENTAL MORTGAGE
Dated as of ________________, 1991
Further Supplementing and Amending the First Mortgage and Deed of Trust, dated as of August 1, 1960, as heretofore supplemented, amended and restated by a Supplemental Mortgage dated as of September 9, 1960, a Second Supplemental Mortgage dated as of May 1, 1961, a Third Supplemental Mortgage dated as of December 15, 1969, a Fifth Supplemental Mortgage dated as of November 15, 1975, a Sixth Supplemental Mortgage dated as of December 30, 1977, a Seventh Supplemental Mortgage dated as of January 1, 1984 and an Eight Supplemental Mortgage dated as of June 17, 1985.
NINTH SUPPLEMENTAL MORTGAGE, dated as of __________________, 1991, between SEAGULL ENERGY CORPORATION (the "Company"), a Texas corporation, party of the first part, and ALASKA PIPELINE COMPANY ("Alaska"), an Alaska corporation, party of the second part.
RECITALS
WHEREAS, Alaska Public Service Corporation (formerly named Anchorage Natural Gas Corporation and herein called "Service"), in order to secure loans made to it form time to time by Alaska, executed and delivered to Alaska, as Mortgagee, a First Mortgage and Deed of Trust dated as of August 1, 1960 (the "Original Mortgage"), and three mortgages supplemental thereto consisting of a Supplemental Mortgage dated as September 9, 1960 (the "First Supplemental Mortgage"), a Second Supplemental Mortgage dated as of May 1, 1961 (the "Second Supplemental Mortgage") and a Third Supplemental Mortgage dated as of December 15, 1969 (the "Third Supplemental Mortgage");
WHEREAS, effective February 18, 1972, Alaska Interstate Company, an Alaska corporation ("Interstate"), acquired all of the assets and business as a going concern of Service and in connection therewith entered into a Fourth Supplemental Mortgage dated as of February 18, 1972 ( the "Fourth Supplemental Mortgage") which, among other things, (a) provided for the assumption by Interstate of all obligations, warranties and agreements of Service under the Secured Notes and the Original Mortgage as supplemented and amended thereby and by the First Supplemental Mortgage, the Second Supplemental Mortgage and the Third Supplemental Mortgage, and (b) restated the terms and provisions of the Original Mortgage, as supplemented and amended thereby and by the First Supplemental Mortgage, the Second Supplemental Mortgage and the Third Supplemental Mortgage;
WHEREAS, effective June 4, 1982, Interstate merged into ENSTAR
Corporation ("ENSTAR"), and ENSTAR, as the surviving corporation, succeeded to
all of Interstate's right, title and interest to the assets and business of
Service as a going concern, and assumed all of Interstate's obligations under
(a) the Original Mortgage as theretofore supplemented, amended and restated by
the First Supplemental Mortgage, the Second Supplemental Mortgage, the Third
Supplemental Mortgage, the Fourth Supplemental Mortgage, a Fifth Supplemental
Mortgage dated as of November 15, 1975, a Sixth Supplemental Mortgage dated as
of December 30, 1977 and a Seventh Supplemental Mortgage dated as of January 1,
1984 (the Original Mortgage, as so supplemented, amended and restated by such
seven supplemental mortgages, being herein called the "Amended Mortgage") and
(b) the notes of Interstate secured by the Amended Mortgage;
WHEREAS, following such merger, the name of Service was changed to ENSTAR Natural Gas Company and its operations were thereafter conducted as a division (the "Division") of ENSTAR;
WHEREAS, effective June 17, 1985, the Company purchased from ENSTAR all of the outstanding common stock of Alaska and all of the assets and business as a going concern of the Division pursuant to an Agreement of Purchase and Sale dated as of October 30, 1984, as amended by a Supplemental Agreement dated may 3, 1985;
