10-K405
1
FORM 10-K405
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
------- EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
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or
------- Transition Report Pursuant To Section 13 or 15 (d) of the Securities
Exchange Act of 1934
(No Fee Required)
Commission file number 1-8975
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PLAINS PETROLEUM COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 84-0928792
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12596 West Bayaud
P.O. Box 281306, Lakewood, Colorado 80228
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 969-9325
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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Common stock, par value $.01 per share New York Stock Exchange
Rights pursuant to preferred stock rights New York Stock Exchange
purchase agreement
Securities registered pursuant to Section 12(g) of the Act: NONE
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(Title of Class)
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
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State the aggregate market value of the voting stock held by non-affiliates of
the registrant.
_______________ $222,200,000 as of March 15, 1995 _________________
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
_______________ 9,815,826 as of March 15, 1995 _________________
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
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PLAINS PETROLEUM COMPANY
INDEX TO FORM 10-K
PART I PAGE
Item 1: Business 3-8
Item 2: Properties 8-13
Item 3: Legal Proceedings 13
Item 4: Submission of Matters to a Vote of 14-15
Security Holders
PART II
Item 5: Market for Registrant's Common Equity 15
and Related Stockholder Matters
Item 6: Selected Financial Data 16
Item 7: Management's Discussion and Analysis of 17-20
Financial Condition and Results of Operations
Item 8: Financial Statements and Supplementary Data 21-42
Item 9: Disagreements on Accounting and Financial 43
Disclosure
PART III
Item 10: Directors and Executive Officers of the 43-44
Registrant
Item 11: Executive Compensation 45-49
Item 12: Security Ownership of Certain Beneficial 50-51
Owners and Management
Item 13: Certain Relationships and Related Transactions 52
PART IV
Item 14: Exhibits, Financial Statement Schedules, and 53-60
Reports of Form 8-K
Signatures 61
PART I
ITEM 1: BUSINESS
(A) GENERAL DEVELOPMENT OF BUSINESS
Plains Petroleum Company (Plains) was incorporated as a wholly-owned
subsidiary of K N Energy, Inc. (K N) in 1983. Plains was formed to own and
operate substantially all of K N's then remaining gas and oil producing
properties. In 1985, K N distributed its Plains stock to the K N shareholders
which resulted in K N no longer holding an ownership position in Plains and in
the trading of Plains' stock on the New York Stock Exchange as a separate and
distinct entity. In 1986, Plains Petroleum Operating Company (PPOC) was formed
as a wholly-owned subsidiary of Plains. Plains Petroleum Gathering Company
(PPGC) was incorporated in 1992 as a wholly-owned subsidiary of PPOC. Plains,
PPOC and PPGC are hereinafter referred to collectively as the "Company".
During the latter part of 1994, another oil and gas firm, Cross
Timbers Oil Company, acquired 6.6 percent of the Company's outstanding stock and
announced it was considering, among other things, a business combination with
the Company. To assure the best possible result to shareholders in such an
event, the Board of Directors authorized its financial advisors, Goldman,
Sachs & Co. and Batchelder & Partners, to study the alternative of a stock-
for-stock merger with a select group of public companies in the energy industry.
Although discussions with a number of possible merger partners have taken place,
the Board has not received a proposal that it is prepared to recommend to the
Company's shareholders. As a result, the study of possible business
combinations was expanded on February 28, 1995 to increase the group of
possible merger partners and to consider transactions involving the acquisition
of the Company for cash or a combination of cash and securities. The expanded
study process is expected to be concluded by late spring. If the process does
not yield a proposal that the Board of Directors believe is in the
shareholders' best interests, then the Company will continue to pursue its
independent strategy of growth through acquisition, exploration and
development.
In 1994, the Company acquired proved natural gas reserves of 20.3
billion cubic feet (Bcf) and 2-1/2 million barrels of oil. The most significant
acquisition during the year was completed on November 1 with the purchase of 15
Bcf of proved natural gas reserves and 2.3 million barrels of proved oil
reserves located in Colorado, Wyoming, Montana, North Dakota and Utah for
approximately $22 million. In addition, the Company purchased interests in an
oil pipeline and 50,000 undeveloped acres for approximately $2 million.
Other smaller 1994 acquisitions included a March purchase for $1.7
million of interests in seven producing natural gas wells with approximately
2-1/2 Bcf of natural gas proved reserves in Wyoming's Washakie Basin. This
acquisition was in connection with PPOC's participation in a natural gas
development program. In September, a $1.825 million acquisition was completed
of nine natural gas wells located in Oklahoma, with estimated net proved
reserves of 2.35 Bcf.
During 1994, the Company added proved reserves, excluding the
acquisitions noted above, of approximately 16.6 Bcf of natural gas and 3 million
barrels of oil through its exploitation and exploration programs.
3
Item 1 (continued)
In 1993, the Company acquired interests in certain producing oil and
gas properties principally located in Wyoming's Powder River Basin for
approximately $1.7 million. In addition, an estimated obligation of $2-1/2
million for contingent consideration related to a 1990 merger transaction was
recognized in the 1993 property costs. The contingent provisions of the
transaction were completed in May 1994 with the issuance of the Company's common
stock and cash valued at $2-1/4 million.
In 1992, the Company acquired producing oil properties located in
Wyoming for approximately $12 million, adding estimated proved reserves of
approximately 2 million barrels of oil.
In 1991, the Company acquired certain oil and gas properties located
in the Permian Basin of west Texas and southeast New Mexico for $17 million.
The purchase, together with additional interests acquired in certain west Texas
oil properties, resulted in total spending of approximately $19 million for
estimated proved reserves of nearly 5 million equivalent barrels of oil.
In 1990, the Company acquired McAdams, Roux and Associates, Inc. (MRA)
by issuing common stock and assuming MRA's bank debt, liabilities and deferred
income taxes in exchange for all of the outstanding common stock of MRA. During
1990 the Company also acquired oil and gas properties in west Texas and
southeastern New Mexico and additional operating interests in west Texas and
Wyoming. These acquisitions added estimated proved reserves of 4.8 million
barrels of oil and 8.7 Bcf of gas.
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company's business, as conducted through December 31, 1994, is in
a single industry segment.
