0000927356-95-000223.txt : 19950816
0000927356-95-000223.hdr.sgml : 19950816
ACCESSION NUMBER: 0000927356-95-000223
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 6
CONFORMED PERIOD OF REPORT: 19950630
FILED AS OF DATE: 19950814
SROS: NYSE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: WESTERN GAS RESOURCES INC
CENTRAL INDEX KEY: 0000856716
STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION [4922]
IRS NUMBER: 841127613
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-10389
FILM NUMBER: 95563868
BUSINESS ADDRESS:
STREET 1: 12200 N PECOS ST
CITY: DENVER
STATE: CO
ZIP: 80234-3439
BUSINESS PHONE: 3034525603
10-Q
1
FORM 10-Q
===============================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995 OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________________ TO
_________________
Commission file number 1-10389
WESTERN GAS RESOURCES, INC.
-------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 84-1127613
--------------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12200 N. Pecos Street, Denver, Colorado 80234-3439
-------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(303) 452-5603
-------------------------------------------------------------------------------
Registrant's telephone number, including area code
No Changes
-------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report).
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---- ----
On August 1, 1995, there were 25,760,807 shares of the registrant's Common Stock
outstanding.
Reference is made to the listing beginning on page 17 of all exhibits filed as a
part of this report.
===============================================================================
1
WESTERN GAS RESOURCES, INC.
FORM 10-Q
TABLE OF CONTENTS
Page
----
PART I - Financial Information
--------------------------------
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet - June 30, 1995 and December 31, 1994............. 3
Consolidated Statement of Cash Flows - Six months ended June 30, 1995
and 1994..................................................................... 4
Consolidated Statement of Operations - Quarters and six months ended
June 30, 1995 and 1994....................................................... 5
Consolidated Statement of Changes in Stockholders' Equity - Six months ended
June 30, 1995................................................................ 6
Notes to Consolidated Financial Statements................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................... 9
PART II - Other Information
---------------------------
Item 1. Legal Proceedings............................................................ 16
Item 5. Other Information............................................................ 16
Item 6. Exhibits and Reports on Form 8-K............................................. 17
Signatures............................................................................ 18
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
WESTERN GAS RESOURCES, INC.
CONSOLIDATED BALANCE SHEET
(000s, except share amounts)
June 30, December 31,
1995 1994
----------- -------------
(unaudited)
ASSETS
------
Current assets:
Cash and cash equivalents.................................................... $ 6,874 $ 8,708
Trade accounts receivable, net............................................... 124,053 134,444
Product inventory............................................................ 38,527 51,139
Parts inventory.............................................................. 2,392 2,291
Other........................................................................ 3,090 1,367
---------- ----------
Total current assets 174,936 197,949
---------- ----------
Property and equipment, at cost:
Gas gathering, processing, storage and transmission.......................... 903,424 881,569
Oil and gas properties and equipment......................................... 142,649 140,601
Construction in progress..................................................... 31,271 40,076
---------- ----------
1,077,344 1,062,246
Less: Accumulated depreciation, depletion and amortization.................. (209,517) (179,537)
---------- ----------
Total property and equipment, net 867,827 882,709
---------- ----------
Other assets:
Gas purchase contracts (net of accumulated amortization of $16,703 and
$14,872, respectively) 41,703 40,958
Other........................................................................ 50,957 45,746
---------- ----------
Total other assets......................................................... 92,660 86,704
---------- ----------
Total assets................................................................... $1,135,423 $1,167,362
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable............................................................. $ 143,446 $ 145,244
Short-term debt.............................................................. 75,000 75,000
Accrued expenses............................................................. 23,577 13,448
Dividends payable............................................................ 3,898 3,895
Income taxes payable......................................................... 323 843
---------- ----------
Total current liabilities.................................................. 246,244 238,430
Long-term debt................................................................. 432,000 418,000
Deferred income taxes payable.................................................. 69,257 68,727
Other long-term liabilities.................................................... 616 5,522
---------- ----------
Total liabilities.......................................................... 748,117 730,679
---------- ----------
Commitments and contingent liabilities......................................... -- --
Stockholders' equity:
Common stock, par value $.10; 100,000,000 shares authorized; 25,782,094 and
25,737,317 shares issued, respectively..................................... 2,578 2,574
Treasury stock, at cost, 25,016 shares in treasury........................... (788) (788)
Preferred Stock, par value $.10; 10,000,000 shares authorized:
$2.625 cumulative convertible preferred stock; 2,760,000 shares issued and
outstanding ($138,000 aggregate liquidation preference).................. 276 276
$2.28 cumulative preferred stock; 1,400,000 shares issued and outstanding
($35,000 aggregate liquidation preference)............................... 140 140
7.25% cumulative senior perpetual convertible preferred stock; none and
400,000 shares issued and outstanding, respectively ($40,000
aggregate liquidation preference)........................................ -- 40
Additional paid-in capital................................................. 301,158 338,926
Notes receivable from key employees secured by common stock................ (1,851) (1,525)
Retained earnings.......................................................... 85,793 97,040
---------- ----------
Total stockholders' equity............................................... 387,306 436,683
---------- ----------
Total liabilities and stockholders' equity..................................... $1,135,423 $1,167,362
========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
3
WESTERN GAS RESOURCES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(000s)
Six Months Ended
June 30,
---------------------
1995 1994
-------- --------
Reconciliation of net income to net cash provided by
operating activities:
Net income............................................ $ 1,538 $ 1,192
Add income items that do not affect working capital:
Depreciation, depletion and amortization............ 33,915 32,584
Deferred income taxes............................... 530 368
Other non-cash items................................ 69 (394)
-------- --------
36,052 33,750
-------- --------
Adjustments to working capital to arrive at net
cash provided by operating activities:
Decrease in trade accounts receivable............... 10,391 31,929
Decrease (increase) in product inventory............ 12,612 (21,320)
Increase in parts inventory......................... (101) (370)
Increase in other current assets.................... (1,723) (1,848)
Increase in other assets and liabilities, net....... (223) (262)
Decrease in accounts payable........................ (1,798) (22,085)
Increase in accrued expenses........................ 9,629 376
(Decrease) increase in income taxes payable......... (520) 311
-------- --------
Total adjustments................................ 28,267 (13,269)
-------- --------
Net cash provided by operating activities............. 64,319 20,481
-------- --------
Cash flows from investing activities:
Payments for business acquisitions.................. (39) (163)
Payments for additions to property and
equipment.......................................... (26,945) (42,806)
Dispositions of property and equipment.............. 6,260 10,458
Contributions to equity investments................. (5,847) (797)
Gas purchase contracts acquired..................... (2,641) --
-------- --------
Net cash used in investing activities................. (29,212) (33,308)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of preferred stock........... -- 132,731
Proceeds from exercise of common stock options...... 90 327
Net borrowings (payments) under revolving credit
facility.......................................... 14,000 (99,000)
Dividends paid to holders of common stock........... (2,573) (2,568)
Dividends paid to holders of preferred stock........ (6,428) (4,636)
Redemption of 7.25% Cumulative Senior Perpetual
Convertible Preferred Stock....................... (42,030) --
-------- --------
Net cash (used in) provided by financing activities... (36,941) 26,854
-------- --------
Net (decrease) increase in cash and cash equivalents.. (1,834) 14,027
Cash and cash equivalents at beginning of period...... 8,708 4,666
-------- --------
Cash and cash equivalents at end of period............ $ 6,874 $ 18,693
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
4
WESTERN GAS RESOURCES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(000s, except share and per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
Revenues:
Sale of residue gas................................. $ 212,011 $ 157,897 $ 420,000 $ 349,271
Sale of natural gas liquids......................... 79,517 75,702 163,768 148,539
Processing and transportation revenue............... 10,073 8,717 20,502 15,995
Other, net.......................................... 2,807 2,154 3,839 6,369
----------- ----------- ----------- -----------
Total revenues 304,408 244,470 608,109 520,174
----------- ----------- ----------- -----------
Costs and expenses:
Product purchases................................... 251,943 195,779 500,256 419,459
Plant operating expense............................. 16,825 16,734 35,004 34,298
Oil and gas exploration and production costs........ 1,258 1,148 2,819 2,420
Selling and administrative expense.................. 7,134 8,072 13,538 15,180
Depreciation, depletion and amortization............ 16,711 15,958 33,915 32,584
Interest expense.................................... 9,108 6,467 18,091 14,347
Restructuring charges............................... 2,065 - 2,065 -
----------- ----------- ----------- -----------
Total costs and expenses 305,044 244,158 605,688 518,288
----------- ----------- ----------- -----------
(Loss) income before taxes........................... (636) 312 2,421 1,886
Provision (benefit) for income taxes:
Current............................................. (144) 135 353 326
Deferred............................................ (89) (4) 530 368
----------- ----------- ----------- -----------
(233) 131 883 694
----------- ----------- ----------- -----------
Net (loss) income.................................... (403) 181 1,538 1,192
Preferred stock requirements......................... (6,876) (3,335) (10,210) (5,542)
----------- ----------- ----------- -----------
Loss attributable to common stock.................... $ (7,279) $ (3,154) $ (8,672) $ (4,350)
=========== =========== =========== ===========
Loss per share of common stock....................... $ (.28) $ (.12) $ (.34) $ (.17)
=========== =========== =========== ===========
Weighted average number of common stock outstanding.. 25,752,832 25,690,658 25,745,305 25,689,183
=========== =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
5
WESTERN GAS RESOURCES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
(000s, except share amounts)
Six Months Ended
June 30, 1995
------------------------
Shares Amount
---------- --------
COMMON STOCK; Par Value $.10 Per Share; 100,000,000
Shares Authorized:
Balance at December 31, 1994........................... 25,712,301 $ 2,574
Common stock options exercised......................... 44,777 4
---------- --------
Balance at June 30, 1995.............................. 25,757,078 $ 2,578
========== ========
COMMON STOCK IN TREASURY, AT COST;
Balance at December 31, 1994........................... 25,016 $ (788)
---------- --------
Balance at June 30, 1995.............................. 25,016 $ (788)
========== ========
PREFERRED STOCK; Par Value $.10; 10,000,000 Shares
Authorized:
$2.625 Cumulative Convertible Preferred Stock;
Balance at December 31, 1994........................... 2,760,000 $ 276
---------- --------
Balance at June 30, 1995.............................. 2,760,000 $ 276
========== ========
$2.28 Cumulative Preferred Stock;
Balance at December 31, 1994........................... 1,400,000 $ 140
---------- --------
Balance at June 30, 1995.............................. 1,400,000 $ 140
========== ========
7.25% Cumulative Senior Perpetual Convertible
Preferred Stock;
Balance at December 31, 1994........................... 400,000 $ 40
Redemption of Cumulative Senior Perpetual Convertible
Preferred Stock....................................... (400,000) (40)
---------- --------
Balance at June 30, 1995.............................. -- $ --
========== ========
ADDITIONAL PAID-IN CAPITAL;
Balance at December 31, 1994........................... $338,926
Common stock options exercised......................... 438
Redemption of 7.25% Cumulative Senior Perpetual
Convertible Preferred Stock........................... (38,206)
--------
Balance at June 30, 1995.............................. $301,158
========
NOTES RECEIVABLE FROM KEY EMPLOYEES SECURED BY
COMMON STOCK;
Balance at December 31, 1994........................... $ (1,525)
Loans related to common stock options exercised........ (378)
Loans forgiven related to the restructuring............ 52
--------
Balance at June 30, 1995.............................. $ (1,851)
========
RETAINED EARNINGS;
Balance at December 31, 1994........................... $ 97,040
Net income for the six months ended June 30, 1995 1,538
Dividends declared on common stock..................... (2,575)
Dividends declared on 7.25% Cumulative Senior
Perpetual Convertible Preferred Stock................. (1,208)
Dividends declared on $2.28 Cumulative Preferred Stock. (1,596)
Dividends declared on $2.625 Cumulative Convertible
Preferred Stock....................................... (3,622)
Reduction related to redemption 7.25% Cumulative
Senior Perpetual Convertible Stock.................... (3,784)
--------
Balance at June 30, 1995.............................. $ 85,793
========
TOTAL STOCKHOLDERS' EQUITY AT JUNE 30, 1995............. $387,306
========
The accompanying notes are an integral part of the consolidated financial
statements
6
WESTERN GAS RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
GENERAL
The interim consolidated financial statements presented herein should be read in
conjunction with the Consolidated Financial Statements and Notes thereto
included in the Company's Form 10-K for the year ended December 31, 1994. The
interim consolidated financial statements as of June 30, 1995 and for the
quarters and six months ended June 30, 1995 and 1994 included herein are
unaudited, but reflect, in the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to fairly present the
results for such periods.
Certain prior years' amounts in the Consolidated Financial Statements and Notes
have been reclassified to conform to the presentation used in 1995.
ACQUISITIONS
Effective January 1, 1995 the Company entered into the Redman Smackover Joint
Venture agreement with DDD Energy, Inc., a wholly-owned exploration and
production subsidiary of Seitel, Inc. ("DDD"), Redman Energy Corporation
("Redman"), and DDD 1995 Oil & Gas Partnership ("DDD 1995"). The Joint Venture
acquired working interests in three producing gas fields in East Texas in the
Smackover Formation from Union Oil Company of California for approximately $11.4
million. The Company's contribution to the partnership was approximately $5.9
million through June 30, 1995. The Company is the managing venturer with a 50%
ownership interest and DDD, Redman, and DDD 1995 own interests of 38%, 10%,
and 2%, respectively. The Company accounts for this transaction under the
equity method.
In July 1995, the Company entered into an agreement to purchase eight
West Texas gathering systems from Transwestern Gathering Company and Enron
Permian Gathering, Inc. The transaction is expected to close during the first
quarter of 1996 and is subject to abandonment pursuant to Federal Energy
Regulatory Commission regulations.
RESTRUCTURING CHARGES
In May 1995, the Company implemented a cost reduction program to reduce
operating and selling and administrative expenses. As a result of this program,
a $2.1 million restructuring charge was incurred, primarily related to employee
severance costs. This cost reduction program is not expected to impact the
overall operations of the Company.
EARNINGS PER SHARE OF COMMON STOCK
In May 1995, the Company redeemed all of the issued and outstanding shares of
its 7.25% Cumulative Senior Perpetual Convertible Stock (liquidation preference
of $40 million) pursuant to the provisions of the Certificate of Designation
relating to such preferred stock, at an aggregate redemption price of
approximately $42.0 million including a redemption premium of $2.0 million.
Earnings per share of common stock is computed by dividing net (loss) income
attributable to shares of common stock by the weighted average number of shares
of common stock outstanding. Net (loss) income attributable to shares of common
stock is net income less preferred stock dividends. Preferred stock dividends of
$3.1 million and $6.4 million for the three and six month periods ended June 30,
1995, respectively, and $3.3 million and $5.5 million for the three and six
month periods ended June 30, 1994, respectively, were declared. In addition,
1995 net (loss) income attributable to common stock was impacted by the $2.0
million redemption premium and up-front cost of $1.8 million paid on the 7.25%
Cumulative Senior Perpetual Convertible Stock. The computation of fully diluted
earnings per share of common stock for the three and six month periods ended
June 30, 1995 was not dilutive; therefore, only primary earnings per share of
common stock is presented.
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid was $18.7 million and $14.8 million, respectively, for the six
months ended June 30, 1995 and 1994.
Income taxes paid during the six months ended June 30, 1995 were approximately
$1.6 million. No income taxes were paid during the six months ended June 30,
1994.
7
WESTERN GAS RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (CONTINUED)
During July 1990, the Company loaned Bill M. Sanderson, President, Chief
Executive Officer and Director, $748,000 to purchase 294,524 shares of common
stock in the Company. In February 1994, he surrendered 25,016 shares of the
Company's common stock, which were valued at $31.50 per share based upon the
February 22, 1994 closing price, as repayment of the loan and accrued interest
of approximately $788,000.
NEW ACCOUNTING STANDARD
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121,"Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of." SFAS No. 121
is effective for financial statements for fiscal years beginning after December
15, 1995, and will be adopted by the Company when required. The Company has not
completed its evaluation and is unable to determine what impact, if any, this
standard will have upon the Company.
LEGAL PROCEEDINGS
Reference is made to Item 1. Legal Proceedings, of Part II, Other Information,
of this Form 10-Q.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------
The following discussion and analysis relates to factors which have affected the
consolidated financial condition and results of operations of the Company for
the three and six months ended June 30, 1995 and 1994. Certain prior year
amounts have been reclassified to conform to the presentation used in 1995.
Reference should also be made to the Company's Consolidated Financial Statements
and Notes thereto included elsewhere in this document.
RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1995 COMPARED TO THE QUARTER AND SIX MONTHS
ENDED JUNE 30, 1994 (000S, EXCEPT PER SHARE AMOUNTS AND OPERATING DATA).
Three Months Ended Six Months Ended
June 30, June 30,
------------------- Percent ------------------- Percent
1995 1994 Change 1995 1994 Change
-------- -------- -------- -------- -------- -------
FINANCIAL RESULTS:
Revenues.................................. $304,408 $244,470 24.5 $608,109 $520,174 16.9
Gross profit.............................. 17,671 14,851 19.0 36,115 31,413 15.0
Net (loss) income......................... (403) 181 (322.7) 1,538 1,192 29.0
Loss per share of common stock............ (.28) (.12) (133.3) (.34) (.17) (100.0)
Net cash provided by (used in) operating
activities.............................. $ 25,741 $ (1,638) 1,671.5 $ 64,319 $ 20,481 214.0
OPERATING DATA:
Average gas sales (MMcf/D)................ 1,569 956 64.1 1,573 979 60.7
Average NGL sales (MGal/D)................ 2,759 2,988 (7.7) 2,885 2,999 (3.8)
Average gas prices ($/Mcf)................ $ 1.49 $ 1.81 (17.7) $ 1.47 $ 1.97 (25.4)
Average NGL prices ($/Gal)................ $ .31 $ .27 14.8 $ .31 $ .27 14.8
Net income decreased $584,000 and net cash provided by operating activities
increased $27.4 million for the quarter ended June 30, 1995 compared to the same
period in 1994. Net income increased $346,000 and net cash provided by operating
activities increased $43.8 million for the six months ended June 30, 1995
compared to the prior year period. Overall, throughput and sales volumes at the
Company's facilities have remained comparable to historical levels. The
decrease for the quarter in net income is primarily due to the charge related to
the restructuring plan implemented by the Company and higher interest costs,
partially offset by lower administrative costs and higher NGL prices. The
increase in net income for the six month period is primarily attributable to the
increase in gas sales volumes and average NGL prices which were partially offset
by the restructuring charge and higher interest costs.
Revenues from the sale of residue gas increased approximately $54.1 million for
the quarter ended June 30, 1995 compared to the same period in 1994. Average
gas sales volumes increased 613 MMcf per day to 1,569 MMcf per day for the
quarter ended June 30, 1995 compared to the same period in 1994, largely as a
result of an increase of approximately 562 MMcf per day in the sale of residue
gas purchased from third parties. Average gas prices decreased $.32 per Mcf to
$1.49 per Mcf for the quarter ended June 30, 1995 compared to the same period in
1994. Revenues from the sale of residue gas increased approximately $70.7
million for the six months ended June 30, 1995 compared to the same period in
1994. Average gas sales volumes increased 594 MMcf per day to 1,573 MMcf per
day for the six months ended June 30, 1995 compared to the same period in 1994,
due to an increase of approximately 539 MMcf per day in the sale of residue gas
purchased from third parties. Average gas prices decreased $.50 per Mcf to $1.47
per Mcf for the six months ended June 30, 1995 compared to the same period in
1994. The effect on the Company's net margin from equity production from the
decrease in natural gas prices was substantially offset by the Company's futures
positions, as the Company realized approximately $2.02 per Mcf from the forward
sales of approximately 70 MMcf per day of its equity gas. Similar forward sales
of equity gas are in place for the remainder of 1995.
Revenues from the sale of NGLs increased approximately $3.8 million for the
quarter ended June 30, 1995 compared to the same period in 1994. Average NGL
sales volumes decreased 229 MGal per day to 2,759 MGal per day and average NGL
prices increased $.04 per gallon to $.31 per gallon for the quarter ended June
30, 1995 compared to the same period in 1994. Revenues from the sale of NGLs
increased approximately $15.2 million for the six months ended June 30, 1995
compared to the same period in 1994. Average NGL sales volumes decreased 114
MGal per day to 2,885 MGal per day and average NGL prices increased $.04
9
per gallon to $.31 per gallon for the six months ended June 30, 1995 compared to
the same period in 1994. The decrease in sales volumes in both periods is
primarily attributable to a decrease in the sale of third party NGLs.
Processing and transportation revenues increased $1.4 million and $4.5 million
for the three and six month periods ended June 30, 1995, respectively, compared
to the corresponding periods in 1994. The increases are due to increases in
liquids revenues from the Company's Giddings system, increased treating revenue
primarily from the Company's Pecos System (which was acquired in December 1994)
and the recognition of demand fees associated with a winter-peaking gas purchase
and sales contract at the Katy facility.
Other net revenue for the quarter ended June 30, 1995 remained relatively
constant and decreased $2.5 million for the six months ended June 30, 1995
compared to the same respective periods in 1994. The decrease for the six month
period is primarily attributable to the accrual of approximately $1.9 million to
be recovered under its business interruption insurance policy for business
losses associated with the December 1993 fire at the Company's Granger facility
and a gain recognized on the sale of idle equipment during the six months ended
June 30, 1994.
Historically, product purchases as a percentage of residue gas and NGL sales
from the Company's plant production have approximated 70%. Product purchases as
a percentage of residue gas and NGL sales from third-party purchases are
substantially higher and approximate 95%. Combined product purchases as a
percentage of residue gas and NGL sales increased slightly to 86% and 85%, for
the quarter and six month period ended June 30, 1995 compared to the same
respective periods in 1994.
Depreciation, depletion and amortization increased $753,000 and $1.3 million for
the quarter and six month period ended June 30, 1995, respectively, compared to
the prior year periods. These increases are primarily attributable to assets
purchased in the Oasis acquisition in December 1994.
The decrease in selling and administrative expense is due to a reduction in
salary and benefits paid primarily resulting from the restructuring program
instituted by the Company in May 1995 and attrition.
Interest expense increased $2.6 million and $3.7 million for the quarter and six
month period ended June 30, 1995, respectively, as compared to the same periods
in 1994. The increase is due to an increase in the Company's variable borrowing
rate and an increase in the total average debt outstanding for the two periods,
primarily resulting from the redemption of the 7.25% Cumulative Senior Perpetual
Convertible Stock, and to the Oasis acquisition.
ACQUISITIONS
Effective January 1, 1995 the Company entered into the Redman Smackover Joint
Venture agreement with DDD Energy, Inc., a wholly-owned exploration and
production subsidiary of Seitel, Inc. ("DDD"), Redman Energy Corporation
("Redman"), and DDD 1995 Oil & Gas Partnership ("DDD 1995"). The Joint Venture
acquired working interests in three producing gas fields in East Texas in the
Smackover Formation with an estimated 25 Bcf of proved reserves from Union Oil
Company of California for approximately $11.4. The Company's contribution to the
partnership was approximately $5.9 million through June 30, 1995. The Company
is the managing venturer with a 50% ownership interest and DDD, Redman, and
DDD 1995 own interests of 38%, 10%, and 2%, respectively.
In July 1995, the Company entered into an agreement to purchase eight West Texas
gathering systems from Transwestern Gathering Company and Enron Permian
Gathering, Inc. The transaction is expected to close during the first quarter of
1996 and is subject to abandonment pursuant to Federal Energy Regulatory
Commission regulation. The acquisition consists of approximately 231 miles of
pipeline in the Permian Basin. Current gas throughput on the systems totals
approximately 145 MMcf per day from approximately 170 wells under fee-based
contracts.
BUSINESS OUTLOOK
The Company cannot accurately predict future hydrocarbon prices and in order to
minimize the impact of price fluctuations on the Company's operating results,
the Company has entered into futures contracts for a majority of the Company's
equity natural gas production for the remainder of 1995 totaling approximately
70 MMcf per day, at an average price of approximately $2.02 per Mcf.
Additionally, the Company has entered into futures contracts totaling
approximately 240,000 barrels of crude oil at an average price of $18.05 per
barrel to hedge a portion of its share of the remainder of 1995 condensate and
crude oil production. The Company has entered, and will continue to enter, into
futures contracts for certain purchase and sales transactions as they occur.
10
The Company continually monitors the economic performance of each operating
facility to see that it meets a desired cash flow objective. If an operating
facility is not generating desired cash flows or does not fit in with the
Company's strategic plans, the Company will explore various options such as
consolidation with other Company-owned facilities, dismantlement, asset swap or
outright sale. In 1994, the Company sold its Sligo plant, swapped its Pyote
treating facilities for gathering assets in Kansas which were subsequently
disposed of during the second quarter of 1995, consolidated assets in the Powder
River Basin and sold its Walnut Bend gathering system. In 1995, the Company
expects to consolidate the Lamont gathering system with the Chaney Dell system
and salvage the Lamont and Walnut Bend processing plants. In addition, on May
1, 1995, the Company sold certain assets which were recently acquired in the
Oasis acquisition for $5 million. The difference between the sales price and
carrying value of these assets was accounted for as an adjustment to the
purchase price of the remaining Oasis assets.
In May 1995, the Company implemented a cost reduction program which is expected
to reduce operating and selling and administrative expenses by approximately
$8.0 million on an annualized pre-tax basis. During 1995, the benefit of these
reductions, net of a one-time pre-tax charge of approximately $2.1 million in
the second quarter of 1995 which is largely related to employee severance costs,
will be approximately $2.7 million on a pre-tax basis. This cost reduction
program is not expected to adversely affect the overall operations of the
Company.
The oil and gas industry has experienced an increasing incidence of mergers,
acquisitions and combinations in recent years. The Company has evaluated, and
will continue to evaluate, such opportunities, including smaller consolidating
acquisitions, that it identifies as offering an opportunity to enhance the
Company's operational and industry position.
LIQUIDITY AND CAPITAL RESOURCES
The Company's sources of liquidity and capital resources historically have been
net cash provided by operating activities, funds available under its financing
facilities and proceeds from offerings of equity securities. In the past, these
sources have been sufficient to meet the needs and finance the growth of the
Company's business. The Company can give no assurance that the historical
sources of liquidity and capital resources will be available for future
development and acquisition projects and may require the Company to investigate
alternative financing sources or other options, including the sale of non-
strategic assets. Net cash provided by operating activities has been primarily
affected by product prices, the Company's success in increasing the number and
efficiency of its facilities and the volumes of natural gas processed by such
facilities, and the margin on third-party residue gas purchased for resale. The
Company's continued growth will be dependent upon success in the areas of
additions to dedicated plant reserves, acquisitions, new project development and
marketing.
For the six months ended June 30, 1995, the Company's total sources of funds
aggregated $84.7 million and was primarily comprised of net cash provided by
operating activities of $64.3 million and borrowings under revolving credit
facilities of $14 million. During the same period, the Company's use of such
funds aggregated $86.5 million which were used primarily to redeem in May 1995
the 7.25% Cumulative Senior Perpetual Convertible Preferred Stock of $42.0
million, to make capital investments of $35.5 million, to pay preferred
dividends of $6.4 million and to pay dividends to holders of common stock of
$2.6 million.
Additional sources of liquidity to the Company are volumes of residue gas and
NGLs in storage facilities and the Company's forward sale activities. The
Company stores volumes of residue gas and NGLs primarily to assure an adequate
supply for long-term sales contracts and for resale during periods when prices
are favorable. At June 30, 1995, the Company held in storage approximately 18.7
Bcf of residue gas at an average cost of $1.76 per Mcf ($1.60 per MMBtu)
primarily at the Katy facility and 15.7 million gallons of NGLs at an average
cost of $.35 per gallon at various facilities.
In May 1995, the Company redeemed all of the issued and outstanding shares of
its 7.25% Cumulative Senior Perpetual Convertible Stock (liquidation preference
of $40 million) pursuant to the provisions of the Certificate of Designation
relating to such preferred stock, at an aggregate redemption price of
approximately $42.0 million.
The Company has Shelf Registrations available which provide for the sale of up
to $200 million of debt securities and preferred stock and up to four million
shares of common stock.
Capital Investment Program
In order to maintain the volumes of natural gas dedicated to or processed by the
Company's existing facilities, future capital expenditures for gathering systems
needed to connect new reserves and acquire consolidating assets are anticipated
to be approximately $51.5 million for 1995 and capital expenditures to maintain
existing facilities are expected to approximate $16.5 million for 1995. For the
six months ended June 30, 1995, the Company expended approximately $35.5
million on expansion
11
and maintenance capital. New drilling is somewhat affected by the price of crude
oil or natural gas depending on whether the natural gas is associated gas or gas
well gas.
Depending on the timing of the Company's future projects, it may be required to
seek additional sources of capital. The Company's ability to secure such
capital is restricted by its credit facilities, although it may request
additional borrowing capacity from the banks, seek waivers from the banks to
permit it to borrow funds from third parties, seek replacement credit facilities
from other lenders or issue additional equity securities. While the Company
believes that it would be able to secure additional financing, if required, no
assurance can be given that it will be able to do so or as to the terms of any
such financing.
Financing Facilities
REVOLVING CREDIT FACILITY. The Company's variable rate Revolving Credit
Facility, as restated on September 2, 1994 and subsequently amended, with a
syndicate of eight banks, provides for a maximum borrowing base of $300 million,
of which $182.0 million was outstanding at June 30, 1995. If the facility is
not renewed on January 1, 1997, any outstanding balance thereunder converts to a
four-year term loan during which such balance will be repaid in equal quarterly
installments. The Revolving Credit Facility bears interest, at the Company's
option, at certain spreads over the Eurodollar rate, the Federal Funds rate plus
.50% or at the agent bank's prime rate. The interest rate spreads are adjusted
based on the Company's debt to capitalization ratio. At June 30, 1995, the
spread was 1.25% for the Eurodollar rate, resulting in an interest rate of 7.3%
at June 30, 1995.
The Company pays a commitment fee on the unused commitment ranging from .15% to
.375% based on the debt to capitalization ratio. At June 30, 1995, the
commitment fee rate was .375%.
TERM LOAN FACILITY. The Company also has a Term Loan Facility with four banks
for $50 million which bears interest at 9.87%. Payments on the Term Loan
Facility of $25 million, $12.5 million and $12.5 million are due in September
1995, 1996 and 1997, respectively. The $25 million payment due on the Term Note
in September 1995 has been classified as long-term debt because the Company
intends to fund this payment from amounts available under the Revolving Credit
Facility.
The agreements governing the Company's Revolving Credit and Term Loan Facilities
(the "Credit Facilities Agreement") contain certain mandatory prepayment
provisions. If funded debt of the Company exceeds five times the sum of the
Company's last four quarters' cash flow (as defined in the agreement) less
preferred stock dividends projected to be paid during the next four quarters,
the overage must be repaid in no more than six equal monthly payments commencing
90 days from notification. This mandatory prepayment threshold will be reduced
to 4.0 to 1.0 at September 1, 1995 and 3.50 to 1.0 at September 1, 1998. At
June 30, 1995, the Company had approximately $107.2 million of available
borrowing capacity.
The Term Loan and Revolving Credit Facilities are unsecured. The Company is
required to maintain a current ratio of at least 1.0 to 1.0 (as defined in the
Credit Facilities Agreement), a tangible net worth at June 30, 1995 of at least
$345.0 million, a debt to capitalization ratio of no more than 60% through
October 31, 1996 and 55% thereafter, and an EBITDA to interest ratio of not less
than 3.00 to 1.0 through October 31, 1996, 3.25 to 1.0 from November 1, 1996
through October 31, 1997 and 3.75 to 1.0 thereafter. The Company is prohibited
from declaring or paying dividends on or after March 31, 1994 that in the
aggregate exceed the sum of $35 million plus 50% of consolidated net income
earned after March 31, 1994 plus 50% of the cumulative net proceeds (in excess
of the amount paid by the Company to redeem its 7.25% Cumulative Senior
Perpetual Convertible Preferred Stock) received by the Company from the sale of
any equity securities sold after March 31, 1994. At June 30, 1995, approximately
$12.4 million is available under this limitation. The Company generally
utilizes excess daily funds to reduce any outstanding revolving credit balances
to minimize interest expense and intends to continue such practice. The $6.9
million cash balance at June 30, 1995 is an overnight investment necessitated by
the timing of cash receipts.
MASTER SHELF AGREEMENT. In December 1991, the Company entered into a Master
Shelf Agreement (the "Master Shelf") with The Prudential Insurance Company of
America ("Prudential") pursuant to which Prudential agreed to quote, from time-
to-time, an interest rate at which Prudential or its nominee would be willing to
purchase up to $100 million of the Company's senior promissory notes (the
"Master Notes"). Any such Master Notes must mature in no more than 12 years,
with an average life not in excess of 10 years, and will be unsecured. On
October 27, 1992, the Company sold $25 million of 7.51% Master Notes due 2000
and $25 million of 7.99% Master Notes due 2003. Principal payments on the $50
million of Master Notes of $8.3 million will be due on October 27 of each year
from 1998 through 2003. On September 22, 1993, the Company sold $25 million of
6.77% Master Notes due in a single payment on September 22, 2003 and on December
27, 1993, the Company sold $25 million of 7.23% Master Notes due in a single
payment on December 27, 2003. The Master Shelf contains certain financial
covenants which conform with those contained in the Credit Facilities Agreement,
as restated and amended. In July 1993, Prudential and the Company amended the
Master Shelf to provide for
12
an additional $50 million of borrowing capacity (for a total borrowing capacity
of $150 million) and to extend the term of the Master Shelf to October 31, 1995.
On October 27, 1994, the Company sold $25 million of 9.05% Master Notes due in a
single payment on October 27, 2001 and $25 million of 9.24% Senior Notes due in
a single payment on October 27, 2004. In July 1995, Prudential and the Company
amended the Master Shelf to provide for an additional $50 million of borrowing
capacity (for a total borrowing capacity of $200 million). On July 28, 1995,
the Company sold $50 million of 7.61% Master Notes due 2007. Principal payments
of $10 million will be due on July 28 of each year from 2003 through 2007. As
of July 28, 1995, the Master Shelf Agreement, as amended, was fully utilized.
SENIOR NOTES. On April 28, 1993 the Company sold $50 million of 7.65% Senior
Notes due 2003 to a group of insurance companies. Principal payments on the $50
million of Senior Notes of $7.1 million will be due on April 30 of each year
from 1997 through 2002, with any remaining principal and interest outstanding
due on April 30, 2003. The Senior Notes contain certain financial covenants
which conform with those contained in the Credit Facilities Agreement, as
restated and amended.
ADDITIONAL BORROWINGS. In April 1995, the Company entered into a Receivables
Purchase Agreement (the "Receivables Facility") with Receivables Capital
Corporation, as purchaser ("RCC"), and Bank of America National Trust and
Savings Association ("BA"), as agent, pursuant to which the Company will sell to
RCC at face value on a revolving basis an undivided interest in certain of the
Company's trade receivables. As part of the sale, the Company has granted to
RCC a security interest in such receivables. The Company may sell up to $75
million of trade receivables under the Receivables Facility, at a rate equal to
RCC's commercial paper rate plus .375%, of which $60 million was funded at a
rate of 6.45% at June 30, 1995. The Company funded the remaining $15 million
available under the Receivables Facility in July 1995. The Receivables
Facility has a 364-day term and contains financial covenants similar to those in
the Credit Facilities Agreement as restated and amended, along with certain
covenants regarding the quality of the trade receivables pool.
On September 2, 1994, in anticipation of entering into the Receivables Facility,
BA entered into a Master Note Agreement (the "Short-Term Note") with the Company
and advanced the Company $75 million at the Eurodollar rate plus .50%, which
resulted in an interest rate of 6.56% per annum at June 30, 1995. The Company
used the $60 million drawn on the Receivables Facility to pay down a portion of
the Short-Term Note. In July 1995, the Company used the additional $15 million
drawn on the Receivables Facility to pay down the remaining $15 million on the
Short-Term Note, which was then canceled.
COVENANT COMPLIANCE. At June 30, 1995, the Company was in compliance with all
covenants in its loan agreements.
INTEREST RATE SWAP AGREEMENTS. The Company had entered into various interest
rate swap agreements to manage exposure to changes in interest rates. The
transactions generally involved the exchange of fixed and floating interest
payment obligations, without the exchange of the underlying principal amounts.
The net effect of interest rate swap activity is reflected as an increase or
decrease in interest expense. For the six months ended June 30, 1995 the net
decrease to interest expense was approximately $358,000. The remaining
interest rate swap agreement expired in April 1995. The Company has not entered
into any new agreements as of June 30, 1995, however, the Company will continue
to evaluate such agreements and, when appropriate, enter into contracts.
The Company believes that the amounts available to be borrowed under the
Revolving Credit Facility together with cash provided from operations, will
provide it with sufficient financing to connect new reserves, maintain its
existing facilities and complete its current capital improvement projects. The
Company also believes that cash provided from operations will be sufficient to
meet its debt service and preferred stock dividend requirements.
13
PRINCIPAL FACILITIES
The following table provides information concerning the Company's principal
facilities. The Company also owns and operates several smaller treating and
processing facilities located in the same areas as its other facilities.
Average for the six months ended
June 30, 1995
Gas Gas -------------------------------------------
Gathering Throughput Gas Gas NGL
Year Placed Systems Capacity Throughput Production Production
Facility(1) In Service Miles(2) (MMcf/D)(2) (MMcf/D)(3) (MMcf/D)(4) (MGal/D)(4)
------------ ----------- ---------------- -------------- -------------- -------------- -----------
SOUTHERN REGION:
Texas
Midkiff/Benedum/Middle Concho... 1955 2,028 149 130.4 84.2 824.0
Giddings Gathering System....... 1979 645 80 73.7 64.0 109.9
Edgewood(5)..................... 1964 85 65 29.8 11.7 79.5
Perkins......................... 1975 2,554 55 22.1 12.7 148.4
Pecos System(6)................. 1973 443 430 96.0 90.1 -
Crockett Gathering System(6).... 1973 136 164 31.7 31.8 .4
Katy(7)......................... 1994 17 - - - -
Louisiana
Black Lake...................... 1966 55 180 59.1 40.0 134.0
Toca(8)(9)...................... 1958 - 160 72.7 - 50.2
NORTHERN REGION:
Oklahoma
Chaney Dell/Lamont.............. 1966 1,999 158 83.7 63.3 275.8
Westana System(10).............. 1986 244 37 54.8 48.0 51.6
Wyoming
Granger(9)...................... 1987 233 230 140.1 129.1 196.7
Red Desert...................... 1979 109 40 32.2 29.1 45.3
Lincoln Road.................... 1988 146 50 40.1 37.0 45.5
Hilight Complex(9).............. 1969 619 80 33.4 28.5 85.4
Kitty and Amos Draw(9).......... 1969 304 17 11.6 8.6 46.1
Newcastle(9).................... 1981 144 5 2.5 1.5 18.6
Reno Junction(11)............... 1991 - - - - 45.5
New Mexico
San Juan River(5)............... 1955 125 60 33.6 30.3 1.1
North Dakota
Williston(12)................... 1981 381 - 8.4 6.2 29.1
Temple(5)....................... 1984 65 7 2.6 1.6 8.8
Teddy Roosevelt(12)............. 1979 332 - 3.1 2.1 14.3
Utah
Four Corners.................... 1988 95 15 4.7 3.8 11.9
Montana
Baker(5)(9)..................... 1981 8 3 1.5 .6 11.2
------ ----- ----- ----- -------
Total......................... 10,767 1,985 967.8 724.2 2,233.3
====== ===== ===== ===== =======
---------------------------
Footnotes on following page
14
(1) The Company's interest in all facilities is 100% except for Midkiff and
Benedum (74%); Black Lake (69%); Lincoln Road (72%); Williston (50%);
Westana (Chester) (50%) and Newcastle (50%). All facilities are operated by
the Company and all data include interests of the Company, other joint
interest owners and producers of gas volumes dedicated to the facility.