WHEREAS, in connection with such purchase, the Company, and Alaska entered into an Eighth Supplemental Mortgage, dated as of June 17, 1985 (the "Eighth Supplemental Mortgage"), providing, among other things, for (i) the amendment and restatement of the Amended Mortgage and (ii) the assumption by the Company all the obligations, warranties and agreements of ENSTAR and the Division under the Amended Mortgage;
WHEREAS, pursuant to the Amended Mortgage, as amended and restated by the Eighth Supplemental Mortgage (the "Mortgage"), the Company issued to Alaska certain promissory notes of the Company (the "Replacement Notes") in exchange for and in cancellation and replacement of all promissory notes of ENSTAR secured by the Mortgage (the "ENSTAR Notes");
WHEREAS, the Replacement Notes were issued in renewal, extension and refunding of the ENSTAR Notes and the lien created by the Mortgage was carried forward and continued in force and effect for the purpose of securing, among other indebtedness, the indebtedness evidenced by the Replacement Notes;
WHEREAS, the Company and Alaska desire to amend certain terms and conditions contained in the Mortgage, and the Company desires to convey and mortgage, and confirm the conveyancing and mortgaging under the Mortgage and hereunder, of certain properties heretofore acquired by the Company with respect to the operations of the Division and not specifically described in the Mortgage, and, to that end, the Company desires to make, execute and deliver to Alaska a Ninth Supplemental Mortgage, supplemental to the Mortgage, in the form hereof and for the purposes herein provided, which will secure all the Notes (as defined in Section 1.01 of the Mortgage);
WHEREAS, all conditions and requirements necessary to authorize the execution, acknowledgment and delivery of this Ninth Supplemental Mortgage and duly and legally to effect the modifications of the Mortgage provided for in this Ninth Supplemental Mortgage and to make the Mortgage, as supplemented and amended hereby, a valid, binding and legal instrument for the security of the Notes ( as defined in Section 1.01 of the Mortgage), have been compiled with or have been done and performed;
NOW, THEREFORE, in consideration of the premises and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Alaska hereby act and agree as follows:
ARTICLE I
Confirmation of Mortgage, etc.
In order further to secure (and the Company hereby acknowledges and agrees that the lien of the Mortgage is hereby carried forward and continued in force and effect for the purpose of securing) the payment of the principal of and the premium, if any, and interest on all Notes at any time issued and outstanding under the Amended Mortgage, as supplemented and amended by this Ninth Supplemental Mortgage and as further supplemented and amended, from time to time, in accordance with their terms, and the performance and observance by the
Company of all of the obligations and agreements of the Company herein and therein contained and the payment of all amounts payable and to become payable by the Company under the Gas Sale Contract (as defined in Section 1.01 of the Mortgage), the Company (i) has executed and delivered this Ninth Supplemental Mortgage, (ii) does hereby ratify and confirm its mortgage and pledge to Alaska of its property (other than Excepted Property, as defined in the Excepted Property Clause of the Mortgage, and any property heretofore released from the lien of the Mortgage pursuant thereto and other than easements, rights-of-way, permits, leaseholds, contracts and agreements which have either expired or been completed in accordance with their terms) described in the Mortgage as being subjected to the lien of the Mortgage and has granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, pledged, set over and confirmed, and (iii) does hereby grant, bargain, sell, release, convey, assign, transfer, mortgage, pledge, set over and confirm unto Alaska, as Mortgagee under the Mortgage, and to its successors and assigns forever the real property and interests in real property described in Schedule I attached hereto and made a part hereof for all purposes.