(C) NARRATIVE DESCRIPTION OF BUSINESS
(1) GENERAL
The Company is an oil and gas exploration, development and production
company with interests in 653 producing gas wells and 853 producing oil wells
located on approximately 344,500 gross (240,500 net) acres held by production
with proved reserves of 312 Bcf of gas and 11 million barrels of oil at
December 31, 1994. The reserves are located in the lower 48 states, principally
in the Kansas and Oklahoma portions of the Hugoton field, the Permian Basin of
west Texas and southeastern New Mexico and in the Powder River and Green River
Basins of Wyoming. See "Properties" in Item 2. In 1994, approximately 47% of
the Company's gas revenues (approximately 34% of total revenues) came from sales
made to K N, its principal purchaser, under a long-term natural gas purchase
contract. See "Marketing" in section (3) below.
The Company is headquartered in Lakewood, Colorado with additional
offices in Midland, Texas; Lakin, Kansas; and Gillette, Wyoming. Annual rent
expense for office and storage facilities was $544,000, $515,000 and $507,000
for 1994, 1993 and 1992, respectively. See Note Six of the Notes to
Consolidated Financial Statements in Part II, Item 8 of this report on Form 10-K
for further information on lease terms and annual rental commitments. As of
March 15, 1994, the Company employed 82 people.
4
Item 1 (continued)
On February 17, 1995, the Company entered into a new credit agreement
for a $150 million unsecured, revolving bank line, replacing the previous $60
million line of credit. The new bank line has an initial borrowing base
limitation of $110 million, which will be redetermined annually. Under the new
agreement, outstanding borrowings at the end of the revolving period in January
1997 convert to a term loan. See Note Three of the Notes to Consolidated
Financial Statements in Part II, Item 8 of this report on Form 10-K for further
information on the line of credit terms.
(2) OIL AND GAS ACQUISITION, EXPLORATION AND DEVELOPMENT
The Company's oil and gas development and production operations are
conducted principally on-shore in the geographic locations indicated in
"General", section (1) above. In addition, primary exploration areas include
the Green River Basin of Wyoming, the Gulf Coast region and west Texas.
Prospects are identified for acreage acquisition and for exploratory
or developmental drilling primarily through in-house staff geologists,
geophysicists, landmen and petroleum engineers. This staff directs various
seismic and other geological and geophysical tests on prospective oil and gas
properties and, based on its analysis of the data provided by such tests,
evaluates such properties and directs the acquisition of oil and gas leases or
interests in drilling prospects. Prospects are acquired by purchasing oil and
gas leasehold interests from other companies or directly from landowners in
areas considered favorable for oil and gas exploration and by participating in
projects and prospects that permit the Company to earn an ownership interest in
leases owned by others in consideration for performing or participating in
certain drilling operations.
The Company typically conducts drilling activities with other
companies as joint working interest owners in order to increase its
participation in different prospects and to reduce the concentration of risk
through diversification. Under the terms of these joint operating arrangements,
one of the working interest owners acts as the operator in charge of the day-to-
day management of the properties and is paid a fee and certain expenses by the
other working interest owners. The Company is generally the operator of
properties in which it generates interests. Where it acts as operator, the
engineering staff directs the drilling of test wells and supervises the
development and operation of properties for the production of oil and gas. It
contracts with independent drilling contractors to perform the actual drilling
and completion of the wells.
Historically, the Company has directed most of its expenditures toward
drilling development wells; that is, wells located in fields having proved oil
or gas reserves. Drilling development wells generally involves fewer risks and
meets with a higher degree of success than exploratory drilling. Cash provided
by operations is expected to sufficiently fund the Company's 1995 capital
spending program, which includes approximately $7-1/2 million for exploration
activities.
The Company continues to seek additional acquisition opportunities.
Supported by its $150 million bank credit line and its market capitalization,
the Company has the financing capability to pursue such opportunities as they
become available. For 1995, the Company has targeted acquiring $25 million of
oil and gas properties. See "Competition" in section (4) below.
5
Item 1 (continued)
(3) MARKETING
(i) GAS
Approximately one-half of the Company's total gas revenues were
generated under a long-term contract for sales from the Hugoton field in
southwestern Kansas and a contract covering the Niobrara area of
northeastern Colorado. This production was sold at a wellhead price of $2.00
per million British Thermal Unit (MMBtu) for the five months (January through
March, November and December) of the 1994 heating season and $1.80 and $1.75
per MMBtu for the balance of the year for the Hugoton field and Niobrara field,
respectively. Gathering, transportation, dehydration, processing and other
similar costs of marketing are included in wellhead prices. Spot market sales
are burdened by these marketing costs, which range from 15 cents to 40 cents
per MMBtu in the Rocky Mountain and Mid-continent areas. A second major
customer purchased natural gas representing approximately 11% of total oil and
gas revenues. No other single customer purchased gas which accounted for more
than 10% of the Company's total revenues.
In the annual price redetermination of its long-term gas sales
contract with its principal purchaser, the Company negotiated a two-tier
seasonal price arrangement for 1995. Under this agreement, the Company will
sell 14 Bcf of natural gas to K N at a weighted average wellhead price for 1995
of $1.80 per MMBtu. Another 2-1/2 Bcf will be sold to K N on a spot market
basis. In 1994, the Company negotiated the release of 66 Hugoton field wells
connected to Company-owned gathering lines covered by this contract. Another 37
wells were released for 1995. The contract covering Niobrara production was
not renewed for 1995. The gas from these wells will be sold on the spot
market to third parties. Negotiations with the principal purchaser for 1996
prices under the long-term contract will begin in late 1995.
Through its marketing department, the Company sells the balance of its
gas supplies to various purchasers under percentage of proceeds, short-term or
spot sales and limited term contracts of up to one year in duration. Prices for
these sales are negotiated between the buyer and seller and depend upon the
length of the term during which the supplies are committed and the supply-demand
conditions in both the geographic area where the gas is produced and the market
area where it is consumed.
Federal price controls of natural gas expired on January 1, 1993
pursuant to the Natural Gas Wellhead Decontrol Act of 1989.
(ii) OIL AND CONDENSATE
Oil, including wellhead condensate production, is generally sold from
the leases at currently posted field prices. Due to its increased oil
production, the Company has negotiated with purchasers prices with bonuses in
excess of the posted price. In 1994, these bonuses added a total of $1.6
million in revenues. Marketing arrangements are made locally with purchasers,
who are various petroleum companies. The Company sells its oil production to
numerous customers. No customer's total 1994 oil purchases represented more than
10% of total Company revenues. Oil revenues totaled $17.2 million for 1994 and
represented 28% of the Company's total revenues for the year.