(2) Gas gathering systems miles and gas throughput capacity are as of June 30,
1995.
(3) Aggregate wellhead natural gas volumes collected by a gathering system.
(4) Volumes of residue gas and NGLs are allocated to a facility when a well is
dedicated to that facility; volumes exclude NGLs fractionated for third
parties.
(5) Sour gas facility (capable of processing gas containing hydrogen sulfide).
(6) West Texas gathering and treating assets of Oasis Pipe Line Company
("Oasis") acquired effective December 1, 1994.
(7) Hub and gas storage facility.
(8) Straddle plant (a plant located near a transmission pipeline which
processes gas dedicated to or gathered by the pipeline company or another
third-party).
(9) Fractionation facility (capable of fractionating raw NGLs).
(10) Gas throughput in excess of gas throughput capacity is unprocessed gas
transported directly to an unaffiliated pipeline.
(11) NGL production represents conversion of third-party feedstock to iso-
butane.
(12) Processing facility has been shut-in since August 1993. The gas dedicated
to these facilities is processed by a third-party under a contractual
arrangement.
Capital expenditures to connect new reserves and to acquire consolidating assets
are anticipated to be approximately $51.5 million for 1995 and capital
expenditures to maintain existing facilities are expected to approximate $16.5
million for 1995. For the six months ended June 30, 1995, the Company has
expended approximately $35.5 million on expansion and maintenance capital.
15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Mountain Gas
On July 28, 1994, the Company and its wholly-owned subsidiary Mountain Gas
Resources, Inc. ("Mountain Gas") filed a complaint in United States District
Court, Denver, Colorado, against Morgan Stanley Leveraged Equity Fund II, L.P.,
Morgan Stanley Leveraged Equity Fund II, Inc., Morgan Stanley & Co.,
Incorporated and certain former directors and officers of Mountain Gas seeking
monetary damages. The complaint alleges certain acts and omissions that
violated federal and state securities laws by the defendants in connection with
the Company's July 1993 purchase of the stock of Mountain Gas from Morgan
Stanley Leveraged Equity Fund II, L.P. The acts and omissions set forth in the
complaint relate primarily to defendants' failure to disclose adequately the
nature and scope of a dispute between Mountain Gas and a major producer in the
Green River Basin. In addition, the Company and Mountain Gas have raised fraud,
misrepresentation and breach of contract claims against certain of the
defendants. The parties are currently engaged in discovery.
Katy Condemnation
Commencing in March 1993 and continuing through July 1993, Western Gas Resources
Storage, Inc. ("Storage"), a wholly-owned subsidiary of the Company, filed a
total of 165 condemnation actions in the County Court at Law No. 1 and No. 2 of
Fort Bend County, Texas, to obtain certain storage rights and rights-of-way
relating to its Katy Gas Storage Facility and the related underground reservoir
("Katy"). The County Court appointed panels of Special Commissioners which
awarded compensation to the owners whose rights were condemned. Condemnation
awards are a capital cost of the Katy project.
A majority of the land and mineral owners involved in the condemnation
proceedings appealed to County Court, seeking a declaration that Storage did not
possess the right to condemn or, in the alternative, that they should be awarded
more compensation than previously awarded by the Special Commissioners. In all
of those appeals, the right to condemn issue has now been resolved in favor of
Storage, although factual issues in individual cases remain as to whether that
right was exercised properly.
Trials in four of the appeals to County Court have now been concluded. The
first trial involved a parcel adjacent to the 82 acre site where the compression
facilities are located, the second trial involved a parcel within 1,000 feet of
the 82 acre site, and the third and fourth trials involved parcels further than
one mile from the 82 acre site. The jury verdicts compared with the awards of
the Special Commissioners were, respectively, as follows: $214,000 versus
$2,000; $38,000 versus $600; $553 versus $553; and $1,000 versus $500. The
Company believes that several reversible errors were committed in the first two
trials and appeals of those cases are now pending in the Texas Court of Appeals.
Other
The Company is involved in various other litigation and administrative
proceedings arising in the normal course of business. In the opinion of
management, any liabilities that may result from these claims, as well as the
specific claims discussed above, will not, individually or in the aggregate,
have a material adverse effect on the Company's financial position or results of
operations.
Item 5. Other Items
-----------
The Stock Purchase Agreement, dated October 23, 1991, between the Company and
The 1818 Fund, L.P. (the "Purchaser") pursuant to which the Purchaser acquired
400,000 shares of the Company's 7.25% Cumulative Senior Perpetual Convertible
Preferred Stock, required the Company to provide at least one seat on the
Company's Board of Directors to the Purchaser's designee for such time as the
stock held by the Purchaser equaled 5% of the Common Stock outstanding on a
fully diluted basis. Subsequent to the redemption of the 7.25% Cumulative Senior
Perpetual Convertible Preferred Stock on May 31, 1995, the Purchaser held less
than the required amount. Walter Grist, the Purchaser's designee, tendered his
resignation as a Class Three Director, effective June 1, 1995, which was
accepted by the Company's Board of Directors.
16
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
10.41 Receivables Purchase Agreement dated as of February 28, 1995 among
Western Gas Resources, Inc. (as seller) and Receivables Capital
Corporation (as purchaser) and Bank of America National Trust and
Savings Association (as agent).
10.42 Joint Venture Agreement of Redman-Smackover Joint Venture.
10.43 Amendment No. 4 to Note Purchase Agreements as of July 14, 1995 by and
among Western Gas Resources, Inc. and the Purchasers.
10.44 Amendment No. 1 to Receivables Purchase Agreement as of July 1, 1995 by
and among Western Gas Resources, Inc., Receivables Capital Corporation
and Bank of America National Trust and Savings Association.
(b) Reports on Form 8-K:
A report on form 8-K was filed on June 1, 1995 to notify the Securities
and Exchange Commission and the Company's stockholders of the
redemption of all of the issued and outstanding shares of the Company's
7.25% Cumulative Senior Perpetual Convertible Preferred Stock.
17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WESTERN GAS RESOURCES, INC.
---------------------------
(Registrant)
Date: March 14, 1995 By: /s/ BILL M. SANDERSON
--------------------------------------------
Bill M. Sanderson
President, Chief Operating Officer and
Director
Date: March 14, 1995 By: /s/ WILLIAM J. KRYSIAK
--------------------------------------------
William J. Krysiak
Vice President - Finance
(Principal Financial and Accounting Officer)
18
EX-10.41
2
RECEIVE. PURCH. AGREEMENT
RECEIVABLES PURCHASE AGREEMENT
DATED AS OF FEBRUARY 28, 1995
AMONG
WESTERN GAS RESOURCES, INC.
AS SELLER
---------
AND
RECEIVABLES CAPITAL CORPORATION
AS PURCHASER
------------
AND
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
AS AGENT
--------
EXHIBIT 10.41
TABLE OF CONTENTS
PAGE
ARTICLE I THE COMMITMENT 2
1.01. Commitment.................................................................. 2
1.02. Purchase and Reinvestment Limits............................................ 3
1.03. Making Purchases from Seller................................................ 3
1.04. Number of Undivided Interests............................................... 4
1.05. Commitment Termination Date................................................. 4
1.06. Purchase Termination Date................................................... 5
1.07. Voluntary Termination of Commitment or Reduction of Maximum Purchase Limit.. 5
1.08. Limitation of Ownership Interest............................................ 5
ARTICLE II UNDIVIDED INTEREST AND PURCHASER'S SHARE.................................... 5
2.01. Undivided Interest.......................................................... 5
2.02. Required Allocation......................................................... 8
2.03. Purchaser's Investment...................................................... 8
2.04. Pool Balance; Concentration Limits.......................................... 9
2.05. Purchaser's Share........................................................... 10
ARTICLE III SETTLEMENTS................................................................. 10
3.01. Non-Run Off Settlement Procedures for Collections........................... 10
3.02. Run Off Settlement Procedures for Collections............................... 11
3.03. Special Settlement Procedures; Reduction of Purchaser's Investment, Etc..... 12
3.04. Additional Limited Recourse................................................. 16
3.05. Reporting................................................................... 17
3.06. Payments and Computations, Etc.............................................. 17
3.07. Dividing or Combining Undivided Interests................................... 18
3.08. Treatment of Collections and Deemed Collections............................. 18
ARTICLE IV FEES AND YIELD PROTECTION................................................... 19
4.01. Fees........................................................................ 19
4.02. Yield Protection............................................................ 19
ARTICLE V CONDITIONS OF PURCHASES..................................................... 21
5.01. Conditions Precedent to Initial Purchase.................................... 21
5.02. Conditions Precedent to All Purchases and Reinvestments..................... 23
5.03. Additional Condition Precedent to Purchases................................. 24
ARTICLE VI REPRESENTATIONS AND WARRANTIES.............................................. 24
6.01. Representations and Warranties of Seller.................................... 24
i
TABLE OF CONTENTS
-----------------
(CONTINUED)
ARTICLE VII GENERAL COVENANTS OF SELLER................................................. 30
7.01. Affirmative Covenants of Seller............................................. 30
7.02. Reporting Requirements of Seller............................................ 32
7.03. Negative Covenants of Seller................................................ 35
ARTICLE VIII ADMINISTRATION AND COLLECTION............................................... 39
8.01. Designation of Servicer..................................................... 39
8.02. Duties of Servicer.......................................................... 39
8.03. Rights of the Agent......................................................... 41
8.04. Responsibilities of Seller.................................................. 43
8.05. Further Action Evidencing Purchases......................................... 44
8.06. Application of Collections.................................................. 44
8.07. Miscellaneous Provision Concerning Servicing and Collection................. 45
ARTICLE IX SECURITY INTEREST........................................................... 45
9.01. Transfers of Undivided Interests; Grant of Security Interest................ 45
9.02. Further Assurances.......................................................... 46
9.03. Remedies.................................................................... 46
ARTICLE X TERMINATION EVENTS.......................................................... 47
10.01. Termination Events.......................................................... 47
10.02. Remedies.................................................................... 49
ARTICLE XI THE AGENT................................................................... 50
11.01. Authorization and Action.................................................... 50
11.02. Agent's Reliance, Etc....................................................... 50
11.03. Agent and Affiliates........................................................ 51
ARTICLE XII ASSIGNMENT OF PURCHASER'S INTEREST.......................................... 51
12.01. Restrictions on Assignments................................................. 51
12.02. Rights of Assignee.......................................................... 52
12.03. Allocation of Payments...................................................... 52
12.04. Notice of Assignment........................................................ 52
12.05. Evidence of Assignment; Endorsement on Certificate.......................... 53
12.06. Rights of Program Support Provider and Collateral Trustee................... 53
ARTICLE XIII INDEMNIFICATION............................................................. 53
13.01. Indemnities by Seller....................................................... 53
ARTICLE XIV MISCELLANEOUS............................................................... 57
14.01. Amendments, Etc............................................................. 57
14.02. Notices, Etc................................................................ 57
14.03. No Waiver; Remedies......................................................... 58
ii
TABLE OF CONTENTS
-----------------
(CONTINUED)
14.04. Binding Effect; Survival.................................................... 58
14.05. Costs, Expenses and Taxes................................................... 58
14.06. No Proceedings.............................................................. 59
14.07. Confidentiality of Seller Information....................................... 59
14.08. Confidentiality of BofA Information......................................... 62
14.09. Captions and Cross References............................................... 65
14.10. Integration................................................................. 65
14.11. Governing Law............................................................... 65
14.12. Waiver Of Jury Trial........................................................ 65
14.13. Consent To Jurisdiction; Waiver Of Immunities............................... 65
14.14. Execution in Counterparts; Effectiveness.................................... 66
iii
TABLE OF CONTENTS
-----------------
(CONTINUED)
APPENDICES
----------
APPENDIX A Definitions
APPENDIX B Calculation of Discount and Reserve
SCHEDULES
---------
SCHEDULE 2.01(c) Estimates of Unbilled Amounts
SCHEDULE 6.01(n) List of Offices of Seller where Records Are Kept
SCHEDULE 6.01(o) List of Lock-Box Banks
SCHEDULE 6.01(p)-1 Forms of Contracts
SCHEDULE 6.01(p)-2 Description of Credit and Collection Policy
SCHEDULE 6.10(q) Schedule of Leased or Licensed Programs
SCHEDULE 7.03(f) Schedule of Liens
EXHIBITS
--------
EXHIBIT 3.05(a) Form of Periodic Report
EXHIBIT 5.01(a) Form of Certificate of Assignments
EXHIBIT 5.01(h) Form of Lock-Box Agreement
EXHIBIT 7.02(a) Form of Officer's Certificate
EXHIBIT 12.05 Form of Assignment (for assignment to third party)
iv
RECEIVABLES PURCHASE AGREEMENT
Dated as of February 28, 1995
THIS IS A RECEIVABLES PURCHASE AGREEMENT, among WESTERN GAS RESOURCES,
INC., a Delaware corporation having its principal office at 12200 North Pecos
Street, Denver, Colorado, 80234 ("Seller"), RECEIVABLES CAPITAL CORPORATION, a
------
Delaware corporation having its principal office at World Financial Center,
South Tower, 225 Liberty Street, 8th Floor, New York, New York 10080 (together
with its successors and assigns, the "Purchaser"), and BANK OF AMERICA NATIONAL
---------
TRUST AND SAVINGS ASSOCIATION, a national banking association having its
principal office at 555 California Street, San Francisco, California 94104
("Bank of America"), as agent for the Purchaser (in such capacity, together with
-----------------
its successors and assigns in such capacity, the "Agent"). Unless otherwise
-----
indicated, capitalized terms used in this Agreement are defined in Appendix A.
----------
BACKGROUND
----------
1. Seller has, and expects to have, Pool Receivables in which
Seller intends to sell one or more undivided interests. Such Pool Receivables
shall have been generated in the ordinary course of Seller's business or shall
have been purchased by Seller from the Originators, which are wholly-owned
Subsidiaries of Seller, and each of which Originator shall have generated such
Pool Receivables in the ordinary course of its business. Seller has requested
Purchaser, and Purchaser has agreed, subject to the terms and conditions
contained in this Agreement, to purchase such undivided interests, referred to
herein as Undivided Interests, from Seller from time to time during the term of
this Agreement.
2. Seller and Purchaser also desire that, subject to the terms
and conditions of this Agreement, certain of the daily Collections in respect of
such Undivided Interests be reinvested in Pool Receivables through the sale by
Seller to Purchaser of additional undivided interests in the Pool Receivables,
such daily reinvestment of Collections to be effected by an automatic daily
adjustment to Purchaser's Undivided Interests, and to be intended to permit
Purchaser to maintain its Purchaser's Investments fully invested in uncollected
Pool Receivables.
3. Purchaser expects generally to fund its Purchases and
Reinvestments through the issuance of Commercial Paper Notes. Purchaser has
entered into Program Support Agreements providing for the purchase by a Program
Support Provider of, or the making
by a Program Support Provider of loans secured by, Undivided Interests in the
event Purchaser hereunder is unable to fund its Purchases or Reinvestments
pursuant to this Agreement by the issuance of Commercial Paper Notes or
otherwise in its reasonable discretion prefers to fund such Purchases or
Reinvestments under the Program Support Agreements rather than by the issuance
of Commercial Paper Notes (and Purchaser agrees to provide to Seller at Seller's
request a statement of Purchaser's rationale for preferring to fund under the
Program Support Agreements; provided that Purchaser shall not be liable for any
--------
failure to provide any such statement), or is unable to pay such Commercial
Paper Notes at maturity from the proceeds of collections from Pool Receivables
in which it holds an Undivided Interest hereunder. Purchaser has also entered
into a Program Support Agreement with a Program Support Provider providing for
the issuance of a letter of credit to the trustee for the holders of Commercial
Paper Notes, and for the making of loans to the Purchaser, to provide funds for
the payment of Commercial Paper Notes and for the making of Purchases and
Reinvestments in the circumstances described above when funding is not available
under certain other Program Support Agreements.
4. Bank of America has been requested, and is willing, to act
as the Agent.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
THE COMMITMENT
SECTION 1.01. Commitment. On the terms and subject to
-----------
the conditions set forth in this Agreement (including Article V):
---------
(a) Purchases. Purchaser shall purchase from Seller Undivided
---------
Interests (as defined in Section 2.01) from time to time during the period from
------------
the Effective Date to the Purchase Termination Date. Each such purchase and, as
the context may require, the purchase price paid by Purchaser to Seller in
respect thereof (determined pursuant to Section 1.03(b)), is herein called a
---------------
"Purchase".
---------
(b) Reinvestments. Pursuant to Section 3.01, during the period
------------- ------------
from the Effective Date to the Commitment Termination Date, Purchaser shall
permit Servicer to cause certain of the Collections in respect of the Undivided
Interests to be applied to the purchase of additional undivided interests in the
Pool Receivables, thereby
2
resulting in an appropriate readjustment of such Undivided Interests. Each such
purchase of an additional undivided interest pursuant to Section 3.01 is herein
------------
called a "Reinvestment".
------------
Purchaser's obligation to make such Purchases and Reinvestments is herein called
the "Commitment".
----------
SECTION 1.02. Purchase and Reinvestment Limits. Under no
---------------------------------
circumstances shall Purchaser make any Purchase or Reinvestment to the extent
that, after giving effect to such Purchase or Reinvestment, as the case may be:
(a) Purchase Limit. The Aggregate Purchaser's Investments (as
--------------
defined in Section 2.03) would exceed an amount (the "Purchase Limit") equal to
------------ --------------
$75,000,000, as such amount may be reduced from time to time pursuant to Section
-------
1.07; or
----
(b) Required Allocations Limit. The Aggregate Required
--------------------------
Allocations would exceed an amount (the "Required Allocations Limit") equal to
--------------------------
100% of the Pool Balance (as defined in Section 2.04).
------------
SECTION 1.03. Making Purchases from Seller. (a) Notice of
----------------------------- ---------
Purchase and Initial Purchaser Rate. Each Purchase from Seller by Purchaser
-----------------------------------
shall be made on notice from Seller to the Agent received by the Agent not later
than 11:00 a.m. (Chicago time) (i) if the Purchaser Rate for such proposed
Purchase is to be calculated on the basis of the Bank Rate determined by
reference to the Eurodollar Rate, on the third Eurodollar Business Day preceding
the date of such proposed Purchase and (ii) otherwise, on the Business Day next
preceding the date of such proposed Purchase. Each such notice of a proposed
Purchase shall specify the desired amount and date of such Purchase, the desired
duration of the initial Yield Period for the resulting Undivided Interest and,
if the Purchaser Rate for such proposed Purchase is to be calculated on the
basis of the Bank Rate, an irrevocable request that such Purchaser Rate be
calculated by reference to the Eurodollar Rate, subject to availability of such
rate pursuant to the provisions of the definition of the term "Bank Rate" and to
the other provisions of this Agreement. The Agent shall use reasonable efforts
to accommodate Seller's preferences in selecting the duration of such initial
and each subsequent Yield Period; provided, however, that the Agent shall select
-------- -------
such Yield Periods in its discretion taking into consideration market
conditions.
(b) Amount of Purchase. The amount of each Purchase shall be
------------------
equal to the lesser of (x) the amount proposed by Seller
3
pursuant to Section 1.03(a) and (y) the maximum amount permitted under Section
--------------- -------
1.02.
-----
(c) Funding of Purchase. On the date of each Purchase,
-------------------
Purchaser shall, upon satisfaction of the applicable conditions set forth in
Article V, make available to the Agent at its office at 231 South LaSalle Street
---------
in Chicago, Illinois the amount of its Purchase (determined pursuant to Section
-------
1.03(b)) in same day funds, and after receipt by the Agent of such funds, the
-------
Agent will make such funds immediately available to Seller at such office.
(d) Notice of Purchaser Rate for Reinvestment. If the Purchaser
-----------------------------------------
Rate for Reinvestment of any Undivided Interest (or any portion thereof) is to
be calculated on the basis of the Bank Rate, Seller may irrevocably request that
the Bank Rate for such Reinvestment be calculated by reference to the Eurodollar
Rate (if such rate is otherwise available pursuant to the provisions of this
Agreement) by delivering a notice to the Agent not later than 11:00 a.m.
(Chicago time) three Eurodollar Business Days before the first day of each Yield
Period (other than the initial Yield Period) for such Undivided Interest (or any
portion thereof). Such notice shall also set forth the desired duration of the
Yield Period for such Undivided Interest (or portion thereof). The Agent shall
select the duration of each such Yield Period in its discretion; provided that
--------
it shall use reasonable efforts, taking into account market conditions, to
accommodate Seller's preferences.
SECTION 1.04. Number of Undivided Interests. The number
------------------------------
of Undivided Interests hereunder at any one time, after giving effect to any
Purchase, Reinvestment, division or combination, shall not exceed 10.
SECTION 1.05. Commitment Termination Date. (a) The
----------------------------
"Commitment Termination Date" shall be the earlier to occur of (i) the date
----------------------------
occurring 364 days from the Effective Date (herein, as the same may be extended,
called the "Scheduled Commitment Termination Date"), and (ii) the date of
-------------------------------------
termination of the Commitment pursuant to Section 1.07 or 10.02.
------------ -----
(b) The then Scheduled Commitment Termination Date may be
extended from time to time on each Scheduled Commitment Termination Date to the
date occurring 364 days from such Scheduled Commitment Termination Date, by
written notice of request given by Seller to the Agent at least 30 days before
such Scheduled Commitment Termination Date, and written notice of acceptance
given by the Agent to Seller not later than 15 days prior to such Scheduled
Commitment Termination Date; provided Agent shall have no obligation whatsoever
--------
to extend the then Scheduled Commitment Termination Date.
4
SECTION 1.06. Purchase Termination Date. (a) The
--------------------------
"Purchase Termination Date" shall be the earlier to occur of (i) the Commitment
--------------------------
Termination Date and (ii) the date of termination of the Commitment with respect
to Purchases pursuant to subsection (b).
--------------
(b) The Commitment shall terminate with respect to Purchases,
and Purchaser shall have no obligation to make any further Purchases hereunder,
on the scheduled date of termination of any Program Support Agreement.
Purchaser agrees to give Seller at least 30 days' prior written notice of the
termination of the Commitment with respect to Purchases pursuant to the
foregoing sentence, but no failure to give or delay in giving such notice shall
prevent or delay such termination. No such termination shall affect Purchaser's
obligation, subject to the terms and conditions of this Agreement, to make
Reinvestments with respect to Undivided Interests purchased by Purchaser
hereunder prior to such termination.
SECTION 1.07. Voluntary Termination of Commitment or
--------------------------------------
Reduction of Maximum Purchase Limit. Seller may, upon at least five Business
------------------------------------
Days' written notice to the Agent, terminate the Commitment in whole or reduce
in part the unused portion of the Purchase Limit; provided, however, that (a)
-------- -------
each partial reduction shall be in an amount equal to $5,000,000 or an integral
multiple thereof and (b) after giving effect to each such partial reduction, the
remaining Purchase Limit will not be less than $25,000,000.
SECTION 1.08. Limitation of Ownership Interest. Nothing
---------------------------------
in this Agreement shall be interpreted as providing Purchaser with an ownership
interest in any Receivables that are not Pool Receivables.
ARTICLE II
UNDIVIDED INTEREST AND PURCHASER'S SHARE
SECTION 2.01. Undivided Interest. (a) Definition and
------------------- --------------
Computation of Undivided Interest. For purposes of this Agreement, "Undivided
--------------------------------- ---------
Interest" means, as the context may require (i) an undivided ownership interest,
--------
in a percentage determined from time to time as provided in clause (ii) below,
-----------
in (A) each and every then outstanding Pool Receivables, (B) all Related
Security with respect to such Pool Receivables, and (C) all Collections with
respect to, and other proceeds of, such Pool Receivables and Related Security;
and (ii) at any time, the quotient, expressed as a percentage, obtained by
dividing the Required Allocation for such Undivided Interest by the Pool
Balance. Each Undivided Interest shall be computed as follows:
5
UI = RA = PI + (0.10 x PI)
-- ----------------
PB PB
where:
------
UI = the Undivided Interest at any time;
RA = the Required Allocations of such Undivided Interest at such time, as determined pursuant to Section 2.02;
PI = the Purchaser's Investment of such Undivided Interest at such time as determined pursuant to Section 2.03;
PB = the Pool Balance at such time, as determined pursuant to Section 2.04.
The "related" Undivided Interest with respect to any of the foregoing items
-------
shall mean the Undivided Interest as to which such item is calculated.
(b) Frequency of Computation of Purchaser's Interest. Each Undivided
------------------------------------------------
Interest shall initially be computed as of the opening of business of Servicer
on the date of Purchase of such Undivided Interest from Seller, and such
Undivided Interest shall be recomputed upon receipt of each Periodic Report. In
addition, until such Undivided Interest shall be reduced to zero, such
Undivided Interest shall be deemed to be automatically recomputed as of the
close of business of Servicer on each day (other than a day on which an actual
recomputation is done), and, as so recomputed, shall constitute the percentage
ownership interest in Pool Receivables held by Purchaser on such day. Such
Undivided Interest shall become zero at such time as Purchaser shall have
received the accrued Earned Discount for such Undivided Interest, shall have
recovered the Purchaser's Investment of such Undivided Interest and shall have
received all other amounts payable to Purchaser pursuant to this Agreement in
respect of such Undivided Interest and Servicer shall have received the accrued
Servicer's Fee for such Undivided Interest. Such Undivided Interest shall
remain constant from the time as of which any such computation or recomputation
is made until the time as of which the next such recomputation, if any, shall be
made.
(c) Estimates of Unbilled Amounts.
-----------------------------
(i) For purposes of making the daily computation of the Undivided
Interest (other than the computation in a Periodic Report of the Undivided
Interest on a Month End Date) to be used for purposes of administering this
Agreement on a daily
6
basis (including for purposes of determining whether a Termination Event or
an Unmatured Termination Event has occurred under Section 10.01(m)), it is
-----------------
understood and agreed that to the extent required by customary and prudent
practices and standards and subject to other provisions of this clause (c)
----------
Seller shall estimate unbilled Receivables pursuant to the procedures
described in Schedule 2.01(c); provided, however, that Seller shall adjust
------------------------------------
such Receivables and the relevant estimates for subsequent periods as
appropriate upon obtaining actual knowledge that the amounts estimated are
or will be incorrect (1) as a result of the occurrence of events the effect
of which was not taken into consideration in establishing the estimate
procedures including but not limited to the shutting-in of a well that has
a material amount of production, the decision by Seller or an Originator
not to sell part of the subject Natural Gas owned by it or the material
disruption in the flow of Natural Gas from a well, a plant or a pipeline,
or (2) as a result of information received from the relevant pipelines,
buyers, and/or traders with respect to the actual volumes delivered, the
identity of the actual purchasers and/or the calculation of the actual
prices;
(ii) For purposes of making the computation in the Periodic Report of the
Undivided Interest with respect to a Month End Date, such Undivided
Interest shall be calculated based on actual deliveries and prices;
(iii) Notwithstanding anything in this Agreement to the contrary, in the
event that (1) the Commitment Termination Date has not occurred, (2) the
Seller has not exceeded the Required Allocations Limit as of the close of
business on a Month End Date as set forth in the Periodic Report, and (3)
the Seller has no actual knowledge that the Required Allocations Limit was
exceeded on any day during such month, then for purposes of Article X and
---------
for purposes of determining whether a Run Off Day has occurred as a result
of the Undivided Interests exceeding the Required Allocations Limit
(including determining the amount of the Earned Discount due for any day)
the Seller shall be deemed to have not exceeded the Required Allocations
Limit at any time during such month. It is also understood and agreed,
however, that nothing herein contained shall in any way diminish, impair or
otherwise affect Seller's obligations under Section 13.01;
-------------
(iv) Anything herein contained to the contrary notwithstanding, the
Purchaser and/or the Agent may at any time require the Seller to make
changes to the procedures used for estimating unbilled Receivables;
7
(v) For all purposes of this clause (c), including subclauses (i) and
----------
(iii) hereof, actual knowledge by Seller means knowledge by the employees
of Seller involved in the calculation of the Undivided Interests, their
direct supervisors and the officers having responsibility for the
compliance by Seller with this Agreement, including each officer which
executes a Periodic Report or any other certificate or report required to
be delivered hereunder. It is understood and agreed that the aforesaid
employees shall make periodic due inquiries from the Seller's marketing
department with respect to prices, volumes, fees, sales and other variables
used in calculating the Undivided Interests.
SECTION 2.02. Required Allocation. The "Required Allocation" of an
------------------- -------------------
Undivided Interest at any time means an amount determined as follows:
RA = PI + (0.10 x PI)
where:
------
RA = the Required Allocation of an Undivided Interest at any time;
PI = the Purchaser's Investment of such Undivided Interest at such time, as determined pursuant to Section 2.03.
SECTION 2.03. Purchaser's Investment. (a) Subject to subsections (b) and
---------------------- ---------------
(c), "Purchaser's Investment" of an Undivided Interest at any time means an
--- ----------------------
amount equal to
(i) the aggregate of the amounts theretofore paid to Seller for the
acquisition of such Undivided Interest (A) by Purchaser pursuant to Sections
--------
1.01(a) and 1.03 and (B) by Reinvestments pursuant to Sections 1.01(b) and 3.01,
------- ---- ---------------- ----
less
----
(ii) the aggregate amount of Collections theretofore received and distributed
on account of such Purchaser's Investment pursuant to Sections 3.01 and 3.02.
------------- ----
(b) Solely for purposes of calculating the Earned Discount (and each
component thereof) with respect to a portion of an Undivided Interest pursuant
to the proviso to the definition of "Earned Discount" in Appendix B:
------- ----------
(i) "Purchaser's Investment" of any portion of an Undivided Interest owned
----------------------
by a Program Support Provider (or any assignee thereof) or otherwise funded by a
Funding shall be deemed to be the amount paid to Purchaser by such Program
8
Support Provider as the purchase price of, or the original principal
amount loaned with respect to, such portion (less any portion of such
purchase price or principal amount allocable to Earned Discount accrued
and unpaid at the time of assignment or Funding), as reduced from time
to time by Collections received and distributed to such Program Support
Provider (or such assignee) on account of such Funding (other than any
portion allocable to Earned Discount) pursuant to Sections 3.01 and 3.02
------------- ----
or by payments by Purchaser to the Program Support Provider in
reimbursement of any Funding; and
(ii) "Purchaser's Investment" of any other portion of an Undivided
----------------------
Interest shall mean Purchaser's Investment of such Undivided Interest
less the sum of Purchaser's Investments of all portions of such
Undivided Interest described in clause (i) above, calculated in
----------
accordance with such clause (i).
----------
(c) Purchaser's Investment shall not be considered reduced by any
distribution of any portion of Collections if at any time such distribution is
rescinded or must otherwise be returned for any reason.
(d) The "related" Purchaser's Investment with regard to a Yield Period or
-------
Undivided Interest (or portion thereof) means the Purchaser's Investment
calculated with regard to such Yield Period or Undivided Interest (or such
portion), as the case may be.
SECTION 2.04. Pool Balance; Concentration Limits. (a) The "Pool Balance"
---------------------------------- ------------
at any time means an amount equal to the aggregate Unpaid Balance of the
Receivables in the Receivables Pool at such time.
(b) "Concentration Limit" for any Obligor at any time means the lesser of
-------------------
(A) the greater of (x) the Special Concentration Limit, if any, for such Obligor
and (y) 3.0% of the Unpaid Balance of all Receivables at such time and (B) such
lesser percentage not below 2.0% of the Unpaid Balance of all Receivables as the
Agent shall designate from time to time in its sole discretion as the
Concentration Limit for such Obligor upon two (2) days prior notice to Seller.
(c) "Special Concentration Limit" (i) for the Investment Grade Obligors
---------------------------
means 5% of the Unpaid Balance of all Receivables and (ii) for any other Obligor
means the amount designated as such by the Agent in a writing delivered to
Seller; it being understood and agreed that the Agent, in setting any Special
Concentration Limit for any Obligor, shall be entitled to consider, among other
things, the credit exposure of the
9
Purchaser and any Program Support Provider to such Obligor arising in
connection with this Agreement and other agreements to which Purchaser is a
party.
(d) In the case of any Obligor which is an Affiliate of any other Obligor,
the Concentration Limit, the Special Concentration Limit, if any, and the
aggregate Unpaid Balance of Receivables of such Obligors shall be calculated as
if such Obligors were one Obligor (such Obligors being collectively called with
respect to any Receivable the "Affiliated Obligors").
-------------------
SECTION 2.05. Purchaser's Share. With respect to each Undivided Interest,
-----------------
"Purchaser's Share" of Collections of Pool Receivables received (or deemed
-----------------
received) by Seller or Servicer on any day means an amount equal to the product
of
(a) the amount of all Collections of Pool Receivables received (or deemed
received) by Seller or Servicer on such day, times:
-----
(b) (i) if such day is not a Run Off Day, such Undivided Interest on such
day, expressed as a decimal, and
(ii) if such day is a Run Off Day, such Undivided Interest on the day
immediately preceding the first Run Off Day to have occurred during the then
current Run Off Period;
provided that after such time as an Undivided Interest shall equal zero the
--------
Purchaser's Share of Collections therefor shall also equal zero.
ARTICLE III
SETTLEMENTS
SECTION 3.01. Non-Run Off Settlement Procedures for Collections. (a) Daily
------------------------------------------------- -----
Procedure. On each day (other than a Run Off Day) in any Yield Period for any
---------
Undivided Interest, Servicer shall deem an amount equal to Purchaser's Share (as
determined in Section 2.05) of Collections of Pool Receivables received or
------------
deemed received on such day to be received in respect of such Undivided
Interest; and
(i) out of Purchaser's Share of such Collections, set aside from any other
funds and hold in trust for the benefit of Purchaser an amount equal to the
related Earned Discount and related Servicer's Fee accrued through such day and
not previously so held for the benefit of Purchaser,
10
(ii) apply an amount equal to the remainder of Purchaser's Share of
such Collections (the "Remaining Collections") to reduce the Purchaser's
---------------------
Investment of such Undivided Interest (it being understood that such amount
need not be physically paid to Purchaser under this clause (ii)),
-----------
(iii) Subject to Section 3.03, after such reduction, (A) apply such
------------
Remaining Collections to the Reinvestment, for the benefit of Purchaser, of
additional undivided interests in Pool Receivables by recomputation of such
Undivided Interest pursuant to Section 2.01 as of the end of such day,
------------
thereby increasing the related Purchaser's Investment, and (B) pay to
Seller such Remaining Collections.
The recomputed Undivided Interest shall constitute the percentage ownership
interest in Pool Receivables on such day held by Purchaser with regard to such
Undivided Interest.
(b) Settlement Date Procedure. On the Settlement Date for each Undivided
-------------------------
Interest, for each day in the related Yield Period of such Settlement Period
that is not a Run Off Day for such Undivided Interest, Servicer shall deposit to
the Agent's account, as described in Section 3.06, the amounts set aside as
------------
described in Section 3.01(a)(i) and the amounts, if any, set aside pursuant to
------------------
Section 3.03(b) or (c) for payment to the Agent on such Settlement Date;
--------------- ---
provided, however, that if the Agent gives its consent (which consent may be
-------- -------
revoked at any time), Servicer may retain amounts which would otherwise be
deposited in respect of Servicer's Fee, in which case no distribution shall be
made in respect of Servicer's Fee under clause (c) below.
----------
(c) Order of Application. Upon receipt by the Agent of funds distributed
--------------------
pursuant to subsection (b), the Agent shall distribute them (i) to Purchaser in
--------------
payment of the accrued and unpaid Earned Discount for such Undivided Interest,
(ii) to Servicer in payment of the accrued and unpaid Servicer's Fee payable
with respect to such Undivided Interest and (iii) in the case of any amounts set
aside pursuant to Section 3.03(b) or (c), to Purchaser in reduction of the
--------------- ---
related Purchaser's Investment. If there shall be insufficient funds on deposit
for the Agent to distribute funds in payment in full of the amounts referred to
in clauses (i) and (ii), the Agent shall distribute funds, first, in payment of
----------- ---- -----
such Earned Discount, and second, in payment of such Servicer's Fee.
------
SECTION 3.02. Run Off Settlement Procedures for Collections. (a) Daily
--------------------------------------------- -----
Procedure. On each Run Off Day occurring in any Yield Period for an Undivided
---------
Interest, Servicer shall set aside from all other funds and hold in trust for
11
Purchaser Purchaser's Share of the Collections of Pool Receivables in respect of
such Undivided Interest for such Run Off Day by depositing such Collections
within one Business Day of Servicer's receipt thereof into a bank account
acceptable to the Agent in which no other funds shall be deposited.
(b) Settlement Date Procedure. On each Settlement Date for each Undivided
-------------------------
Interest, if one or more Run Off Days for such Undivided Interest occurred
during the related Yield Period for the Settlement Period ending on such
Settlement Date for such Undivided Interest, Servicer shall deposit to the
Agent's account, as described in Section 3.06, the amounts set aside pursuant to
Section 3.02(a) during such Settlement Period, but not to exceed the sum of (i)
---------------
the accrued and unpaid related Earned Discount, (ii) the Purchaser's Investment
of such Undivided Interest, (iii) the aggregate of other amounts owed hereunder
by Seller to Purchaser or the Agent in respect of such Undivided Interest, and
(iv) the accrued Servicer's Fee payable with respect to such Undivided Interest.
If no Termination Event or Unmatured Termination Event shall have occurred and
be continuing, any amounts set aside pursuant to the first sentence of this
Section 3.02 and not required to be deposited to the Agent's account pursuant to
------------
the next preceding sentence shall be paid to Seller by Servicer.
(c) Order of Application. Upon receipt of funds deposited to the Agent's
--------------------
account pursuant to Section 3.02(b) or 3.04(c), the Agent shall distribute them
--------------- -------
(i) to Purchaser or the Agent (as the case may be) (A) in payment of the accrued
and unpaid Earned Discount for such Undivided Interest, (B) in reduction of the
Purchaser's Investment of such Undivided Interest and (C) in payment of any
other amounts owed by Seller hereunder to Purchaser or the Agent, in each case
until reduced to zero, and (ii) to Servicer in payment of the accrued Servicer's
Fee payable with respect to such Undivided Interest, also until reduced to zero.