ARTICLE II
Modifications of the Mortgage
SECTION 2.1. Section 2.02 Amended. Section 2.02 of the Mortgage is hereby amended by adding the following new paragraph to the Form of Note contained in such Section:
"Anything in this Note, the Mortgage or elsewhere to the contrary notwithstanding, Seagull shall not be personally liable for the payment of the principal of, premium (if any) or interest on this Note, it being expressly understood and agreed that the sole recourse of the holder of this Note for the payment hereof shall be against the Mortgaged Property and that no recourse (whether under rule of law, statute or constitution or by the enforcement of any assessment or penalty or otherwise) shall be had against Seagull or any other Person for the payment of the principal of, premium (if any) or interest on this Note or for any claim based hereon or otherwise in respect hereof; provided, however, that nothing in this paragraph shall (i) affect the validity of the indebtedness evidenced by this Note or the rights of any holder of this Note to proceed against the Mortgaged Property in accordance with the Mortgage, (ii) constitute a waiver of any indebtedness or obligation evidenced by this Note (but the same shall continue until paid or discharged), (iii) limit or otherwise prejudice in any way the right of any holder of this Note to name Seagull or any owner, holder or transferee of any interest in the Mortgaged Property as a party defendant in any action or suit for judicial foreclosure of, or in the exercise of any other remedy available to such holder with respect to, the Mortgaged Property so long as no judgment in the nature of a deficiency or seeking personally liability shall be asked of or (if obtained) enforced against Seagull."
SECTION 2.2. Section 3.02 Amended. Section 3.02 of the Mortgage is
hereby amended by replacing the second paragraph thereof with the following
paragraph:
"Anything in this Mortgage, the Notes or elsewhere to the contrary
notwithstanding, the Company shall not be personally liable for the payment of
the principal of, premium (if any) or interest on the Notes (whether Replacement
Notes or otherwise), it being expressly understood and agreed that the sole
recourse of the holders of the Notes for the
payment thereof shall be against the Mortgaged Property and that no recourse (whether under rule of law, statute or constitution or by the enforcement of any assessment or penalty or otherwise) shall be had against the Company or any other Person for the payment of the principal of, premium (if any) or interest on the Notes or for any claim based hereon or otherwise in respect thereof; provided, however, that nothing in this paragraph shall (i) affect the validity of the indebtedness evidenced by the Notes or the rights of any holder of a Note to proceed against the Mortgaged Property in accordance with this Mortgage, (ii) constitute a waiver of any indebtedness or obligation evidenced by the Notes (but the same shall continue until paid or discharged), (iii) limit or otherwise prejudice in any way the right of any holder of a Note to name the Company or any owner, holder or transferee of any interest in the Mortgaged Property as a party defendant in any action or suit for judicial foreclosure of, or in the exercise of any other remedy available to such holder with respect to, the Mortgaged Property so long as no judgment in the nature of a deficiency or seeking personally liability shall be asked of or (if obtained) enforced against the Company."
ARTICLE III
Miscellaneous Provisions
SECTION 3.1. Titles, Headings, Etc. The titles and headings of the Articles, Sections and subdivisions of this Ninth Supplemental Mortgage have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms or provisions hereof.
SECTION 3.2. Counterparts. This Ninth Supplemental Mortgage may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.
IN WITNESS WHEREOF, the parties have caused this Ninth Supplemental Mortgage to be executed by their respective officers thereunto duly authorized, all as of the day and year first above written.
SEAGULL ENERGY CORPORATION
By:_____________________________
[Corporate Seal] Title:__________________________
Attest:
By:___________________________
Secretary
ALASKA PIPELINE COMPANY
By:__________________________
[Corporate Seal]
Title:_______________________
Attest:
By:___________________________
Secretary
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE ME, the undersigned authority, on this day personally appeared ___________________________, known to me to be the person whose name is subscribed to the foregoing instrument, and known to me to be the ___________________________________ of SEAGULL ENERGY CORPORATION, a Texas corporation, and acknowledged to me that he executed said instrument for the purposes and consideration therein expressed, and in the capacity therein stated, as the free and voluntary act and deed of the said corporation for the uses and purposes therein mentioned.
Given under my hand and seal of office this _____ day of ____________, 1991.
[Notarial Seal]
My Commission Expires:_______________
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE ME, the undersigned authority, on this day personally appeared ______________________________, known to me to be the person whose name is subscribed to the foregoing instrument, and known to me to be the ________________________________ of ALASKA PIPELINE COMPANY, a Texas corporation, and acknowledge to me that the executed said instrument for the purposes and consideration therein expressed, and in the capacity therein stated, as the free and voluntary act and deed of the said corporation for the uses and purposes therein mentioned.