6
Item 1 (continued)
(4) COMPETITION
The Company faces strong competition in all phases of its operations
from major oil and gas companies, independent operators and other entities,
particularly in the areas of acquisition of oil and gas properties and
undeveloped leases and marketing of crude oil and natural gas. Many of these
competitors have financial resources, operating staffs, geological and
geophysical data and facilities substantially greater than those of the Company.
Furthermore, there exists many factors which may impact the production, process-
ing and marketing of crude oil and natural gas that are beyond the control of
the Company and cannot be accurately predicted. One of many factors is the
significant influence of foreign producers on the production and pricing of
crude oil. The demand for viable prospects available for exploration and
development of oil and gas reserves as well as the necessary supportive servic-
ing equipment and experienced personnel continues to be intense. Although the
Company believes it has adequate financial and operating resources to remain
competitive, there is no assurance of the continued availability of these
resources, and consequently, it may be at a significant disadvantage with its
competitors.
(5) OPERATING HAZARDS
The Company's operations are subject to all the risks normally
incident to the exploration for and production of oil and gas, including
blowouts, encountering formations with abnormal pressure, cratering, pollution
and fires. Any of these events could result in damage to, or destruction of,
oil and gas wells or producing facilities, suspension of operations, damage to
property or the environment, and injury to persons. Losses and liabilities
arising from such events could reduce revenues and increase costs to the extent
the Company is liable and such loss or liability is not covered by insurance.
The Company maintains insurance which it believes is customary in the industry
against some, but not all, of these risks. There is no assurance that such
insurance will continue to be available in the future at a reasonable cost.
(6) ENVIRONMENTAL, PRODUCTION AND PRICE REGULATION
The states where the Company operates control production from oil and
gas wells. State conservation statutes or regulations require drilling permits,
establish the spacing of wells, allow the pooling and unitization of properties
and limit the rate of allowable production. Such conservation regulations have
not had a material adverse effect on the Company's operations in the past, and
management does not anticipate that they will in the future.
The Company, as an owner and operator of oil and gas properties, is
subject to various federal, state and local laws and regulations relating to the
protection of the environment. These laws and regulations may, among other
things, impose liability on an oil and gas lessee for the cost of pollution
clean-up and pollution damages to the property of others, require suspension or
cessation of operations in affected areas and impose restrictions on the
injection of liquids into subsurface aquifers that may contaminate groundwater.
7
Item 1 (continued)
The Company has made and will continue to make expenditures to comply
with these requirements, which are necessary costs of doing business in the oil
and gas industry. As part of the Company's commitment to environmental
responsibility, it has adopted a corporate environmental policy, and retained
the services of an independent consulting firm to conduct an initial audit of
Company properties and train operations and professional employees in environ-
mental awareness, as well as in preventative and remedial work, when appropri-
ate. Environmental requirements have a substantial impact upon the energy
industry; however, these requirements do not appear to affect the Company any
differently or to any greater or lesser extent than other companies in the
industry as a whole.
At present, there are no known environmental or other regulatory
matters related to the Company's operations which are reasonably expected to
result in a material liability to the Company. The Company believes that
expenditures for compliance with current federal, state or local provisions
regulating the discharge of materials into the environment, or otherwise
relating to the protection of the environment, will not have a material adverse
effect in the future upon the capital expenditures, earnings or competitive
position of the Company.
ITEM 2: PROPERTIES
(A) LOCATION AND CHARACTER OF PROPERTIES
The Company had an interest in 1,506 wells as of December 31, 1994 and
operated 772 of those wells.
Number of Wells Gross Net
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Gas 653 471
Oil 853 292
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Total 1,506 763
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----- ---
Most of the Company's wells and associated reserves are located in the
Hugoton field in southwest Kansas and the Oklahoma panhandle, the Permian Basin
of west Texas and southeastern New Mexico and the Powder River and Green River
Basins of Wyoming. The wells are located on leases held by production.
Gross acres are the total number of acres in which the Company owns a
working interest; net acres are the sum of the fractional working interests
owned by the Company in gross acres. Acreage is deemed to be developed if it is
either held by existing production or is part of a unit held by existing
production. At yearend, 344,455 gross and 240,548 net acres were held by
production, and 229,412 gross and 99,974 net acres were held for exploration.
KANSAS
The majority of gas production is generated from the Company's
interest in wells (394 gross, 322 net) located in two fields in Kansas.
Approximately 71% of the Company's total proved producing gas reserves are
located in the Hugoton field, the larger of the two fields. The Company
operates 275 wells of the 323 Hugoton wells in which it has an interest.
8
Item 2 (continued)
The Kansas Corporation Commission ruled in 1986 that optional infill
drilling is permitted in the Chase group of the Hugoton field. Infill drilling
allows a second well to be drilled in each unit. Units are generally 640 acres
in size. The Company has participated in or drilled 121 infill wells, all of
which are currently producing.
Recently, the Company drilled two horizontal legs to an old Hugoton
field well with relatively weaker deliverability. Should this effort prove
successful, it could enhance the economics of drilling on 55 of the Company's
remaining potential infill locations and provide opportunities of adding
horizontal legs on a number of the older wells.
WYOMING
The Company has an interest in 406 gross wells (86 net wells) located
in the Powder River, Washakie and Greater Green River Basins of Wyoming. In
addition to the acquisition of Wyoming properties described in Item 1, the
Company participated in various exploitation and exploration projects.
In November 1994, the Snowbank No. 1, an Almond formation discovery
in the Washakie Basin in Carbon County, was completed. It was connected to a
temporary pipeline in late January 1995 and is currently producing 1.12 MMcf of
natural gas per day. The Company operates this well and has a 50 percent
working interest. Approximately 12,000 acres surrounding this well are con-
trolled by the Company and its co-venturers. Further development of this
acreage will begin after evaluation of the discovery well's production.
Under a development program commenced in 1993, the Company
participated as a 50% working interest owner in the drilling of fourteen natural
gas wells to the Almond-Mesaverde formation in Washakie Basin. Eight wells were
completed and four are on production. Five wells are awaiting completion or a
pipeline connection. One well was unsuccessful. In March 1994, the Company
acquired, for $1.7 million, interests in seven wells drilled in the Washakie
Basin prior to 1994. Due to current low natural gas prices, the 1995 drilling
program with the co-owner has been reduced to four wells.