If there shall be insufficient funds on deposit for the Agent to distribute
funds in payment in full of the aforementioned amounts, the Agent shall
distribute funds on deposit, first, in payment of the Earned Discount for such
-----
Undivided Interest, second, in payment of the Servicer's Fee payable with
------
respect to such Undivided Interest, if any, (if Servicer is not Seller or an
Affiliate of Seller), third, in reduction of Purchaser's Investment of such
-----
Undivided Interest, fourth, in payment of other amounts payable to Purchaser or
------
the Agent hereunder, and fifth, in payment of the Servicer's Fee payable with
-----
respect to such Undivided Interest (if Seller is Servicer or an Affiliate of
Seller).
SECTION 3.03. Special Settlement Procedures; Reduction of Purchaser's
-------------------------------------------------------
Investment, Etc. (a) Deemed Collections. If on any day
---------------- ------------------
12
(i) the Unpaid Balance of any Pool Receivable is
(A) reduced as a result of any defective, rejected or returned
merchandise or services, any cash discount, or any allowances or any
adjustment by Seller or any Affiliate of Seller,
(B) reduced or cancelled as a result of a setoff in respect of any claim
by the Obligor thereof against Seller or any Affiliate of Seller (whether
such claim arises out of the same or a related or an unrelated transaction),
or
(C) reduced on account of the obligation of Seller to pay to the related
Obligor any rebate or refund; or
(ii) any of the representations or warranties of Seller set forth in Section
-------
6.01(l) is no longer true with respect to a Pool Receivable; or
-------
(iii) any of the representations or warranties of Seller set forth in Section
-------
6.01(p) is not true; or
-------
(iv) any holder of a lien or security interest conveyed or perfected pursuant
to Section 9.319 of the UCC of the State of Texas, Section 84-9-319 of the UCC
of the State of Kansas, Section 34.1--9.319 of the UCC of the State of Wyoming,
the Oil and Gas Products Lien Act, New Mexico Statutes Annotated (S)(S) 48-9-1 -
48-9-8 (1978) or the Oil and Gas Owners' Lien Act, Title 52 Oklahoma Statutes
Annotated (S)(S) 548 - 548.6 (or a comparable provision of the law of any other
jurisdiction) shall take any step to enforce such lien or security interest with
respect to any Pool Receivable, or portion thereof, including, without
limitation, any action or attempt to perfect by filing or sending notices of
lien as provided in the Oil and Gas Products Lien Act, New Mexico Statutes
Annotated (S) 48-9-5 (1978), the Oil and Gas Owners' Lien Act, 52 Oklahoma
Statutes Annotated (S)(S) 548.2C and 548.4 or in a comparable provision of any
law or any similar statute of any other jurisdiction; or
(v) any Pool Receivable shall become an Ineligible Receivable at any time on
or prior to the Commitment Termination Date for any reason other than those set
forth in the foregoing clauses (i) through (iv);
----------- ----
then, on such day, Seller shall be deemed to have received a Collection of such
----
Pool Receivable
13
(I) in the case of clause (i) above, in the amount of such reduction
----------
or cancellation;
(II) in the case of each of clause (ii), (iii) and (v) above, in the
----------- ----- ---
amount of the Unpaid Balance of such Pool Receivable;
(III) in the case of clause (iv) above, in the amount of the Unpaid
-----------
Balance of such Pool Receivable, or if less the amount of the relevant lien or
security interest with respect to such Pool Receivable;
provided, however, that if a Collection is deemed to be received on any date as
-------- -------
a result of a reduction or adjustment made on any day to a Pool Receivable (such
Pool Receivable being the "Original Receivable") resulting from a correction in
-------------------
the volumes delivered to an Obligor which will result in an upward adjustment in
the Pool Receivables owing by another Obligor and which are not disputed and the
sole reason for delay in making such upward adjustment is the inability to
obtain information as to volumes received, transported and delivered by third
party pipeline transporters, then the portion of such deemed Collection which is
expected to result in an upward adjustment of such other Pool Receivable shall
not be considered a deemed Collection until the earlier of (i) the date when
such upward adjustment is made; (ii) the 60th day after the day when the
Original Receivable was first reduced or adjusted; and (iii) the Commitment
Termination Date; provided, further, that the amount of deemed Collections at
-------- -------
any time suspended pursuant to the immediately preceding proviso shall never
exceed $3,000,000.
Such deemed Collections shall be in addition to the Collections actually
received on such day.
(b) Unreinvested Collections. Collections that may not be reinvested by
------------------------
means of Reinvestments in an Undivided Interest on account of the application of
the Required Allocations Limit or the Purchase Limit pursuant to Section 1.02
------------
shall be so reinvested as soon as it is possible to do so without violating such
Required Allocations Limit or Purchase Limit, as the case may be. To the extent
and so long as such Collections may not be so reinvested, Servicer shall hold
such Collections in trust for the benefit of Purchaser in a separate deposit
account containing only such Collections and no other funds, for payment to the
Agent on the next following Settlement Date for the Yield Period in which such
Collections are accumulated, and the Purchaser's Investment of such Undivided
Interest shall be deemed reduced in the amount to be paid to the Agent only when
in fact finally so paid. During any Run Off Period, upon three (3) days'
written notice given by the Agent to Seller or at Seller's request, Servicer
shall pay in immediately available funds such
14
Collections not so reinvested to the Agent within one Business Day of receipt
thereof by Servicer.
(c) Seller's Reduction of Purchaser's Investment. If at any time Seller
--------------------------------------------
shall wish to cause the reduction of the Purchaser's Investment of a related
Undivided Interest (but not to commence the liquidation, or reduction to zero,
of all Undivided Interests), Seller may do so as follows:
(i) Seller shall give the Agent at least two (2) days' prior written
notice thereof (including the amount of such proposed reduction and the
proposed date on which such reduction will commence),
(ii) on the proposed date of commencement of such reduction and on each
day thereafter, Servicer shall refrain from reinvesting Remaining
Collections until the amount thereof not so reinvested shall equal the
desired amount of reduction, and
(iii) Servicer shall hold such Collections for the benefit of
Purchaser, for payment to the Agent on the next following Settlement Date
for the Yield Period in which such Collections are accumulated, and the
Purchaser's Investment of such Undivided Interest shall be deemed reduced in
the amount to be paid to the Agent only when in fact finally so paid;
provided that,
--------
(A) the amount of any such reduction shall be not less than $100,000
and shall be an integral multiple of $100,000, and the Purchaser's
Investment of such Undivided Interest after giving effect to such reduction
shall be not less than $5,000,000 (unless Purchaser's Investment of such
Undivided Interest shall thereby be reduced to zero) and shall be in an
integral multiple of $1,000,000,
(B) if Seller shall commence any voluntary reduction in a Yield Period
containing all or a portion of any Run Off Period, Collections not so
reinvested shall be treated as if collected on the next following Run Off
Day,
(C) Seller shall use reasonable efforts to attempt to choose a
reduction amount, and the date of commencement thereof, so that such
reduction shall commence and conclude in the same Yield Period,
(D) if two or more Undivided Interests shall be outstanding at the
time of any proposed reduction, such proposed reduction shall be applied,
unless the Agent shall
15
consent otherwise, to the Undivided Interest having a Purchaser Rate
calculated by reference to the Alternate Reference Rate, and if no such
Undivided Interest shall then be outstanding, then to the Undivided
Interest with the shortest remaining Yield Period, and
(E) Seller may pay such Collections to the Agent prior to the next
following Settlement Date for the Yield Period in which such Collections
are accumulated if such reduction is being applied to an Undivided Interest
having a Purchaser Rate calculated by reference to the Alternate Reference
Rate.
(d) Allocations of Obligor's Payments. Except as provided in Section
--------------------------------- -------
3.03(a) or as otherwise required by law or the underlying Contract or the Credit
-------
and Collection Policy, all Collections received from an Obligor of any
Receivable shall be applied to Receivables then outstanding of such Obligor in
the order of the age of such Receivables, starting with the oldest such
Receivable; provided, however, that, if payment is designated by such Obligor
-------- -------
for application to specific Receivables, it shall be applied to such specified
Receivables.
SECTION 3.04. Additional Limited Recourse. (a) Recourse Account. Servicer
--------------------------- ----------------
shall establish on its books a special recordkeeping account (the "Recourse
--------
Account") and shall calculate the balance in such account as of the close of
-------
business on each Month-End Date and each Run Off Day in the manner set forth in
Section 3.04(b).
---------------
(b) Recourse Account Balance. The balance of the Recourse Account as of the
------------------------
close of business on the date of the initial Purchase and on any Month-End Date
and any Run Off Day shall be equal to the positive difference, if any, of (x)
the sum of the Discount Factor for each Undivided Interest plus the Default
----
Reserve for each Undivided Interest plus, the Servicer's Fee Reserve for each
----
Undivided Interest minus (y) 10% multiplied by the Purchaser Investment (such
-----
positive difference, if any, being the "Recourse Unpaid Balance").
-----------------------
(c) Recourse Collections. Seller shall be deemed to have received
--------------------
Collections, if any, and shall be required to make a payment, on each Run Off
Day in an amount equal to the amount of the Recourse Unpaid Balance to be held
or distributed by Servicer in accordance with Section 3.08. Such deemed
------------
Collections shall be in addition to the Collections actually received on such
day and in addition to the other Collections deemed received on such day
pursuant to Section 3.03 and the amount of such Recourse Unpaid Balance be full
------------
recourse obligations of the Seller, and shall be applied in the order of
application described in Section 3.02(c).
---------------
16
SECTION 3.05. Reporting. (a) On or prior to the twenty-fifth day of each
---------
month (or if such day is not a Business Day, on the next following Business
Day), Servicer shall prepare and forward to the Agent
(i) a Periodic Report relating to all Undivided Interests owned by
Purchaser, as of the close of business of Servicer on the next preceding
Month End Date, and
(ii) a summary of agings of all Receivables; and
(iii) an Excepted Receivables Schedule dated as of the date of the
Periodic Report.
(b) On or prior to the Settlement Date of any Settlement Period containing
a Run Off Day, Servicer shall prepare and forward to the Agent a Periodic Report
as of the close of business of Servicer on the next preceding Month End Date.
(c) On or prior to each Settlement Date, Seller will advise the Agent and,
if Seller is not Servicer, Servicer of each Run Off Day occurring during the
Settlement Period ending on such Settlement Date.
SECTION 3.06. Payments and Computations, Etc. (a) All amounts to be paid
------------------------------
or deposited by Seller hereunder shall be paid or deposited in accordance with
the terms hereof no later than 11:00 a.m. (Chicago time) on the day when due in
lawful money of the United States of America in same day funds to the Agent at
Bank of America's office at 231 South LaSalle Street, Chicago, Illinois.
(b) Seller or Servicer, as applicable, shall, to the extent permitted by
law, pay to the Agent interest on all amounts not paid or deposited when due
hereunder at 2% per annum above the Alternate Reference Rate, payable on demand,
--- -----
provided, however, that such interest rate shall not at any time exceed the
-------- -------
maximum rate permitted by applicable law. Such interest shall be retained by
the Agent except to the extent that such failure to make a timely payment or
deposit has continued beyond the date for distribution by the Agent of such
overdue amount to Purchaser or any other Person having an interest in such
overdue amount, in which case such interest accruing after such date shall be
for the account of, and distributed by the Agent, to such Persons ratably in
accordance with their respective interests in such overdue amount.
(c) All computations of interest, Earned Discount, Negative Spread Fee and
any other fees hereunder shall be made on the basis of a year of 360 days for
the actual number of days (including the first day but excluding the last day)
elapsed.
17
SECTION 3.07. Dividing or Combining Undivided Interests.
-----------------------------------------
(a) Division of Undivided Interests. The Agent may at any time, as of the
-------------------------------
last day of any Yield Period for any then existing Undivided Interest, divide
such existing Undivided Interest on such last day into two or more new Undivided
Interests, each such new Undivided Interest having a Purchaser's Investment as
designated in such notice and all such new Undivided Interests collectively
having aggregate Purchaser's Investments equal to the Purchaser's Investment of
such existing Undivided Interest.
(b) Combination of Undivided Interests. The Agent may at any time, as of
----------------------------------
the last day of any Yield Period for two or more existing Undivided Interests,
on or before the date of any proposed Purchase of an Undivided Interest pursuant
to Sections 1.01 and 1.04 by Purchaser, on such last day or such date of
------------- ----
Purchase, as the case may be, combine into one new Undivided Interest such
existing and/or proposed Undivided Interests or any combination thereof, such
new Undivided Interest having a Purchaser's Investment equal to the aggregate
Purchaser's Investments of such Undivided Interests so combined.
(c) Effect of Division or Combination. On and after any division or
---------------------------------
combination of Undivided Interests as described above, each of the new
Undivided Interests resulting from such division, or the new Undivided Interest
resulting from such combination, as the case may be, shall be a separate
Undivided Interest having a Purchaser's Investment as set forth above, and shall
take the place of such existing Undivided Interest or Undivided Interests or
proposed Undivided Interest, as the case may be, in each case under and for all
purposes of this Agreement.
SECTION 3.08. Treatment of Collections and Deemed Collections. Seller
-----------------------------------------------
shall deliver within one Business Day to Servicer all Collections deemed
received by Seller pursuant to Sections 3.03(a) and 3.04, and Servicer shall
---------------- ----
hold or distribute such Collections as Earned Discount, accrued Servicer's Fee,
repayment of Purchaser's Investment, and in payment of other amounts due
hereunder to the same extent as if such Collections had actually been received
on the date of such delivery to Servicer. If Collections are then being paid to
the Agent, or lock boxes or accounts directly or indirectly owned or controlled
by the Agent, Servicer shall forthwith cause such deemed Collections to be paid
to the Agent to such account as the Agent shall designate from time to time in
writing. So long as Seller shall hold any Collections or deemed Collections
required to be paid to Servicer or the Agent, it shall hold such Collections in
trust and separate and apart from its own funds and shall clearly mark its
records to reflect such trust. The Purchaser and the
18
Agent shall have full recourse to the Seller for the amounts due with respect of
Collections deemed received by Seller pursuant to this Agreement.
ARTICLE IV
FEES AND YIELD PROTECTION
SECTION 4.01. Fees. (a) Arrangement Fee. Seller shall pay to the Agent
---- ---------------
for its own account an arrangement fee ("Arrangement Fee") payable on such dates
---------------
and in such amounts as set forth in the letter agreement dated April 12, 1995
from the Agent to Seller.
(b) Program Fee. From the Effective Date until the date, following the
-----------
Commitment Termination Date, on which Aggregate Purchaser's Investments shall be
reduced to zero, Seller shall pay to Purchaser a program fee ("Program Fee")
-----------
payable on such dates and in such amounts as set forth in the letter agreement
dated April 12, 1995 from the Agent to the Seller.
SECTION 4.02. Yield Protection. (a) If (i) Regulation D or (ii) any
----------------
Regulatory Change
(A) shall subject an Affected Party to any tax, duty or other charge
with respect to any Undivided Interest owned by or funded by it, or any
obligations or right to make Purchases or Reinvestments or to provide
funding therefor, or shall change the basis of taxation of payments to the
Affected Party of any Purchaser's Investments or Earned Discount owned by,
owed to or funded by it or any other amounts due under this Agreement in
respect of any Undivided Interest owned by or funded by it or its
obligations or rights, if any, to make Purchases or Reinvestments or to
provide funding therefor (except for changes in the rate of tax on the
overall net income of such Affected Party imposed by the United States of
America, by the jurisdiction in which such Affected Party's principal
executive office is located and, if such Affected Party's principal
executive office is not in the United States of America, by the
jurisdiction where such Affected Party's principal office in the United
States is located); or
(B) shall impose, modify or deem applicable any reserve (including,
without limitation, any reserve imposed by the Federal Reserve Board, but
excluding any reserve included in the determination of Earned Discount),
special deposit or similar requirement against assets of any Affected
Party, deposits or obligations with or for the account of any Affected
Party or with or for the account of
19
any affiliate (or entity deemed by the Federal Reserve Board to be an
affiliate) of any Affected Party, or credit extended by any Affected
Party; or
(C) shall change the amount of capital maintained or required or
requested or directed to be maintained by any Affected Party; or
(D) shall impose any other condition affecting any Undivided Interest
owned or funded by any Affected Party, or its obligations or rights, if
any, to make Purchases or Reinvestments or to provide funding therefor;
and the result of any of the foregoing is or would be
(x) to increase the cost to (or in the case of Regulation D
referred to above, to impose a cost on) (I) an Affected Party funding or
making or maintaining any Purchases or Reinvestments, any purchases,
reinvestments, or loans or other extensions of credit under any Program
Support Agreement or any Funding or any commitment of such Affected Party
with respect to any of the foregoing, or (II) the Agent for continuing its,
or Seller's, relationship with Purchaser,
(y) to reduce the amount of any sum received or receivable by an
Affected Party under this Agreement or the Certificate of Assignments, or
under any Program Support Agreement with respect thereto, or
(z) in the sole determination of such Affected Party, to reduce
the rate of return on the capital of an Affected Party as a consequence of
its obligations hereunder or arising in connection herewith to a level
below that which such Affected Party could otherwise have achieved,
then within thirty days after demand by such Affected Party (which demand shall
be accompanied by a statement setting forth the basis of such demand), Seller
shall pay directly to such Affected Party such additional amount or amounts as
will compensate such Affected Party for such additional or increased cost or
such reduction.
(b) Each Affected Party will promptly notify Seller and the Agent of any
event of which it has knowledge which will entitle such Affected Party to
compensation pursuant to this Section 4.02; provided, however, no failure to
------------ -------- -------
give or delay in giving such notification shall adversely affect the rights of
any Affected Party to such compensation.
20
(c) In determining any amount provided for or referred to in this Section
-------
4.02, an Affected Party may use any reasonable averaging and attribution methods
----
that it (in its sole discretion) shall deem applicable. Any Affected Party when
making a claim under this Section 4.02 shall submit to Seller a statement as to
------------
such increased cost or reduced return (including calculation thereof in
reasonable detail), which statement shall, in the absence of manifest error, be
conclusive and binding upon Seller.
ARTICLE V
CONDITIONS OF PURCHASES
SECTION 5.01. Conditions Precedent to Initial Purchase. The initial
----------------------------------------
Purchase hereunder is subject to the condition precedent that the Agent shall
have received, on or before the date of such Purchase, the following, each
(unless otherwise indicated) dated such date and in form and substance
satisfactory to the Agent:
(a) A Certificate of Assignments;
(b) A copy of the resolutions of the Board of Directors of Seller
approving this Agreement, the Certificate of Assignments and the other
Agreement Documents to be delivered by it hereunder and the transactions
contemplated hereby, certified by its Secretary or Assistant Secretary;
(c) Good standing certificates for Seller issued by the Secretaries of
State of Delaware, Colorado, Utah, New Mexico, Kansas, Oklahoma, Texas,
Wyoming, Louisiana, North Dakota, Montana, Mississippi and Massachusetts;
(d) A certificate of the Secretary or Assistant Secretary of Seller
certifying the names and true signatures of the officers authorized on its
behalf to sign this Agreement, the Certificate of Assignments and the other
Agreement Documents to be delivered by it hereunder (on which certificate
the Agent and Purchaser may conclusively rely until such time as the Agent
shall receive from Seller a revised certificate meeting the requirements of
this subsection (d));
--------------
(e) The Articles of Incorporation of Seller, duly certified by the
Secretary of State of Delaware, as of a recent date acceptable to Agent,
together with a copy of the By-laws of Seller, duly certified by the
Secretary or an Assistant Secretary of Seller;
21
(f) Acknowledgment copies of proper Financing Statements (Form UCC-
1), filed on or prior to the date of the initial Purchase, naming Seller as
the debtor and seller of Receivables or an undivided interest therein and
Purchaser as the secured party and purchaser, and acknowledgment copies of
proper Financing Statements (Form UCC-1), filed on or prior to the date of
the initial Purchase, naming each Originator as the debtor and seller of
Receivables and Seller as the secured party and purchaser, and the
Purchaser as the assignee of the secured party and purchaser, or other,
similar instruments or documents, as may be necessary or, in the opinion of
the Agent, desirable under the UCC or any comparable law of all appropriate
jurisdictions to perfect Seller's interest in all Receivables assigned or
purchased from the Originators and Purchaser's interests in all Undivided
Interests assigned to it or otherwise created or arising hereunder;
(g) A search report provided in writing to the Agent by Prentice-
Hall Legal and Financial Services, Inc., listing all effective financing
statements that name Seller or any Originator as debtor and that are filed
in the jurisdictions in which filings were made pursuant to subsection (f)
--------------
above and in such other jurisdictions that Agent shall reasonably request,
together with copies of such financing statements (none of which shall
cover any Receivables or Contracts or interests therein or Collections or
proceeds of any thereof);
(h) Duly executed copies of Lock-Box Agreements with each of the
Lock-Box Banks;
(i) A favorable opinion of the General Counsel for Seller and
Originators, in form and substance satisfactory to the Agent, and a
favorable opinion of Skadden, Arps, Slate, Meagher & Flom, counsel to the
Seller and Originators in form and substance satisfactory to the Agent;
(j) A favorable opinion of Mayer, Brown & Platt, counsel for the
Agent, in form and substance satisfactory to the Agent;
(k) An Excepted Receivables Schedule as of the date of the initial
Purchase hereunder.
(l) Such powers of attorney as the Agent shall reasonably request
to enable the Agent to collect all amounts due under any and all Pool
Receivables;
(m) A Periodic Report as of a Month End Date acceptable to the
Agent;
22
(n) All Indebtedness owing to the Bank of America in excess of a
principal amount of $15,000,000 under that certain Note dated September 2,
1994 made by the Seller shall have been paid in full and any obligations of
Bank of America thereunder or in connection therewith with respect to such
amounts required to be paid hereunder shall have been terminated;
(o) A duly executed Assignment Agreement and certificates
evidencing the assignment of Receivables by each of Western Gas Resources
Storage, Inc., a Texas corporation ("WGRS") and Western Gas Resources-
Texas, Inc., a Texas corporation ("WGRT"), as Originators to the Seller
together with duly executed copies of the documents listed in clauses (i)
through (viii) inclusive of the definition of the term "Originator" with
----------
respect to each of WGRS and WGRT;
(p) A duly executed letter agreement from Seller to Purchaser and
Agent regarding the Affected Receivables;
(q) Duly executed Financing Statement Amendments (Form UCC-3), in
form and substance satisfactory to the Agent, amending the financing
statements referred to in Section 5.01(f); and
---------------
(r) The Agent shall have received all fees, costs and expenses due
and payable pursuant to Section 4.01 and, if then invoiced, under Section
------------ -------
14.05.
-----
SECTION 5.02. Conditions Precedent to All Purchases and Reinvestments.
-------------------------------------------------------
Each Purchase (including the initial Purchase) and each Reinvestment hereunder
shall be subject to the further conditions precedent ("Conditions Precedent")
--------------------
that on the date of such Purchase or Reinvestment the following statements shall
be true (and Seller by accepting the amount of such Purchase or by receiving the
proceeds of such Reinvestment shall be deemed to have certified that):
(a) The representations and warranties contained in Section 6.01
------------
are correct on and as of such day as though made on and as of such day and
shall be deemed to have been made on such day,
(b) No event has occurred and is continuing, or would result from
such Purchase or Reinvestment, that constitutes a Termination Event or
Unmatured Termination Event,
(c) After giving effect to each proposed Purchase or Reinvestment,
Aggregate Purchaser's Investments will not exceed the Purchase Limit and
Aggregate Required Allocations will not exceed the Required Allocations
Limit, and
23
(d) The Commitment Termination Date shall not have occurred;
provided, however, the absence of the occurrence and continuance of an Unmatured
-------- -------
Termination Event shall not be a Condition Precedent to
(i) any Reinvestment being made with the proceeds of
Collections that were, on the same day, applied in reduction of
the Aggregate Purchaser's Investments, or
(ii) any other Reinvestment or any Purchase on any day which
does not cause the Aggregate Purchaser's Investments, after
giving effect to such Reinvestment or Purchase (and to any
Reinvestment referred to in clause (i) next above) to
----------
exceed the Aggregate Purchaser's Investments as of the opening of
business on such day.
SECTION 5.03. Additional Condition Precedent to Purchases. Each Purchase
-------------------------------------------
(including the initial Purchase) shall be subject to the further condition
precedent that the Purchase Termination Date shall not have occurred.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.01. Representations and Warranties of Seller. Seller represents
----------------------------------------
and warrants as follows:
(a) Organization and Good Standing. Seller has been duly organized and
------------------------------
is validly existing as a corporation in good standing under the laws of the
State of Delaware, with power and authority to own its properties and to
conduct its business as such properties are presently owned and such
business is presently conducted, and had at all relevant times, and now
has, all necessary power, authority, and legal right to acquire and own the
Receivables.
(b) Due Qualification. Seller is duly qualified to do business as a
-----------------
foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business makes such qualification,
licenses or approvals necessary or desirable, except for qualification in
such jurisdictions in which the failure to qualify or maintain such
qualification would not have a material adverse effect upon the Seller's
condition
24
(financial or otherwise), assets, business, operations or properties or
upon Seller's ability to perform its obligations hereunder or under any
other Agreement Document.
(c) Power and Authority; Due Authorization. Seller (i) has all
--------------------------------------
necessary power, authority and legal right to (A) execute and deliver this
Agreement, the Certificate of Assignments and the other Agreement
Documents, (B) carry out the terms of the Agreement Documents, and (C) sell
and assign Undivided Interest on the terms and conditions herein provided
and (ii) has duly authorized by all necessary corporate action the
execution, delivery and performance of this Agreement and the other
Agreement Documents and the sale and assignment of Purchaser's Interest on
the terms and conditions herein provided.
(d) Valid Sale; Binding Obligations. This Agreement constitutes a valid
-------------------------------
sale, transfer, and assignment of the Undivided Interests to Purchaser,
enforceable against creditors of, and purchasers from, Seller and each
Originator; and this Agreement constitutes, and each other Agreement
Document to be signed by Seller when duly executed and delivered will
constitute, a legal, valid and binding obligation of Seller enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of
equity, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
(e) No Violation. The consummation of the transactions contemplated by
------------
this Agreement and the other Agreement Documents and the fulfillment of the
terms hereof will not (i) conflict with, result in any breach of any of the
terms and provisions of, or constitute (with or without notice or lapse of
time or both) a default under, the articles of incorporation or by-laws of
Seller, or any indenture, loan agreement, receivables purchase agreement,
mortgage, deed of trust, or other agreement or instrument to which Seller
is a party or by which it or any of its properties is bound, (ii) result in
the creation or imposition of any Adverse Claim upon any of Seller's
properties pursuant to the terms of any such indenture, loan agreement,
receivables purchase agreement, mortgage, deed of trust, or other agreement
or instrument, other than this Agreement and the Certificate of
Assignments, or (iii) violate any law or any order, rule, or regulation
applicable to Seller of any court or of any federal or state regulatory
body, administrative agency, or other
25
governmental instrumentality having jurisdiction over Seller or any of
its properties.
(f) No Proceedings. There are no proceedings pending or to the best
--------------
of Seller's knowledge threatened and to the best of Seller's knowledge
there are no investigations pending, or threatened, before any court,
regulatory body, administrative agency, or other tribunal or
governmental instrumentality (i) asserting the invalidity of this
Agreement, the Certificate of Assignments or any other Agreement
Document, (ii) seeking to prevent the sale and assignment of any
Undivided Interest, the issuance of the Certificate of Assignments or
the consummation of any of the other transactions contemplated by this
Agreement or any other Agreement Document, (iii) seeking any
determination or ruling that might materially and adversely affect (A)
the performance by Seller or Servicer of its obligations under this
Agreement, (B) the validity or enforceability of this Agreement, the
Certificate of Assignments, any other Agreement Document, the
Receivables or the Contracts, or (C) except as disclosed in the Seller's
Form 8K, Form 10K or Form 10Q most recently provided to the Agent, the
financial condition, operations, assets, business, properties or
prospects of Seller or (iv) seeking to adversely affect the federal
income tax attributes of the Purchases hereunder or the Certificate of
Assignments with respect to Seller or any Originator or otherwise to
Seller's knowledge (but Seller makes no representation with respect to
such attributes).
(g) Bulk Sales Act. No transaction contemplated hereby requires
--------------
compliance with any bulk sales act or similar law.
(h) Government Approvals. No authorization or approval or other
--------------------
action by, and no notice to or filing with, any governmental authority
or regulatory body is required for the due execution, delivery and
performance by Seller of this Agreement, the Certificate of Assignments
or any other Agreement Document, except for the filing of the UCC
------
Financing Statements referred to in Article V, all of which, at the time
---------
required in Article V, shall have been duly made and shall be in full
---------
force and effect.
(i) Financial Condition. (x) The Consolidated balance sheets of
-------------------
Seller and its Consolidated subsidiaries as at December 31, 1994, and
the related statements of income and shareholders' equity of Seller and
its Consolidated subsidiaries for the fiscal year then ended, certified
by Price Waterhouse, independent certified public accountants, copies of
which have been furnished to the Agent, fairly present the Consolidated
financial condition, business,
26
business prospects and operations of Seller and its Consolidated
subsidiaries as at such date and the Consolidated results of the
operations of Seller and its Consolidated subsidiaries for the period
ended on such date, all in accordance with generally accepted accounting
principles consistently applied, and (y) since December 31, 1994 there
has been no material adverse change in any such condition, business,
business prospects or operations except as described in the Seller's
Form 8K, Form 10K or Form 10Q most recently provided to the Agent.
(j) Litigation. No injunction, decree or other decision has been
----------
issued or made by any court, governmental agency or instrumentality
thereof of a type that would be required to be disclosed to its
shareholders pursuant to any applicable law including securities laws,
and to the best of Seller's knowledge no threat by any Person has been
made to attempt to obtain any such decision, Seller or any Originator
from conducting a significant part of its business operations, except as
described in the Seller's Form 8K, Form 10K or Form 10Q most recently
provided to the Agent.
(k) Use of Funds; Margin Regulations. Seller will not use any funds
--------------------------------
obtained under this Agreement to acquire any equity security of a class
which is registered pursuant to Section 12 of the Securities Exchange
Act of 1934, as amended. The use of all funds obtained by Seller under
this Agreement will not conflict with or contravene any of Regulations
G, T, U and X promulgated by the Board of Governors of the Federal
Reserve System from time to time.
(l) Quality of Title. Each Pool Receivable, together with the
----------------
related Contract and all purchase orders and other agreements related to
such Pool Receivable, is owned by Seller free and clear of any Adverse
Claim (other than (x) any Adverse Claim arising solely as the result of
any action taken by Purchaser (or any assignee thereof) or by the Agent
and (y) in the case of UCC 9.319 Receivables, the rights described in
the definition thereof as to which no action of the type described in
Section 7.02(g) has been taken or commenced; and if such Pool Receivable
---------------
shall have been purchased by Seller from an Originator, Seller shall
have made all filings under applicable law in each relevant jurisdiction
in order to protect and perfect Seller's ownership interest in such Pool
Receivables against all creditors of, and purchasers from, such
Originator; when Purchaser makes a Purchase, it shall have acquired and
shall continue to have maintained a valid and perfected first priority
undivided percentage ownership interest to the extent of its Undivided
Interest in each Pool Receivable and
27
in the Related Security and Collections with respect thereto, free and
clear of any Adverse Claim (other than (x) any Adverse Claim arising
solely as the result of any action taken by Purchaser (or any assignee
thereof) or by the Agent and (y) in the case of UCC 9.319 Receivables,
the rights described in the definition thereof as to which no action of
the type described in Section 7.02(g) has been taken or commenced); and
---------------
no effective financing statement or other instrument similar in effect
covering any Pool Receivable, any interest therein, the Related Security
or Collections with respect thereto is on file in any recording office
except (a) such as may be filed (i) in favor of Seller or any Originator
in accordance with the Contracts, (ii) in favor of Seller in accordance
with any agreement with any Originator, or in accordance with this
Agreement, (iii) in favor of Purchaser or the Agent in accordance with
this Agreement or in connection with any Adverse Claim arising solely as
the result of any action taken by Purchaser (or any assignee thereof) or
by the Agent, or (iii) in favor of Bank of America, as Collateral
Trustee, or any successor in such capacity, as described in Section
-------
12.01 and (b) with respect to UCC 9.319 Receivables, a deed, mineral
-----
deed, reservation in either, oil or gas lease, assignment or any other
such writing effective as a filed financing statement pursuant to
Section 9.319 of the UCC of the State of Texas, Section 34.1-9-319 of
the UCC of the State of Wyoming or Section 84-9-319 of the UCC of the
State of Kansas or any comparable law or similar statute of any other
jurisdiction. None of the Pool Receivables constitute accounts resulting
from the sale of minerals or the like (including oil and gas) at the
wellhead except for such of those Receivables as to which all action
required by Section 8.05 has been taken and completed (including without
------------
limitation, the filing of financing statements, in a form which complies
with the requirements for perfection under applicable law in the office
of each county or parish clerk where a mortgage on the real estate would
be filed or recorded).
(m) Accurate Reports. No Periodic Report (if prepared by Seller, or
----------------
to the extent that information contained therein was supplied by
Seller), information, exhibit, financial statement, document, book,
record or report furnished or to be furnished by Seller to the Agent or
Purchaser in connection with this Agreement was or is inaccurate in any
material respect as of the date it was or is dated or (except as
otherwise disclosed to the Agent or Purchaser, as the case may be, at
such time) as of the date so furnished, or contained or contains any
material misstatement of fact or omitted or omits to state a material
28
fact or any fact necessary to make the statements contained therein not
materially misleading.
(n) Offices. The chief place of business and chief executive office
-------
of Seller are located at the address of Seller referred to in Section
-------
14.02, and the offices where Seller keeps all its books, records and
-----
documents evidencing Receivables, Pool Receivables, the related
Contracts and all purchase orders and other agreements related to such
Receivables, Pool Receivables are located at the addresses specified in
Schedule 6.01(n) (or at such other locations, notified to the Agent in
----------------
accordance with Section 7.01(f), in jurisdictions where all action
--------------
required by Section 8.05 has been taken and completed).
------------
(o) Lock-Box Accounts. The names and addresses of all the Lock-Box
-----------------
Banks, together with the account numbers of the lock-box accounts of
Seller at such Lock-Box Banks, are specified in Schedule 6.01(o) (or
----------------
have been notified to the Agent in accordance with Section 7.03(d)).
----------------
(p) Eligible Receivables. Each Receivable included in the Pool
--------------------
Balance shall be an Eligible Receivable on the date of its Purchase and
each Reinvestment and on each other date prior to the Commitment
Termination Date.
(q) Servicing Programs. Any and all programs used by Seller and any
------------------
Originator in the servicing of the Receivables Pool are owned by Seller
and not leased or licensed, except for the programs listed on Schedule
--------
6.01(q), which are leased or licensed from the Persons listed on such
-------
Schedule pursuant to leases and licenses, copies or descriptions of
which have been provided to the Purchaser and the Agent.
(r) Termination Event, etc. No event has occurred and is continuing
-----------------------
which constitutes a Termination Event or an Unmatured Termination Event.
(s) Credit and Collection Policies. Each of Seller and each
------------------------------
Originator is in compliance in all material respects with its Credit and
Collection Policy in regard to each Receivable and each Pool Receivable
and the related Contract.
(t) Solvency. Each of Seller and each Originator has sufficient
--------
capital to carry on all businesses and transactions in which it now
engages or proposes to engage, is solvent, and will, in the reasonable,
good faith determination of management of Seller or such Originator, as
applicable, continue to be solvent after giving effect to
29
the transactions contemplated by this Agreement and is able to pay its
debts as they mature.
(u) Affected Receivables. The Receivables listed in that certain
--------------------
letter agreement dated the date hereof from Seller to Purchaser and
Agent were affected by a computer system malfunction which occurred at a
certain pipeline company (as more fully described in such letter
agreement) before the date hereof. To the best of Seller's knowledge,
there have been no other similar events or computer system malfunctions
which may affect other Receivables.
(v) Assignment Agreement. Each of the representations and
--------------------
warranties made by Seller or any Originator in the Assignment Agreement
were true, correct and complete as of the date made or deemed made.
(w) Purchase of Receivables from an Originator. With respect to any
------------------------------------------
Receivable sold by an Originator to Seller and included in the
Receivables Pool, pay such Originator an amount at least equal to the
fair market value of such Receivable which sale shall be on terms
(determined in advance of such sale) not less favorable to the relevant
Originator or the terms the Originator may be able to obtain from
unaffiliated third parties in arms' length transactions.
ARTICLE VII
GENERAL COVENANTS OF SELLER
SECTION 7.01. Affirmative Covenants of Seller. From the Effective Date
-------------------------------
until the date, following the Commitment Termination Date, on which all
Undivided Interests shall be reduced to zero, Seller will, unless the Agent
shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply in all material respects with
-------------------------
all applicable laws, rules, regulations and orders with respect to the
Pool Receivables and related Contracts.
(b) Preservation of Corporate Existence. Preserve and maintain its
-----------------------------------
corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and qualify and remain qualified in
good standing as a foreign corporation in each jurisdiction where the
failure to preserve and maintain such existence, rights, franchises,
privileges and qualification would materially adversely affect (i) the
interests of the Agent or Purchaser hereunder
30
or (ii) the ability of Seller or Servicer to perform their respective
obligations hereunder.
(c) Access. (i) At any time and from time to time during regular
------
business hours, permit the Agent, or its agents or representatives, (A)
to examine and make copies of and abstracts from all books, records and
documents (including, without limitation, computer tapes and disks) in
the possession or under the control of Seller relating to Receivables or
Pool Receivables, including, without limitation, the related Contracts
and purchase orders and other agreements, and (B) to visit the offices
and properties of Seller for the purpose of examining such materials
described in clause (i)(A) next above, and to discuss matters relating
------------
to Receivables and Pool Receivables or Seller's performance hereunder
with any of the officers or employees of Seller having knowledge of such
matters; and (ii) without limiting the provisions of clause (i) next
----------
above, from time to time on request of Agent, permit Price Waterhouse or
other certified public accountants or other auditors acceptable to the
Agent to conduct, at Seller's reasonable expense, a review of Seller's
books and records, provided that as long as no Termination Event or
Unmatured Termination Event shall have occurred Seller shall only be
liable pursuant to clause (ii) next above for the cost of two
-----------
independent collateral audits per Calendar Year.
(d) Keeping of Records and Books of Account. Maintain and implement
---------------------------------------
administrative and operating procedures (including, without limitation,
an ability to recreate records evidencing Receivables and Pool
Receivables in the event of the destruction of the originals thereof),
and keep and maintain, all documents, books, records and other
information reasonably necessary or advisable for the collection of all
Pool Receivables (including, without limitation, records adequate to
permit the daily identification of each new Receivable and each new Pool
Receivable and all Collections of and adjustments to each existing
Receivable and each existing Pool Receivable).