Given under my hand and seal of office this ______ day of ____________, 1991.
[Notarial Seal]
My Commission Expires:_______________
SCHEDULE I
A. The right, title and interest of the Company in the following easements, rights-of-way, permits, licenses, servitudes, leases, grants and rights (all references hereafter made to books and pages being to the Conveyance and Deed Records of the respective Recording Districts of the State of Alaska), to wit:
[ To Come]
B. The right, title and interest of the Company in the following permits, licenses, franchises and grants over, in, on and across the lands described and for the purposed stated therein:
[To Come]
C. The right, title and interest of the Company in the following real property:
[To Come]
EXHIBIT 21
SUBSIDIARIES
The Company was incorporated in Texas in 1973. The following is a listing of significant subsidiaries of the Company as of March 9, 1998:
% Voting
Securities
Jurisdiction of or Beneficial
Incorporation Interest Owned
Name of Subsidiary or Organization by the Company
---------------------------------------------------------------------- ------------------------------ ---------------------------
Alaska Pipeline Company Alaska 100%
Global Natural Resources Corporation of Nevada Nevada 100%
Global Natural Resources Inc. New Jersey 100%
Seagull (Cote d'Ivoire) CI-104 Ltd. Cayman Islands 100%
Seagull (Cote d'Ivoire) CI-12 Ltd. Cayman Islands 100%
Seagull (Cote d'Ivoire) Ltd. Cayman Islands 100%
Seagull (Egypt) Darag, Ltd. Cayman Islands 100%
Seagull (Egypt) East Beni Suef, Ltd. Cayman Islands 100%
Seagull (Egypt) Ltd. Cayman Islands 100%
Seagull East Zeit Petroleum Ltd. Cayman Islands 100%
Seagull Energy E&P Inc. Delaware 100%
Seagull Energy International Inc. Delaware 100%
Seagull Field Services Company Texas 100%
Seagull International Holdings Ltd. Cayman Islands 100%
Seagull Marketing Services, Inc. Texas 100%
Seagull Midcon Inc. Delaware 100%
Seagull Mid-South Inc. Delaware 100%
Seagull Pipeline & Marketing Company Delaware 100%
Seagull Pipeline Company Delaware 100%
Seagull Power Services Inc. Delaware 100%
Seagull Products Pipeline Corporation Texas 100%
Seagull South Hurghada Petroleum Ltd. Cayman Islands 100%
Seagull WAG Petroleum Ltd. Cayman Islands 100%
Texneft Inc. Texas 100%
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EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Seagull Energy Corporation:
We consent to the incorporation by reference in the following Registration Statements of Seagull Energy Corporation of our report dated January 28, 1998, relating to the consolidated balance sheets of Seagull Energy Corporation and Subsidiaries as of December 31, 1997 and 1996 and the related consolidated statements of operations, shareholders' equity and cash flows for each of the years in the three-year period ended December 31 1997, which report appears or is incorporated by reference in the December 31, 1997 Annual Report on Form 10-K of Seagull Energy Corporation.
a. Form S-8, Seagull Thrift Plan (2-72014).
b. Form S-8, Seagull Energy Corporation 1981 Non-Qualified and
Incentive Stock Option Plan (2-80834).
c. Form S-8, ENSTAR Natural Gas Company Thrift Plan (33-14463).
d. Forms S-8 and S-3, Seagull Energy Corporation 1983 Stock Option Plan
(2-93087).
e. Forms S-8 and S-3, Seagull Energy Corporation 1986 Stock Option Plan
(33-22475).
f. Form S-8, Seagull Energy Corporation 1990 Stock Option Plan (33-43483).
g. Form S-8, Seagull Energy Corporation 1993 Stock Option Plan (33-50643).
h. Form S-8, Seagull Energy Corporation 1993 Nonemployee Directors' Stock
Option Plan (33-50645).
i. Form S-3, $350,000,000 Debt Securities of Seagull Energy Corporation
(33-65118).
j. Form S-3, ENSTAR Alaska Group of Common Stock of Seagull Energy Corporation
(33-53729).
k. Form S-8, Seagull Energy Corporation 1995 Omnibus Stock Plan (33-64041).
l. Form S-3, $300,000,000 Debt Securities, Preferred Stock, Depositary Shares,
Common Stock or Securities Warrants of Seagull Energy Corporation (33-64051).
m. Form S-8, Global Natural Resources In. 1989 Key Employees Stock Option
Plan and 1992 Stock Option Plan (333-13393).