TEXAS
As of December 1994, the Company had an interest in 323 gross wells
(213 net wells) located in Texas. During 1994, the Company's exploitation and
exploration activities included the participation in five successful exploratory
wells located in Dawson County. These prospects were identified through the use
of three-dimensional seismic technology. Drilling of a second offset well
commenced in late January 1995. The Company has a 10 percent working interest
in this project. In 1995, the Company plans to drill six additional west Texas
exploratory prospects.
9
Item 2 (continued)
The Company acquired a working interest (80 percent before payout; 50
percent after payout) in a waterflood project in the Moss Grayburg San Andres
Unit located in Ector County. Six producing wells and six water injection wells
were drilled in 1994. Three other wells were recompleted as water injection
wells. The Company plans to join in two additional Ector County waterflood
projects in 1995.
LOUISIANA
The first of two exploratory prospects begun in 1994, the Patterson
Deep Prospect in St. Mary Parish, was completed as a dry hole in the first
quarter of 1995. The Company's share of dry hole costs approximated $600,000.
Drilling on a second prospect, South Perry Point in Acadia and Vermillion
Parish, is expected to reach its total depth in the second quarter of
1995.
The 1992 discovery well of the Ship Shoal Block 45 field in shallow
state waters offshore Louisiana was placed on production in September 1993 after
a second well was completed. Three additional wells were drilled in 1994, two
of which were placed on production in August and one in late December. The
Company has a 33 percent working interest (25 percent net revenue interest) in
this project. For 1995, the Company plans to continue its exploratory efforts
in the Gulf of Mexico.
OTHER ACTIVITIES
The Company joined in the drilling of a Morrow well located in Eddy
County, New Mexico and two Simpson-McKee wells and a Devonian well located in
the Teague field in Lea County. These wells were placed on production in 1994.
Other 1994 New Mexico exploitation projects included the recompletion of eight
wells to the P1 formation in the Bluitt area of Roosevelt County and the
drilling of four Niobrara wells in northeastern Colorado.
In a joint venture effort, the Company participated in a project to
develop infill locations identified using three-dimensional seismic technology
in the Eagle Springs field located in Nye County, Nevada. Two wells were
drilled and completed in 1994 and a third was placed on production in mid-
January 1995. The Company has a 40 percent working interest in the three new
wells and, after spending an additional $432,000 on drilling, will earn a 40
percent working interest in the remainder of the field. Four additional wells
are planned in 1995.
10
Item 2 (continued)
DRILLING ACTIVITY
The following table sets forth the Company's drilling activity for
each of the three years ended December 31, 1994.
Development Exploratory Total
Wells Wells Wells
----------- ----------- -------------
Gross Net Gross Net Gross Net
----- --- ----- --- ----- ---
1994 - Total 46 27 16 3 62 30
- Successful (2) 36 23 6 1 42 24
1993 - Total 23 16 9 3 32 19
- Successful (2) 17 15 1 1/10 18 15
1992 - Total (1) 56 40 10 4 66 44
- Successful (2) 50 36 1 1/3 51 36
(1) In addition, nine wells were successfully recompleted in new formations.
(2) A successful well is an exploratory or a development well found to be
capable of producing either oil or gas in sufficient quantities to justify
completion of the well for the production of oil or gas.
Proved reserves added from extensions, discoveries and other additions
in each year were as follows:
Gas (MMcf) Oil (MBbls)
---------- -----------
1994 19,639 2,297
1993 6,288 1,194
1992 1,993 171
Note: MMcf = million cubic feet
MBbls = thousand barrels
(B) DISCLOSURE OF OIL AND GAS OPERATIONS (provided in accordance with
the Securities Act Industry Guide 2 and including information in
Item 2 (A) above))
(1) OIL AND GAS RESERVES
All of the Company's proved developed reserve quantities of 292 Bcf of
gas and 7.5 million barrels of oil were estimated at yearend 1994 by Netherland,
Sewell & Associates, Inc., an independent petroleum engineering firm. Proved
undeveloped reserves were estimated to be 20.1 Bcf and 3.5 million barrels by
the Company's petroleum engineers and amounted to approximately 11% of total
proved reserve equivalents at December 31, 1994. Proved developed reserve
quantities in prior years were estimated annually by independent petroleum
engineers. The Company's reserves are located in the lower 48 states, princi-
pally in the Kansas and Oklahoma portions of the Hugoton Field, the Permian
Basin of west Texas and southeastern New Mexico, and in the Powder River and
Green River Basins of Wyoming.
11
Item 2 (continued)
The report of the independent petroleum engineering firm provides
estimated proved developed reserves and future revenues as of December 31, 1994
and includes an estimate of proved developed reserves established by the
Company's infill drilling in the Kansas Hugoton Field. Reserve estimates for
infill wells are based upon the initial test results and the completion report
of each newly completed well rather than an extrapolation of field-wide data.
However, no proved undeveloped reserves for the Hugoton Field are included in
the Company's estimate.
The reserve quantities are estimates of the Company's net volumes
which can be expected to be recovered commercially at current prices and with
existing conventional equipment and operating methods. Proved developed
reserves are only those reserves expected to be recovered from existing wells.
Proved undeveloped reserves include those reserves expected to be recovered from
new wells and improved recovery projects where additional expenditures are
required.
At December 31, 1994, the Company believes that there are no material
estimated future dismantlement and abandonment costs for its properties. For
the purpose of computing the discounted future net cash flows, estimated future
dismantlement and abandonment costs are assumed to equal the estimated salvage
values of the properties.
For further information on the Company's reserves, see Note Eight of
the Notes to Consolidated Financial Statements in Part II, Item 8 of this report
on Form 10-K.
(2) RESERVES REPORTED TO OTHER AGENCIES
The Company will file the Annual Survey of Domestic Oil and Gas
Reserves with the Energy Information Administration (EIA) as required by law.
Only minor differences of less than five percent are anticipated in reserve
estimates, which were due to small variances in actual production versus yearend
estimates, and in certain classifications reported in Form 10-K as compared to
those in the EIA report.
(3) GAS PRODUCTION, SALES PRICES AND PRODUCTION COSTS
The following table sets forth the average sales price of gas and oil
produced and sold and the average production costs per thousand cubic feet
equivalent (Mcfe) of gas for each of the periods presented.
Average Average
Gas Sales Price Oil Average Production
Production Per Production Sales Price Cost Per
(MMcf) Mcf (MBbls) Per Bbl Mcfe(a)
---------- ----------- ---------- ----------- ----------
1994 23,925 $1.86 1,236 $13.91 $.79
1993 23,757 1.94 1,220 14.83 .88
1992 21,654 1.83 1,039 18.20 .91
(a) Includes lease operations expense, production and property taxes, transpor-
tation and processing and net profit and gas trust payments. Mcfe is
calculated on the basis of 6 Mcf per 1 barrel of oil. Net profit and gas
trust payments are described in (5) and (6) below.