(e) Performance and Compliance with Receivables and Contracts. At
---------------------------------------------------------
its expense timely and fully perform and comply, and cause each
Originator to timely and fully perform and comply, with all material
provisions, covenants and other promises required to be observed by it
under the Contracts related to the Pool Receivables and all purchase
orders and other agreements related to such Pool Receivables including
all agreements with Originators with respect to Pool Receivables, and
cause each Originator to comply with the Agreement Documents.
31
(f) Location of Records. Keep its chief place of business and chief
-------------------
executive office, and the offices where it keeps its records concerning
the Pool Receivables, all related Contracts and all purchase orders and
other agreements related to such Pool Receivables (and all original
documents relating thereto), at the address(es) of Seller referred to in
Section 6.01(n) or, upon 30 days' prior written notice to the Agent, at
---------------
such other locations in jurisdictions where all action required by
Section 8.05 shall have been taken and completed.
------------
(g) Credit and Collection Policies. Comply in all material respects
------------------------------
with its Credit and Collection Policy in regard to each Pool Receivable
and the related Contract.
(h) Collections. Instruct all Obligors to cause all Collections of
-----------
Pool Receivables to be deposited directly with a Lock-Box Bank.
SECTION 7.02. Reporting Requirements of Seller. From the Effective Date
--------------------------------
until the date, following the Commitment Termination Date, on which all
Undivided Interests shall be reduced to zero, Seller will, unless the Agent
shall otherwise consent in writing, furnish to the Agent:
(a) Quarterly Financial Statements. As soon as available and in any
------------------------------
event within 45 days after the end of each fiscal quarter of Seller, (A)
Seller's Consolidated and consolidating balance sheets as of the end of
such fiscal quarter and statements of operations for the period from the
beginning of the then current fiscal year of Seller to the end of such
fiscal quarter, all in reasonable detail in accordance with generally
accepted accounting principles applied consistently throughout the
periods reflected therein, subject to changes resulting from normal
year-end adjustments, and (B) a certificate in the form of Exhibit
-------
7.02(a) signed by the chief financial officer, vice president-finance,
-------
controller, chief accounting officer or treasurer of Seller confirming
compliance or failure to comply with the requirements of Section
-------
7.03(e), (f) and (j) and setting out in reasonable detail calculation
------- --- ---
showing such compliance, if applicable, stating that such financial
statements are materially complete, stating that he has reviewed the
Agreement Documents and carried out or caused to be carried out such
further review as is necessary to enable him to express an informed
opinion as to compliance with the Agreement Documents, and further
stating that to the best of his knowledge there is no condition or event
at the end of such fiscal quarter or at the time of such certificate
which constitutes a Termination Event or an
32
Unmatured Termination Event or specifying the nature and period of
existence of any such condition or event;
(b) Annual Financial Statements. As soon as available and in any
---------------------------
event within 90 days after the end of each fiscal year of Seller,
complete Consolidated and consolidating financial statements of Seller
together with all notes thereto, prepared in reasonable detail in
accordance with generally accepted accounting principles applied
consistently throughout the periods reflected therein, together with
opinions, based on audits using generally accepted audit standards, by
Price Waterhouse, or other independent certified public accountants of
recognized standing selected by Seller, stating that such financial
statements have been so prepared certifying such consolidated financial
statements without a going concern or like qualification. Such
Consolidated financial statements shall contain a balance sheet as of
the end of such fiscal year and statements of operations, of cash flows,
and of changes in stockholders' equity for such fiscal year, each
setting forth in comparative form the corresponding figures for the
preceding fiscal year of Seller. Additionally, at the same time Seller
will provide Agent consolidating financial statements containing a
balance sheet as of the end of such fiscal year and a statement of
operations for such fiscal year. In addition, within 90 days after the
end of each fiscal year of Seller, Seller will furnish to Agent (A) a
certificate in the form of Exhibit 7.02(a) signed by the chief financial
---------------
officer, vice president-finance, controller, chief accounting officer or
treasurer of Seller confirming compliance (or failure to comply) with
the requirements of Section 7.03(e), (f), and (j) and setting out in
--------------- --- ---
reasonable detail calculations showing such compliance, if applicable
and (B) a report signed by such accountants stating that they have
reviewed this Agreement and further stating that, in making such review
and the examination and report on the consolidated financial statements
described above, they did not obtain any knowledge that there existed
any condition or event related to the financial covenants set forth in
Sections 7.03(e) and (j) relating to Seller at the end of such fiscal
---------------- ---
year or at the time of their report which constituted a Termination
Event or an Unmatured Termination Event, or, if they did obtain any such
knowledge, specifying the nature and period of existence of any such
condition or event;
(c) Reports to Holders and Exchanges. In addition to the reports
--------------------------------
required by subsections (a) and (b) next above, promptly upon the
--------------- ---
Agent's request, copies of any reports which Seller sends to any of its
security holders, and any reports or registration statements that Seller
files with
33
the Securities and Exchange Commission or any national securities
exchange other than registration statements relating to employee benefit
plans and to registrations of securities for selling security holders;
(d) ERISA. Promptly after the filing or receiving thereof, copies
-----
of all reports and notices with respect to any Reportable Event defined
in Article IV of ERISA which Seller files under ERISA with the Internal
Revenue Service, the Pension Benefit Guaranty Corporation or the U.S.
Department of Labor or which Seller receives from the Pension Benefit
Guaranty Corporation;
(e) Termination Events. As soon as possible and in any event within
------------------
five days after the occurrence of each Termination Event and each
Unmatured Termination Event, a written statement of the chief financial
officer, vice president-finance, controller, chief accounting officer or
treasurer of Seller setting forth details of such event and the action
that Seller proposes to take with respect thereto;
(f) Litigation. As soon as possible and in any event within three
----------
Business Days of Seller's knowledge thereof, notice of (i) any
litigation, investigation or proceeding which may exist at any time
which could have a material adverse effect on the business, operations,
property or financial condition of Seller or impair the ability of
Seller to perform its obligations under this Agreement and (ii) any
material adverse development in previously disclosed litigation;
(g) UCC 9.319 Receivables. As soon as possible and in any event
---------------------
within three Business Days after Seller knows or reasonably should have
known that any holder of a lien or security interest or other Adverse
Claim arising pursuant to Section 9.319 of the UCC of the State of
Texas, Section 84-9-319 of the UCC of the State of Kansas, Section 34.1-
9-319 of the UCC of the State of Wyoming, the Oil and Gas Products Lien
Act, New Mexico Statutes Annotated (S)(S) 48-9-1 - 48-9-8 (1978), or the
Oil and Gas Owners' Lien Act, Title 52 Oklahoma Statutes Annotated
(S)(S) 548 - 548.6 (or a comparable provision of any law or any similar
statute of any other jurisdiction) shall have taken any step to enforce
such lien or security interest or to perfect any such lien or security
interest with respect to any Receivable including, without limitation,
attempts to perfect by filing or sending notices of lien as provided in
the Oil and Gas Products Lien Act, New Mexico Statutes Annotated (S) 48-
9-5 (1978), the Oil and Gas Owners' Lien Act, 52 Oklahoma Statutes
Annotated (S)(S) 548.2 C and 548.4 or a comparable provision of the law
of
34
any other jurisdiction, the statement of the chief financial officer,
vice president-finance, chief accounting officer, treasurer or
controller of Seller setting forth details of such step and the action
that Seller proposes to take with respect thereto;
(h) Notices with Respect to the Revolving Loan Agreement. As soon
----------------------------------------------------
as possible and in any event on the same Business Day that the Seller
provides notice to the agent under the Revolving Loan Agreement of a
default under the Revolving Loan Agreement, and as soon as possible and
in any event within three days after the request for a waiver under or
amendment of the Revolving Loan Agreement, and after the granting of any
such waiver or amendment, a written statement of a chief financial
officer, vice president-finance, controller, chief accounting officer or
treasurer of Seller setting forth the details of such default, waiver or
amendment; and
(i) Other. Promptly, from time to time, such other information,
-----
documents, records or reports respecting the Receivables or the
condition or operations, financial or otherwise, of Seller as the Agent
may from time to time reasonably request in order to protect, monitor,
enforce, determine or evaluate or otherwise take any action with respect
to the interests of the Agent or Purchaser hereunder.
SECTION 7.03. Negative Covenants of Seller. From the Effective Date until
----------------------------
the date, following the Commitment Termination Date, on which all Undivided
Interests shall be reduced to zero, Seller will not, without the prior written
consent of the Agent:
(a) Sales, Liens, Etc. Except as otherwise provided herein, sell,
-----------------
assign (by operation of law or otherwise) or otherwise dispose of, or
create or suffer to exist any Adverse Claim (except, with respect to UCC
9.319 Receivables, the rights described in the definition thereof so
long as no step of the type described in Section 7.02(g) shall have been
---------------
taken or commenced) upon or with respect to, any Receivable or related
Contract or Related Security, or any interest therein, or any lock-box
account to which any Collections of any Receivable or Pool Receivable
are sent, or any right to receive income from or in respect of any of
the foregoing.
(b) Extension or Amendment of Receivables. Except as otherwise
-------------------------------------
permitted in Section 8.02, extend, amend or otherwise modify, and not
------------
permit any Originator to extend, amend or otherwise modify, the terms of
any Pool Receivable,
35
or amend, modify or waive any term or condition of any Contract related
thereto; provided, however, that Seller or an Originator, as the case
-------- -------
may be, may amend, modify or waive the terms of the Contracts with
respect to rights and obligations of the parties thereto that do not or
would not affect the Pool Receivables then outstanding or any of
Seller's rights with respect to such Pool Receivables as long as such
amendment, modification or waiver would not impair the legality,
validity or enforceability of such Contract, or of any Pool Receivable
theretofore or thereafter arising thereunder and would not impair the
collectibility of such Pool Receivable or otherwise adversely affect the
ownership or rights of Purchaser, Agent or any Program Support Provider
hereunder or in the Pool Receivables or the Related Security or in any
Agreement Document.
(c) Change in Business or Credit and Collection Policy. Make any
--------------------------------------------------
change in the character of its business or in the Credit and Collection
Policy, which change would, in either case, materially impair the
collectibility of any Pool Receivable.
(d) Change in Payment Instructions to Obligors. Add or terminate
------------------------------------------
any bank as a Lock-Box Bank from those listed in Schedule 6.01(o) or
----------------
make any change in its instructions to Obligors regarding payments to be
made to Seller or Servicer or payments to be made to any Lock-Box Bank,
unless the Agent shall have received notice of such addition,
termination or change, shall have consented in writing thereto and shall
have received duly executed copies of Lock-Box Agreements with each new
Lock-Box Bank.
(e) Debt to Capitalization Ratio. Permit Seller's Debt to
----------------------------
Capitalization Ratio to be greater than (i) 0.60 to 1.0 at any time
until and including October 31, 1995 and (ii) 0.55 to 1.0 at any time
thereafter.
(f) Limitation on Liens. Neither the Seller nor any Originator will
-------------------
(and the Seller will not permit any Originator to) create, assume or
permit to exist any mortgage, deed of trust, pledge, encumbrance, lien
or charge of any kind (including any security interest in or vendor's
lien on property purchased under conditional sales or other title
retention agreements and including any lease intended as security or in
the nature of a title retention agreement) upon any of its properties or
assets whether now owned or hereafter acquired, except, to the extent
not otherwise forbidden by the Agreement Documents:
36
(i) Statutory liens for taxes and other sums which are not
delinquent or which are being Diligently Contested;
(ii) Mechanics' and materialmen's and similar statutory liens
with respect to obligations which are not delinquent or which are
being Diligently Contested;
(iii) Minor defects and irregularities in title to any property
which do not materially impair the value of such property or the
use thereof for the purposes for which it is held;
(iv) Any encumbrances expressly permitted under the terms of
any Agreement Document hereafter accepted by Agent;
(v) Liens listed on Schedule 7.03(f); and
----------------
(vi) Liens securing Indebtedness arising under this Agreement
or under any Agreement Documents.
(g) [Intentionally Deleted].
(h) [Intentionally Deleted].
-----------------------
(i) Mergers, Acquisitions, Sales, etc. Be a party to any merger or
---------------------------------
consolidation, or purchase or otherwise acquire all or substantially all
of the assets or any stock of any class of, or any partnership or joint
venture interest in, any other Person, or, except in the ordinary course
of its business, sell, transfer, convey or lease all or any substantial
part of its assets, or sell or assign with or without recourse any
Receivables or any interest therein (other than pursuant hereto), or
permit any Subsidiary to do any of the foregoing, except for any such
merger or consolidation, of or by (i) any wholly-owned Subsidiary into
Seller, (ii) any wholly-owned Subsidiary which is not an Originator
into, with or to any other wholly-owned Subsidiary (provided that if
such other Subsidiary is an Originator, such Originator shall survive),
(iii) any Originator into, with or to any other Originator, or (iv)
Seller with or into any other business entity if Seller is the surviving
business entity; provided however, that the mergers and consolidations
-------- -------
described in each of the foregoing cases shall be permitted only if no
Termination Event or Unmatured Termination Event shall have occurred or
shall result from such merger or consolidation. The Seller will notify
the Agent of any merger or consolidation effected pursuant to the
exceptions in this Section.
37
(j) Restricted Payments. Except for payments by Seller to its
-------------------
stockholders which are permitted under the following sentences of this
subsection and do not otherwise violate any provisions of this Agreement
and except for dividends paid to Seller by its Subsidiaries or to MIGC,
Inc., a Delaware corporation, by MGTC, Inc., a Wyoming corporation, none
of the Seller and its Subsidiaries will declare or pay any dividends on,
or make any other distribution in respect of, any class of its capital
stock or any partnership or other interest in it, other than the
distribution of common stock pursuant to the conversion or exchange of
Preferred Stock, nor will any of Seller and its Subsidiaries directly or
indirectly make any capital contribution to or purchase, redeem, acquire
or retire any shares of the capital stock of or partnership interest in
any of Seller and its Subsidiaries (whether such interests are now or
hereafter issued, outstanding or created), other than pursuant to the
redemption of the 7.25% Cumulative Senior Perpetual Convertible
Preferred Stock of Seller, or cause or permit any reduction or
retirement of the capital stock of or partnership interest in any of
Seller and its Subsidiaries. Seller may make any of the payments,
distributions, capital contributions or purchases described above in
this Section 7.03(j) so long as (i) no Unmatured Termination Event or
---------------
Termination Event has occurred and is continuing at the time such
dividends are declared and paid and (ii) such repurchases and dividends
declared or paid by Seller since March 31, 1994, other than the
Redemption Amount, together with all investments Seller has made in
accordance with the provisions of Section 6.2(f)(v) of the Revolving
Loan Agreement as in effect on the date hereof, do not, in the
aggregate, exceed the sum of (A) $50,000,000; plus (B) fifty percent
----
(50.0%) of Seller's Consolidated cumulative net income earned after
March 31, 1994 if such figure is positive (zero percent, if negative);
plus (C) fifty percent (50.0%) of the cumulative net proceeds, in excess
----
of the Redemption Amount, received by Seller and its Subsidiaries at any
time after March 31, 1994 from the sale of any equity securities issued
by Seller or any of its Subsidiaries.
(k) Deposits to Special Accounts. At any time after the occurrence
----------------------------
of an Unmatured Termination Event or following a request from the Agent
deposit or otherwise credit, or cause or permit to be so deposited or
credited, to any lock-box account of Seller at any Lock-Box Bank cash or
cash proceeds other than Collections of Pool Receivables.
(l) Change of Control. Permit or suffer to exist any Change of
-----------------
Control.
38
ARTICLE VIII
ADMINISTRATION AND COLLECTION
SECTION 8.01. Designation of Servicer. (a) Seller as Initial Servicer.
----------------------- --------------------------
The servicing, administering and collection of the Pool Receivables shall be
conducted by the Person designated as Servicer hereunder ("Servicer") from time
--------
to time in accordance with this Section 8.01. Until the Agent gives to Seller a
------------
Successor Notice (as defined in Section 8.01(b)), Seller is hereby designated
---------------
as, and hereby agrees to perform the duties and obligations of, Servicer
pursuant to the terms hereof.
(b) Successor Notice; Servicer Transfer Events. Upon Seller's receipt of
------------------------------------------
a notice from the Agent of the Agent's designation of a new Servicer (a
"Successor Notice"), Seller agrees that it will terminate its activities as
----------------
Servicer hereunder in a manner that the Agent believes will facilitate the
transition of the performance of such activities to the new Servicer, and the
Agent (or, its designee) shall assume each and all of Seller's said obligations
to service and administer such Receivables, on the terms and subject to the
conditions herein set forth, and Seller shall use its best efforts to assist the
Agent (or its designee) in assuming such obligations including without
limitation, in identifying Pool Receivables and Collections. The Agent agrees
not to give Seller a Successor Notice until (i) after the occurrence of any
Termination Event or (ii) one Business Day shall have elapsed following notice
by Agent to Seller of Agent's intent to give Seller a Successor Notice after any
event which, in the reasonable opinion of the Agent, could have a material
adverse effect on Seller's ability to perform its obligations as Servicer
hereunder (any such Termination Event or other event being herein called a
"Servicer Transfer Event"), in which case such Successor Notice may be given at
-----------------------
any time in the Agent's discretion. If Seller disputes the occurrence of a
Servicer Transfer Event, Seller may take appropriate action to resolve such
dispute; provided that Seller must terminate its activities hereunder as
--------
Servicer and allow the newly designated Servicer to perform such activities on
the date provided by the Agent as described above, notwithstanding the
commencement or continuation of any proceeding to resolve the aforementioned
dispute.
(c) Subcontracts. Servicer may, with the prior consent of the Agent,
------------
subcontract with any other person for servicing, administering or collecting the
Pool Receivables, provided that Servicer shall remain liable for the performance
of the duties and obligations of Servicer pursuant to the terms hereof.
SECTION 8.02. Duties of Servicer. (a) Appointment; Duties in General.
------------------ ------------------------------
Each of Seller, Purchaser and the Agent hereby
39
appoints as its agent Servicer, as from time to time designated pursuant to
Section 8.01, to enforce its rights and interests in and under the Pool
------------
Receivables, the Related Security and the Contracts. Servicer shall take or
cause to be taken all such actions as may be necessary or advisable to collect
each Pool Receivable from time to time, all in accordance with applicable laws,
rules and regulations, with reasonable care and diligence, and in accordance
with the Credit and Collection Policy; provided that neither the Agent nor the
--------
Purchaser shall have an obligation to determine whether a Receivable is a Pool
Receivable and each of the Agent and the Purchaser shall be entitled to rely
conclusively upon the Excepted Receivables Schedule most recently received by
the Agent in determining which Receivables constitute Pool Receivables, and
shall not be charged with knowledge that any Receivable is an Ineligible
Receivable unless it is listed in the Excepted Receivables Schedule most
recently received by the Agent; and provided further that the Agent shall be
entitled to rely on the most recent Periodic Report received by the Agent in
determining Purchaser's Undivided Interest and shall have no duty to make any
investigation to determine whether such information is correct as of any day.
(b) Allocation of Collections; Segregation. Servicer shall set aside for
--------------------------------------
the account of Seller and Purchaser their respective allocable shares of the
Collections of Pool Receivables in accordance with Sections 3.01 and 3.02 but
------------- ----
shall not be required (unless otherwise requested by the Agent, pursuant to
Section 3.08) to segregate the funds constituting such portions of such
------------
Collections, or to segregate the respective allocable shares of Purchaser and
the Program Support Providers, if applicable, prior to the remittance thereof in
accordance with said Sections. If instructed by the Agent and based on such
instructions (which instructions shall include the percentages to be used as a
basis for allocating Collections among the Purchaser, the Program Support
Providers and any other assignee, if the Servicer is being requested to
segregate Collections allocable to such Persons), Servicer shall segregate and
deposit with a bank (which may be Bank of America) designated by the Agent such
allocable shares of Collections of Pool Receivables, set aside for Purchaser,
Program Support Provider and any other assignee from Purchaser of any Undivided
Interest, on the first Business Day following receipt by Servicer of such
Collections in immediately available funds.
(c) Modification of Receivables. So long as no Termination Event or
---------------------------
Unmatured Termination Event shall have occurred and be continuing, Seller, while
it is Servicer, may, in accordance with the Credit and Collection Policy and
reasonable business judgment, (i) extend the maturity or adjust the Unpaid
Balance of any Defaulted Receivable as Seller may determine to be appropriate to
maximize Collections thereof; provided that after
40
giving effect to such extension of maturity, the Aggregate Required Allocations
will not exceed the Required Allocations Limit, and (ii) adjust the Unpaid
Balance of any Receivable to reflect the reductions or cancellations described
in the first sentence of Section 3.03(a).
---------------
(d) Documents and Records. Seller shall deliver to Servicer, and Servicer
---------------------
shall hold in trust for Seller and Purchaser in accordance with their respective
interests, all documents, instruments and records (including, without
limitation, computer tapes or disks) that evidence or relate to Pool
Receivables.
(e) Certain Duties to Seller. Servicer shall, as soon as practicable
------------------------
following receipt, turn over to Seller (i) that portion of Collections of Pool
Receivables representing its undivided interest therein, less, in the event
Seller is no longer Servicer, all reasonable and appropriate out-of-pocket costs
and expenses of Servicer of servicing, collecting and administering the Pool
Receivables to the extent not covered by the Servicer's Fee received by it, and
(ii) the Collections of any Receivable which is not a Pool Receivable.
Servicer, if other than Seller, shall, as soon as practicable upon demand,
deliver to Seller all documents, instruments and records in its possession that
evidence or relate to Receivables of Seller other than Pool Receivables, and
copies of documents, instruments and records in its possession that evidence or
relate to Pool Receivables.
(f) Termination. Servicer's authorization under this Agreement shall
-----------
terminate upon receipt by the Agent, after the Commitment Termination Date, of
an amount equal to the Aggregate Purchaser's Investment plus accrued Earned
Discount for each Undivided Interest plus all other amounts owed to the Agent
and Purchaser and (unless otherwise agreed to by the Agent and Servicer)
Servicer under this Agreement.
SECTION 8.03. Rights of the Agent. (a) Notice to Obligors. At any time
------------------- ------------------
following the earlier to occur of (i) the occurrence of a Termination Event and
(ii) any of the Conditions Precedent shall not be satisfied, and (iii) any
representation or warranty shall not be true when made or deemed made, the Agent
may, following at least two hours prior notice to the Seller (which notice may
be oral or written and may be given in person, by telephone or otherwise
pursuant to Section 14.02), notify the Obligors of Pool Receivables, or any of
-------------
them, of the ownership of the Undivided Interests by Purchaser and of the
security interest held by Purchaser, and of any assignments of such ownership or
security by Purchaser.
41
(b) Notice to Lock-Box Banks. At any time following the earliest to occur
------------------------
of (i) the occurrence of a Termination Event, (ii) any of the Conditions
Precedent shall not be satisfied, and (iii) any representation or warranty shall
not be true when made or deemed made, the Agent is hereby authorized, following
at least two hours prior notice to the Seller (which notice may be oral or
written and may be given in person, by telephone or otherwise pursuant to
Section 14.02), to give notice to the Lock-Box Banks, as provided in the Lock-
-------------
Box Agreements, of the transfer to the Agent of dominion and control over the
lock-box accounts to which the Obligors of Pool Receivables make payments.
Seller hereby transfers to the Agent, effective when the Agent shall give notice
to the Lock-Box Banks as provided in the Lock-Box Agreements, the exclusive
dominion and control over such lock-box accounts, and shall take any further
action that the Agent may reasonably request to effect such transfer.
(c) Rights on Servicer Transfer Event. At any time following the
---------------------------------
designation of a Servicer other than Seller pursuant to Section 8.01:
------------
(i) The Agent may direct the Obligors of Pool Receivables, or any
of them, to pay all amounts payable under any Pool Receivable directly
to the Agent or its designee.
(ii) Seller shall, at the Agent's request and at Seller's expense,
give notice of such ownership and of the security interest herein
granted to each said Obligor and direct that payments be made directly
to the Agent or its designee.
(iii) Seller shall (and with respect to any computer programs leased
or licensed by it, Seller shall use its best efforts to cause the owner
thereof to), at the Agent's request, (A) assemble all of the documents,
instruments and other records (including, without limitation, computer
programs, tapes and disks) which evidence the Pool Receivables, and the
related Contracts and Related Security, or which are otherwise necessary
or desirable to collect such Pool Receivables, and shall make the same
available to the Agent at a place selected by the Agent or its designee,
and (B) segregate all cash, checks and other instruments received by it
from time to time constituting Collections of Pool Receivables in a
manner acceptable to the Agent and shall, promptly upon receipt, remit
all such cash, checks and instruments, duly endorsed or with duly
executed instruments of transfer, to the Agent or its designee. Seller
shall use its best efforts to (i) cause the owner of any computer
programs leased or licensed by it to consent to the transfer, at
Seller's sole expense, of such programs to
42
Agent or other successor Servicer or any other Person designated by
Agent and to provide Agent or other successor Servicer or such other
Person the same access to computer programs, records and software that
such owner would provide to Seller or (ii) to obtain leases or licenses
(to be held by the Agent, the Successor Servicer or such other Person as
the Agent shall designate) providing access to programs reasonably
acceptable to Agent containing terms not less favorable to the Agent
than those of the leases and licenses held by Seller described in
Schedule 6.10(q) subject to reasonable variations reflecting changes in
----------------
market conditions and provided that Seller shall be solely responsible
for all payments due thereunder or in connection therewith.
(iv) Each of Seller and Purchaser hereby authorizes the Agent to
take any and all steps in Seller's name and on behalf of Seller and
Purchaser which are necessary or desirable, in the determination of the
Agent, to collect all amounts due under any and all Pool Receivables,
including, without limitation, endorsing Seller's name on checks and
other instruments representing Collections and enforcing such Pool
Receivables and the related Contracts.
SECTION 8.04. Responsibilities of Seller. Anything herein to the contrary
--------------------------
notwithstanding:
(a) Seller shall perform all of its obligations under the Contracts
related to the Receivables and under the related purchase orders and
other agreements to the same extent as if Undivided Interests had not
been sold hereunder and the exercise by the Agent of its rights
hereunder shall not relieve Seller from such obligations.
(b) Neither the Agent nor Purchaser shall have any obligation or
liability with respect to any Receivables, any Pool Receivables,
Contracts related thereto or any other related purchase orders or other
agreements, nor shall any of them be obligated to perform any of the
obligations of Seller thereunder.
(c) Seller hereby grants to Servicer an irrevocable power of
attorney, with full power of substitution, coupled with an interest, to
take in the name of Seller all steps which are necessary or advisable to
endorse, negotiate or otherwise realize on any writing or other right of
any kind held or transmitted by Seller or transmitted or received by
Purchaser (whether or not from Seller) in connection with any
Receivable.
43
SECTION 8.05. Further Action Evidencing Purchases. (a) Seller agrees that
-----------------------------------
from time to time, at its expense, it will, and will cause each Originator to,
promptly execute and deliver all further instruments and documents, and take all
further action that the Agent may reasonably request in order to perfect,
protect or more fully evidence the Purchases hereunder and the resulting
Undivided Interests, or to enable Purchaser or the Agent to exercise or enforce
any of their respective rights hereunder or under the Certificate of
Assignments. Without limiting the generality of the foregoing, Seller will upon
the request of the Agent:
(i) execute and file such financing or continuation statements, or
amendments thereto or assignments thereof, and such other instruments or
notices, as may be necessary or appropriate;
(ii) after the occurrence of an Unmatured Termination Event or a
Termination Event mark conspicuously each Contract evidencing each Pool
Receivable with a legend, acceptable to the Agent, evidencing that such
Undivided Interests have been sold and that the security interests have
been granted in accordance with this Agreement; and
(iii) mark its and each Originator's aging reports and any other
reports or records relating to the Pool Receivables with such legend.
(b) Seller hereby authorizes the Agent to file one or more financing or
continuation statements, and amendments thereto and assignments thereof,
relative to all or any of the Pool Receivables and the Related Security now
existing or hereafter arising in the name of Seller. If Seller fails to perform
any of its agreements or obligations under this Agreement, the Agent may (but
shall not be required to) itself perform, or cause performance of, such
agreement or obligation, and the expenses of the Agent incurred in connection
therewith shall be payable by Seller as provided in Section 13.01.
-------------
SECTION 8.06. Application of Collections. Any payment by an Obligor in
--------------------------
respect of any indebtedness owed by it to Seller shall be applied as a
Collection of any Pool Receivable or Pool Receivables of such Obligor to the
extent of any amounts then due and payable thereunder before such payment is
applied to any other indebtedness of such Obligor, unless (i) otherwise
specified by such Obligor, (ii) otherwise required by contract or law, or (iii)
the Agent instructs otherwise pursuant to instructions that do not violate
applicable contract or law or such Obligor's specifications.
SECTION 8.07. Miscellaneous Provision Concerning Servicing and Collection.
-----------------------------------------------------------
It is understood and agreed that the Agent, the Purchaser and the Servicer may
exercise their servicing and collection rights and duties (including the right
to settle) hereunder with respect to (i) 100% of each Receivable which
constitutes in whole a Pool Receivable and all Related Security and Collections
relating thereto and (ii) 100% of each Receivable
44
which constitutes in part a Pool Receivable (as a result of the Concentration
Limit or the Special Concentration Limit), in each case notwithstanding the fact
that Purchaser's security interest and/or ownership interest in such Receivable,
and the Related Security and Collections relating thereto may attach only to
part of such Receivable; provided, however, that (i) the foregoing shall not
-------- -------
give the Agent, the Servicer or the Purchaser, the right to conduct a
foreclosure sale under the Uniform Commercial Code or otherwise sell a portion
of a Receivable that is not subject to the security interest granted pursuant to
Section 9.01, and (ii) any Collections or other proceeds from a Receivable which
------------
do not constitute Collections or proceeds from the Undivided Interest (as
determined pursuant to the other terms and provisions of this Agreement as of
any day which does not occur during a Run Off Period as of such day and if such
day occurs during a Run Off Period on the last day immediately preceding the
commencement of such Run Off Period) shall be turned over to Seller as soon as
practicable following receipt. To the extent the Servicer or the Agent take any
action hereunder with respect to a portion of a Receivable that is not part of
Purchaser's Undivided Interest it is understood and agreed that such action
shall be taken pursuant to the terms of this Agreement and the other Agreement
Documents in a capacity as attorney-in-fact, with full power of substitution,
for the Seller, which power of attorney is hereby granted and shall be
irrevocable and is coupled with an interest.
ARTICLE IX
SECURITY INTEREST
SECTION 9.01. Transfers of Undivided Interests; Grant of Security Interest.
------------------------------------------------------------
The parties hereto intend the transfer of Undivided Interests pursuant to
this Agreement to constitute true sales for all purposes of such Undivided
Interests by Seller to Purchaser providing Purchaser with the full benefits of
ownership thereof, and no party hereto intends the transactions contemplated
hereunder to be, or for any purpose to be characterized as, a loan from
Purchaser to Seller or a grant of a security interest in the Undivided Interests
by Seller to Purchaser to secure a debt or other obligation of Seller. In the
event that, contrary to the express intent of the parties hereto and the terms
hereof, and to the extent that the conveyance of Undivided Interests to
Purchaser hereunder is characterized by a court or other governmental authority
or regulatory body of competent jurisdiction as a financing, it is intended by
the parties hereto that the assignment, conveyance and transfer by Seller of its
right, title and interest in the Undivided Interests to the Purchaser hereunder
constitute the grant of a security interest under the UCC (as defined in the UCC
as in
45
effect in the State of New York). Seller hereby assigns and grants to
Purchaser a first priority security interest in and against all of Seller's
right, title and interest in the Undivided Interests, whether now or hereafter
existing or acquired, due or to become due, direct or indirect, or absolute or
contingent, for the purpose of securing all obligations of Seller arising in
connection with this Agreement, the Certificate of Assignments and each other
Agreement Document including but not limited to any repayment of, in the case of
any aforesaid forced recharacterization, a loan deemed to have been made by
Purchaser to Seller in the amount of the Purchaser's Investment, all obligations
pursuant to Section 3.04, Indemnified Amounts, payments on account of
------------
Collections received or deemed to be received, fees and Earned Discount, in each
case pro rata according to the respective amounts thereof (the aggregate of the
--- ----
foregoing from time to time herein called the "Secured Obligations"); provided
------------------- --------
that (a) the Undivided Interest shall be calculated with respect to any day
which is not a Run Off Day as of such day, and if such day is a Run Off Day, as
of the day immediately preceding the first Run Off Day to have occurred during
the then current Run Off Period, and (b) in no event will the Collateral on any
day secure Secured Obligations in an amount in excess of the lesser of (x)
$82,500,000 and (y) 110% multiplied by the Aggregate Purchaser's Investments
calculated, if such day is a Run Off Day, on the day immediately preceding the
first Run Off Day to have occurred during the then current Run Off Period or if
such day is not a Run Off Day, on such day. In the event that and to the extent
that the conveyance of Undivided Interests hereunder is characterized by a court
of competent jurisdiction as a financing, the parties agree that this Agreement
constitutes a "security agreement" under applicable law.
SECTION 9.02. Further Assurances. The provisions of Section 8.05 shall
------------------ ------------
apply to the security interest granted under Section 9.01 as well as to the
------------
Purchases and all Undivided Interests hereunder.
SECTION 9.03. Remedies. Upon the occurrence of a Termination Event,
--------
Purchaser shall have, with respect to the collateral granted pursuant to Section
-------
9.01, and in addition to all other rights and remedies available to Purchaser or
----
the Agent under this Agreement or other applicable law, all the rights and
remedies of a secured party upon default under the UCC.
46
ARTICLE X
TERMINATION EVENTS
SECTION 10.01. Termination Events. If any of the following events
------------------
("Termination Events") shall occur:
--------------------
(a) (i) Servicer (if Seller) shall fail to perform or observe any
term, covenant or agreement hereunder (other than as referred to in
clause (ii) next following) or (ii) Servicer (if Seller) or Seller shall
-----------
fail to make any payment or deposit to be made by it hereunder when due,
or (iii) Seller shall fail to comply with Section 7.03(e), 7.03(f), or
--------------- -------
7.03(j); or
-------
(b) Any representation or warranty made or deemed to be made by
Seller (or any of its officers) under or in connection with this
Agreement or any Periodic Report or other information or report
delivered pursuant hereto shall prove to have been false or incorrect in
any material respect when made; or either the Purchaser or the Agent
shall determine, in its reasonable judgment, that the estimates by the
Seller of the actual Unpaid Balance of Pool Receivables or the Seller's
identification of Pool Receivables, Eligible Receivables or Ineligible
Receivables at any time, do not reflect Seller's best efforts, in good
faith, to estimate or identify such Unpaid Balance or such Receivables,
respectively; or
(c) Seller shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement on its part to be
performed or observed and any such failure shall remain unremedied for
ten days; or
(d) A default shall have occurred and be continuing under any
instrument or agreement evidencing, securing or providing for the
issuance of indebtedness for borrowed money in excess of $1,000,000 of,
or guaranteed by, Seller or any Affiliate thereof, which default if
unremedied, uncured, or unwaived (with or without the passage of time or
the giving of notice or both) would permit acceleration of the maturity
of such indebtedness and such default shall have continued unremedied,
uncured or unwaived for a period long enough to permit such acceleration
and any notice of default required to permit acceleration shall have
been given; or
(e) An Event of Bankruptcy shall have occurred and remained
continuing with respect to Seller, Originator or any Affiliate thereof;
or
47
(f) Seller or any Affiliate of Seller suffers the entry against it
of a final judgment for the payment of money in excess of $5,000,000
(not covered by effective insurance), unless the same is discharged
within thirty days after the date of entry thereof or an appeal or
appropriate proceeding for review thereof is taken within said period
and a stay of execution pending such appeal is obtained; or Seller or
any Affiliate of Seller suffers a writ or warrant of attachment or any
similar process to be issued by any court against all or any substantial
part of its property or any Pool Receivable, any Related Security or any
Collections with regard thereto, and such writ or warrant of attachment
or any similar process is not stayed or released within thirty days
after the entry or levy thereof or after any stay is vacated or set
aside; or
(g) The average of the Losses to Liquidations Ratio for any month
exceeds 2%; provided that such event shall constitute an Unmatured
--------
Termination Event for the first five (5) Business Days and a Termination
Event thereafter; or
(h) The average of the Default Ratio for any three consecutive
months exceeds 5%; provided that such event shall constitute an
--------
Unmatured Termination Event for the first five (5) Business Days and a
Termination Event thereafter; or
(i) The average of the Delinquency Ratio for any three consecutive
months exceeds 6%; provided that such event shall constitute an
--------
Unmatured Termination Event for the first five (5) Business Days and a
Termination Event thereafter; or
(j) The average of the Dilution Ratio for any three consecutive
months exceeds 5%; provided that such event shall constitute an
--------
Unmatured Termination Event for the first five (5) Business Days and a
Termination Event thereafter; or
(k) There shall have occurred any event which materially adversely
affects the collectibility of the Pool Receivables or there shall have
occurred any other event which materially adversely affects the ability
of Seller or Servicer to collect Pool Receivables or the ability of
Seller or Servicer to perform hereunder or the warranty in Section
-------
6.01(i)(y) shall not be true at any time; or
----------
(l) The Internal Revenue Service shall file notice of a lien
pursuant to Section 6323 of the Internal Revenue Code with regard to any
of the assets of Seller and such lien shall not have been released or
the Pension Benefit Guaranty
48
Corporation shall, or shall indicate its intention to, file notice of a
lien pursuant to Section 4068 of ERISA with regard to any of the assets
of Seller or its Subsidiaries; or
(m) The aggregate Undivided Interests exceed 100%; or
(n) Any Change of Control shall occur; or
(o) Seller's Preferred Stock ceases to be rated B+ or better by
Standard & Poor's Ratings Group or B or better by Moody's Investors
Service, Inc. in each case for a period of at least five (5) consecutive
days; or
(p) There shall have occurred a material adverse change in the
Consolidated financial condition, business, assets, operations or
prospects of the Seller and its Consolidated Subsidiaries and each
happening shall continue to exist three (3) Business Days after the
Agent or the Purchaser shall have given notice thereof to the Seller.
SECTION 10.02. Remedies. (a) Optional Termination. Upon the occurrence
-------- --------------------
of a Termination Event (other than a Termination Event described in subsection
----------
(a), (e) or (f) of Section 10.01), the Agent shall, at the request, or may with
--- --- --- -------------
the consent, of Purchaser, by notice to Seller declare the Commitment
Termination Date to have occurred.