/s/ KPMG Peat Marwick LLP
Houston, Texas
March 17, 1998
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EXHIBIT 23.2
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS
We hereby consent to the use of our name in the Annual Report on Form 10-K of Seagull Energy Corporation and Subsidiaries (the "Company") for the year ended December 31, 1997, and the incorporation by reference thereof into the Company's registration statements on Form S-8 (Nos. 2-72014, 2-80834, 33-14463, 33-43483, 33-50643, 33-50645, 33-64041 and 333-13393), Forms S-8 and S-3 (Nos. 2-93087 and 33-22475) and Form S-3 (Nos. 33-53729, 33-65118, 33-64051 and 333-34841).
\S\ Ryder Scott Company
Petroleum Engineers
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Houston, Texas
March 16, 1998
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EXHIBIT 23.3
CONSENT of INDEPENDENT PETROLEUM ENGINEERS
We hereby consent to the use of our name under the heading "Oil and Gas Operations" of Item 1 in the Annual Report on Form 10-K (the Form 10-K) for the year ended December 31, 1997, of Seagull Energy Corporation and Subsidiaries and the incorporation by reference of the Form 10-K into the Company's registration statements on Form S-8 (Nos. 2-72014, 2-80834, 33-14463, 33-43483, 33-50643, 33-50645, 33-64041 and 333-13393), Forms S-8 and S-3 (Nos. 2-93087 and 33-22475) and Form S-3 (Nos. 33-53729, 33-65118, 33-64051 and 333-34841).
\S\ DeGolyer and MacNaughton
DeGOLYER AND MacNAUGHTON
Dallas, Texas
March 16, 1998
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EXHIBIT 23.4
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS
We hereby consent to the use of our name in the Annual Report on Form 10-K of Seagull Energy Corporation and Subsidiaries (the "Company") for the year ended December 31, 1997, and the incorporation by reference thereof into the Company's registration statements on Form S-8 (Nos. 2-72014, 2-80834, 33-14463, 33-43483, 33-50643, 33-50645, 33-64041 and 333-13393), Forms S-8 and S-3 (Nos. 2-93087 and 33-22475) and Form S-3 (Nos. 33-53729, 33-65118, 33-64051 and 333-34841).
By:/s/ Clarence M. Netherland
Clarence M. Netherland, Chairman
NETHERLAND, SEWELL & ASSOCIATES, INC.
Houston, Texas
March 18, 1998
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| ARTICLE 5 |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | YEAR |
| FISCAL YEAR END | DEC 31 1997 |
| PERIOD END | DEC 31 1997 |
| CASH | 45,654 |
| SECURITIES | 0 |
| RECEIVABLES | 147,442 |
| ALLOWANCES | 0 |
| INVENTORY | 13,635 |
| CURRENT ASSETS | 222,971 |
| PP&E | 2,053,683 |
| DEPRECIATION | 908,849 |
| TOTAL ASSETS | 1,411,066 |
| CURRENT LIABILITIES | 213,860 |
| BONDS | 469,017 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 6,388 |
| OTHER SE | 640,816 |
| TOTAL LIABILITY AND EQUITY | 1,411,066 |
| SALES | 549,367 |
| TOTAL REVENUES | 549,367 |
| CGS | 43,684 |
| TOTAL COSTS | 438,891 |
| OTHER EXPENSES | (14,257) |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 38,533 |
| INCOME PRETAX | 86,200 |
| INCOME TAX | 37,070 |
| INCOME CONTINUING | 49,130 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 49,130 |
| EPS PRIMARY | 0.78 |
| EPS DILUTED | 0.77 |