12
Item 2 (continued)
(4) FUTURE NET CASH FLOWS
At yearend 1994, the pre-tax present value (discounted at 10%) of
future net cash flows from proved reserves was $235 million, with gas represent-
ing 83% and oil 17% of proved reserves. Net cash flows from properties under
the K N contract were computed using (1) the price which was renegotiated with
KN for 1995 and (2) yearend costs. Net cash flows from other properties used
yearend prices or prices under production sales contracts and yearend costs.
The discount factor was applied on a year-by-year basis utilizing anticipated
sales over the life of the reserves. Additional information concerning the
future net cash flows from proved oil and gas reserves is presented in Note
Eight of the Notes to Consolidated Financial Statements in Part II, Item 8 of
this report on Form 10-K.
(5) NET PROFIT AGREEMENTS
The Company produces gas in the Oklahoma portion of the Hugoton field
under a "Dry Gas Agreement" with Chevron USA, Inc. (Chevron). This agreement
allows the Company to expend funds for the operation of the properties
(including the cost of drilling wells) and to recoup the funds so expended from
current production income. Eighty percent of net operating income generated by
the gas production (after operational costs are recouped, including the cost of
drilling and equipping wells) is then paid to Chevron. At December 31, 1994,
the Company had working interests in 21 Guymon-Hugoton wells and 43 Camrick
wells under the terms of this agreement.
The Company also produces gas in the Kansas Hugoton field under
various agreements similar to the Chevron agreement, except that net operating
income is allocated 15% to the Company and 85% to the other parties. At
December 31, 1994, the Company had working interests in 47 Chase wells and
eight Council Grove wells under such agreements.
Additional or replacement wells drilled on the properties, including
wells drilled under the infill drilling program in the Hugoton field, would be
operated under the same terms and conditions as existing wells, and would result
in the commencement of the 80/20 or 85/15 net operating income allocation after
the cost of the new wells is recovered.
(6) HUGOTON GAS TRUST AGREEMENT
Gas rights established in 1955 to some 50,000 partially developed
acres in Finney and Kearny Counties, Kansas were transferred by K N on
October 1, 1984 to the Company subject to a gas payment of six cents per Mcf
for gas produced from the acreage. Quarterly payments are made by the Company
to the Hugoton Gas Trust, a publicly-held trust created in 1955. Payments
terminate when the recoverable gas reserves decline to 50 Bcf or less. At
yearend 1994, the Company has working interests in 156 Chase wells and 42
Council Grove wells which are subject to such payments. Any additional gas
wells drilled on this acreage will also be subject to the six-cent payment per
Mcf of gas produced.
ITEM 3: LEGAL PROCEEDINGS
See Note Six of the Notes to Consolidated Financial Statements in Part II,
Item 8 of this report on Form 10-K.
13
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ADDITIONAL ITEM -
EXECUTIVE OFFICERS OF THE REGISTRANT
The following information required by Item 401 of Regulation S-K
pertains to the executive officers who are not directors of the Registrant and
are not included with information under Item 10, Part III of this Form 10-K:
Darrel Reed: Vice President, Controller and
Treasurer
Age: 53
Term ends: April 1995
Period served: Since July 1985
Past five years - business experience: Vice President - Finance and Treasurer
and Chief Financial and Accounting
Officer from July 1985 through May
1994.
Eugene A. Lang, Jr: Senior Vice President, General Counsel
and Secretary
Age: 41
Term ends: April 1995
Period served: Since October 1990
Past five years - business experience: Vice President, General Counsel and
Secretary from October 1990 through May
1994. Attorney at Law, Houston, Texas,
from September 1986 through September
1990.
Lee B. VanRamshorst: Senior Vice President - Business
Development of Plains Petroleum
Operating Company (PPOC), the
Registrant's operating subsidiary.
Age: 55
Term ends: May 1995
Period served: Since November 1985
Past five years - business experience: Vice President - Engineering of PPOC
from May 1988 through November 1991.
Robert A. Miller, Jr: Vice President - Law of PPOC
Age: 53
Term ends: May 1995
Period served: Since September 1985
Past five years - business experience: Vice President, General Counsel from
August 1987 through September 1990.
Robert W. Wagner: Vice President - Land and Marketing of
PPOC
Age: 54
Term ends: May 1995
Period served: Since May 1985
Past five years - business experience: Manager - Land of PPOC from May 1985
through April 1988.
14
Additional Item (Continued)
John N. Wood: Vice President - Information Systems of
PPOC
Age: 47
Term ends: May 1995
Period served: Since November 1990
Past five years - business experience: Vice President - Geoscience Systems of
PPOC from May through November 1991;
Manager - Geoscience Systems of PPOC
from November 1990 through April 1991;
Vice President - Exploration Computing,
McAdams, Roux and Associates, Inc. from
1988 through October 1990.
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The common stock of Plains Petroleum Company was first listed on the
New York Stock Exchange on September 16, 1985. The reported high and low market
prices for the two most recent fiscal years and the most recent interim period
are shown below.
High Low
-------- -------
1995 First quarter (through March 15) 24 21 3/8
1994 (by quarter):
Fourth 27 7/8 23 1/8
Third 26 5/8 20 3/4
Second 22 5/8 19 1/2
First 27 7/8 21 3/8
1993 (by quarter):
Fourth 28 19 1/2
Third 30 3/8 25 3/8
Second 29 24 3/8
First 29 3/4 24 7/8
There are approximately 3,800 record holders as of March 15, 1995 of
the Company's common stock. In addition, Plains estimates that approximately
5,200 shareholders hold stock as beneficial owners in nominee accounts.
The Company paid quarterly dividends of 6 CENTS per share, or 24 CENTS
per annum, during each of the three years ending December 31, 1994. On
February 15, 1995 the Company declared a quarterly dividend of 6 CENTS per share
payable on March 31, 1995.
The Company has a rights plan designed to insure that stockholders
receive full value for their shares in the event of certain takeover attempts.