(b) Automatic Termination. Upon the occurrence of a Termination Event
---------------------
described in subsection (a), (e) or (f) of Section 10.01, the Commitment
--------------- --- --- -------------
Termination Date shall be deemed to have occurred automatically upon the
occurrence of such event; provided however, that with respect to any proceeding
-------- -------
instituted against Seller pursuant to 11 U.S.C. (S)303 (an "Involuntary Federal
-------------------
Proceeding"), the settlement procedures described in Section 3.02 shall become
---------- ------------
applicable upon the commencement of such Proceeding and no further Purchases or
Reinvestments of Collections shall be made; and provided, further, that if such
-------- -------
Involuntary Federal Proceeding is dismissed within 60 days after its
commencement, and if no other Termination Event has occurred, then following
such dismissal, the Commitment shall be reinstated as if the Commitment
Termination Date had not occurred upon the commencement of such Involuntary
Federal Proceeding.
(c) Additional Remedies. Upon any termination of the Facility pursuant to
-------------------
this Section 10.02, the Agent and Purchaser shall have, in addition to all other
-------------
rights and remedies under this Agreement or otherwise, all other rights and
remedies provided under the UCC of each applicable jurisdiction and other
applicable laws, which rights shall be cumulative. Without limiting the
foregoing or the general applicability of
49
Article XII hereof, (i) the occurrence of a Termination Event shall not deny to
-----------
Purchaser any remedy in addition to termination of the Commitment to which
Purchaser may be otherwise appropriately entitled, whether at law or in equity,
and (ii) following the occurrence of any Termination Event Purchaser may elect
to assign to any Person any Undivided Interest owned by Purchaser.
ARTICLE XI
THE AGENT
SECTION 11.01. Authorization and Action. Purchaser hereby appoints and
------------------------
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to the Agent by the terms
hereof, together with such powers as are reasonably incidental thereto.
SECTION 11.02. Agent's Reliance, Etc. Neither the Agent nor any of its
---------------------
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or the Agent under or in connection with this
Agreement (including, without limitation, the servicing, administering or
collecting Pool Receivables as Servicer pursuant to Section 8.01), except for
------------
its or their own gross negligence or willful misconduct. Without limiting the
generality of the foregoing, the Agent: (a) may consult with legal counsel
(including counsel for Seller), independent certified public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (b) makes no warranty or representation to
Purchaser or any other holder of any interest in Pool Receivables and shall not
be responsible to Purchaser or any such other holder for any statements,
warranties or representations made in or in connection with this Agreement; (c)
shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement on the
part of Seller or to inspect the property (including the books and records) of
Seller; (d) shall not be responsible to Purchaser or any other holder of any
interest in Pool Receivables for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement, the
Certificate of Assignments or any Agreement Document; and (e) shall incur no
liability under or in respect of this Agreement by acting upon any notice
(including notice by telephone), consent, certificate or other instrument or
writing (which may be by facsimile or telex) believed by it to be genuine and
signed or sent by the proper party or parties.
50
SECTION 11.03. Agent and Affiliates. Bank of America and its Affiliates
--------------------
may generally engage in any kind of business with Seller or any Obligor, any of
their respective Affiliates and any Person who may do business with or own
securities of Seller or any Obligor or any of their respective Affiliates, all
as if Bank of America were not the Agent and without any duty to account
therefor to Purchaser or any other holder of an interest in Pool Receivables.
ARTICLE XII
ASSIGNMENT OF PURCHASER'S INTEREST
SECTION 12.01. Restrictions on Assignments. (a) Neither Seller nor
---------------------------
Purchaser may assign its rights hereunder or any interest herein without the
prior written consent of the Agent, and Purchaser may not assign any Undivided
Interest (or portion thereof) to any Person without the prior written consent of
Seller; provided, however, that
-------- -------
(i) Purchaser may assign, or grant a security interest in, any
Undivided Interest (or portion thereof) to Bank of America, any Program
Support Provider (or any successor of any thereof by merger,
consolidation or otherwise), any Affiliate of Bank of America, or any
Program Support Provider (which may then assign any Undivided Interest
(or portion thereof) so assigned or any interest therein to such party
or parties as it may choose provided any such further assignment shall
be in an amount of not less than $10,000,000 as of the time of such
assignment and provided further that the Person making such further
assignment agrees to notify the Seller of such assignment); and
(ii) Purchaser may assign and grant a security interest in any
interest in, to and under any Undivided Interest, this Agreement and the
other Agreement Documents to Bank of America, as Collateral Trustee, and
any successor in such capacity, to secure Purchaser's obligations under
or in connection with the Commercial Paper Notes, any Program Support
Agreement, and certain other obligations of Purchaser incurred in
connection with the funding of the Purchases and Reinvestments
hereunder, which assignment and grant of a security interest shall not
be considered an "assignment" for purposes of Section 12.01(b), Section
---------------- -------
12.03 or 12.04 or, prior to the enforcement of such security interest,
----- -----
for purposes of any other provision of this Agreement.
51
(b) Seller agrees to advise the Agent within five Business Days
after notice to Seller of any proposed assignment by Purchaser of any
Undivided Interest (or portion thereof), not otherwise permitted under
subsection (a), of Seller's consent or non-consent to such assignment.
--------------
If Seller does not consent to such assignment, Purchaser may immediately
assign such Undivided Interest (or portion thereof) to Bank of America,
any Program Support Provider or any Affiliate of Bank of America, or any
Program Support Provider. All of the aforementioned assignments shall be
upon such terms and conditions as Purchaser and the assignee may
mutually agree.
SECTION 12.03. Rights of Assignee. Upon the assignment by Purchaser of
------------------
any Undivided Interest (or portion thereof) in accordance with this Article XII,
-----------
(a) the assignee receiving such assignment shall have all of the rights of
Purchaser hereunder with respect to such Undivided Interest (or such portions
thereof) and (b) all references to Purchaser in Section 4.02 shall be deemed to
------------
apply to such assignee to the extent of its interest in the related Purchaser's
Investment and the related Collections.
SECTION 12.04. Allocation of Payments. If on any date there are
----------------------
sufficient funds in the Agent's account to distribute a portion, but not all, of
the amounts payable pursuant to subsection (c)(i) of either Section 3.01 or
----------------- ------------
Section 3.02 and, due to any assignment of any Undivided Interest (or portion
------------
thereof), such amounts are payable to more than one Person, then (unless
otherwise agreed between such Persons) (a) if any of such Persons is a Program
Support Provider, as assignee of or holder of a security interest in such
Undivided Interest pursuant to the relevant Program Support Agreement, then the
Agent shall distribute such funds (i) first to such Program Support Provider, to
the extent of its interest in such Undivided Interest (or shall hold such funds
in trust for such Program Support Provider pending distribution in accordance
with the Program Support Agreement) and (ii) second to such Program Support
Provider to the extent of its accrued and unpaid interest in any other Undivided
Interest (or shall hold such funds in trust for such Program Support Provider
pending distribution in accordance with the Program Support Agreement), before
distributing any such funds to any other Person, and (b) in all other cases, the
Agent shall distribute funds to such Persons pro rata based upon the amounts so
--- ----
payable to such Persons.
SECTION 12.04. Notice of Assignment. Purchaser shall provide notice to
--------------------
Seller of any assignment of any Undivided Interest (or portion thereof) by
Purchaser to any assignee, other than an assignment to a Program Support
Provider pursuant to a Program Support Agreement or to the Collateral Trustee.
52
SECTION 12.05. Evidence of Assignment; Endorsement on Certificate. Any
--------------------------------------------------
assignment of any Undivided Interest (or portion thereof) to any Person may be
evidenced by an instrument of assignment in the form of Exhibit 12.05 or by such
-------------
other instrument(s) or document(s) as may be satisfactory to Purchaser, the
Agent and the assignee. Purchaser authorizes the Agent to, and the Agent agrees
that it shall, endorse the Certificate of Assignments to reflect any assignments
made pursuant to this Article XII or otherwise.
-----------
SECTION 12.06. Rights of Program Support Provider and Collateral Trustee.
---------------------------------------------------------
Seller hereby agrees that, upon notice to Seller, a Program Support Provider and
the Collateral Trustee referred to in Section 12.01, or either of them, may
-------------
exercise all the rights of the Agent hereunder, in the case of a Program Support
Provider, with respect to Undivided Interests, and Collections with respect
thereto, which have been assigned (or in which a security interest has been
granted) to such Program Support Provider, and in the case of such Collateral
Trustee, with respect to all Undivided Interests (or portions thereof), and
Collections with respect thereto, which are owned by Purchaser (and not subject
to an assignment or security interest in favor of such Program Support Provider
under a Program Support Agreement), and all other rights and interests of
Purchaser in, to or under this Agreement or any other Agreement Document.
Without limiting the foregoing, upon such notice such Program Support Provider
and such Collateral Trustee, or either of them, may request Servicer to
segregate Purchaser's and Program Support Provider's allocable shares of
Collections from Seller's allocable share, and from each other's allocable
share, in accordance with Section 8.02(b), may give a Successor Notice pursuant
---------------
to Section 8.01(a), may give or require the Agent to give notice to the Lock-Box
---------------
Banks as referred to in Section 8.03(a), and may direct the Obligors of Pool
---------------
Receivables to make payments in respect thereof directly to an account
designated by them (provided that such Program Support Provider and such
Collateral Trustee together shall designate a single account for the making of
such payments with respect to any Pool Receivable), in each case, to the same
extent as the Agent might have done.
ARTICLE XIII
INDEMNIFICATION
SECTION 13.01. Indemnities by Seller. (a) General Indemnity. Without
---------------------- -----------------
limiting any other rights which any such Person may have hereunder or under
applicable law, Seller hereby agrees to indemnify each of the Agent, Purchaser,
each Program Support Provider, Bank of America, each of Bank of America's
53
Affiliates, their respective successors, transferees, participants and assigns
and all officers, directors, shareholders, controlling persons, employees and
agents of any of the foregoing (each an "Indemnified Party"), forthwith on
-----------------
demand, from and against any and all damages, losses, claims, liabilities and
related costs and expenses, including reasonable attorneys' fees and
disbursements (all of the foregoing being collectively referred to as
"Indemnified Amounts") awarded against or incurred by any of them arising out of
-------------------
or relating to this Agreement or the ownership or funding of any Undivided
Interest or in respect of any Receivable or any Contract, excluding, however,
--------- -------
(a) Indemnified Amounts to the extent resulting from gross negligence or willful
misconduct on the part of the Agent, Purchaser or such Indemnified Party or (b)
recourse (except as otherwise specifically provided in Section 3.04 and recourse
arising for occurrences and conditions other than solely as a result of the
credit of the Obligor) for Defaulted Receivables. Without limiting the
foregoing, Seller shall indemnify each Indemnified Party for Indemnified Amounts
arising out of or relating to:
(i) the transfer by Seller of any interest in any Pool Receivable other
than the transfer of an Undivided Interest to Purchaser pursuant to this
Agreement and the grant of a security interest to Purchaser pursuant to
Section 9.01;
------------
(ii) the breach of any representation or warranty made by Seller (or any of
its officers) under or in connection with this Agreement, any Periodic Report
or any other information or report delivered by Seller pursuant hereto, which
shall have been false or incorrect in any material respect when made or deemed
made;
(iii) the failure by Seller to comply with any applicable law, rule,
regulation or tariff with respect to any Pool Receivable or the related
Contract, or the nonconformity of any Pool Receivable or the related Contract
with any such applicable law, rule or regulation;
(iv) the failure to vest and maintain vested in Purchaser an undivided
percentage ownership interest, to the extent of each Undivided Interest owned
by it hereunder, in the Receivables in, or purporting to be in, the
Receivables Pool, free and clear of any Adverse Claim, other than (a) an
Adverse Claim arising solely as a result of an act of Purchaser, any assignee
from Purchaser or the Agent (when used in this clause (iv), an Adverse Claim
-----------
shall include any lien for taxes whether accrued and payable or not), whether
existing at the time of any Purchase or Reinvestment of such Undivided
Interest or at any time thereafter;
54
(v) any holder of a lien or security interest conveyed or perfected
pursuant to Section 9.319 of the UCC of the State of Texas, Section 84-9-319 of
the UCC of the State of Kansas, Section 34.1-9-319 of the UCC of the State of
Wyoming, the Oil and Gas Products Lien Act, New Mexico Statutes Annotated (S)(S)
48-9-1 - 48-9-8 (1978), or the Oil and Gas Owners' Lien Act, 52 Oklahoma
Statutes Annotated (S)(S) 548 - 548.6 (or a comparable provision of any law or
any similar statute of any other jurisdiction) taking any step to enforce such
lien or security interest or to perfect any such lien or security interest with
respect to any Receivable (other than automatic perfection or perfection by
recording in the real estate records of a county clerk as provided in Section
9.319 of the UCC of the State of Texas, Section 84-9-319 of the State of Kansas,
Section 34.1-9-319 of the UCC of the State of Wyoming, or in a comparable
provision of any law or any similar statute of any other jurisdiction)
including, without limitation, attempting to perfect by filing or sending
notices of lien as provided in the Oil and Gas Products Lien Act, New Mexico
Statutes Annotated (S)(S) 48-9-5 (1978), the Oil and Gas Owners' Lien Act, 52
Oklahoma Statutes Annotated (S)(S) 548.2 C and 548.4 or a comparable provision
of any law or any similar statute of any other jurisdiction;
(vi) the failure to file, or any delay in filing, financing statements or
other similar instruments or documents under the UCC of any applicable
jurisdiction or other applicable laws with respect to any receivables in, or
purporting to be in, the Receivables Pool, whether at the time of any Purchase
or Reinvestment or at any time thereafter including, without limitation, the
failure to file or any delay in filing financing statements or other similar
instruments or documents and in the form required under the UCC with respect to
any account arising at the wellhead in any county or parish where a mortgage in
the real estate would be filed or recorded;
(vii) any dispute, claim, offset or defense (other than preferential claims
or discharges in bankruptcy) of the Obligor to the payment of any Receivable in,
or purporting to be in, the Receivables Pool (including, without limitation, a
defense based on such Receivable's or the related Contract's not being a legal,
valid and binding obligation of such Obligor enforceable against it in
accordance with its terms including any defense resulting from adjustments
relating to any discrepancies in estimated and actual volumes, deliveries,
prices or ownership) or any other claim resulting from the sale of the
merchandise or services related to such Receivable or the furnishing or failure
to furnish such merchandise or services;
55
(viii) any failure of Seller, as Servicer or otherwise, to perform its
duties or obligations in accordance with the provisions of Article VIII;
------------
(ix) any products liability or damage claim arising out of or in
connection with merchandise or services that are the subject of any Pool
Receivable;
(x) any tax or governmental fee or charge (but not including taxes upon
or measured by net income), all interest and penalties thereon or with respect
thereto, and all out-of-pocket costs and expenses, including the reasonable fees
and expenses of counsel in defending against the same, which may arise by reason
of the purchase or ownership of any Undivided Interest, or any other interest in
the Pool Receivables or in any goods which secure any such Pool Receivables; or
(xi) the use of estimates in calculating Undivided Interests, Pool
Receivables or Receivables whether or not such estimates are made pursuant to
the provisions of Section 2.01(c) and/or Exhibit 2.01(c), and the failure to
--------------- ---------------
bill or delay in billing any Receivable; provided that Seller shall not be
--------
responsible hereunder for failure to pay Earned Discount calculated as if a Run
Off Day had occurred, as a result of the use of estimates in the daily
administration of this Agreement if Seller complied in full acting in good faith
with the provisions of Section 2.01(c) including any request made by Agent on
---------------
the modification of the estimation procedures; or
(xii) the failure to identify and segregate Ineligible Receivables or
Collections therefrom properly or to notify the Agent and the Purchaser thereof
promptly in accordance with the provisions of this Agreement; or
(xiii) the failure to pay deemed Collections with respect to Pool
Receivables which become Ineligible Receivables prior to the Commitment
Termination Date.
(b) Contest of Tax Claim; After-Tax Basis. If any Indemnified Party
-------------------------------------
shall have notice of any attempt to impose or collect any tax or governmental
fee or charge for which indemnification will be sought from Seller under
Section 13.01(a), such Indemnified Party shall give prompt and timely notice
----------------
of such attempt to Seller and Seller shall have the right, at its expense, to
conduct or participate in any proceedings resisting or objecting to the
imposition or collection of any such tax, governmental fee or charge.
Indemnification hereunder shall be in an amount necessary to make the
Indemnified Party whole after taking into account any tax
56
consequences to the Indemnified Party of the payment of any of the aforesaid
taxes and the receipt of the indemnity provided hereunder or of any refund of
any such tax previously indemnified hereunder, including the effect of such tax
or refund on the amount of tax measured by net income or profits which is or was
payable by the Indemnified Party.
(c) Contribution. If for any reason the indemnification provided above in
------------
this Section 13.01 is unavailable to an Indemnified Party or is insufficient to
-------------
hold an Indemnified Party harmless, then Seller shall contribute to the amount
paid or payable by such Indemnified Party as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect not only the
relative benefits received by such Indemnified Party on the one hand and Seller
on the other hand but also the relative fault of such Indemnified Party as well
as any other relevant equitable considerations.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.01. Amendments, Etc. No amendment or waiver of any provision
---------------
of this Agreement nor consent to any departure by Seller therefrom shall in any
event be effective unless the same shall be in writing and signed by (a) Seller,
the Agent and Purchaser (with respect to an amendment) or (b) the Agent and
Purchaser (with respect to a waiver or consent by them) or Seller (with respect
to a waiver or consent by it), as the case may be, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 14.02. Notices, Etc. All notices and other communications
------------
provided for hereunder shall, unless otherwise stated herein, be in writing
(including Telex and facsimile communication) and shall be personally delivered
or sent by certified mail, postage prepaid, or by Telex, or by facsimile, to the
intended party at the address or Telex or facsimile number of such party set
forth under its name on the signature pages hereof or at such other address or
Telex or facsimile number as shall be designated by such party in a written
notice to the other parties hereto. All such notices and communications shall
be effective, (a) if personally delivered, when received, (b) if sent by
certified mail, three Business Days after having been deposited in the mail,
postage prepaid, (c) if sent by overnight courier, one Business Day after having
been given to such courier, (d) if transmitted by Telex, when sent, answerback
confirmed, and (e) if transmitted by facsimile, when sent, receipt confirmed by
telephone or electronic means, except that notices and
57
communications pursuant to Article I shall not be effective until received.
---------
SECTION 14.03. No Waiver; Remedies. No failure on the part of the Agent,
-------------------
any Affected Party, any Indemnified Party, Purchaser or any other holder of any
Undivided Interest to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law. Without limiting the foregoing,
each of Bank of America, and each Program Support Provider is hereby authorized
by Seller at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by Bank of America, and each Program Support Provider to or for the
credit or the account of Seller, now or hereafter existing under this Agreement,
to the Agent, any Affected Party, any Indemnified Party or Purchaser, or their
respective successors and assigns.
SECTION 14.04. Binding Effect; Survival. This Agreement shall be binding
------------------------
upon and inure to the benefit of Seller, the Agent, Purchaser and their
respective successors and assigns, and the provisions of Section 4.02 and
------------
Article XIII shall inure to the benefit of the Affected Parties and the
------------
Indemnified Parties, respectively, and their respective successors and assigns;
provided, however, nothing in the foregoing shall be deemed to authorize any
-------- -------
assignment not permitted by Section 12.01. This Agreement shall create and
-------------
constitute the continuing obligations of the parties hereto in accordance with
its terms, and shall remain in full force and effect until such time, after the
Commitment Termination Date, as all Undivided Interests shall have been reduced
to zero. The rights and remedies with respect to any breach of any
representation and warranty made by Seller pursuant to Article VI and the
----------
indemnification and payment provisions of Article XIII and Sections 4.02,
------------ -------------
14.05, 14.06, 14.07 and 14.08 shall be continuing and shall survive any
----- ----- ----- -----
termination of this Agreement.
SECTION 14.05. Costs, Expenses and Taxes. In addition to its obligations
-------------------------
under Article XIII, Seller agrees to pay on demand:
------------
(a) all costs and expenses incurred by the Agent, Purchaser, Bank of
America, each Program Support Provider and their respective Affiliates
in connection with the negotiation, preparation, execution and delivery,
the administration (including periodic auditing, one collateral
58
audit to be completed within three months after the date hereof (or such
other date as the Agent shall determine) and semi-annual collateral audits
of Seller) or the enforcement of, or any actual or claimed breach of, this
Agreement, the Certificate of Assignments and the other Agreement
Documents, including, without limitation (i) the reasonable fees and
expenses of counsel (including allocated costs of staff counsel) to any of
such Persons incurred in connection with any of the foregoing or in
advising such Persons as to their respective rights and remedies under any
of the Agreement Documents, and (ii) all reasonable out-of-pocket expenses
(including reasonable fees and expenses of independent accountants)
incurred in connection with any review of Seller's books and records
either prior to the execution and delivery hereof or pursuant to
Section 7.01(c); and
---------------
(b) all stamp and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing and recording
of this Agreement, the Certificate of Assignments or the other Agreement
Documents, and agrees to indemnify each Indemnified Party against any
liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and fees.
SECTION 14.06. No Proceedings. Seller and Bank of America, individually
--------------
and as Agent, each hereby agrees that it will not institute against Purchaser,
or join any other Person in instituting against Purchaser, any insolvency
proceeding (namely, any proceeding of the type referred to in the definition of
Event of Bankruptcy) so long as any Commercial Paper Notes issued by Purchaser
shall be outstanding or there shall not have elapsed one year plus one day since
the last day on which any such Commercial Paper Notes shall have been
outstanding. The foregoing shall not limit Seller's right to file any claim in
or otherwise take any action with respect to any insolvency proceeding that was
instituted by any Person other than Seller.
SECTION 14.07. Confidentiality of Seller Information. (a) Each party
-------------------------------------
hereto (other than Seller) acknowledges that certain of the information provided
to such party by or on behalf of Seller in connection with this Agreement and
the transactions contemplated hereby is or may be confidential, and each such
party severally agrees that, unless Seller shall otherwise agree in writing, and
except as provided in subsection (b), such party will not disclose to any other
--------------
person or entity:
(i) any information regarding, or copies of, this Agreement or any
transaction contemplated hereby including the identity of Seller,
59
(ii) any information regarding, or copies of, any Periodic Reports and
any non-public financial statements, reports and other information,
furnished by Seller to Purchaser or the Agent pursuant to Section 3.05,
------------
5.01(m), 6.01(i), 6.01(j), 7.01(c) or 7.02, or
------- ------- ------- ------- ----
(iii) any other information regarding Seller which is designated by
Seller to such party in writing or otherwise as confidential
(the information referred to in clauses (i), (ii) and (iii) above, whether
----------- ---- -----
furnished by Seller, or any attorney for or other representative of Seller (each
a "Seller Information Provider"), is collectively referred to as the "Seller
--------------------------- ------
Information"; provided, however, "Seller Information" shall not include
----------- -------- ------- ------------------
(A) any information which is or becomes generally available
to the general public or to such party on a nonconfidential basis from
a source other than Seller, or any other Seller Information Provider,
or which was known to such party on a nonconfidential basis prior to
its disclosure by Seller or any other Seller Information Provider, or
(B) general information regarding the nature of this
Agreement, the basic terms hereof (including without limitation the
amount and nature of Purchaser's commitment and Purchaser's
Investments hereunder and of the recourse or other credit enhancement
provided by Seller hereunder), the nature, amount and status of the
Pool Receivables, the current and/or historical ratios of losses to
liquidations and/or outstandings with respect to the Receivables Pool.
(b) Notwithstanding subsection (a), each party may disclose any Seller
--------------
Information:
(i) to any of such party's independent attorneys, consultants and
auditors, and to such of Program Support Provider, any dealer or placement
agent for Purchaser's commercial paper, and any actual or potential
assignees, agents, pledgees, or trustees of, or participants in, any of the
rights or obligations of Purchaser, any Program Support Provider or Bank of
America under or in connection with this Agreement, who (A) in the good
faith belief of such party, have a need to know such Seller Information,
(B) are informed by such party of the confidential nature of the Seller
Information and the terms of this Section 14.07, and (C) are subject to
-------------
confidentiality restrictions generally consistent with this Section 14.07,
-------------
60
(ii) to any rating agency that maintains a rating for Purchaser's
commercial paper or is considering the issuance of such a rating, for the
purposes of reviewing the credit of Purchaser in connection with such
rating,
(iii) to any other party to this Agreement, for the purposes
contemplated hereby,
(iv) in the case of the identity of the Seller, to any Person whom any
dealer or placement agent for Purchaser shall have identified as an actual
or potential investor in Commercial Paper Notes, and who shall have agreed
with Bank of America in writing to keep such information confidential and
use it only in connection with considering or monitoring such investments,
subject to applicable legal requirements (it being understood that such
Person may also receive the information excluded from the definition of
"Seller Information" pursuant to clause (B) of subsection (a)),
---------- --------------
(v) as may be required by law (including any securities law) or by any
municipal, state, federal or other regulatory body having or claiming to
have jurisdiction over such party, in order to comply with any law, order,
regulation, regulatory request or ruling applicable to such party, or
(vi) subject to subsection (c), in the event such party is legally
--------------
compelled (by interrogatories, requests for information or copies,
subpoena, civil investigative demand or similar process) to disclose such
Seller Information.
(c) In the event that any party hereto (other than Seller) or any of its
representatives is requested or becomes legally compelled (by interrogatories,
requests for information or documents, subpoena, civil investigative demand or
similar process) to disclose any of the Seller Information, such party will (or
will cause its representatives to)
(i) provide Seller with prompt written notice so that (A) Seller or
any other Seller Information Provider may seek a protective order or other
appropriate remedy, or (B) Seller may, if it so chooses, agree that such
party (or its representatives) may disclose such Seller Information
pursuant to such request or legal compulsion;
(ii) unless Seller agrees that such Seller Information may be
disclosed, make a timely objection to the request or compulsion to provide
such Seller Information on the basis that such Seller Information is
confidential and subject to the agreements contained in this Section 14.07;
-------------
61
(iii) take any action as Seller or any other Seller Information
Provider may reasonably request to seek a protective order or other
appropriate remedy, provided that, in connection therewith, such party
--------
shall have first received such assurances as it may reasonably request that
Seller or such other Seller Information Provider shall reimburse such
party's or its representatives' reasonable costs and expenses or provide
such other assistance as such party or its representatives may reasonably
require; and
(iv) in the event that such protective order or other remedy is not
obtained, or Seller agrees that such Seller Information may be disclosed,
furnish only that portion of the Seller Information which is legally
required to be furnished, and, provided such party (or its representative)
is reimbursed or assisted as referred to in clause (iii) above, exercise
------------
best efforts to obtain reliable assurance that confidential treatment will
be accorded the Seller Information.
(d) This Section 14.07 shall survive termination of this Agreement.
-------------
SECTION 14.08. Confidentiality of BofA Information. (a) Each party hereto
------------------------------------
(other than Bank of America) acknowledges that Bank of America regards the
structure of the transactions contemplated by this Agreement, and by any Program
Support Agreement and the other Program Documents referred to therein, to be
proprietary, and each such party severally agrees that:
(i) unless Bank of America shall otherwise agree in writing, and
except as provided in subsection (b), such party will not disclose to
--------------
any other person or entity:
(A) any information regarding, or copies of, this Agreement or any
transaction contemplated hereby,
(B) any information regarding, or copies of, any Program Support
Agreement, any of the other Program Documents referred to therein, or any
transaction contemplated thereby,
(C) any information regarding the organization or business of
Purchaser generally, or
(D) any information regarding Bank of America which is
designated by Bank of America to such party in writing or otherwise as
confidential or not otherwise available to the general public
62
(the information referred to in clauses (A), (B), (C) and (D) above, whether
----------- --- --- ---
furnished by Purchaser, Bank of America, any Program Support Provider, any
assignee of or participant in any rights or obligations of Purchaser, or any
Program Support Provider or any attorney for or other representative of any of
the foregoing (each a "BofA Information Provider"), is collectively referred to
-------------------------
as the "BofA Information"; provided, however, "BofA Information" shall not
---------------- -------- ------- ----------------
include any information which is or becomes generally available to the general
public or to such party on a nonconfidential basis from a source other than Bank
of America or any other BofA Information Provider, or which was known to such
party on a nonconfidential basis prior to its disclosure by Bank of America or
any other BofA Information Provider);
(ii) such party will make the BofA Information available to only such
of its officers, directors, employees and agents who (A) in the good faith
belief of such party, have a need to know such BofA Information, (B) are
informed by such party of the confidential nature of the BofA Information and
the terms of this Section 14.08, and (C) are subject to confidentiality
-------------
restrictions consistent with this Section 14.08;
-------------
(iii) such party will use the BofA Information solely for the purposes
of evaluating, administering and enforcing the transactions contemplated by
this Agreement and making any necessary business judgments with respect
thereto; and
(iv) such party will, upon demand, return (and cause each of its
officers, directors, employees, agents, attorneys, consultants or auditors
(collectively, "representatives") to return) to Bank of America, or to such
---------------
other BofA Information Provider as shall have furnished it with any BofA
Information, all documents or other written material received from Bank of
America or such other BofA Information Provider which constitute or contain
any Information described in subclause (B), (C), or (D) of clause (i) above
------------- --- --- ----------
and all copies of such documents or other material in its possession or in
the possession of any of its representatives, and will not retain any copy,
summary or extract thereof on any storage medium whatsoever.
(b) Notwithstanding clause (i) of subsection (a), each party may disclose
---------- --------------
any BofA Information:
(i) to its independent attorneys, consultants and auditors who (A) in
the good faith belief of such party, have a need to know such BofA
Information, (B) are informed by such party of the confidential nature of
the BofA Information and the terms of this Section 14.08, and (C) are
-------------
63
subject to confidentiality restrictions consistent with this Section 14.08,
-------------
(ii) to any other party to this Agreement, for the purposes contemplated
hereby,
(iii) as may be required by any municipal, state, federal or other
regulatory body having or claiming to have jurisdiction over such party, in
order to comply with any law, order, regulation, regulatory request or ruling
applicable to such party, or
(iv) subject to subsection (c), in the event such party is legally
--------------
compelled (by interrogatories, requests for information or copies, subpoena,
civil investigative demand or similar process) to disclose such BofA
Information.
(c) In the event that any party hereto (other than Bank of America) or any
one to whom such party or its representatives transmits the BofA Information is
requested or becomes legally compelled (by interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar
process) to disclose any of the BofA Information, such party will (or will cause
its representatives to)
(i) provide Bank of America with prompt written notice so that (A)
Purchaser, Bank of America, or any other BofA Information Provider may seek a
protective order or other appropriate remedy, or (B) Bank of America may, if
it so chooses, agree that such party (or its representatives) may disclose
such BofA Information pursuant to such request or legal compulsion;
(ii) unless Bank of America agrees that such BofA Information may be
disclosed, make a timely objection to the request or compulsion to provide
such BofA Information on the basis that such BofA Information is confidential
and subject to the agreements contained in this Section 14.08;
-------------
(iii) take any action as Bank of America or any other BofA Information
Provider may reasonably request to seek a protective order or other
appropriate remedy; and
(iv) in the event that such protective order or other remedy is not
obtained, or Bank of America agrees that such BofA Information may be
disclosed, furnish only that portion of the BofA Information which is legally
required to be furnished, and exercise best efforts to obtain reliable
assurance that confidential treatment will be accorded the BofA Information.
64
(d) This Section 14.08 shall survive termination of this Agreement.
------------
SECTION 14.09. Captions and Cross References. The various captions
------------------------------
(including, without limitation, the table of contents) in this Agreement are
provided solely for convenience of reference and shall not affect the meaning or
interpretation of any provision of this Agreement. Unless otherwise indicated,
references in this Agreement to any Section, Appendix, Schedule or Exhibit are
to such Section of or Appendix, Schedule or Exhibit to this Agreement, as the
case may be, and references in any Section, subsection, or clause to any
subsection, clause or subclause are to such subsection, clause or subclause of
such Section, subsection or clause.
SECTION 14.10. Integration. This Agreement contains a final and complete
------------
integration of all prior expressions by the parties hereto with respect to the
subject matter hereof and shall constitute the entire Agreement among the
parties hereto with respect to the subject matter hereof, superseding all prior
oral or written understandings.
SECTION 14.11. GOVERNING LAW. THIS AGREEMENT, INCLUDING THE RIGHTS AND
--------------
DUTIES OF THE PARTIES HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE
PERFECTION OF THE INTERESTS OF THE PURCHASERS IN THE RECEIVABLES IS GOVERNED BY
THE LAWS OF THE JURISDICTION OTHER THAN THE STATE OF NEW YORK.
SECTION 14.12. WAIVER OF JURY TRIAL . EACH OF SELLER, PURCHASER AND AGENT
---------------------
HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, THE CERTIFICATE OF
ASSIGNMENTS, ANY OTHER AGREEMENT DOCUMENT OR UNDER ANY AMENDMENT, INSTRUMENT OR
DOCUMENT DELIVERED OR WHICH MAY BE IN THE FUTURE BE DELIVERED IN CONNECTION
HEREWITH OR ARISING FROM ANY BANKING OR OTHER RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT, THE CERTIFICATE OF ASSIGNMENTS OR ANY OTHER
AGREEMENT DOCUMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT A JURY TRIAL.
SECTION 14.13. CONSENT TO JURISDICTION; WAIVER OF IMMUNITIES. EACH OF
----------------------------------------------
SELLER AND PURCHASER HEREBY ACKNOWLEDGES AND AGREES THAT:
(a) IT IRREVOCABLY (i) SUBMITS TO THE JURISDICTION, FIRST, OF ANY
UNITED STATES FEDERAL COURT, AND SECOND, IF FEDERAL JURISDICTION IS NOT
AVAILABLE, OF ANY NEW YORK STATE COURT, IN EITHER CASE SITTING IN THE BOROUGH OF
MANHATTAN, NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, (ii) AGREES THAT ALL
65
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
ONLY IN SUCH NEW YORK STATE OR FEDERAL COURT AND NOT IN ANY OTHER COURT,
AND (iii) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING.
(b) TO THE EXTENT THAT IT HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
THE JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH
SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID TO
EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY,
IT HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS
UNDER OR IN CONNECTION WITH THIS AGREEMENT.
SECTION 14.14. Execution in Counterparts; Effectiveness. This Agreement
-----------------------------------------
may be executed in any number of counterparts and by the different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one and
the same Agreement. This Agreement shall become effective when counterparts
hereof executed on behalf of the Seller and the Purchaser (or notice thereof
satisfactory to the Agent) shall have been received by the Agent and notice
thereof shall have been given by the Agent to the Seller and the Purchaser.
[SIGNATURES FOLLOW]
66
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
RECEIVABLES CAPITAL CORPORATION,
as Purchaser
By_________________________________
Title______________________________
c/o Merrill Lynch Money Markets Inc.
World Financial Center - South Tower
225 Liberty Street - 8th Floor
New York, New York 10080
Attention: Mr. Gary Carlin
Telephone Number: (212) 236-7200
Facsimile Number: (212) 236-7584
With a copy to:
Merrill Lynch Money Markets Inc.
5500 Sears Tower
Chicago, Illinois 60606
Telephone Number: (312) 993-2497
Facsimile Number: (312) 993-2497
Attention: Mr. John Pratt
And with a copy to the Agent (except in the case
of notice from the Agent)
67
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
as the Agent
By_______________________________
Title____________________________
231 South LaSalle Street
Chicago, Illinois 60697
Facsimile No.: (312) 828-7855
Attention: Asset Securitization
Group
Eurodollar Office:
231 South LaSalle Street
Chicago, Illinois 60697
WESTERN GAS RESOURCES, INC.,
as Seller and initial Servicer
By_______________________________
Title____________________________
12200 North Pecos Street
Denver, Colorado 80234
Facsimile No.: (303) 254-9794
Attention: Vice President - Finance
68
APPENDIX A
DEFINITIONS
This is Appendix A to the Receivables Purchase Agreement dated as of
----------
February 28, 1995 among Western Gas Resources, Inc., Receivables Capital
Corporation and Bank of America National Trust and Savings Association, as Agent
(as amended, supplemented or otherwise modified from time to time, this
"Agreement"). Each reference in this Appendix A to any Section, Appendix or
---------- ----------
Exhibit refers to such Section of or Appendix or Exhibit to this Agreement.
INDEX
Page No.
--------
A. Defined Terms ........................................... A-1
B. Other Terms ............................................. A-20
C. Computations of Time Periods ............................ A-21
A. Defined Terms. As used in this Agreement, unless the context requires a
-------------
different meaning, the following terms have the meanings indicated hereinbelow:
"Adjusted Average Maturity" has the meaning set forth in Appendix B.
------------------------- ----------
"Adverse Claim" means a lien, security interest, charge, or encumbrance, or
-------------
other right or claim of any Person other than (a) a potential claim or right
(that has not yet been asserted) of a trustee appointed for an Obligor in
connection with any Event of Bankruptcy or (b) an unfiled lien for taxes accrued
but not yet payable; provided, that a right of setoff (whether arising by
--------
contract entered into in the ordinary course of business or by operation of law)
shall not be deemed an "Adverse Claim"; provided, however that Seller shall, and
------------- -------- -------
shall cause each Originator to, use its best efforts (x) not to enter into any
contractual setoff rights and (y) to monitor and, upon Agent's request, to
provide reports as to, Contracts containing contractual setoff rights;
notwithstanding the foregoing, the Agent may exclude as an Eligible Receivable
any Receivable subject to any right of setoff, it being understood that any
Receivable that is subject to a known offset shall not constitute an Eligible
Receivable.
A-1
"Affected Party" means each of Purchaser, each Program Support Provider, any
--------------
permitted assignee of Purchaser or any Program Support Provider any assignee of
any of Purchaser's obligations to a Program Support Provider in respect of any
Funding, and any holder of a participation interest in the rights and
obligations of any Program Support Provider under a Program Support Agreement
and in respect of any Funding, the Agent, Bank of America and any holding
company of Bank of America.
"Affected Receivables" means each of those Receivables listed in that certain
--------------------
letter agreement dated the date hereof from Seller to Purchaser and Agent, being
Receivables affected by a computer system malfunction at a certain pipeline
company (as more fully described in such letter agreement) which occurred prior
to the date of the Agreement as represented by the Seller to the Purchaser
pursuant to Section 6.01(u).
---------------
"Affiliate" when used with respect to a Person means any other Person
---------
controlling, controlled by, or under common control with, such Person provided
--------
that directors of the Seller that are "affiliates" of the Seller solely as a
result of a designation as such required by the rules and regulations of the
Securities and Exchange Commission shall not be considered Affiliates of the
Seller under this Agreement. A Person shall be deemed to be "controlled by" any
other Person if such other Person owns or holds 50% or more of any class of
voting securities of such Person or possesses, directly or indirectly, power to
vote 50% or more of the securities (on a fully diluted basis) having ordinary
voting power for the election of directors or managing general partners.
"Affiliated Obligors" has the meaning set forth in Section 2.04.
------------------- ------------
"Agent" has the meaning set forth in the preamble.
----- --------
"Agreement Documents" means this Agreement, the Certificate of Assignments,
-------------------
the Assignment Agreement and the other documents to be executed and delivered in
connection herewith.
"Aggregate Purchaser's Investments" at any time means the sum of the Dollar
---------------------------------
amount of all Purchaser's Investments.