15
ITEM 6: SELECTED FINANCIAL DATA
(In thousands, except per share) 1994 1993 1992 1991 1990
------------------------------------------------------------------------------------------------------
OPERATING DATA
Revenues $61,693 $64,280 $58,541 $58,706 $48,791
Net earnings 6,650 1,727 (a) 9,134 16,659 16,796
Earnings per share .68 .18 .93 1.71 1.76
BALANCE SHEET DATA
Total assets $156,944 $126,792 $133,975 $120,474 $91,348
Long-term debt 37,000 13,500 20,000 15,000 3,000
Stockholders' equity 99,456 94,803 95,358 88,515 73,280
Cash dividends per common share .24 .24 .24 .24 .16
(a) Includes an impairment charge of $9.3 million and a net credit of $1.3
million for two mandatory accounting changes.
16
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company achieved growth in oil and gas reserves of 11% through a
combined program of acquisitions, exploration and exploitation. In a highly
competitive market for a limited quantity of quality properties, the Company
successfully acquired 20 billion cubic feet (Bcf) of gas and 2.5 million barrels
of oil. Exploration and exploitation achievements added another 19.6 Bcf of gas
and 2.3 million barrels of oil. In a year marked by fluctuating and declining
prices resulting in production curtailments, the Company reported net earnings
of 68 CENTS per share as compared to 18 CENTS per share in the previous year.
Concentrated efforts to reduce operating costs and improve operating
efficiencies offset declines in revenues stemming from lower prices.
LIQUIDITY AND CAPITAL RESOURCES
At yearend 1994, the Company's working capital increased to $1.9 million,
as compared to $1 million the prior yearend. Cash provided by operations was
used principally to fund the Company's 1994 capital expenditures for development
drilling and exploration, totaling approximately $21 million and for production
facilities including gathering and automation facilities and compression units
in the Hugoton field of $1.3 million. Additionally, cash provided in excess of
funding operational requirements was used to repay a portion of the borrowings
and to fund dividend payments. Development drilling and production enhancement
projects in 1994 comprised approximately 63% of the capital expenditures. Of
the total expenditures, 1994 exploration projects represented approximately $7
million.
During 1994, the Company utilized a portion of its bank credit line to
finance acquisitions of properties in Colorado, Wyoming, Montana, North Dakota,
Utah and Oklahoma totaling approximately $27 million.
On February 17, 1995, the Company entered into a new credit agreement for a
$150 million unsecured, revolving bank line replacing the previous $60 million
line of credit. (See Note Three of Notes to Consolidated Financial Statements.)
Together with cash provided from operations, the Company believes that this new
bank line provides the financial strength to aggressively pursue acquisition
opportunities and to support an active development and exploration program, all
of which are necessary for growth.
The Company plans a 1995 capital spending program of approximately $34
million for exploitation, exploration and production enhancement projects. An
additional $25 million has been targeted for acquisition of oil and gas
properties. Approximately $16 million, or 46% of the capital spending program
will be directed toward development drilling projects located principally in
Wyoming, Nevada and offshore Texas and Louisiana. Secondary recovery projects
consisting of waterflood enhancement programs in the Cambridge, Rozet, N. Adon
Road and other Minnelusa fields of Wyoming and the Moss Grayburg San Andres Unit
located in Texas will require capital spending of approximately $8 million.
Exploration drilling efforts of approximately $3 1/2 million will focus on
projects in the Permian Basin of west Texas, the offshore Gulf Coast and the
Green River Basin of Wyoming. Other exploration capital spending efforts,
estimated to cost approximately $4 million will be directed toward the
development of prospects through lease acquisitions and utilization of seismic
and other geological studies.
17
In mid-February 1995, an exploratory test, the Patterson Deep Prospect in
Louisiana, was completed as a dry hole. The Company's investment in this well
approximated $600,000 and will be expensed in the first quarter of 1995.
For the three-year period ended December 31, 1994, the Company paid
quarterly dividends of 6 CENTS per share, or 24 CENTS per annum. It has
repurchased a total of approximately 48,000 shares of its common stock for use
in its employee benefit plans.
RESULTS OF OPERATIONS
During 1994, the Company generated net earnings of $6.6 million (68 CENTS
per share) compared to $1.7 million (18 CENTS per share) in 1993. In an effort
to improve profitability, the Company concentrated its efforts on improving the
efficiency of field operations while simultaneously reducing costs. Lower
production and exploration operating costs in 1994 offset increases in
depreciation, depletion and amortization expense and in general and
administrative expenses. Net earnings in 1993 were impacted by a $9.3 million
impairment charge on certain properties and a net credit of $1.3 million derived
from two mandatory accounting changes.
REVENUES
Revenues for 1994 were $62 million, 4% lower than 1993 revenues of $64
million, primarily due to lower average gas and oil prices. Revenues for 1993
increased 10% over 1992 as a result of higher volumes sold and increased average
gas prices. Gas revenues represented nearly 72% of the Company's total revenues
for 1994 and 1993.
Gas revenues declined 4% to $44 million from $46 million in 1993
principally due to declining prices. Average gas prices for 1994 ranged from
$2.08 per Mcf in the first quarter to $1.74 in the fourth quarter, resulting in
average prices for the year of $1.86, down 8 CENTS, or 4%, from 1993. Average
prices for 1993 were up 11 CENTS per Mcf from 1992.
One-half of the Company's total gas revenues were received from the
Company's principal purchaser for sales from the Hugoton field in southwestern
Kansas and the Niobrara area of northeastern Colorado. The Company received a
wellhead price of $2.00 per million British Thermal Unit (MMBtu) from this
purchaser for the five months of January through March, November and December.
For the months of April through October 1994, the Company received $1.80 and
$1.75 per MMBtu at the wellhead for the Hugoton field and the Niobrara field,
respectively. Under a two-tier seasonal pricing contract effective for 1995,
the Company will receive a weighted average wellhead price of $1.80 per MMBtu on
net sales volumes of 14 Bcf and spot market prices on another 5 Bcf (net). In
addition to the 1994 negotiated permanent release of 66 Hugoton field wells
connected to Company-owned gathering lines, an additional 37 wells were released
for 1995. Production from these wells will be sold on the spot market.
Negotiations with the purchaser for 1996 prices will commence in late 1995.
18
Wellhead prices include all transportation and marketing charges, whereas
spot market sales are burdened with these additional costs. These charges
currently range from 15 CENTS to 40 CENTS per MMBtu in the Rocky Mountain and
Mid-continent area. The balance of the Company's gas supplies are sold to
various purchasers under percentage of proceeds, short-term or spot sales
contracts.