"Aggregate Required Allocations" at any time means the sum of all Required
------------------------------
Allocations of all Undivided Interests.
"Alternate Reference Rate" has the meaning set forth in Appendix B.
------------------------ ----------
"Arrangement Fee" has the meaning set forth in Section 4.01(a).
--------------- ---------------
A-2
"Assignment Agreement" means the Assignment Agreement dated as of February 28,
--------------------
1995, among Seller and the Originators, as it may be amended, supplemented or
otherwise modified from time to time with the consent of the Agent.
"Average Maturity" has the meaning set forth in Appendix B.
---------------- ----------
"Bank of America" has the meaning set forth in the preamble.
--------------- --------
"Bank Rate" has the meaning set forth in Appendix B.
--------- ----------
"Business Day" means a day on which both (a) the Agent at its principal office
------------
in Chicago, Illinois is open for business and (b) commercial banks in New York
City are not authorized or required to be closed for business.
"Certificate of Assignments" means a certificate of assignment, by Seller to
--------------------------
the Agent, in the form of Exhibit 5.01(a), evidencing an Undivided Interest
---------------
owned by Purchaser or an assignee thereof.
"Change of Control" means any of the following: (i) the occurrence of a
-----------------
Founders Ownership Change; or (ii) Brion G. Wise ceases to be a director of
Seller for reasons other than death or disability; or (iii) Bill M. Sanderson
ceases to be a director of Seller for reasons other than death or disability.
For purposes of this definition, a "Founders Ownership Change" shall be deemed
to have occurred at any point in time at which a Person or Persons acting in
concert (such Person or Persons herein referred to as an "Acquiring Person")
obtain legal or beneficial ownership (within the meaning of Rule 13d-3,
promulgated by the Securities and Exchange Commission and now in effect under
the Securities Exchange Act of 1934, as amended) of a number of Voting Shares
greater than or equal to the Voting Shares owned by the Founders at the time of
calculation. For purposes of calculating the number of Voting Shares of any
Founder for purposes of this definition, the Voting Shares owned legally or
beneficially by such Founder shall be included in the Voting Shares of an
Acquiring Person (and excluded from the Voting Shares of the remaining Founders)
if such Founder votes his Voting Shares in concert with an Acquiring Person
against the remaining Founders in (A) an election for the Board of Directors or
(B) the modification of the Seller's certificate of incorporation or by-laws.
"Collateral" has the meaning set forth in Section 9.01.
---------- ------------
"Collections" means, with respect to any Receivable, all funds which either
-----------
(a) are received by Seller or Servicer from or on behalf of the related Obligors
in payment of any amounts owed (including, without limitation, purchase prices,
finance charges,
A-3
interest and all other charges) in respect of such Receivable,
or applied to such amounts owed by such Obligors (including, without limitation,
insurance payments that Seller or Servicer applies in the ordinary course of its
business to amounts owed in respect of such Receivable and net proceeds of sale
or other disposition of repossessed goods or other collateral or property of the
Obligor or any other party directly or indirectly liable for payment of such
Receivable and available to be applied thereon), or (b) are deemed to have been
received by Seller or any other Person as a Collection pursuant to Section 3.03
------------
or 3.04; provided that, prior to such time as Seller shall cease to be Servicer,
---- -------- ----
late payment charges, collection fees and extension fees shall not be deemed to
be Collections.
"Commercial Paper Notes" means short-term promissory notes issued or to be
----------------------
issued by Purchaser to fund its investments in accounts receivable or other
financial assets.
"Commercial Paper Rate" has the meaning set forth in Appendix B.
--------------------- ----------
"Commitment" has the meaning set forth in Section 1.01.
---------- ------------
"Commitment Termination Date" has the meaning set forth in Section 1.05(a).
--------------------------- ---------------
"Concentration Limit" has the meaning set forth in Section 2.04(b).
------------------- ---------------
"Conditions Precedent" has the meaning set forth in Section 5.02.
-------------------- ------------
"Consolidated" refers to the consolidation of any Person, in accordance with
------------
generally accepted accounting principles, with its properly consolidated
Subsidiaries. References herein to a Person's Consolidated financial
statements, financial position, financial condition, liabilities, etc. refer to
the consolidated financial statements, financial position, financial condition,
liabilities, etc. of such Person and its properly consolidated Subsidiaries.
"Contract" means a contract between Seller and any Person or between any
--------
Originator and any Person or an open account agreement with any Person, in each
case pursuant to or under which such Person shall be obligated to make payments
to Seller or such Originator for the sale, transportation, gathering, treating,
processing, storing or transferring of Natural Gas by Seller or such Originator
from time to time.
"Credit and Collection Policy" means those credit and collection policies and
----------------------------
practices relating to Contracts and
A-4
Receivables described in Schedule 6.01(p)-2, as modified without violating
------------------
Section 7.03(c).
---------------
"Debt to Capitalization Ratio" means, at the time of determination, the ratio
----------------------------
of (a) the Adjusted Funded Debt of Seller to (b) the sum of (i) the Adjusted
Funded Debt of Seller plus (ii) Seller's Shareholders' Equity. As used in this
----
definition, "Shareholders' Equity" means the remainder of (1) Seller's
consolidated assets minus (2) the sum of (x) Seller's consolidated liabilities
-----
plus (y) all treasury stock of Seller and its Subsidiaries plus (z) all
intangible assets of Seller and its Subsidiaries (including without limitation
all patents, copyrights, licenses, franchises, goodwill, trade names and trade
secrets); provided that the term "Shareholder's Equity" shall include the book
value of long-term gas contracts with producers that Seller assumes in
connection with acquisitions that are reflected on the books of Seller as
assets. As used in this definition, "Adjusted Funded Debt of Seller" means, at
the time of determination, the sum of (1) Funded Debt plus (2) Excess Working
Capital Deficit.
"Default Ratio" means the ratio (expressed as a percentage) computed as of the
-------------
last day of each month by dividing (x) the aggregate Unpaid Balance of all
Receivables (other than Affected Receivables) that were Defaulted Receivables
during such month by (y) the aggregate Unpaid Balance of all Receivables (other
than Affected Receivables) on such date.
"Default Reserve" has the meaning set forth in Appendix B.
--------------- ----------
"Defaulted Receivable" means a Receivable: (a) as to which any payment, or
--------------------
part thereof, remains unpaid for 90 days from the original due date for such
payment (or if such 90th day is not a Business Day, the Business Day immediately
succeeding such 90th day), (b) as to which the Obligor thereof is an Obligor
with regard to which an Event of Bankruptcy has occurred and remains continuing,
(c) as to which payments have been extended, or the terms of payment thereof
rewritten, without the Agent's consent or (d) which, consistent with the Credit
and Collection Policy, would be written off Seller's books as uncollectible.
"Delinquency Ratio" means the ratio (expressed as a percentage) computed as of
-----------------
the last day of each month by dividing (x) the aggregate Unpaid Balance of all
Receivables (other than Affected Receivables) that were Delinquent Receivables
at the end of such month by (y) the aggregate Unpaid Balance of all Receivables
(other than Affected Receivables) on such date.
"Delinquent Receivable" means a Receivable that is not a Defaulted Receivable
---------------------
and: (a) as to which any payment, or part thereof, remains unpaid for 30 days or
more from the original due
A-5
date for such payment; or (b) which, consistent with the Credit and Collection
Policy, would be classified as delinquent by Seller.
"Designated Affiliate" means with respect to the Purchaser or the Agent, any
--------------------
Person which the Purchaser or the Agent respectively shall have described as
such by at least 3 days prior notice to the Seller.
"Designated Obligor" means, at any time, all Obligors of Seller and all
------------------
Obligors of the Originators except any such Obligor as to which the Agent has,
at least three Business Days prior to the date of determination, given notice to
Seller that such Obligor shall not be considered a Designated Obligor.
"Diligently Contested" means, with respect to any lien or encumbrance, any
--------------------
such lien or encumbrance which is being contested in good faith by appropriate
proceeding and with respect of which the Seller has set aside on its books
adequate allowance accounts therefor in accordance with generally accepted
accounting principles.
"Dilution Ratio" means, on any day occurring during a calendar month, the
--------------
ratio (expressed as a percentage) of (x) the aggregate sum of all Collections
deemed to have been received by the Seller with respect to any Receivable other
than the Affected Receivables pursuant to Section 3.03 (a) (i) through (iv)
-------------------- ----
inclusive during the immediately preceding calendar month other than Collections
deemed to have been received by the Seller with respect to a Receivable solely
because such Receivable became a Defaulted Receivable, to (y) the aggregate
principal balance of all Receivables other than the Affected Receivables billed
during such immediately preceding calendar month.
"Discount Factor" has the meaning set forth in Appendix B.
--------------- ----------
"Dollars" means dollars in lawful money of the United States of America.
-------
"Earned Discount" has the meaning set forth in Appendix B.
--------------- ----------
"Effective Date" means the date this Agreement becomes effective pursuant to
--------------
Section 14.14.
-------------
"Eligible Contract" means a Contract substantially in one of the forms set
-----------------
forth in Schedule 6.01(p)-1 or in such other form or forms from time to time
------------------
approved by the Agent subject to amendments and modifications of the type
permitted pursuant to Section 7.03(b).
---------------
"Eligible Receivable" means, at any time, a Receivable:
-------------------
A-6
(a) which, according to the Contract related thereto, is required to be paid
in full within 30 days of the original billing date therefor;
(b) which, (i) if the perfection of Purchaser's undivided ownership interest
therein is governed by the laws of a jurisdiction where the Uniform Commercial
Code -- Secured Transactions is in force, constitutes an account as defined in
the Uniform Commercial Code as in effect in such jurisdiction, and (ii) if the
perfection of Purchaser's undivided ownership interest therein is governed by
the law of any jurisdiction where the Uniform Commercial Code -- Secured
Transactions is not in force, Seller has furnished to the Agent such opinions
of counsel and other evidence as has reasonably been requested, establishing to
the reasonable satisfaction of the Agent that Purchaser's undivided ownership
interest and other rights with respect thereto are not significantly less
protected and favorable than such rights under the Uniform Commercial Code;
(c) the Obligor of which is a United States resident, is not an Affiliate of
Seller or of any Originator, is not a Designated Affiliate of Agent or Purchaser
and is not a government or a governmental subdivision or agency;
(d) the Obligor of which is a Designated Obligor;
(e) the Obligor of which is not the Obligor with respect to Defaulted
Receivables having an aggregate Unpaid Balance of 50% or more of the aggregate
Unpaid Balance of all Receivables of such Obligor;
(f) the Obligor of which has not for credit reasons been required by
Seller at any time during the immediately preceding 12-month period to pay on
a cash basis for services rendered or goods sold;
(g) which is not a Defaulted Receivable;
(h) with regard to which the warranty of Seller in Section 6.01(l) is true
---------------
and correct;
(i) the sale of an undivided interest in which does not contravene or
conflict with any law;
(j) which is an account receivable representing all or part of the sales
price of merchandise, insurance and services within the meaning of
Section 3(c)(5) of the Investment Company Act of 1940, as amended;
(k) which arises out of a current transaction, or the proceeds of which have
been or are to be used for current
A-7
transactions, within the meaning of Section 3(a)(3) of the Securities Act of
1933, as amended;
(l) which is denominated and payable only in Dollars in the United States;
(m) which arises under an Eligible Contract that has been duly authorized
and that, together with such Receivable, is in full force and effect and
constitutes the legal, valid and binding obligation of the Obligor of such
Receivable enforceable against such Obligor in accordance with its terms and is
not subject to any known dispute (it being understood that nonpayment resulting
solely from failure to receive an invoice or back-up information does not
constitute a dispute), offset, counterclaim or defense whatsoever (except the
discharge in bankruptcy of such Obligor and except, with respect to UCC 9.319
Receivables, the rights described in the definition thereof as to which no step
of the type described in Section 7.02(g) has been taken or commenced);
---------------
(n) which, together with the Contract related thereto, does not contravene
in any material respect any laws, rules or regulations applicable thereto
(including, without limitation, laws, rules and regulations relating to usury,
truth in lending, fair credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and privacy) and with respect to
which no party to the Contract related thereto is in violation of any such law,
rule or regulation in any material respect if such violation would impair the
collectibility of such Receivable;
(o) which (i) was generated in the normal course of Seller's or an
Originator's business, and (ii) satisfies all applicable requirements of the
Credit and Collection Policy;
(p) which is not an Affected Receivable;
(q) which is billed within 60 days of the date it was generated;
(r) as to which the Agent has not provided Seller three (3) Business Days'
prior notice that the Agent has determined, in its sole discretion, that such
Receivable (or class of Receivables) is not or is no longer acceptable for
purchase hereunder; and
(s) the Obligor of such Receivable is not the Obligor with respect to
Receivables with an aggregate Unpaid Balance in excess of the Concentration
Limit for such Obligor;
provided, however, that in the event one or more Receivables generated on any
-------- -------
day by an Obligor or one or more Affiliated
A-8
Obligors would not constitute Eligible Receivables solely because its or their
Unpaid Balance exceed the Concentration Limit for such Obligor or Affiliated
Obligors as calculated pursuant to Section 2.04 (the excess of the sum of the
------------
Unpaid Balance of all Receivables of such Obligor or Affiliated Obligors over
the Concentration Limit for such Obligor or Affiliated Obligors, as the case
may be, being herein called the "Excess Concentration Amount") then (i) the
---------------------------
Unpaid Balance of such Receivables shall be deemed to be reduced pro rata by
--- ----
such Excess Concentration Amount (the resulting Unpaid Balance being the
"Reduced Unpaid Balance") and such Receivables shall be deemed Eligible
----------------------
Receivables up to the Reduced Unpaid Balance, (ii) all Collections in respect of
each such Receivables up to the Reduced Unpaid Balance for each such Receivable
shall be payable to the Purchaser and the Seller as Collections in respect of
Pool Receivables pursuant to the other provisions of this Agreement, and (iii)
all Collections (if any) in respect of each such Receivable in excess of such
Receivable's Reduced Unpaid Balance shall be payable to Seller as if such funds
were not Collections on account of Pool Receivables, it being understood that no
Collections in respect of any such Receivable shall be payable under clause
(iii) of this sentence except to the extent that Collections with respect to
such Receivable in an amount exceeding the Reduced Unpaid Balance of such
Receivable shall have been paid as Collections in respect of Pool Receivables
pursuant to the provisions of this Agreement.
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"Eurodollar Rate (Reserve Adjusted)" has the meaning set forth in Appendix B.
--------------------------------- ----------
"Event of Bankruptcy" shall be deemed to have occurred with respect to a
-------------------
Person if either:
(a) a case or other proceeding shall be commenced, without the
application or consent of such Person, in any court, seeking the liquidation,
reorganization, debt arrangement, dissolution, winding up, or composition or
readjustment of debts of such Person, the appointment of a trustee, receiver,
custodian, liquidator, assignee, sequestrator or the like for such Person or
all or substantially all of its assets, or any similar action with respect to
such Person under any law relating to bankruptcy, insolvency, reorganization,
winding up or composition or adjustment of debts, and such case or proceeding
shall continue undismissed, or unstayed and in effect, for a period of 60
consecutive days; or an order for relief in respect of such Person shall be
entered in an involuntary
A-9
case under the federal bankruptcy laws or other similar laws now or
hereafter in effect; or
(b) such Person shall commence a voluntary case or other proceeding
under any applicable bankruptcy, insolvency, reorganization, debt arrangement,
dissolution or other similar law now or hereafter in effect, or shall consent
to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar official) for,
such Person or for any substantial part of its property, or shall make any
general assignment for the benefit of creditors, or shall fail to, or admit in
writing its inability to, pay its debts generally as they become due, or, if a
corporation or similar entity, its board of directors shall vote to implement
any of the foregoing.
"Excepted Receivables" means, on any date, those Receivables which are
--------------------
described in the Excepted Receivables Schedule last received by the Agent at a
time when the Undivided Interest, calculated as of such date after taking into
consideration the Excepted Receivables Schedule received on such date, did not
exceed 100%.
"Excepted Receivables Schedule" means a schedule signed by the Seller in form
-----------------------------
and substance satisfactory to the Agent and the Purchaser describing by Obligor,
amount, invoice number and date, the Receivables which constitute Ineligible
Receivables and certifying that (i) the information contained in such schedule
is true, correct and complete, (ii) the Receivables described in such schedule
constitute all the then outstanding Ineligible Receivables and will not be
included in the Receivables Pool as a result of such ineligibility and (iii) the
Undivided Interests do not exceed 100%
"Excess Working Capital Deficit" means (i) if Seller's Working Capital is
------------------------------
greater than or equal to negative $10,000,000, zero, or (ii) if Seller's Working
Capital is less than negative $10,000,000 the product of (A) the amount of such
Working Capital plus $10,000,000 multiplied by (B) negative one (for example, if
---- -------------
Working Capital equals negative $15,000,000, the Excess Working Capital Deficit
would equal $5,000,000). For purposes of this definition, "Working Capital"
means the remainder of Seller's Consolidated current assets minus Seller's
-----
Consolidated current liabilities, excluding current maturities of long-term
Indebtedness.
"Existing Credit Agreement" means and includes the Credit Agreement dated as
-------------------------
of December 1, 1989 among Purchaser, BofA (as assignee of BAI) and Credit
Lyonnais, as amended, supplemented or otherwise modified from time to time.
A-10
"Federal Reserve Board" means the Board of Governors of the Federal Reserve
---------------------
System, or any successor thereto or to the functions thereof.
"Founders" means, collectively, Brion G. Wise, Bill M. Sanderson, Walter L.
--------
Stonehocker, Dean Phillips, Ward Sauvage and their immediate families and the
companies through which they hold ownership in Seller.
"Funded Debt" means the aggregate of the following Indebtedness of Seller and
-----------
the Subsidiaries, after elimination of intercompany items and other
consolidation in accordance with generally accepted accounting principles: (a)
Indebtedness for borrowed money, regardless of maturity, (b) Indebtedness
constituting an obligation to pay the deferred purchase price of property, (c)
Indebtedness evidenced by a bond, debenture, note or similar instrument and (d)
Indebtedness which is due and payable at the time in question, with respect to
letters of credit or applications or reimbursement agreements therefor; provided
however that any amounts outstanding under subordinated notes into which shares
of Preferred Stock have been converted (following Agent's consent thereto) shall
be included in Funded Debt following such conversion.
"Funding" means a drawing under a letter of credit, surety bond or other
-------
instrument issued pursuant to a Program Support Agreement, a drawing on a cash
collateral account funded pursuant to a Program Support Agreement, a purchase,
loan or other extension of credit made by a Program Support Provider to the
Purchaser under a Program Support Agreement, or any other advance or
disbursement of funds from or to the Purchaser or for the Purchaser's account or
for which the Purchaser is obligated to reimburse a Program Support Provider
pursuant to a Program Support Agreement.
"Indebtedness" means, as to any Person, all indebtedness, liabilities and
------------
obligations of such Person, whether primary or secondary, direct or indirect,
absolute or contingent.
"Indemnified Amounts" has the meaning set forth in Section 13.01.
------------------- -------------
"Indemnified Party" has the meaning set forth in Section 13.01.
----------------- -------------
"Ineligible Receivable" means, as of any date, each Receivable that as of such
---------------------
date does not constitute an Eligible Receivable.
"Investment Grade Obligor" means any two Obligors from time to time designated
------------------------
by the Seller and not disapproved by the Agent
A-11
the long term senior debt of which (or of whose Parent Company) is rated BBB
or better by Standard & Poor's Corporation or Baa2 or better by Moody's
Investors Service, Inc.; provided that the Agent may at any time upon three (3)
days prior written notice declare any Obligor previously accepted as an
Investment Grade Obligor not to be an Investment Grade Obligor.
"Involuntary Federal Proceeding" has the meaning set forth in Section
------------------------------ -------
10.02(b).
--------
"Liquidations" means, for any period, the aggregate Collections of all
------------
outstanding Receivables (including all cash proceeds of the Related Security
with respect thereto) during such period minus without duplication, the amount
of Collections deemed to have been received during such period pursuant to
Sections 3.03(a) and 3.04.
---------------- ----
"Lock-Box Agreement" means a letter agreement, in substantially the form of
------------------
Exhibit 5.01(h), between Seller and any Lock-Box Bank.
---------------
"Lock-Box Bank" means any of the banks holding one or more lock-box accounts
-------------
for receiving Collections from Pool Receivables.
"Losses to Liquidations Ratio" means the percentage, computed as of each Month
----------------------------
End Date, that (x) the losses (net of recoveries) recognized during the one
month period ending on such Month End Date on all Receivables owned by Seller
other than the Affected Receivables was of (y) the sum of (i) Liquidations of
such Receivables during such period plus (ii) the amount of Collections deemed
to have been received with respect to such Receivables during such period
pursuant to Section 3.03(a)(i)(B) as a result of a setoff in respect of any
---------------------
claim by the Obligor thereof against Seller or any Affiliate of Seller (whether
such claim arises out of the same or a related or an unrelated transaction).
"Month End Date" means the last day of each calendar month.
--------------
"Natural Gas" means natural gas and natural gas liquids.
-----------
"Negative Spread Fee" has the meaning set forth in Appendix B.
------------------- ----------
"Obligor" means a Person obligated to make payments with respect to a
-------
Receivable.
"Originator" means each wholly-owned Subsidiary of Seller that becomes a party
----------
to the Assignment Agreement, provided that the Agent has approved such
--------
Subsidiary in writing and such
A-12
Subsidiary delivers to the Agent the following documents, each in form and
substance satisfactory to the Agent: (i) a copy of the resolutions of the Board
of Directors of such Subsidiary approving the Assignment Agreement and the
transactions contemplated thereby, certified by its Secretary or Assistant
Secretary; (ii) good standing certificates issued by the Secretary of State of
such Subsidiary's incorporation and the Secretary of State of Colorado; and
(iii) the certificate of the Secretary or Assistant Secretary of such Subsidiary
certifying the names and true signatures of the officers authorized on its
behalf to sign the Assignment Agreement and the other Agreement Documents to be
delivered by it; (iv) the Articles of Incorporation of such Subsidiary, duly
certified by the Secretary of State of its incorporation, together with a copy
of its by-laws, duly certified by its Secretary or Assistant Secretary; (v)
acknowledgement copies of proper financing statements (form UCC-1), naming such
Subsidiary as debtor and seller, Seller as secured party and purchaser and
Purchaser as assignee that have been filed in such jurisdictions as the Agent
may reasonably request; (vi) a search report provided in writing by a service
acceptable to the Agent, listing all effective financing statements that name
such Subsidiary as debtor or seller and that are filed in the jurisdictions in
which filings were made pursuant to the foregoing clause (v) and in such other
----------
jurisdictions as the Agent shall reasonably request, together with copies of
such financing statements (none of which shall cover any Receivables or
Contracts or interest therein or Collections or proceeds of any thereof); (vii)
favorable opinions from counsel satisfactory to the Agent in form and substance
satisfactory to the Agent with respect to such Subsidiary and the Receivables
generated by such Subsidiary); and (viii) evidence of the execution and delivery
by such Subsidiary of the Assignment Agreement and the fact that such Subsidiary
has delivered each document to be executed and delivered in connection
therewith.
"Parent Company" means with respect to any Person, any other Person which
--------------
directly or indirectly owns 50% or more of the common stock of such Person.
"Periodic Report" means a report in substantially the form of Exhibit 3.05(a).
--------------- ---------------
"Person" means an individual, partnership, corporation (including a business
------
trust), joint stock company, trust, unincorporated association, joint venture,
government or any agency or political subdivision thereof or any other entity.
"Pool Balance" has the meaning set forth in Section 2.04(a).
------------ ---------------
"Pool Receivable" means a Receivable in the Receivables Pool.
---------------
A-13
"Preferred Stock" means, collectively, (i) the 7.25% Cumulative Senior
---------------
Perpetual Convertible Preferred Stock of Seller and (ii) 2,760,000 shares of
Cumulative Convertible Preferred Stock of Seller.
"Program Fee" has the meaning set forth in Section 4.01(b).
----------- ---------------
"Program Fee Rate" has the meaning set forth in Schedule 4.01.
---------------- -------------
"Program Support Agreement" means and includes (a) the Existing Credit
-------------------------
Agreement and any letter of credit issued thereunder, (b) the Existing Liquidity
Agreement and (c) any other agreement hereafter entered into by any Program
Support Provider providing for the issuance of one or more letters of credit for
the account of the Purchaser, the issuance of one or more surety bonds for which
the Purchaser is obligated to reimburse the applicable Program Support Provider
for any drawings thereunder, the sale by the Purchaser to any Program Support
Provider of Undivided Interests (or portions thereof) and/or the making of loans
and/or other extensions of credit to the Purchaser in connection with the
Purchaser's securitization program, together with any letter of credit, surety
bond or other instrument issued thereunder (but excluding any discretionary
advance facility provided by the Agent).
"Program Support Provider" means and includes BofA and any other or additional
------------------------
Person (other than any customer of the Purchaser) now or hereafter extending
credit or having a commitment to extend credit to or for the account of the
Purchaser or issuing a letter of credit, surety bond or other instrument to
support any obligations arising under or in connection with the Purchaser's
securitization program.
"Purchase" has the meaning set forth in Section 1.01(a).
-------- ---------------
"Purchase Limit" has the meaning set forth in Section 1.02(a).
-------------- ---------------
"Purchase Termination Date" has the meaning set forth in Section 1.06.
------------------------- ------------
"Purchaser" has the meaning set forth in the preamble.
--------- --------
"Purchaser Rate" has the meaning set forth in Appendix B.
-------------- ----------
"Purchaser's Investment" has the meaning set forth in Section 2.03.
---------------------- ------------
"Purchaser's Share" has the meaning set forth in Section 2.05.
----------------- ------------
A-14
"Rate Variance Factor" has the meaning set forth in Appendix B.
-------------------- ----------
"Receivable" means any right to payment from a Person, whether constituting an
----------
account, chattel paper, instrument or general intangible, arising for the
account of Seller or any Originator from the sale, transportation, gathering,
treating, processing, storing or transferring by Seller or any Originator of
Natural Gas, including any right to payment under any Contract relating to the
sale, transportation, gathering, treating, processing, or storing or
transferring by Seller or any Originator of Natural Gas and the right to payment
of any interest or finance charges and other obligations of such Person with
respect thereto.
"Receivables Pool" means at any time all then outstanding Receivables other
----------------
than the Excepted Receivables. If a Receivable is a Pool Receivable on the day
immediately preceding the Commitment Termination Date, such Receivable shall
continue to be considered a Pool Receivable at all times thereafter.
"Recourse Account" has the meaning set forth in Section 3.04(a).
---------------- ---------------
"Recourse Unpaid Balance" has the meaning set forth in Section 3.04(b).
----------------------- ---------------
"Redemption Amount" means the aggregate amount of all sums paid by Seller to
-----------------
the holder of the 7.25% Cumulative Senior Perpetual Convertible Preferred Stock
of Seller in connection with the redemption of such stock.
"Regulation D" means Regulation D of the Federal Reserve Board, or any other
------------
regulation of the Federal Reserve Board that prescribes reserve requirements
applicable to nonpersonal time deposits or "Eurocurrency Liabilities" as
presently defined in Regulation D, as in effect from time to time.
"Regulatory Change" means, relative to any Affected Party
-----------------
(a) any change in (or the adoption, implementation, phase-in or
commencement of effectiveness of) any
(i) United States federal or state law or foreign law
applicable to such Affected Party;
(ii) regulation, interpretation, directive, requirement or
request (whether or not having the force of law) applicable to such
Affected Party of (A) any court, government authority charged with the
interpretation or administration of any law referred to
A-15
in clause (a)(i) or of (B) any fiscal, monetary or other authority
-------------
having jurisdiction over such Affected Party; or
(iii) generally accepted accounting principles or regulatory
accounting principles applicable to such Affected Party and affecting the
application to such Affected Party of any law, regulation,
interpretation, directive, requirement or request referred to in clause
------
(a)(i) or (a)(ii) above; or
------ -------
(b) any change in the application to such Affected Party of any
existing law, regulation, interpretation, directive, requirement, request or
accounting principles referred to in clause (a)(i), (a)(ii) or (a)(iii) above.
------------- ------- --------
"Reinvestment" has the meaning set forth in Section 1.01(b).
------------ ---------------
"Related Security" means, with respect to any Pool Receivable: (a) all of
----------------
Seller's right, title and interest in and to all Contracts or other agreements
that relate to such Pool Receivable; (b) all of Seller's interest in the
merchandise (including returned merchandise and merchandise constituting Natural
Gas (including returned Natural Gas)), if any, relating to the sale which gave
rise to such Pool Receivable; (c) all other security interests or liens and
property subject thereto from time to time purporting to secure payment of such
Pool Receivable, whether pursuant to the Contract related to such Pool
Receivable or otherwise; (d) the assignment to the Agent, for the benefit of
Purchaser and any assignee, of all UCC financing statements covering any
collateral securing payment of such Pool Receivable (but such assignment is made
only to the extent of the interest of Purchaser in the respective Pool
Receivable); and (e) all guarantees and other agreements or arrangements of
whatever character from time to time supporting or securing payment of such Pool
Receivable whether pursuant to the Contract related to such Pool Receivable or
otherwise. The interest of Purchaser in any Related Security is only to the
extent of Purchaser's Undivided interest, as more fully described in the
definition of an Undivided Interest.
"Remaining Collections" has the meaning set forth in Section 3.01(a)(ii).
--------------------- -----------
"Required Allocations" with respect to any Undivided Interest at any time
--------------------
means the product of 110% multiplied by the Purchaser's Investment, with respect
-------------
to such Undivided Interest at such time.
"Required Allocations Limit" has the meaning set forth in Section 1.02(b).
-------------------------- ---------------
A-16
"Reserve Percentage" has the meaning set forth in Appendix B.
------------------ ----------
"Revolving Loan Agreement" means that certain First Restated Loan Agreement
------------------------
(Revolver) dated as of September 2, 1994 among Seller, the lenders party thereto
and NationsBank of Texas, N.A., as Agent, as it may be amended, supplemented or
otherwise modified from time to time.
"Run Off Day" for any Undivided Interest means any of (a) each day which
-----------
occurs on or after the date designated by the Agent to Seller to be the "Run Off
Commencement Date", provided such date is designated on at least one Business
Day's notice prior to such Run Off Commencement Date during a time when any of
the conditions set forth in Section 5.02 are not satisfied, and on or before the
------------
date, if any, designated by the Agent in its sole discretion to Seller as the
"Run Off Termination Date", and (b) each day which occurs on or after the
Termination Date for such Undivided Interest.
"Run Off Discount" has the meaning set forth in Appendix B.
---------------- ----------
"Run Off Period" means one or more successive Run Off Days.
--------------
"Run Off Servicer's Fee" has the meaning set forth in Appendix B.
---------------------- ----------
"Scheduled Commitment Termination Date" has the meaning set forth in
-------------------------------------
Section 1.05.
------------
"Secured Obligations" has the meaning set forth in Section 9.01.
------------------- ------------
"Seller" has the meaning set forth in the preamble.
------ --------
"Servicer" has the meaning set forth in Section 8.01(a).
-------- ---------------
"Servicer Transfer Event" has the meaning set forth in Section 8.01(b).
----------------------- ---------------
"Servicer's Fee" has the meaning set forth in Appendix B.
-------------- ----------
"Servicer's Fee Reserve" has the meaning set forth in Appendix B.
---------------------- -----------
"Settlement Date" means the last day of each Settlement Period.
---------------
"Settlement Period" for any Undivided Interest means
-----------------
A-17
(a) each period commencing on the first day of each Yield Period for
such Undivided Interest and ending on the last day of such Yield Period; and
(b) on and after the Termination Date for such Undivided Interest, such
period (including, without limitation, a daily period) as shall be selected from
time to time by the Agent or, in absence of any such selection, each period of
thirty days from the next preceding Settlement Date;
provided, however, that
-------- -------
(i) with respect to any Yield Period of one day (as described in
clause (ii) of the proviso of the definition of "Yield Period"), the
----------- -------
related Settlement Period shall be the first day following such Yield
Period;
(ii) any Settlement Period which would otherwise end on a day which is
not a Business Day shall be extended to the next succeeding Business Day;
and
(iii) the last Settlement Period shall end on the date on which all
Undivided Interests have been reduced to zero.
"Special Concentration Limit" has the meaning set forth in Section 2.04(c).
--------------------------- ---------------
"Subsidiary" means any corporation, association, partnership, joint
----------
venture, or other business or corporate entity, enterprise or organization which
is directly or indirectly (through one or more intermediaries) controlled by or
owned fifty-one percent (51%) or more by the Seller or any of its other
Subsidiaries.
"Successor Notice" has the meaning set forth in Section 8.01(b).
---------------- ---------------
"Term Loan Agreement" means that certain Third Restated Loan Agreement
-------------------
(Term) dated as of August 31, 1993, among Seller, Agent and the lenders party
thereto, as amended by that certain First Amendment to Third Restated Loan
Agreement (Term) dated as of December 31, 1993 and that certain Second Amendment
of Third Restated Loan Agreement (Term) dated as of September 2, 1994, as it may
be further amended, supplemented or modified from time to time.
"Termination Date" for any Undivided Interest means the Commitment
----------------
Termination Date.
A-18
"Termination Event" has the meaning set forth in Section 10.01.
----------------- -------------
"UCC" means the Uniform Commercial Code as from time to time in effect in
---
the applicable jurisdiction or jurisdictions.
"UCC 9.319 Receivable" means any Receivable which may be subject to Adverse
--------------------
Claim arising pursuant to Section 9.319 of the UCC of the State of Texas,
Section 84-9-319 of the UCC of the State of Kansas, Section 34.1-9-319 of the
UCC of the State of Wyoming, the Oil and Gas Products Lien Act, New Mexico
Statutes Annotated (S)(S) 48-9-1 - 48-9-8 (1978) or the Oil and Gas Owners' Lien
Act, Title 52 Oklahoma Statutes Annotated (S)(S) 548 - 548.6, or any successor
law or statute or other comparable provision or law of any such jurisdiction, or
any comparable provision of any law or similar statute of any other
jurisdiction.
"Undivided Interest" has the meaning set forth in Section 2.01.
------------------ ------------
"Unmatured Termination Event" means any event which, with the giving of
---------------------------
notice or lapse of time, or both, would become a Termination Event.
"Unpaid Balance" of any Receivable means at any time the sum of (x) the
-------------- ---
unpaid principal amount thereof, plus (y) the unpaid amount of all finance
----
charges, interest payments and other amounts actually accrued thereon at such
time, but excluding, in the case of clause (y) next above, all late payment
--------- ----------
charges, delinquency charges, and extension or collection fees.
"Voting Shares" means at the time in question, the sum of (a) all
-------------
outstanding shares of common stock of Seller, (b) all other securities issued by
Seller which entitle the holder thereof to voting rights with respect to Seller
at such time (as used in this definition, the shares described in the
immediately preceding clauses (a) and (b) are collectively called ("Shares")),
and (c) the amount of additional Shares (not including any share or security
included in the preceding clauses (a) and (b) which may be obtained by
converting outstanding shares of capital stock of Seller or rights under other
outstanding instruments into Shares.
"Yield Period" means with respect to any Undivided Interest (or portion
------------
thereof):
(a) the period commencing on the date of the initial Purchase of such
Undivided Interest (or such portion) and ending such number of days (not to
exceed 45 days or if the related Undivided Interest shall be accruing
Earned Discount at a rate determined by reference to the Eurodollar Rate
A-19
(Reserved Adjusted), not to exceed 60 days or if the related Undivided
Interest shall be accruing Earned Discount at a rate determined by
reference to the Alternate Reference Rate, not to exceed 90 days)
thereafter as the Agent shall select, after consultation with the Seller,
pursuant to Sections 1.03 or 2.01(b); and
------------- -------
(b) thereafter, each period commencing on the last day of the
immediately preceding Yield Period for such Undivided Interest (or such
portion) and ending such number of days (not to exceed 45 days or if the
related Undivided Interest shall be accruing Earned Discount at a rate
determined by reference to the Eurodollar Rate (Reserved Adjusted), not to
exceed 60 days or if the related Undivided Interest shall be accruing
Earned Discount at a rate determined by reference to the Alternate
Reference Rate, not to exceed 90 days) thereafter as the Agent shall
select, after consultation with the Seller;
provided, however, that
-------- -------
(i) any such Yield Period (other than a Yield Period consisting of one
day) which would otherwise end on a day that is not a Business Day shall be
extended to the next succeeding Business Day (unless the related Undivided
Interest shall be accruing Earned Discount at a rate determined by
reference to the Eurodollar Rate (Reserve Adjusted), in which case if such
succeeding Business Day is in a different calendar month, such Yield Period
shall instead be shortened to the next preceding Business Day);
(ii) in the case of Yield Periods of one day for any Undivided
Interest, (A) the initial Yield Period shall be the day of the related
Purchase; (B) any subsequently occurring Yield Period which is one day
shall, if the immediately preceding Yield Period is more than one day, be
the last day of such immediately preceding Yield Period, and if the
immediately preceding Yield Period is one day, shall be the next day
following such immediately preceding Yield Period, and (C) any Yield Period
for any Undivided Interest which commences before the Termination Date for
such Undivided Interest and would otherwise end on a date occurring after
such Termination Date, such Yield Period shall end on such Termination Date
and the duration of each such Yield Period which commences on or after the
Termination Date for such Undivided Interest shall be of such duration as
shall be selected by the Agent; and
(iii) notwithstanding the foregoing clauses (a) and (b), each Yield
----------- ---
Period for any Undivided Interest accruing Earned Discount determined by
reference to the Alternate
A-20
Reference Rate occurring on a Run Off Day or during a Run Off Period
shall have a duration of one day.
The "related" Yield Period for any Undivided Interest at any time means the
-------
Yield Period pursuant to which Earned Discount is then accruing for such
Undivided Interest.
B. Other Terms. All accounting terms not specifically defined herein
-----------
shall be construed in accordance with generally accepted accounting principles.
All terms used in Article 9 of the UCC in the State of New York, and not
specifically defined herein, are used herein as defined in such Article 9.
C. Computation of Time Periods. Unless otherwise stated in this
---------------------------
Agreement, in the computation of a period of time from a specified date to a
later specified date, the word "from" means "from and including" and the words
"to" and "until" each means "to but excluding".
A-21
APPENDIX B
CALCULATION OF DISCOUNT AND RESERVE
This is Appendix B to the Receivables Purchase Agreement dated as of
----------
February 28, 1995 among Western Gas Resources, Inc., Receivables Capital
Corporation and Bank of America National Trust and Savings Association, as Agent
(as amended, supplemented or otherwise modified from time to time, the
"Agreement"). Capitalized terms used in this Appendix B without definition have
--------- ----------
the meanings assigned to such terms in Appendix A to the Agreement. Each
----------
reference in this Appendix B to any Section refers to such Section of the
----------
Agreement. Each reference in this Appendix B to any Part refers to the part of
----------
this Appendix B so designated.
----------
INDEX
PART I
DISCOUNT FACTOR
Sub-
Part Term Page No.
---- -------------------------------------------------- --------
A. Discount Factor................................... B-2
B. Earned Discount................................... B-3
C. Negative Spread Fee............................... B-3
D. Run Off Discount.................................. B-4
E. Rate Definitions.................................. B-4
Alternate Reference Rate........................ B-4
Bank Rate....................................... B-5
Commercial Paper Rate........................... B-5
Domestic CD Rate (Adjusted)..................... B-6
Eurodollar Rate (Reserve Adjusted).............. B-7
Purchaser Rate.................................. B-8
Rate Variance Factor.............................. B-9
B-1
PART II
DEFAULT RESERVE
Sub-
Part Term Page No.
----- ----------------------------------------------------- --------
A. Default Reserve...................................... B-9
B. Reserve Percentage................................... B-10
PART III
SERVICER'S FEE RESERVE
A. Servicer's Fee Reserve............................... B-10
B. Servicer's Fee....................................... B-10
C. Run Off Servicer's Fee............................... B-11
PART IV
ADJUSTED AVERAGE MATURITY
A. Adjusted Average Maturity............................ B-11
B. Average Maturity..................................... B-11
--------------------
PART I
DISCOUNT FACTOR
A. Discount Factor. The "Discount Factor" for a related Undivided
--------------- ---------------
Interest at any time in a Yield Period means an amount determined as follows:
DF = ED + ROD
where:
-----
DF = the Discount Factor of such Undivided Interest at such time;
ED = Earned Discount of such Undivided Interest accrued and unpaid at
such time, as determined pursuant to Part I.B;
--------
ROD = Run Off Discount of such Undivided Interest at such time, as
determined pursuant to Part I.D.
--------
B-2
B. Earned Discount. The "Earned Discount" for any Undivided Interest for
--------------- ---------------
each day in a related Yield Period means an amount determined as follows:
ED = [PI x PR x 1/360] + NSF (if any);
provided, however, that if, pursuant to the definition of "Purchaser Rate" in
-------- -------
Part I.E., different Purchaser Rates would apply to different portions of an
---------
Undivided Interest, then Earned Discount shall be calculated separately with
respect to each such portion, and the Earned Discount shall be the sum of the
Earned Discount so calculated for such portions;
where:
-----
ED = Earned Discount of such Undivided Interest (or such portion)
accrued on such day;
PI = the Purchaser's Investment of such Undivided Interest (or such
portion) on such day, as determined pursuant to Section 2.03;
------------
PR = the Purchaser Rate for such Undivided Interest (or such portion)
on such day, as defined in Part I.E; and
--------
NSF = the Negative Spread Fee for such Undivided Interest (or such
portion thereof) on such day, as defined in Part I.C.
--------
No provision of the Agreement shall require the payment or permit the collection
of Earned Discount in excess of the maximum permitted by applicable law. Earned
Discount for any Undivided Interest shall not be considered paid by any
distribution if at any time such distribution is rescinded or must otherwise be
returned for any reason.
C. Negative Spread Fee. The "Negative Spread Fee" means, for each Undivided
------------------- -------------------
Interest (or portion thereof) for each day in any Yield Period (computed without
regard to clause (ii) of the proviso clause of the definition of "Yield Period")
----------- ------- ------------
during which any Run Off Day or Termination Date for such Undivided Interest
occurs, the amount, if any, by which;
(i) the additional Earned Discount (calculated without taking into
account any Negative Spread Fee) which have accrued on the reductions
of the related Purchaser's Investment of such Undivided Interest (or
such portion) during such Yield Period (as so computed) if such
reductions had remained as Purchaser's Investment exceeds,
B-3
(ii) the income, if any, received by the owner of such Undivided
Interest (or such portion) from such owner's investing the proceeds of
such reductions of Purchaser's Investment.
D. Run Off Discount. The "Run Off Discount" for the related Undivided
---------------- ----------------
Interest at any time means an amount determined as follows:
ROD = PI x (BR + RVF) x AAM
---------------------
360
where:
-----
ROD = the Run Off Discount for such Undivided Interest at such time;
PI = the Purchaser's Investment of such Undivided Interest at such
time;
BR = the Bank Rate for such Undivided Interest for a Yield Period
deemed to commence at such time pursuant to Part I.E;
--------
AAM = the Adjusted Average Maturity of the Receivables Pool related
to such Undivided Interest, as determined pursuant to Part IV;
-------
and
RVF = the Rate Variance Factor deemed to be in effect at such time,
as determined pursuant to Part I.F.
---------
E. Rate Definitions. The "Alternate Reference Rate" means, on any date, a
---------------- ------------------------
fluctuating rate of interest per annum equal to the higher of
--- -----
(a) the rate of interest most recently announced by Bank of America at
its principal office in San Francisco, California as its reference rate;
and
(b) the Federal Funds Rate (as defined below) most recently determined by
Bank of America plus .5% per annum.
--- -----
For purposes of this definition, "Federal Funds Rate" means, for any period,
------------------
a fluctuating interest rate per annum equal (for each day during such period)
---------
to
(i) the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as
B-4
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
(ii) 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 Bank of America from three federal funds brokers
of recognized standing selected by it.
The Alternate Reference Rate is not necessarily intended to be the lowest rate
of interest determined by Bank of America in connection with extensions of
credit.
"Bank Rate" for any Yield Period for the related Undivided Interest means
---------
an interest rate per annum equal to the sum of (a) .60% per annum, plus (b) the
--- ----- --- ----- ----
Eurodollar Rate (Reserve Adjusted) for such Yield Period; provided, however,
-------- -------
that if (i) it shall become unlawful for the Agent or any Program Support
Provider to obtain funds in the offshore dollar interbank market in order to
fund any Purchase or to maintain any Undivided Interest, or if such funds shall
not be reasonably available to the Agent or any Program Support Provider, or
(ii) there shall not be time prior to the commencement of an applicable Yield
Period to determine a Eurodollar Rate in accordance with its terms, or (iii)
Seller shall have failed to provide the notice required pursuant to Section
-------
1.03(a) or 1.03(d) requesting that the Bank Rate be determined by reference to
------- -------
the Eurodollar Rate, then the "Bank Rate" for any Yield Period for such
---------
Undivided Interest shall be a rate per annum equal for each day during such
--- -----
Yield Period to the Alternate Reference Rate in effect on such day.
"Commercial Paper Rate" for any Yield Period for the related Undivided
---------------------
Interest means a rate per annum equal to the sum of (i) the rate or, if more
--- -----
than one rate, the weighted average of the rates, determined (as applicable) by
converting to an interest-bearing equivalent rate per annum the discount rate
--- -----
(or rates) at which Commercial Paper Notes having a term equal to such Yield
Period and to be issued to fund the Purchase of or to maintain such Undivided
Interest by Purchaser (including, without limitation, Purchaser's Investment and
accrued and unpaid Earned Discount) may be sold by any placement agent or
commercial paper dealer selected by the Agent, as agreed between each such agent
or dealer and the Agent, plus (ii) without duplication of amounts included in
----
(i), the commissions and charges charged by such placement agent or commercial
paper dealer with respect to such Commercial Paper Notes, expressed as a
percentage of such face amount and converted to an interest-bearing equivalent
rate per annum.
--- -----
B-5
"Eurodollar Rate (Reserve Adjusted)" means, with respect to any Yield
----------------------------------
Period for any related Undivided Interest (or portion thereof), a rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) determined pursuant
to the following formula:
Eurodollar Rate = Eurodollar Rate
---------------
(Reserve Adjusted) 1-Eurodollar
Reserve Percentage
where:
-----
"Eurodollar Rate" means, with respect to any Yield Period for any
---------------
related Undivided Interest (or portion thereof), the rate per annum at
which Dollar deposits in immediately available funds are offered to
the Eurodollar Office of the Agent two Eurodollar Business Days prior
to the beginning of such period by prime banks in the interbank
eurodollar market at or about 10:00 a.m., Chicago time for delivery on
the first day of such Yield Period, for the number of days comprised
therein and in an amount equal or comparable to the amount of the
related Purchaser's Investment of such Undivided Interest (or such
portion) for such Yield Period.
"Eurodollar Business Day" means a day of the year on which dealings
-----------------------
are carried on in the eurodollar interbank market and banks are open
for business in Chicago and are not required or authorized to close in
New York City.
"Eurodollar Office" shall mean the office of the Agent designated as
-----------------
such on the signature page to the Agreement and, thereafter, such
other office or offices of the Agent as designated from time to time
by notice from the Agent to Seller or such other office or offices
through which the Agent determines the Eurodollar Rate. A Eurodollar
Office of the Agent may be, at the option of the Agent, either a
domestic or foreign office.
"Eurodollar Reserve Percentage" means, with respect to any Yield
-----------------------------
Period, the then applicable percentage (expressed as a decimal)
prescribed by the Federal Reserve Board for determining reserve
requirements applicable to "Eurocurrency Liabilities" pursuant to
Regulation D.
"Purchaser Rate" for any Yield Period for any related Undivided
--------------
Interest (or portion thereof) means:
B-6
(a) in the case of an Undivided Interest (or portion thereof)
other than one referred to in clause (b) or (c) of this definition,
------ --- ---
the Commercial Paper Rate for such Undivided Interest (or such
portion) for such Yield Period;
(b) in the case of an Undivided Interest (or portion thereof) (i)
owned by any Program Support Provider or any other assignee (other
than Purchaser), or otherwise funded pursuant to a Program Support
Agreement, or (ii) funded by a Funding, if, at the time of the making
of such Funding, the Aggregate Required Allocations did not exceed the
Required Allocations Limit, the Bank Rate for such Undivided Interest
(or such portion) for such Yield Period; and
(c) in the case of an Undivided Interest (or portion thereof)
funded by a Funding other than a Funding referred to in clause (b)
----------
above, a rate per annum equal for each day during such Yield Period to
--- -----
the Alternate Reference Rate in effect on such day plus 2% per annum;
--- -----
provided, however, that (i) on any day when any Termination Event shall have
-------- -------
occurred and be continuing, the Purchaser Rate shall mean a rate per annum equal
--- -----
to the Alternate Reference Rate in effect on such day plus 2% per annum and (ii)
--- -----
on each Run Off Day occurring at a time when no Termination Event exists or is
continuing, the Purchaser Rate shall mean a rate per annum equal to the
--- -----
Alternate Reference Rate.
F. Rate Variance Factor. The "Rate Variance Factor" means, (i) during any
-------------------- --------------------
Yield Period when no Run Off Day shall occur, zero, and (ii) during any Yield
Period in which one or more Run Off Days occur, such percentage per annum equal
--- -----
to 10% of the Bank Rate used to calculate the Run Off Discount.
PART II
DEFAULT RESERVE
A. Default Reserve. The "Default Reserve" of any Undivided Interest on
--------------- ---------------
any day means the greater of (x) $3,000,000, and (y) an amount determined as
follows:
DR = RP x (PI + DF)
where:
-----
DR = the Default Reserve of such Undivided Interest on such day;
B-7
RP = the Reserve Percentage at the close of business of Purchaser
on such day, as determined pursuant to Part II.B;
---------
PI = the related Purchaser's Investment of such Undivided
Interest at the opening of business of Purchaser on such
day, as determined pursuant to Section 1.03; and
------------
DF = the Discount Factor of such Undivided Interest at the close
of business of Purchaser on such day, as determined
pursuant to Part I.A.
---------
B. Reserve Percentage. The "Reserve Percentage" means, with respect to
------------------ ------------------
any Yield Period the greater of (i) the product of three times the highest
average Default Ratio for any three consecutive month period occurring during
any of the twelve calendar months preceding or ending on the determination date,
(ii) the product of three times the then highest Concentration Limit for any
Obligor provided that for purposes of this clause (ii) the then highest
--------
Concentration Limit shall not exceed 3%, (iii) the product of three times the
highest average Losses to Liquidations Ratio for any three consecutive month
period occurring during any of the twelve calendar months preceding or ending on
the determination date, and (iv) 10%.
PART III
SERVICER'S FEE RESERVE
A. Servicer's Fee Reserve. The "Servicer's Fee Reserve" for the related
---------------------- ----------------------
Undivided Interest at any time means an amount determined as follows:
SFR = SF + ROSF
where:
-----
SFR = the Servicer's Fee Reserve for such Undivided Interest at any
time;
SF = the unpaid Servicer's Fee relating to such Undivided Interest
accrued to such time and unpaid as determined pursuant to Part
----
III.B; and
-----
ROSF = the Run Off Servicer's Fee for such Undivided Interest at such
time, as determined pursuant to Part III.C.
----------
B. Servicer's Fee. The "Servicer's Fee" relating to any Undivided
-------------- --------------
Interest accrued for any day means
B-8
(i) an amount equal to the product of (x) 0.50% per annum,
--- -----
times (y) the amount of the related Purchaser's Investment at the
-----
close of business on such day, times (z) 1/360; or
-----
(ii) on and after Servicer's reasonable request made at any
time when Seller shall no longer be Servicer, an alternative amount
charged by Servicer to perform its obligations under the Agreement
during such Yield Period.
C. Run Off Servicer's Fee. The "Run Off Servicer's Fee" for any
---------------------- ----------------------
Undivided Interest at any time means an amount equal to
(x) the related Purchaser's Investment at such time, times
-----
(y) (A) the percentage per annum set forth in clause (i)(x) of
--- ----- -------------
the definition of "Servicer's Fee", or (B) if Servicer's Fee is
calculated pursuant to clause (ii) of such definition, the percentage
-----------
per annum charged by Servicer (provided that if the amount charged by
--- -----
Servicer is not expressed as a percentage, the Agent shall determine
the applicable percentage using reasonable methods of calculation),
times
-----
(z) a fraction, the numerator of which is the number of days
equal to the then Adjusted Average Maturity, and the denominator of
which is 360 days.
PART IV
ADJUSTED AVERAGE MATURITY
"Adjusted Average Maturity" means, on any day, the product of (i) 1.5
------------------------- -------
multiplied by (ii) the Average Maturity for such day.
-------------
"Average Maturity" means, on any day, that time period (expressed in days)
----------------
equal to the weighted average maturity of the Pool Receivables as shall be
calculated by Servicer, as set forth in the most recent Periodic Report in
accordance with the provisions thereof. If the Agent shall disagree with any
such calculation, the Agent may recalculate the Average Maturity for such day,
which calculation shall, absent manifest error, be binding upon Servicer, Seller
and Purchaser.
B-9
EX-10.42
3
JOINT VENTURE AGREEMENT
JOINT VENTURE AGREEMENT
OF
REDMAN-SMACKOVER JOINT VENTURE
THIS JOINT VENTURE AND OPERATING AGREEMENT is made and entered into this
28th day of November, 1994, by and between REDMAN ENERGY CORPORATION, DDD
ENERGY, INC., a wholly owned subsidiary of Seitel, Inc., and WESTERN GAS
RESOURCES, INC., each individually called "Venturer" and collectively called
"Venturers".
NOW THEREFORE, in consideration of the mutual covenants, promises and
agreements contained herein, the parties hereto agree as follows:
ARTICLE I
THE JOINT VENTURE
-----------------
1.1 Formation. The Venturers hereby form a joint venture pursuant to the
---------
laws of the State of Texas, subject to the terms and provisions of this
Agreement.
1.2 Name. The name of the joint venture shall be REDMAN-SMACKOVER JOINT
----
VENTURE, herein designated the "Joint Venture". All business activities of the
Joint Venture shall be conducted under that name.
1.3 Principal Place of Business. The location of the principal place of
---------------------------
business of the Joint Venture shall be at 12200 North Pecos Street, Denver,
Colorado 80234, or at such other location as may be selected from time to time
by the Venturers.
1.4 Purpose and Character of Business. The purposes of this Joint
---------------------------------
Venture are (i) to evaluate and submit single joint preliminary and final bids
to purchase a non-operating interest in the Eustace Gas Plant and associated gas
gathering system ("Plant") owned by Union Oil Company of California ("Unocal")
and the ownership interests of Unocal in all leases and reserves (operated and
non-operated) in wells and properties ("Wells") in Henderson, Van Zandt, Rains,
and Wood counties, Texas (hereinafter collectively "Assets", which are also
known as the Unocal East Texas Smackover Package); (ii) if successful in
acquiring the Assets, to own and operate the Assets; and (iii) to do any and all
acts incidental or beneficial to such purposes, including the delivery of gas
available from sources other than the Wells to the Plant. The Joint Venture
shall engage in no business other than that related to and incidental to the
above purposes and activities, unless mutually agreed to by the Venturers.
1.5 Term. The Joint Venture shall be effective as of the date hereof, and
----
shall continue through and until December 31, 2014, unless terminated earlier as
expressly hereinafter provided; and further provided, should the Joint Venture
not be successful in acquiring the Assets, then on the date that Unocal sells
the Assets
EXHIBIT 10.42
to another purchaser, this Joint Venture shall be deemed terminated.
ARTICLE II
JOINT VENTURE CAPITAL
---------------------
2.1 Capital Accounts. The Managing Venturer shall maintain for each
----------------
Venturer a capital account in accordance with the provisions of this Agreement.
2.2 Capital Contributions. The initial capital contributions of the
---------------------
Venturers shall be as follows:
Western Gas Resources, Inc. $100.00
DDD Energy, Inc. $ 80.00
Redman Energy Corporation $ 20.00
The cash and the agreed to value of any property contributed by the
Venturers to the Joint Venture was and shall be credited to each Venturer's
capital account.
2.3 Additional Capital Contributions. Each Venturer shall make additional
--------------------------------
capital contributions in the proportion to its Ownership Interest, as is
required for the development and operation of the Joint Venture, as determined
by unanimous agreement of the Venturers, subject to the provisions for
disproportionate contributions under Article V, below.
ARTICLE III
PROFITS AND LOSSES
------------------
3.1 Profits and Losses. The profits earned and the losses sustained by
------------------
the Joint Venture during each calendar year shall be apportioned to, credited
to, charged to, and borne by the Venturers in proportion to their respective
Ownership Interests, as set forth in Section 3.2, except for special allocations
in accordance with other terms of this Agreement.
3.2 Venturer's Ownership Interests. The initial Ownership Interest of
------------------------------
each Venturer shall be as follows:
REDMAN ENERGY CORPORATION 10%
DDD ENERGY, INC. 40%
WESTERN GAS RESOURCES, INC. 50%
3.3 Distribution of Available Cash. Available cash of the Joint Venture
------------------------------
(after paying or providing for the payment of all costs and expenses of the
Joint Venture then due) shall be
2
distributed to the Venturers monthly in proportion to their respective Ownership
Interests; provided, however, that the Joint Venture may agree to establish and
maintain the Working Capital Account as provided below.
ARTICLE IV
MANAGEMENT AND RESTRICTIONS
---------------------------
4.1 Management. Each Venturer shall have the right to participate in the
----------
management of the Joint Venture in accordance with the provisions hereof and
voting procedures set forth below.
4.2 Voting Procedure. On all matters requiring a vote of the Venturers in
----------------
accordance with the provisions of this Agreement, the Managing Venturer shall,
at its discretion, conduct the voting either at a meeting of the Venturers, by
written polling of the Venturers members or by submission from the Managing
Venturer of written authorities for expenditure. Any such authority for
expenditure submitted by the Managing Venturer shall be returned to the Managing
Venturer within thirty (30) days after receipt thereof (or within such other
period of time as is specified by the Venturers). On all matters requiring a
vote hereunder, an affirmative vote of at least a simple majority of the
Ownership Interests shall be binding upon all Venturers, unless a different
percentage is expressly provided for herein. For purposes of determining the
voting hereunder, a Venturer's failure to respond shall be deemed to constitute
an affirmative vote with respect to such matter being voted upon.
4.3 Restrictions on Venturers. Except with respect to authority delegated
-------------------------
herein to the Managing Venturer, no Venturer, without the unanimous consent of
the other Venturers obtained in accordance with the voting procedure above, may:
(a) Sell, lease, exchange, abandon, encumber, or convey title to or grant
options for sale of all or any portion of the Joint Venture property;
(b) Borrow money, or incur any indebtedness or other obligation, or
execute any contract therefor on behalf of the Joint Venture;
(c) Assign, transfer, or pledge any debts to the Joint Venture or release
any debts due except on payment in full;
(d) Compromise any claims due in excess of Twenty Five Thousand Dollars
($25,000.00) to the Joint Venture or submit to arbitration any dispute or
controversy involving the Joint Venture except any dispute or controversy
covering this Agreement;
3
(e) Modify the current structure of the Joint Venture through the addition
and/or deletion of Venturers except as may be provided herein;
(f) Change the scope of the business activities of the Joint Venture.
4.4 Accounting Records. The Joint Venture accounting records shall be
------------------
maintained by the Managing Venturer at the principal place of business of the
Managing Venturer or at such other place as selected by the Venturers and each
Venturer shall, at all reasonable times, have access thereto. The Joint
Venture's accounting records shall be identified separately from the Managing
Venturer's non-Joint Venture accounting records. The Joint Venture shall keep
its records in accordance with generally accepted accounting principles.
4.5 Time Devoted to Joint Venture. Each Venturer hereby agrees to devote
-----------------------------
to the business of the Joint Venture time and attention as is reasonably
required in order to pursue the Joint Venture's business. Each Venturer
acknowledges its obligations to the other Venturers to conduct the Joint Venture
for the benefit of the Joint Venture without regard to the effect that conduct
may have on an individual Venturer's outside interests.
4.6 Expenses. The Joint Venture shall pay all of its costs, debts,
--------
financing costs, expenses and liabilities of whatever kind or nature incurred in
pursuit of its business operation.
4.7 Managing Venturer. The day-to-day managing and operation of the Joint
-----------------
Venture, including the operation of the Joint Venture's properties, shall be the
responsibility of the Managing Venturer, subject to the operating sub-contract
agreements referred to in Article V. Western Gas Resources, Inc., is hereby
designated as the Managing Venturer of the Joint Venture and shall act as
operator in accordance with the provisions of this Agreement until either the
removal or resignation as Managing Venturer, as provided below.
4.8 Removal of Managing Venturer. The Managing Venturer shall be subject
----------------------------
to removal from that position upon a vote of Venturers holding a majority of the
Ownership Interests held by Venturers other than the then current Managing
Venturer, which vote shall be taken and shall only occur upon the occurrence of
one or more of the following events:
(a) The Managing Venturer no longer retains an Ownership Interest in the
Joint Venture;
(b) Any material act of fraud or conversion is committed by the Managing
Venturer;
4
(c) The Managing Venturer fails or refuses to perform its covenants
hereunder or materially breaches its duties and obligations specified in this
Agreement; or,
(d) The Managing Venturer becomes insolvent, files for bankruptcy or seeks
a rearrangement or reorganization of its affairs under the Federal Bankruptcy
Act.
4.9 Resignation. The Managing Venturer will have the right to resign its
-----------
position upon providing ninety (90) days advance written notice to all of the
other Venturers.
4.10 Selection of Successor Managing Venturer. In the event the Managing
----------------------------------------
Venturer resigns or is removed, pursuant hereto, then a new Managing Venturer
shall be appointed based upon a vote of Venturers holding a majority of the
Ownership Interests; provided, however, that if the selection of a successor
Managing Venturer is due to the removal of the prior Managing Venturer, the
removed Managing Venturer shall not be entitled to vote for itself as the
successor Managing Venturer.
4.11 Effectiveness of Resignation or Removal. Upon the resignation or
---------------------------------------
removal of the then Managing Venturer, that Managing Venturer shall be released
from its further duties and obligations as Managing Venturer four (4) months
after notice of its removal or resignation, as provided above, or upon the date
that a successor Managing Venturer is selected by the Venturers, whichever
occurs first, however, the removed or resigned Managing Venturer will not be
relieved of liability for its gross negligence or wilful misconduct as provided
in Section 6.5.
ARTICLE V
OPERATIONS
----------
5.1 Purpose. The Joint Venture shall be operated hereunder, in accordance
-------
with applicable laws and regulations, for the purposes consistent with the
provisions of Section 1.4, above, consistent with sound economic, technical and
operating practices and with the intent of generating the maximum profit and
return on investment to the Joint Venture. The Venturers agree that the Joint
Venture shall be operated for the exclusive benefit of the Venturers without
regard to the effect of those operations on any individual Venturer.
5.2 Bidding on Assets. The Venturers agree to submit single joint initial
-----------------
and final bids for the purchase of the Assets. The bids shall be submitted in
the name of the Joint Venture with full disclosure of the Joint Venturers.
Prior to the deadline for submission of initial and final bids, the Venturers
shall meet and mutually agree to the joint bid purchase price to be tendered by
the Joint Venture. If the Venturers are unable to agree upon a joint bid amount
by the time specified above, then either party to
5
this Agreement may terminate this Joint Venture and thereafter either party may
pursue the acquisition of the Assets alone, but not with another party and shall
have no obligation or responsibility to the other party regarding the Assets.
5.3 Existing Agreements. The Joint Venture shall be subject to all
-------------------
existing joint operating agreements and other contracts affecting or pertaining
to the Assets as of the date acquired.
5.4 Responsibilities. Subject to the operating subcontracts referred to
----------------
below, the Managing Venturer shall have exclusive control and management of the
construction, operation, maintenance, alteration, and enlargement of the Joint
Venture properties, subject to the limitations and restrictions set forth
elsewhere in this Agreement and to the orders, directions, decisions and
limitations given or imposed by the Venturers to the extent the Venturers's
review and/or approval is required or permitted by the terms of this Agreement.
The Managing Venturer shall conduct, or cause to be conducted, all operations
hereunder in a good and workmanlike manner and shall have the right and duty to
conduct the operations in accordance with its good faith judgment of what a
prudent operator would do under the same or similar circumstances. The duties
and responsibilities of the Managing Venturer shall be delegated to
subcontractors as follows:
a. Operations of the Wells shall be delegated to Redman Operating
Company pursuant to the terms of the Operating Subcontract attached
hereto as Exhibit A. Under that Operating Subcontract, Redman
Operating Company will perform all duties and obligations of the Joint
Venture as to those of the Wells in which the Joint Venture is the
designated successor operator and shall have all rights thereunder.
Redman Operating Company will continue as the subcontracting operator
until replaced in accordance with the terms of the Operating
Subcontract. Redman Operating Company's compensation for performing
those duties shall be equal to the overhead payments specified in the
operating agreement(s) pertaining to the Wells on which it is
performing those duties and services. That Operating Subcontract shall
expressly provide that Western Gas Resources, Inc., will have the
right to bid contract production services for the Wells covered by the
Operating Subcontract and that Redman Operating Company may award
contracts for those services to Western Gas Resources, Inc., if those
bids are competitive, at the discretion of Redman Operating Company.
b. In the event that the Joint Venture acquires or assumes the
operation of any gas processing, gas gathering, gas treating or
related facilities, the Managing Venturer will delegate the actual
operations
6
thereof to Western Gas Resources, Inc., under an operating subcontract
similar to that attached as Exhibit A, but modified to reflect the
operation of those facilities rather than wells.
c. In the event that the Joint Venture undertakes any seismic
operations or activities, the Managing Venturer will delegate the
actual operations thereof to DDD Energy, Inc., under an operating
subcontract similar to that attached as Exhibit A, but modified to
reflect the conduct of seismic operations rather than wells.
5.5 Duties. The Managing Venturer, except as limited elsewhere in this
------
Agreement, or except as delegated under the operating subcontracts referred to
above, shall have the complete and exclusive charge of constructing and
operating the Joint Venture and its properties and of all activities incidental
or necessary or desirable thereto, including without limitation, the following:
(a) Conduct the day to day construction and drilling activities of the
Joint Venture, conduct the day to day operations of the Joint Venture;
(b) Keep the Joint Venture free and clear of all liens and encumbrances on
account of any claims arising out of operations hereunder; Managing Venturer
shall hold each Venturer harmless from any lien or encumbrance on itsexit
interest in the Joint Venture resulting from the failure of Managing Venturer to
pay, liquidate and discharge all claims, obligations and charges attributable
thereto for which each Venturer has theretofore paid to Managing Venturer that
Venturer's proportionate share;
(c) Cause the appropriate operating subcontractor to make all reports
required to be made by the Joint Venture to any governmental body, state or
federal, in connection with the Joint Venture or its operations; make all
internal reports to the Venturers, as required by this Agreement and/or as
required from time to time by the Venturers, pertaining to the operation and
business activities of the Joint Venture;
(d) Call meetings of the Venturers at those times as it deems necessary,
but at least once each twelve (12) months; provided, any Venturer may require
the Managing Venturer to call a special meeting of the Venturers if that
Venturer deems appropriate;
(e) Promptly pay and discharge all costs and expenses incurred in
connection with the construction and operation of the Joint Venture or, pursuant
to this Agreement, out of Joint Venture funds, and to take advantage of trade
discounts, tax exemptions and items of a similar nature where available;
7
(f) Keep an accurate and itemized record of each Venturer's account and of
all operations of the Joint Venture, and report all expenditures made or
incurred; and extend to each Venturer, upon ten (10) days written notice, hereto
the right and opportunity to examine and inspect all books and records relating
to operations of the Managing Venturer in connection with the Joint Venture
during regular business hours; these records shall be maintained by the Managing
Venturer for a period of three (3) years following the calendar year to which
they apply;
(g) Furnish Venturers a monthly accounting of the Joint Venture within
forty-five (45) days following the end of the month for which the statement
applied.
5.6 Activities Requiring Approval. The Managing Venturer shall not,
-----------------------------
without the prior approval of the Venturers, incur any of the following
expenditures or perform any of the following acts:
(a) Exceed total approved expenditures by more than fifteen percent (15%);
(b) Sell, or otherwise dispose of any materials, equipment or other
property of the Joint Venture; provided, however, that Managing Venturer shall
be authorized, in the ordinary course of business, to sell or dispose of
materials, equipment or other Joint Venture property having an original cost of
less than Twenty Five Thousand Dollars ($25,000.00);
(c) Incur any single operation and maintenance expenditure, not itemized in
the budget, in excess of Twenty Five Thousand Dollars ($25,000.00);
(d) The payment in excess of Twenty Five Thousand Dollars ($25,000.00) over
and above any applicable insurance coverage and proceeds, in settlement or
satisfaction of any claims for injury to or death of person, or for the loss of
or damage to property and institution or defense of litigation involving the
ownership, or arising out of the operation, of the Joint Venture; sums paid in
such settlement or satisfaction shall be charged as expenses and paid by the
Venturers in the proportion of their Ownership Interest;
(e) The making of any substantial long-term or permanent modification in
the basic method of operating all or any portion of the Joint Venture, including
the abandonment of any portion thereof;
(f) The Venturers, at any time or from time to time, may modify, by
unanimous agreement, the above list of approval requirements so as to delegate a
lesser or greater level of authority to the Managing Venturer.
8
5.7 Distributions and Billings. (a) The Managing Venturer shall have the
--------------------------
right to establish a "Working Fund Account" for the purposes of providing
funding to discharge expenses associated with the operation of the Joint
Venture. The amount to be retained as the Working Fund Account shall be
determined, from time to time, by the Venturers in accordance with the voting
procedures, but shall in any event be in an amount sufficient to provide for one
hundred fifty percent (150%) of one month's average day-to-day operating
expenses, which shall be used to meet shortfalls between collection of
receivables and expenditure of payables for Joint Venture expenses. Each
Venturer, including the Managing Venturer, shall contribute its proportionate
share of the Working Fund Account based on its respective Ownership Interest and
such monies shall be deposited in the Joint Venture bank account.
(b) Within thirty (30) days (or within such other period of time as is
specified by the Venturers) after any Venturer proposes any capital or
extraordinary expenditure (which proposal shall include an authority for
expenditure detailing the proposed capital expenditures, appropriate incremental
operating costs and anticipated return), each Venturer shall notify the Managing
Venturer as to its approval or disapproval of that expenditure.
(i) If all Venturers approve such expenditure, each Venturer shall
contribute to the Joint Venture, on an "as needed" or "progress" basis, its
proportionate share of that expenditure, based on its respective Ownership
Interest. The Managing Venturer shall submit, on a monthly basis, its
proportionate share of that expenditure based on its respective Ownership
Interest. The Managing Venturer shall submit, on a monthly basis, to each
Venturer, in writing, a capital cash contribution request detailing the
cash required by project name and authority for expenditure number, less
the amount of any then accrued yet undistributed Venturer cash
distributions (which undistributed cash distributions shall be retained and
applied to the expenditure). Within fifteen (15) working days after receipt
of the capital cash contribution request, each Venturer shall make payment
to the Managing Venturer. The Managing Venturer shall have the option to
request capital cash contributions on the basis of (1) actual amounts for
invoices received by the Managing Venturer and/or (2) projected amounts for
invoices anticipated to be received by the Managing Venturer in the
following month. The capital cash contributions paid by each Venturer,
including the Managing Venturer, which relate to projected amounts for
invoices anticipated to be received by the Managing Venturer in the
following month shall be deposited in the Joint Venture bank account until
such time as the actual invoices are received by the Managing Venturer.
9
(ii) If less than all Venturers approve the expenditure and the
consenting Venturer(s) proceed with the expenditure, then the Managing
Venturer, nevertheless, shall proceed to make that expenditure for the
Joint Venture under the terms of this Agreement, as specified in this
Paragraph (ii). Upon making that expenditure, it is specifically provided
that all income (being gross income, less the appropriate incremental
expenses allocated to that project) to the Joint Venture arising from
operations in connection with that expenditure shall accrue to, be
allocated to, and be distributed to the Venturers who participated in and
made the expenditure (which shall be deemed a special allocation for tax
purposes) until those Venturers have recovered three hundred percent (300%)
of that expenditure; at which time, all Venturers will share in any
subsequent income in accordance with each Venturer's respective interest.
Managing Venturer will establish and maintain proper accounts to implement
the provisions of this paragraph, and shall furnish monthly statements of
those accounts to the Venturers.
(c) All revenues attributable to any of the operations or activities of the
Joint Venture shall be initially received by the Managing Venturer. The
Managing Venturer shall, from those revenues, first discharge all accounts
payable and other obligations of the Joint Venture then due prior to making any
distributions to the Venturers hereunder.
(d) In the event that, during any month, the revenues attributable to the
operations and activities of the Joint Venture are insufficient to discharge all
accounts payable and other obligations of the Joint Venture then due, the
Managing Venturer shall makeup the shortfall on behalf of the Venturers and at
its sole discretion then may either (i) deduct and retain each Venturer's share
thereof (based on its Ownership Interest) from the amounts that would otherwise
be distributed to that Venturer and/or (ii) bill each Venturer for its
proportionate share (based on its Ownership Interest) of the shortfall. Within
thirty (30) days after it receives any such bill, each Venturer shall pay to the
Managing Venturer, in the manner specified by the Managing Venturer, its
proportionate share of the shortfall (based on the Venturer's Ownership
Interest). If any Venturer does not pay that bill within the time specified in
the immediately preceding sentence, then, in addition to the other rights of the
Managing Venturer, (i) the unpaid amount shall bear interest monthly at the
lesser of the prime rate as published in the Wall Street Journal on the first
day of the month in which the delinquency occurs, plus one percentage point, but
not to exceed the maximum contract rate permitted by applicable usury laws in
the State of Texas; or (ii) the Managing Venturer may bill each of the other
Venturers for their respective share (based on the ratios that the Ownership
10
Interests of the other Venturers bear to each other) of the delinquent amount
and, when the delinquent amount is ultimately paid by the delinquent Venturer,
the Managing Venturer shall credit the account of each of the other Venturers
with the portion of the delinquent amount each has paid, along with any interest
attributable to that portion.
(e) Payment of any bill shall not prejudice the right of any Venturer to
protest or question the correctness thereof; provided, however, that all bills
rendered to the Venturers by the Managing Venturer, pursuant to this subsection,
during any calendar year shall conclusively be presumed to be true and correct
after twenty-four (24) months following the end of the calendar year, unless
within such 24-month period a Venturer takes written exception thereto and makes
a claim on the Managing Venturer for adjustment.
5.8 Marketing of Joint Venture Products. The Managing Venturer shall have
------------------------------------
the exclusive right to market all products owned by or acquired by the Joint
Venture, including, without limitation, all gas and residue gas, all liquid
hydrocarbons and condensate and all sulfur. All proceeds received for the sale
of those products shall be received by the Managing Venturer for the benefit of
the Joint Venture to be applied and distributed as otherwise provided in this
Agreement.
5.9 Bank Accounts. All monies of the Joint Venture shall be deposited in,
-------------
and the Joint Venture business transacted from the independent Joint Venture
bank account(s) as determined by the mutual agreement of the Venturers, which
account(s) shall be established to permit transactions only by the Managing
Venturer.
ARTICLE VI
INSURANCE, TAXES AND ROYALTIES
------------------------------
6.1 Insurance Coverage. The Managing Venturer shall, at all times during
------------------
the term of this Agreement for the protection of the Venturers, carry insurance
with insurance companies authorized to do business in the State of Texas in
amounts not less than the following, which shall be in addition to any coverages
required under the terms of the applicable operating subcontracts:
(a) Worker's Compensation Insurance as required by laws and regulations
applicable to and covering employees of the Managing Venturer engaged in the
performance of the work under this Agreement;
(b) Employer's Liability Insurance protecting the Managing Venturer against
common law liability in the absence of the statutory liability for employee
bodily injury arising out of the master-servant relationship with a limit of not
less than Five Hundred Thousand Dollars ($500,000.00);
11
(c) General Liability Insurance, including bodily injury, property damage,
contractual liability, underground resource damage, explosions and saline
contamination, with limits of One Million Dollars ($1,000,000.00), each
occurrence/aggregate;
(d) Automobile Liability Insurance, including non-owned and hired vehicle
coverage with limits of One Million Dollars ($1,000,000.00);
(e) An umbrella policy with limits of One Million Dollars ($1,000,000.00)
for each occurrence and Ten Million Dollars ($10,000,000.00) in the aggregate to
the extent available at commercially reasonable rates;
(f) A business interruption policy with contingent expense coverage for
each occurrence in the amount of $6,000,000.00.
(g) Subject to the annual approval of the Venturers, the Managing Venturer
may request modification of the above insurance coverages and/or addition of
such other insurance, including, but not limited to physical damage and excess
liability coverages, as the Managing Venturer deems advisable or necessary; in
the event the Venturers cannot agree on such modifications and/or additional
insurance coverage, then the coverage in Sections (a) through (e), above, shall
continue to apply;
(h) The cost of the above mentioned insurance shall be a cost of the Joint
Venture to be apportioned for the account of each of the Venturers.
6.2 Contractors and Subcontractors Coverage. The Managing Venturer shall
---------------------------------------
require any contractor and subcontractor it may engage to comply at all times
with applicable worker's compensation laws and to maintain, at all times,
comprehensive general and automobile liability insurance with limits consistent
with risk potential, and an umbrella liability policy with a minimum limit of
$5,000,000 in the aggregate, or as otherwise specified in the applicable
operating subcontract.
6.3 Limitation on Claim Settlement. Any claim arising out of the
------------------------------
operation or maintenance of the Joint Venture may be settled and discharged by
the Managing Venturer, but no claim shall be settled by the Managing Venturer
for an amount in excess of Twenty Five Thousand Dollars ($25,000.00), unless the
Managing Venturer first obtains the prior approval of the proposed settlement
from the Venturers.