Natural gas production volumes of 23.9 Bcf sold in 1994 increased 1% over
1993 volumes of 23.8 Bcf. This nominal increase was attributed to constraints
on the principal purchaser's gathering system in the Hugoton field for the first
quarter and curtailment of production due to low prices during the third
quarter.
Oil revenues of $17 million declined 5% from 1993 primarily due to a 6%
drop in average prices. Oil revenues of $18 million for 1993 declined 4% as
compared to 1992 revenues. Average oil prices realized during 1994 were at a
five-year average low of $13.91 per barrel, in comparison to $14.83 for 1993 and
$18.20 for 1992. Oil production of 1.2 million barrels for 1994 was comparable
to 1993. However, due to the acquisition of primarily oil properties in
November 1994, average daily production by yearend was 4,602 barrels, an
increase of 34% from the beginning of the year.
OPERATING EXPENSES
Operating expenses for 1994 were relatively unchanged as compared with
1993, excluding the $9.3 million impairment charge in 1993. Operating expenses
in 1993, exclusive of the impairment charge, were 14% over 1992 due to increased
lease operating costs and higher depreciation, depletion and amortization
charges associated with acquired properties.
Production costs, including lease operating costs, production and property
taxes, transportation and processing fees and net profits payments, declined
$2.6 million to $24.7 million in 1994, a 10% decrease from 1993. Production
costs for 1994 approximated $4.73 per barrel of oil equivalent (BOE) compared to
$5.28 per BOE in 1993 and $5.48 per BOE in 1992.
A decline in lease operating costs of 14% from 1993 is directly attributed
to the Company's program to improve operating efficiencies, dispose of
marginally economic wells and reduce costs, particularly with respect to oil
field operations. Lease operating costs for 1993 were 9% over 1992 due to
increased operating costs associated with acquisitions, drilling programs and
production workovers and increased transportation and processing costs on spot
sales of natural gas.
Production and property taxes increased 10% over the prior year.
Production taxes for 1994 decreased 6% due to lower revenues. 1993 production
taxes were at a comparable level to 1992. Conversely, property taxes consisting
principally of ad valorem taxes increased 31% over 1993. This increase is
primarily attributable to rising rates and valuation methods utilized by Kansas
tax authorities for the Hugoton field properties.
Transportation and processing (T&P) costs decreased 6% from 1993 due to
lower average charges of 10 CENTS to 15 CENTS per MMBtu related to spot market
sales. Increased spot market sales volumes in 1993 resulted in a 41% increase
in T&P over 1992. Lower gas sales (down 7%) and an 11% decline in average
prices received for production from Oklahoma properties resulted in a 32%
decline in net profits expense as compared to 1993. In 1993, gas sales from
these same properties were higher as compared to 1992 resulting in an increase
in net profits expense of 4% above 1992.
19
Consistent with industry practices, certain general and administrative
costs attributed directly to other operating expense classifications of lease
operations, exploration and transportation were reclassified to the respective
operating expense categories for the years 1994, 1993 and 1992. Employee payroll
expenses declined by 10% in 1994 from 1993 as a result of a 14% staff reduction
in 1993. After reclassifications of $2.3 million and $3.4 million for 1994 and
1993, respectively, to the operating expense categories, general and
administrative costs were approximately $935,000, or 15%, above 1993, primarily
due to higher costs related to employee benefit plans. Termination of an
administrative overhead sharing arrangement in mid-1992 and reduction of
operating overhead reimbursement attributed to properties sold caused 1993
general and administrative costs to increase 15% above 1992.
Depreciation, depletion and amortization increased by 13% in 1994 primarily
due to an 11% increase in depletion rates over 1993. Depletion expenses for
1993 increased one-third over 1992. Higher cost-basis oil properties acquired
in previous years and revisions of oil reserves in 1993 and 1992 caused
depletion rates to increase for both periods. As recognition of the excess cost
basis over market value of certain Permian Basin properties in 1993, the Company
reduced the depletable basis through the recognition of an impairment provision
of $9.3 million.
Exploration expenses consisting of unsuccessful exploration drilling,
seismic costs and lease impairments and rentals, were 38% lower than 1993,
which, in turn, was 5% lower than 1992 due to reduced exploration activities.
Borrowings for property acquisitions in the latter half of 1994 and
increasing interest rates resulted in higher interest expense than in 1993.
Interest rates and debt balances were lower in 1993 than in 1992.
Other income was generated principally from third party utilization of the
Company's gathering and automation systems in the Hugoton field. Restructuring
and staff reduction costs and unsuccessful acquisition expenses contributed to
an increase in other expenses in 1993.
Effective January 1, 1993, the Company adopted the Financial Accounting
Standards Board Statement No. 106 on accounting for postretirement benefits
other than pensions. As a result of this adoption, the Company recognized a
one-time, cumulative charge of approximately $800,000 (pretax) in 1993 (see
Note Five of the Notes to Consolidated Financial Statements in Part II, Item 8
of this report on Form 10-K).
TAXES
The Company's effective income tax rates are considerably below the
statutory rate primarily due to the benefit of the Company's tax loss
carryforwards. The Company adopted Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes", effective January 1, 1993. A one-time,
cumulative benefit of $2 million for the effect of the accounting change on
prior years was recognized in 1993 (see Notes One and Four of the Notes to
Consolidated Financial Statements in Part II, Item 8 of this report on
Form 10-K).
20
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PLAINS PETROLEUM COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
YEAR ENDED DECEMBER 31
-----------------------------------
In thousands, except per share 1994 1993 1992
---------------------------------------------------------------------
REVENUES
Gas sales $44,505 $46,189 $39,623
Oil and condensate sales 17,188 18,091 18,918
------ ------ ------
61,693 64,280 58,541
---------------------------------------------------------------------
OPERATING EXPENSES
Production -
Lease operations 10,810 12,537 11,503
Production and property taxes 8,161 7,406 7,514
Transportation and processing 2,476 2,640 1,875
Net profit payments 3,247 4,748 4,575
General and administrative 7,350 6,415 5,559
Depreciation, depletion & amortization 17,353 15,282 11,415
Exploration 2,861 4,623 4,865
Interest expense, net 762 643 690
Other (income) expense (563) 219 (203)
Property impairment 9,300
------ ------ ------
52,457 63,813 47,793
---------------------------------------------------------------------
EARNINGS BEFORE TAXES 9,236 467 10,748
-------------------------------------------------------------------
PROVISIONS FOR INCOME TAXES (Note Four)
Current 302 425 625
Deferred 2,284 (341) 989
------ ------ ------
2,586 84 1,614
---------------------------------------------------------------------
NET EARNINGS
Before accounting changes 6,650 383 9,134
Accounting changes:
Deferred income taxes (Note One) 2,000
Postretirement benefits, net of
tax (Note Five) (656)
------ ------ ------
$6,650 $1,727 $9,134
------ ------ ------
------ ------ ------
AVERAGE SHARES OUTSTANDING (Note One) 9,808 9,797 9,796
------ ------ ------
------ ------ ------
EARNINGS PER SHARE (Note One)
Before accounting changes $ .68 $ .04 $ .93
Accounting changes:
Deferred income taxes .20
Postretirement benefits (.06)
------ ------ ------
Net earnings $ .68 $ .18 $ .93
------ ------ ------
------ ------ ------
The accompanying notes are an integral part of these financial statements.