6.4 Expense of Litigation. Unless covered by insurance, as set forth in
---------------------
this Agreement, any expense of handling and investigating litigation or claims
resulting from operations under
12
this Agreement in excess of Twenty-Five Thousand Dollars ($25,000.00) shall be
subject to prior approval by the Venturers.
6.5 Losses Due to Gross Negligence. No Venturer shall be responsible for
------------------------------
any loss and associated costs or expenses caused by any other Venturer's gross
negligence or willful misconduct.
6.6 Taxes. The Managing Venturer shall render, or cause the appropriate
-----
operating subcontractor to render, for ad valorem tax purposes, all Joint
Venture property subject to ad valorem taxes under existing laws or which may be
made subject to taxation under future laws and shall pay, for the benefit and
the account of the Venturers, all ad valorem taxes and any other taxes levied
upon the Joint Venture.
6.7 Royalties. The Managing Venturer shall pay, or cause to be paid, all
---------
royalties due on production of the Joint Venture from the Wells.
ARTICLE VII
PRIVILEGES OF VENTURERS
-----------------------
7.1 Inspections. Each Venturer and its representative, upon notification,
-----------
shall have the right, at its own risk and expense, at all reasonable hours, to
inspect the Joint Venture property.
7.2 Audits. Any Venturer may, upon written notice to the Managing
------
Venturer, cause an audit to be performed with respect to any aspect of Joint
Venture activities. Such audit shall be performed at a time agreed upon by the
Managing Venturer and the requesting Venturer (or, in the absence of an
agreement, commencing within sixty (60) days after such written notice);
provided, however, that in any event there shall be (i) no audits (covering the
same subject matter) conducted more frequently than once each twelve (12)
months; (ii) no audit may cover a period greater than twenty-four (24)
consecutive months; and (iii) no audit may cover a period that has been subject
to a prior audit. The costs and expenses incurred by any auditor conducting an
audit shall not be charged to the Joint Venture account, but shall be borne and
paid by the Venturer(s) participating in the audit. If so requested by an
auditor, the Managing Venturer shall produce original documents, where
available, for the auditor's use in conducting the audit.
ARTICLE VIII
RESTRICTIONS ON TRANSFER
------------------------
8.1 Restrictions. No Venturer may sell, exchange, assign, or otherwise
------------
dispose of (except as expressly permitted in this Agreement) all or any portion
of its Ownership Interest in the Joint Venture or its right to receive its pro
rata share of distributions of the Joint Venture; provided, however, a Venturer
may assign and convey such interest and this Agreement to an
13
Affiliate, subsidiary, or parent company of such Venturer having given notice of
same to the other Venturers. Any transfer or other disposition in violation of
this Article shall be deemed null and void, and shall have no legal effect.
8.2 Encumbrances by a Venturer. Any Venturer hereunder shall have the
--------------------------
right to pledge, mortgage, assign for security purposes or hypothecate all or
any portion of its Ownership Interest in the Joint Venture.
8.3 Bankruptcy of a Venturer. If any Venturer shall take advantage of any
------------------------
bankruptcy or insolvency act, or if any insolvency petition shall be filed
against any Venturer or final adjudication of any insolvency or bankruptcy
entered thereon, or if any Venturer shall make an assignment for the benefit of
its creditors, then within ninety (90) days after such adjudication or
assignment, the remaining Venturer(s) shall have the option and right to
purchase all or any part of such Venturer's interest in the Joint Venture at a
price equal to the appraised value, obtained by a third party appraiser selected
by mutual agreement of the Venturers, for such part as of the date of
adjudication of bankruptcy or the date of assignment of creditors. Those
Venturers exercising such option shall purchase the interest in the proportions
in which their Ownership Interests then bear to each other. The Venturer's
trustee in bankruptcy or other legal representative shall execute any documents
as may be necessary to evidence and effect a transfer upon receipt of the
purchase price. If the trustee or legal representative fails or refuses to
execute the documents, then the other Venturer is authorized to execute the
instruments of transfer in the name of, and on behalf of that Venturer, and for
those purposes is given an irrevocable Power of Attorney to do any and all
things, including the execution of all documents necessary to implement and
carry out the foregoing. Purchase of all or a part of the bankrupt or insolvent
Venturer's interest hereunder shall be consummated for cash within thirty (30)
days after exercise of the option herein given, which option shall be exercised
in writing.
8.4 Third Party Offers. Any Venturer desiring to dispose of all or any
------------------
portion of its Ownership Interest, hereinafter called the "Notifying Venturer"
must first obtain a bona fide written purchase offer therefor and then give the
other Venturers written notice of same (Notice of Intention) by certified or
registered mail. That Notice of Intention shall state the Joint Venture
interest intended to be disposed of, and the name and address of the intended
transferee, the consideration and the manner of payment to govern the intended
disposition. The other Venturers shall thereupon have forty-five (45) days from
the date of mailing to:
(a) At their option, individually exercise an option to purchase the Joint
Venture interest referred to in the Notice of Intention; provided, however, if
more than one Venturer elects to
14
exercise its individual right to purchase, the electing Venturers shall purchase
that Joint Venture interest in the proportions in which their Ownership
Interests in the Joint Venture then bear to each other; or
(b) By unanimous agreement of the Venturers, cause the Joint Venture to
purchase that Joint Venture interest; or
(c) Consent to that sale. In the event the Notifying Venturer has not
received any written response within the 45-day period from the other Venturers,
that failure to respond shall be deemed a consent to the sale.
The election to exercise the option to purchase shall be made in writing
and mailed by certified or registered mail to the Notifying Venturer. The
option purchase price, terms, and the manner of payment shall be the same as
indicated in the Notice of Intention of the Notifying Venturer. All of the
offered interest must be purchased if the election under (a) and (b), above, is
selected; the Venturers do not have the right to purchase only a portion
thereof. Closing shall take place not later than ninety (90) days from the date
of mailing of the Venturers' election to exercise the option to purchase.
If no Venturer exercises the option, as provided herein, the Notifying
Venturer may retain its interest or may, within five (5) months after the date
of mailing of that Notice of Intention, dispose of its Joint Venture interest to
the person, joint venture, association, trust or corporation for consideration
and on the terms, all of which were stated in the Notice of Intention, but may
not dispose of its interest to any person, joint venture association, trust, or
corporation not stated in its Notice of Intention, nor on terms or at a price
more favorable to the purchase than stated in this Notice of Intention.
8.5 Buy-Sell Procedure. Each Venturer shall have the right to offer to
------------------
purchase all or a portion of the interest in the Joint Venture of the other
Venturers at any time. The Venturer desiring to buy out the others ("Offeror")
shall exercise this right by giving written notice to the other Venturers
("Offeree(s)") of its intent to purchase all or a portion of the interest of the
Offeree(s) at a purchase price as set forth in that notice, with final closing
to occur not later than ninety (90) days from the date of the Notice. In the
event that any of the Offeree(s) desires not to sell its interest to the Offeror
on the terms specified in the Notice, that Offeree(s) shall have the right, but
not the obligation, to acquire all of the Joint Venture interest of the Offeror
at the purchase price, as stated in the Offeror's notice (adjusted forth
proportionate interest owned). If more than one Offeree elects to purchase the
Offeror's Joint Venture interest, their participation in that acquisition shall
be proportional based on their Ownership Interests (or in such other
15
proportions as are agreed upon by them). If the Offeree(s) does not close on the
purchase of the Offeror's Joint Venture interest within 90 days after the date
of the Offeror's notice, then the Offeror has the right, within 30 days
thereafter to acquire all of the Joint Venture interest of the Offeree on the
terms as set forth in the Offeror's notice.
ARTICLE IX
WAIVER OF PARTITION AND WITHDRAWAL OF A VENTURER
------------------------------------------------
9.1 Waiver of Partition. All Venturers specifically waive any direct or
-------------------
indirect right they now have or may hereafter acquire to cause Joint Venture
property which is now owned or hereafter acquired by the Venturers to be the
subject of a partition suit.
9.2 Withdrawal of a Venturer. The withdrawal by a Venturer shall be
------------------------
considered a breach of this Agreement and shall subject the withdrawing Venturer
to damages as provided in the Texas Uniform Limited Partnership Act,
notwithstanding the fact that this Agreement does not create a limited
partnership. Upon the effective date of the withdrawal, the withdrawing
Venturer (1) shall no longer be considered to be a Venturer; (2) shall no longer
have any rights to participate in the management or operations of the Joint
Venture; and (3) shall have a zero percent (0%) share of the profits and losses
for all purposes. Upon withdrawal, any amount distributable to such withdrawing
Venturer after set-off for damages resulting from such breach, shall be paid to
such Venturer as an Internal Revenue Code Section 736(a) guaranteed payment over
ten (10) equal annual installments without interest.
ARTICLE X
TERMINATION AND DISSOLUTION
---------------------------
10.1 Grounds for Dissolution. In addition to any dissolution of the Joint
-----------------------
Venture provided for in any other provisions of this Agreement, the Joint
Venture shall be terminated and dissolved upon the happening of any of the
following events:
(a) Expiration of the Joint Venture term, as set forth above;
(b) The vote of Venturers holding more than seventy-five percent (75%) of
the Ownership Interests to effect a dissolution, with that resolution fixing the
date of termination and dissolution;
(c) The bankruptcy or dissolution or other termination of existence of the
Managing Venturer (unless the remaining Venturers elect to continue the Joint
Venture as provided below).
If, within thirty (30) days following any event described above, the
remaining Venturers unanimously elect to continue
16
the Joint Venture and a new Managing Venturer (which must be different than the
Managing Venturer that is the subject of the event described in (c), above) is
appointed based on a majority vote of such remaining Venturers, the Joint
Venture shall not be dissolved but shall continue in accordance with the
provisions of this Agreement, unless otherwise amended by mutual agreement of
the surviving Venturers, with the new Managing Venturer.
10.2 Termination of the Joint Venture. If the Joint Venture is dissolved
--------------------------------
or terminated pursuant to the provisions above, a liquidating agent shall be
designated by the Venturers, and that liquidating agent shall immediately
commence to conclude the Joint Venture's affairs and liquidate. The liquidating
agent, on behalf of the Joint Venture, shall engage the services of an
independent investment banking firm or other expert, to obtain the highest
possible price for the assets of the Joint Venture. Any Venturer shall have the
right during this period to also seek potential purchasers of the Joint
Venture's assets. The Joint Venture's assets shall be distributed in payment of
liabilities of the Joint Venture and to the Venturers in liquidation of the
Joint Venture in the following order:
(a) To creditors by the payment, or provision for payment, of the debts and
liabilities of the Joint Venture (other than any loans or advances that may have
been made by any of the Venturers to the Joint Venture) and the expenses of
liquidation;
(b) To the setting up of any reserves that the Venturers may deem
reasonably necessary for any contingent or unforeseen liabilities or obligations
of the Joint Venture. Such reserves shall be paid over by the Venturers to a
bank or other institutional escrow agent to be held in an interest bearing
account for the purpose of ultimately disbursing such reserves in payment of the
aforementioned contingencies, and at the expiration of that period as the
Venturers may deem advisable, to distribute the balance in the manner provided
in this Section, and in the order named herein;
(c) To the payment to the Venturers of their respective capital accounts at
the date of distribution; if any Venturer's Capital Account is negative, that
Venturer shall make a capital contribution so as to restore its capital account
balance to zero (0), which contribution shall be distributed to Joint Venture
creditors or to Venturers with positive capital account balances in accordance
with the terms of this Agreement;
(d) The balance, if any, shall be divided among the Venturers in accordance
with their Ownership Interests.
10.3 Inadequate Assets. Should the assets of the Joint Venture be
-----------------
insufficient to satisfy its debts, expenses, and liabilities (other than return
of capital and profit), then, and in
17
that event, each Venturer shall forthwith remit its proportionate share of any
deficiency in accordance with its Ownership Interest. That remittance must be
made within thirty (30) days after receipt of written notification of the
existence of that deficiency.
ARTICLE XI
RESTRICTIONS ON PARTIES
-----------------------
11.1 Other Business Activities. Any Venturer may engage in other business
-------------------------
activities of every nature and description, whether or not in competition with
the Joint Venture (except for bidding on the Assets), and neither the Joint
Venture nor any Venturer shall have any rights by virtue of this Agreement in
and to the independent Venturer's activities, or the income or profits derived
therefrom.
ARTICLE XII
INDEMNIFICATION
---------------
12.1 Cross Indemnity. Each Venturer agrees that it (the "Indemnifying
---------------
Venturer") shall indemnify each of the other Venturers against, and hold each of
the other Venturers harmless from any claims, damages, actions, or expenses
resulting from the Indemnifying Venturer's breach of this Agreement or the
Indemnifying Venturer's breach of any agreement related to the Joint Venture, or
resulting from the conduct of the Indemnifying Venturer.
ARTICLE XIII
MISCELLANEOUS
-------------
13.1 Benefits. This Agreement shall be binding upon the parties and their
--------
legal representatives, successors and assigns.
13.2 Amendments. This Agreement is subject to amendment only by a written
----------
statement executed by all the Venturers.
13.3 Notices. All notices, decisions, consents, waivers, directions,
-------
requests, votes or other instruments or communications provided for under this
Agreement shall be in writing, signed by the Venturer giving the same, and shall
be deemed properly given when mailed, postage prepaid, certified return receipt
requested, and addressed to the parties hereto at their addresses appearing on
the signatory pages. Each Venturer, by written notice to all other Venturers,
may specify any other address for the receipt of such instrument or
communication.
13.4 Integration. This Agreement embodies the entire agreement and
-----------
understanding among the Venturers and supersedes all prior agreements and
understandings.
18
13.5 Applicable Law. This Agreement and the rights of the Venturers shall
--------------
be governed by and construed and enforced in accordance with the laws of the
State of Texas.
13.6 Severability. In case any one or more of the provisions contained in
------------
this Agreement, or any application thereof, shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and any other application thereof shall
not in any way be affected or impaired thereby.
13.7 Headnotes. Headnotes are used merely for reference purposes and do
---------
not affect context in any manner.
13.8 Gender. Wherever applicable, the pronouns designating the masculine
------
or neuter gender shall equally apply to the feminine, neuter and masculine
genders. Furthermore, whenever applicable within this Agreement, the singular
shall include the plural.
13.9 Time of the Essence. Any and all activities of the Venturers
-------------------
governed by the terms of his Agreement shall be accomplished with the utmost
expediency by the parties hereto.
IN WITNESS WHEREOF, the undersigned, being all of the Venturers of this
Joint Venture have executed this Agreement as of the day and year first above
written.
ATTEST: REDMAN ENERGY CORPORATION
___________________ By:___________________________________
Title:________________________________
Address: ____________________________
____________________________
Notices to the attention of:
J. Jeff Voncannon
19
ATTEST: DDD ENERGY, INC.
___________________ By:___________________________________
Title:________________________________
Address: ____________________________
____________________________
Notices to the attention of:
Horace A. Calvert
ATTEST: WESTERN GAS RESOURCES, INC.
___________________ By:___________________________________
Title:________________________________
Address: ____________________________
____________________________
Notices to the attention of:
Gary W. Davis
GUARANTY
By execution below, Seitel, Inc., hereby unconditionally and absolutely
guaranties the timely and full performance of all obligations and
indemnification of all liabilities of DDD Energy, Inc., under the terms and
provisions of this Joint Venture Agreement. This guaranty shall not be affected
by the insolvency or bankruptcy of DDD Energy, Inc.
ATTEST: SEITEL, INC.
_____________________ By:__________________________
20
EXHIBIT A
OPERATING SUBCONTRACT AGREEMENT
THIS AGREEMENT, dated _______________________, 1994, is by and between
REDMAN-SMACKOVER JOINT VENTURE, hereinafter referred to as "Owner", and Redman
Operating Company, hereinafter referred to as "Operator".
NOW THEREFORE in consideration of the mutual covenants and agreements set
forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
-----------
As used in this Agreement, the following words and terms shall have the
meanings here ascribed to them:
1. AFE means a document prepared by Owner or Operator which indicates the
---
cost and describes work to be performed.
2. Authorized Expenses means expenses set forth in an approved AFE or
-------------------
expenses authorized under Paragraph 3.3, hereof.
3. Year means a Calendar Year.
----
4. Wells means the wells described on Exhibit A, attached hereto and made
-----
a part hereof, as to which Owner is the designated operator under the Operating
Agreement(s).
5. Month means a calendar month.
-----
6. Working Interest Owners means all interest Owners in the Well.
-----------------------
7. Contract Fee means the amount Owner shall pay to Operator as
------------
consideration for services rendered by Operator.
8. Operating Agreement(s) means those certain operating agreements
----------------------
pertaining to the Wells and which are further described on Exhibit B, attached
hereto and made a part hereof.
ARTICLE II
TERM
----
2.1 The term of this Agreement shall end upon the earlier of (i) the date
Owner is no longer the designated Operator under the Operating Agreement, (ii)
the termination of the Operating Agreement(s), or (iii) upon a majority vote of
the joint venturers in the Redman-Smackover Joint Venture, based upon those
joint venturers' Ownership Interest.
21
ARTICLE III
OPERATOR'S DUTIES AND SERVICES
------------------------------
3.1 Operator agrees that, it will for the benefit of Owner, perform all
duties, obligations and responsibilities designated as those of the Operator
under the Operating Agreement(s).
3.2 Employees. Operator shall be an independent contractor and the number
---------
of employees used by Operator in performing services hereunder, their selection,
the hours of labor, and their compensation for services performed shall be
determined solely by Operator, and all employees shall be employees of Operator
and not of Owner.
3.3 Responsibilities. In addition to the duties, responsibilities and
----------------
obligations under 3.1, above, Operator shall provide the following services, on
behalf of Owner:
(a) Providing to Owner reports and information concerning the Wells, as
specified by Owner herein and as may be requested in the future;
(b) Supervisory services required for normal day-to-day operation of the
Wells;
(c) Providing recommendations and implementing procedures to reduce
operating costs of the Field consistent with prudent and safe practices;
(d) Preparation of AFE's for Wells workovers or mechanical repairs; and,
Operator shall prepare an AFE and obtain Owner's approval for any single
expenditure in excess of Fifteen Thousand Dollars ($15,000.00) before initiating
work;
(e) Obtaining written permission from Owner before proceeding to plug
and/or abandon the Wells;
(f) Operator shall prepare an Annual Budget setting forth estimated
expenses to be incurred in the first Calendar Year, and each Calendar Year
thereafter, no later than November 15 prior to the relevant Calendar Year;
(g) In arranging for contract production services for the Wells, Operator
agrees that Western Gas Resources, Inc., (Western) shall have the right to
submit bids to perform and provide those services and Operator may award
contracts for those services to Western Gas Resources, Inc., if those bids are
competitive, at the discretion of Operator;
(h) Operator shall not make any proposals to other working interest owners
in the Wells for work or activities which would require the approval of Owner
hereunder without first obtaining that approval of Owner;
22
(i) Operator shall timely prepare and file all requisite reports or filings
required by the Texas Railroad Commission or by other regulatory or governmental
authorities and shall furnish copies of all of those filings to Owner promptly
after filing;
(j) Operator will timely invoice all other working interest owners for
their proportionate share of all expenses authorized under the Operating
Agreement(s) and shall diligently pursue collection of all invoice amounts.
3.4 Standard of Care. Operator shall perform the services in a safe,
----------------
proper and workmanlike manner with that degree of diligence and prudence which
would be reasonably and ordinarily exercised by experienced Operators engaged in
a similar activity under similar circumstances and conditions. Operator shall
do, or cause to be done, all acts and things within its control as may be
reasonably necessary to maintain the Wells in compliance with the requirements
of applicable federal, state, regional and local laws, rules and regulations.
3.5 Indemnification. Operator shall protect, indemnify, defend and save
---------------
harmless Owner, its respective officers, employees, shareholders, agents,
successors and assigns from and against any and all liabilities, claims,
demands, expenses, actions and causes of action of every kind and character
(including reasonable attorney fees associated therewith) of Operator's
officers, employees and agents and the officers, employees and agents of
Operator's subcontractors, if any, because of personal injury, disease or bodily
injury (including death at any time resulting therefrom) and for damage to or
destruction of their property growing out of or incident to or resulting from
the performance of any of the services covered by this Agreement by Operator,
its officers, employees, agents or subcontractors, except to the extent any such
personal or bodily injury, disease, death or property damage is shown to have
been caused by or arisen out of the negligence, willful misconduct or non-
compliance with industry standards by Owner, its respective officers, employees
or agents.
Owner shall protect, indemnify, defend, and save harmless Operator, its
officers, employees and agents from and against any and all liabilities, claims,
demands, expenses, actions and causes of action of every kind and character
(including reasonable attorney fees associated therewith) of Owner's officers,
employees and agents and the officers, employees and agents of Owner's third
party Operators, if any, because of personal injury, disease or bodily injury
(including death at any time resulting therefrom) and for damage to or
destruction of their property growing out of or incident to or resulting from
the performance of any of the services covered by this Agreement by Operator,
its officers, employees, agents or subcontractors, except to the extent any such
personal or bodily injury, disease, death or property damage is shown to have
been caused by or arisen out of the negligence,
23
willful misconduct or noncompliance with industry standards by Operator, its
respective officers, employees or agents.
3.6 Insurance. At all times during the term of this Agreement, Operator
---------
shall maintain, at Operator's cost, the following insurance with companies
satisfactory to Owner:
(a) Worker's Compensation Insurance as required by laws and regulations
applicable to and covering employees of the Operator engaged in the performance
of the work under this Agreement;
(b) Employer's Liability Insurance protecting the Operator against common
law liability in the absence of the statutory liability for employee bodily
injury arising out of the master-servant relationship with a limit of not less
than Five Hundred Thousand Dollars ($500,000.00);
(c) General Liability Insurance, including bodily injury, property damage,
contractual liability, underground resource or equipment damage, explosions and
saline contamination, with limits of One Million Dollars ($1,000,000.00), each
occurrence/aggregate;
(d) Automobile Liability Insurance, including non-owned and hired vehicle
coverage with limits of One Million Dollars ($1,000,000.00);
(e) An umbrella policy with limits of One Million Dollars ($1,000,000.00)
for each occurrence and Five Million Dollars ($5,000,000.00) in the aggregate to
the extent available at commercially reasonable rates;
(f) Subject to the annual approval of the Owner, the Operator may request
modification of the above insurance coverages and/or addition of such other
insurance, including, but not limited to physical damage and excess liability
coverages, as the Operator deems advisable or necessary; in the event the
Venturers cannot agree on such modifications and/or additional insurance
coverage, then the coverage in Sections (a) through (e), above, shall continue
to apply;
(g) The policies specified above, and any insurance Operator carries shall
be endorsed to include a waiver of subrogation in favor of Owner and shall
include Owner as an additional insured.
(h) Operator shall require any contractor and subcontractor it may engage
to comply at all times with applicable worker's compensation laws and to
maintain, at all times, comprehensive general and automobile liability insurance
with limits consistent with risk potential, and an umbrella liability policy
with a minimum limit of $1,000,000 in the aggregate.
24
3.7 Taxes. Owner shall escrow all production, ad valorem and similar
-----
taxes accruing with respect to the Wells and will timely render the Wells for
tax purposes and pay the appropriate tax liability on the Wells.
ARTICLE IV
CONTRACT FEE
------------
4.1 Contract Fee. As consideration for the services rendered by Operator
------------
hereunder, Owner shall pay to Operator the fees received by Owner as the
designated operator under the Operating Agreement(s).
ARTICLE V
ACCOUNTING PROCEDURES
---------------------
5.1 Accounting. Operator will provide all necessary financial accounting
----------
for the Wells. Operator's responsibility shall be to receive, approve or
disapprove, and pay all Wells invoices promptly. Operator shall provide, on a
timely basis, any and all information requested by Owner in order to assist
Owner in its accounting, including its monthly invoice for services, direct
operating expenses and joint interest statements.
5.2 Audits. Owner shall have the right, at reasonable times, and after
------
reasonable advance notice, to audit the accounts and records of Operator
relating to expenditures made for the Wells, provided that any audits, or audits
relating to any Contract Year, must be conducted within that Contract Year or in
the twenty-four (24) month period immediately thereafter, and no audit may
include any time period subject to a previous audit. The cost of any audit or
audits shall be borne solely by Owner.
ARTICLE VI
REPORTS
-------
6.1 Reports. Operator shall provide to Owner, by the 15th day of each
-------
month, a report for the preceding month that includes a detailed daily summary
of Wells operations. The report shall identify and highlight any significant
changes in the Wells characteristics. Daily detailed reports of any workovers
or major equipment expenditures or installations, or any other significant items
shall be sent to the Owner by facsimile each day for the previous 24 hours
activities.
ARTICLE VII
RELATIONSHIP OF THE PARTIES
---------------------------
7.1 It is the intent of the parties that Operator shall be an independent
Operator in its activities hereunder.
25
ARTICLE VIII
LIENS
-----
8.1 Operator herewith agrees to hold Owner harmless and to indemnify
Owner against liability for all liens or claims by whomsoever filed and arising
in connection with Operator's performance or nonperformance of its obligations
hereunder.
ARTICLE IX
NOTICES
-------
9.1 Notices and statements provided to be given hereunder shall be deemed
sufficiently given and served if deposited in the United States mail, postage
prepaid, and addressed to the respective parties or their designees at the
address and facsimile number below, or as they designate in writing to the
other:
Operator:
Redman Operating Company
50 Briar Hollow Ln. W., 6th Floor
Houston, Texas 77027
Fax: (713) 963-9701
Attention: Rex A. Bigler
Owner:
Redman-Smackover Joint Venture
c/o Western Gas Resources, Inc., Managing Venturer
12200 N. Pecos Street
Denver, Colorado
Fax: (303) 450-6927
Attention: Jeff Jones
ARTICLE X
ASSIGNMENT
----------
10.1 This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and to their respective successors and assigns; provided,
however, that neither party may assign its rights under this Agreement without
the consent of the other party, which consent shall not be unreasonably
withheld.
ARTICLE XI
TERMINATION OF AGREEMENT
------------------------
11.1 Owner reserves the right to terminate this Agreement at any time if:
(a) Operator becomes insolvent, bankrupt or is placed in
receivership; or
26
(b) Operator materially fails to perform its duties hereunder; which
failure continues for a period of thirty (30) days following
written notice of that failure from Owner to Operator.
ARTICLE XII
MISCELLANEOUS
-------------
12.1 The validity and interpretation of this Agreement shall be governed
by the laws of the State of Texas.
12.2 Failure or delay by either party in exercising any right or power
under this Agreement shall not operate as a waiver of that right or power.
12.3 This Agreement is the entire Agreement between the parties as to its
subject matter, and there are no other contracts, oral or written, as to that
subject matter, expressed or implied. This Agreement may be modified only in
writing signed by both parties.
IN WITNESS WHEREOF, the parties hereto have subscribed their names
effective as of the day and year first above written.
Operator:
ATTEST: REDMAN OPERATING COMPANY
________________________ By:_____________________________
ATTEST: Owner:
REDMAN-SMACKOVER JOINT VENTURE
By: Western Gas Resources, Inc.,
its Managing Venturer
________________________ By:______________________________
27
EX-10.43
4
AMD. #4 TO NOTE PURCHASE
AMENDMENT NO. 4 TO NOTE PURCHASE AGREEMENTS
THIS AMENDMENT NO. 4 TO NOTE PURCHASE AGREEMENTS (this "Amendment"), by and
among Western Gas Resources, Inc., a Delaware corporation, each of the
Guarantors listed on Attachment 1 attached hereto and incorporated herein by
reference and each of the Note Holders listed on Attachment 1 attached hereto
and incorporated herein by reference, dated as of July 14, 1995.
W I T N E S S E T H:
-------------------
WHEREAS, prior hereto, the Company and the Guarantors have entered into
those certain Note Purchase Agreements dated as of April 1, 1993, as amended,
with each of the Purchasers named therein (as amended, the "Note Purchase
Agreements"), pursuant to which the Company sold its 7.65% Senior Notes due
April 30, 2003 to the Purchasers;
WHEREAS, the Company and the Guarantors have requested that Section 7.11 of
the Note Purchase Agreements be amended and that certain definitions of the Note
Purchase Agreements be amended or added; and
WHEREAS, the Required Holders (as that term is defined in the Note Purchase
Agreements) have agreed to amend the Note Purchase Agreements, as set forth
herein.
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein, the parties hereto agree as follows:
Section 1. Defined Terms. Unless otherwise defined herein, the terms used
-------------
herein shall be as defined in the Note Purchase Agreements.
Section 2. Amendments Relating to Fixed Charge Coverage. (a) Section
--------------------------------------------
7.11 of each Note Purchase Agreement is hereby deleted in its entirety and
replaced, in lieu thereof, with the following:
"7.11 Fixed Charge Coverage
As at the end of each fiscal quarter of the Company, for the period of four
(4) consecutive fiscal quarters of the Company then most recently ended,
Income Available for Fixed Charges shall be at least the applicable
percentage of Fixed Charges specified in the chart below:
EXHIBIT 10.43
For each fiscal quarter of Income Available for Fixed Charges
the Company ending within shall be at least the following
the period: applicable percentage of Fixed Charges:
========================================================================
June 30, 1995 through 300%
September 30, 1996
(inclusive)
October 1, 1996 through 325%
September 30, 1997
(inclusive)
October 1, 1997 and 375%
thereafter
========================================================================
(b) The definition of the term "Income Available for Fixed Charges" set forth
in Section 11.1 of each Note Purchase Agreement is hereby deleted in its
entirety and replaced, in lieu thereof, with the following:
"Income Available for Fixed Charges - for any period shall mean
Consolidated Adjusted Net Income for such period plus income taxes (to the
extent deducted in computing Consolidated Adjusted Net Income for such period),
interest, depreciation, amortization and the Restructuring Charge."
(c) The following definition of the term "Restructuring Charge" is hereby
added to Section 11.1 of each Note Purchase Agreement:
"Restructuring Charge" - means an amount equal to the restructuring charge
recognized by the Company in its fiscal quarter ending June 30, 1995 relating to
a cost reduction program; provided, however, that in no event shall the
Restructuring Charge be greater than Two Million Dollars ($2,000,000)."
Section 3. Amendment Fee. Promptly upon the execution and delivery of
-------------
this Amendment by the Required Holders, the Company shall pay each holder of
Note (regardless of whether such holder has executed and delivered this
Amendment) a fee (the "Amendment Fee") in an amount equal to one-tenth of a
percent (0.1%) of the principal amount of Notes held as of June 30, 1995 by such
holder.
Section 4. Effectiveness. This Amendment shall be effective as of July
-------------
14, 1995: provided, however, that its effectiveness is conditioned upon: (i)
-------- -------
the Company having entered into amendments to: (a) that certain First Restated
Loan Agreement (Revolver), dated as of September 2, 1994, by and among the
Company, NationsBank of Texas, N.A. ("NationsBank"), as Agent and Certain
2
Banks, as Lenders; (b) that certain Third Restated Loan Agreement (Term), dated
as of September 2, 1994, by and among the Company, NationsBank, as Agent and
Certain Banks, as Lenders; and (c) that certain Amended and Restated Master
Shelf between the Company and The Prudential Insurance Company of America; (ii)
such amendments containing covenants substantially similar to the amendments
made to the Note Purchase Agreements hereby; and (iii) the Company having paid
each holder of a Note the Amendment Fee.
IN WITNESS WHEREOF, the undersigned have set their hands hereto as of this
July 14, 1995.
WESTERN GAS RESOURCES, INC.
By: /s/ JOHN C. WALTER
-----------------------
John C. Walter, Executive Vice President
MGTC, INC.
MIGC, INC.
MOUNTAIN GAS RESOURCES, INC.
WESTERN GAS RESOURCES- OKLAHOMA, INC.
WESTERN GAS RESOURCES STORAGE, INC.
WESTERN GAS RESOURCES-TEXAS, INC.
By: /s/ JOHN C. WALTER
----------------------
John C. Walter, Executive Vice President
LIFE INSURANCE COMPANY OF NORTH AMERICA*
INSURANCE COMPANY OF NORTH AMERICA*
CONNECTICUT GENERAL LIFE INSURANCE COMPANY*
CONNECTICUT GENERAL LIFE INSURANCE COMPANY,
ON BEHALF OF ONE OR MORE SEPARATE ACCOUNTS*
BY: CIGNA Investments, Inc.
By____________________________
Name:_________________________
Title:________________________
* This entity is either the registered owner of one or more of the securities
pertaining hereto or is a beneficial owner of one or more of such securities
owned
3
by and registered in the name of a nominee for that entity.
4
ATTACHMENT 1 TO
AMENDMENT NO. 3 TO
NOTE PURCHASE AGREEMENTS
------------------------
A. THE GUARANTORS.
MGTC, Inc.
MIGC, Inc.
Mountain Gas Resources, Inc.
Western Gas Resources-Oklahoma, Inc.
Western Gas Resources Storage, Inc.
Western Gas Resources-Texas, Inc.
B. THE NOTE HOLDERS.
Connecticut General Life Insurance Company
Connecticut General Life Insurance Company
Insurance Company of North America
Life Insurance Company of North America
The Canada Life Assurance Company
Canada Life Insurance Company of America
Canada Life Insurance Company of New York
The Franklin Life Insurance Company
Royal Maccabees Life Insurance Company
5
EX-10.44
5
AMD. #1 TO REC PUR AGREEMENT
AMENDMENT NO. 1 TO
RECEIVABLES PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 TO RECEIVABLES PURCHASE AGREEMENT (this "Amendment"),
by and among Western Gas Resources, Inc., a Delaware corporation, as Seller
(the "Seller"), Receivables Capital Corporation, a Delaware corporation, as
Purchaser (the "Purchaser") and Bank of America National Trust and Savings
Association, a national banking association, as Agent for the Purchaser (the
"Agent"), dated as of July 1, 1995.
W I T N E S S E T H:
-------------------
WHEREAS, prior hereto, the Seller, the Purchaser and the Agent have entered
into that certain Receivables Purchase Agreement, dated as of February 28, 1995
(the "Receivables Agreement");
WHEREAS, the Company has requested that Section 7.03(e) of the Receivables
Agreement be amended; and
WHEREAS, the Purchaser and the Agent have agreed to amend Section 7.03(e)
of the Receivables Agreement, as set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein, the parties hereto agree as follows:
Section 1. Defined Terms. Unless otherwise defined herein, the terms
-------------
used herein shall be as defined in the Receivables Agreement.
Section 2. Amendment Relating to Debt to Capitalization Ratio. Section
--------------------------------------------------
7.03(e) of the Receivables Agreement is hereby deleted in its entirety and
replaced, in lieu thereof, by the following:
"(e) Debt to Capitalization Ratio. Permit Seller's Debt to Capitalization
----------------------------
Ratio to be greater than (i) 0.60 to 1.0 at any time until and including
October 31, 1996 and (ii) 0.55 to 1.00 at any time thereafter."
Section 3. Certain Representations and Warranties of Seller. The Seller
------------------------------------------------
EXHIBIT 10.44
hereby represents and warrants as follows:
(a) The representations and warranties contained in Section 6.01 of the
Receivables Agreement are correct on and as of the date hereof as though
made on and as of the date hereof and shall be deemed to have been made on
the date hereof;
(b) No event has occurred and is continuing that constitutes a Termination
Event or Unmatured Termination Event;
(c) Seller (i) has all necessary power, authority and legal right to
execute, deliver and perform this Amendment and (ii) has duly authorized by
all necessary corporate action the execution, delivery and performance of
this Amendment.
(d) This Amendment and the Receivables Agreement, as amended hereby, when
duly executed and delivered by Purchaser and the Agent, constitute the
legal, valid and binding obligations of Seller enforceable in accordance
with their terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, or other similar laws affecting the enforcement
of creditors' rights generally and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding in
equity or at law.
(e) The consummation of the transaction contemplated by this Amendment and
the fulfillment of the terms hereof will not (i) conflict with, result in
any breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time or both) a default under, the certificate
of incorporation or by-laws of Seller, or any indenture, loan agreement,
receivables purchase agreement, mortgage, deed of trust, or other agreement
or instrument to which Seller is a party or by which it or any of its
properties is bound, (ii) result in the creation or imposition of any
Adverse Claim upon any of Seller's properties pursuant to the terms of any
such indenture, loan agreement, receivables purchase agreement, mortgage,
deed of trust, or other agreement or instrument, or (iii) violate any law
or any order, rule, or regulation applicable to Seller of any court or of
any federal or state regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over Seller or any of its
properties.
2
(f) There are no proceedings pending or to the best of Seller's knowledge
threatened and to the best of Seller's knowledge there are no
investigations pending, or threatened, before any court, regulatory body,
administrative agency, or other tribunal or governmental instrumentality
asserting the invalidity of this Amendment or seeking any determination or
ruling that might materially and adversely affect the performance by Seller
of its obligations under this Amendment or the validity or enforceability
of this Amendment.
(g) No authorization or approval or other action by, and no notices to or
filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by Seller of this Amendment.
Section 4. Effectiveness. This Amendment shall be effective as July 1,
-------------
1995; provided, however, that its effectiveness is conditioned upon: (i)
-------- -------
Seller having amended the Revolving Loan Agreement and the Term Loan Agreement
to contain covenants regarding the debt to capitalization ratio comparable to
those set forth in this Amendment; (ii) Seller having paid to Agent for its own
account the amendment fee contemplated by that certain Fee Letter from the Agent
to the Seller dated as of July 1, 1995; and (iii) the General Counsel for the
Seller having delivered an opinion to the Agent substantially in the form of
Exhibit A attached hereto and incorporated herein by reference.
Section 5. Governing Law; Counterparts. This Amendment shall be governed
---------------------------
by, and construed in accordance with, the internal laws of the State of New
York. This Amendment may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
Section 6. Reaffirmation of Receivables Agreement. This Amendment shall
--------------------------------------
be deemed to be an amendment to the Receivables Agreement, and the Receivables
Agreement, as amended hereby, is hereby ratified, approved and confirmed in each
and every respect. All references to the Receivables Agreement in any other
document, instrument, agreement or writing shall hereafter be deemed to refer to
the Receivables Agreement as amended hereby.
3
IN WITNESS WHEREOF, the undersigned have set their hands hereto as of this
July 1, 1995.
WESTERN GAS RESOURCES, INC.,
as Seller
By: ___________________________
RECEIVABLES CAPITAL CORPORATION,
as Purchaser
By: ___________________________
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as Agent
By: ___________________________
4
EX-27
6
FINANCIAL DATA SCHEDULE
5
1,000
6-MOS
DEC-31-1995
JUN-30-1995
6,874
0
124,053
0
40,919
174,936
1,077,344
209,517
1,135,423
246,244
432,000
2,578
0
416
384,312
1,135,423
604,270
608,109
500,256
500,256
87,341
0
18,091
2,421
883
1,538
0
0
0
1,538
(.34)
(.34)