21
PLAINS PETROLEUM COMPANY
CONSOLIDATED BALANCE SHEETS
Successful Efforts Accounting Method
December 31
----------------
ASSETS In Thousands 1994 1993
-------------------------------------------------------------------------------
CURRENT ASSETS
Cash and equivalents $2,331 $2,660
Accounts receivable 7,057 5,422
Inventory, at lower of average cost or market 643 629
Prepaid expenses 422 614
------ -----
Total current assets 10,453 9,325
------ -----
------ -----
PROPERTY AND EQUIPMENT (Note One)
Oil and gas properties 221,337 180,923
Undeveloped leases 4,568 2,350
Other equipment and assets 8,627 7,883
Accumulated depreciation, depletion
and amortization (88,041) (73,689)
-------- --------
Net property and equipment 146,491 117,467
------- -------
$156,944 $126,792
------- -------
------- -------
The accompanying notes are an integral part of these financial statements.
22
PLAINS PETROLEUM COMPANY
CONSOLIDATED BALANCE SHEETS
Successful Efforts Accounting Method
December 31
------------------
LIABILITIES AND STOCKHOLDERS' EQUITY In Thousands 1994 1993
-------------------------------------------------------------------------
CURRENT LIABILITIES
Accounts payable $2,245 $958
Undistributed production receipts 2,025 2,006
Accrued taxes 2,069 1,841
Accrued lease costs 994 780
Other accruals 1,199 2,795
------ ------
Total current liabilities 8,532 8,380
------ ------
LONG-TERM DEBT (Note Three) 37,000 13,500
DEFERRED INCOME TAXES (Notes One and Four) 10,012 7,728
POSTRETIREMENT BENEFITS (Note Five) 927 860
OTHER LONG-TERM LIABILITIES (Notes One and Five) 1,017 1,521
COMMITMENTS AND CONTINGENCIES (Note Six)
STOCKHOLDERS' EQUITY (Note One)
Common stock, $0.01 par value; 20 million
shares authorized; 9,813,055 and
9,800,618 shares outstanding 98 98
Additional paid-in capital 20,278 19,498
Retained earnings 79,713 75,417
Treasury stock, at cost (633) (210)
------ ------
Total stockholders' equity 99,456 94,803
------ ------
$156,944 $126,792
-------- --------
-------- --------
The accompanying notes are an integral part of these financial statements.
23
PLAINS PETROLEUM COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock Additional Treasury Stock Total
-------------- Paid-in Retained ---------- Stockholders'
In Thousands Shares Amount Capital Earnings Shares Amount Equity
----------------------------------------------------------------------------------------------------------------
Balance, December 31, 1991 9,793 $98 $19,178 $69,258 (1) $(19) $88,515
Net earnings 9,134 9,134
Cash dividends (2,350) (2,350)
Exercised stock options 7 183 183
Treasury stock purchased (5) (158) (158)
TREASURY STOCK ISSUED 1 34 34
----------------------------------------------------------------------------------------------------------------
Balance, December 31, 1992 9,800 98 19,361 76,042 (5) (143) 95,358
Net earnings 1,727 1,727
Cash dividends (2,352) (2,352)
Exercised stock options 8 151 151
Treasury stock purchased (9) (263) (263)
TREASURY STOCK ISSUED (14) 7 196 182
----------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 9,808 98 19,498 75,417 (7) (210) 94,803
Net earnings 6,650 6,650
Cash dividends (2,354) (2,354)
Exercised stock options 2 45 45
Common stock issued 32 750 750
Treasury stock purchased (34) (740) (740)
TREASURY STOCK ISSUED (15) 12 317 302
----------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 9,842 $98 $20,278 $79,713 (29) $(633) $99,456
----------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
24
PLAINS PETROLEUM COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31
---------------------------
In Thousands 1994 1993 1992
----------------------------------------------------------------------------
OPERATING ACTIVITIES
Net earnings $6,650 $1,727 $9,134
Adjustments to reconcile earnings to cash
provided by operations:
Depreciation, depletion and amortization 17,353 15,282 11,415
Property impairment 9,300
Deferred income taxes 2,284 (2,485) 989
Exploration expense 2,861 4,623 4,865
Postretirement benefits 67 800
Changes in components of working capital:
Accounts receivable (1,635) 1,591 100
Prepaid expenses 192 (95) 333
Accounts payable 1,287 (813) (1,283)
Undistributed production receipts 19 (219) (180)
Other liabilities (1,154) 1,721 2,126
------- ------- -------
Cash provided by operating activities 27,924 31,432 27,499
------- ------- -------
INVESTING ACTIVITIES
Capital expenditures - Exploration and production (20,525) (15,632) (18,043)
- Other (1,748) (3,713) (601)
Acquisition of oil and gas properties (27,414) (4,171) (12,162)
Proceeds from sale of properties 435 525 569
------- ------- -------
Cash used in investing activities (49,252) (22,991) (30,237)
------- ------- -------
FINANCING ACTIVITIES
Long-term borrowings 28,000 11,000
Repayments of long-term debt (4,500) (6,500) (6,000)
Dividends paid (2,354) (2,352) (2,350)
Exercised stock options 45 151 183
Treasury stock purchased (438) (81) (124)
Other 246 868 6
------- ------- -------
Cash provided by (used in) financing activities 20,999 (7,914) 2,715
------- ------- -------
(Decrease) increase in cash and equivalents (329) 527 (23)
Cash and equivalents at beginning of year 2,660 2,133 2,156
------- ------- -------
Cash and equivalents at end of year $2,331 $2,660 $2,133
------- ------- -------
------- ------- -------
The accompanying notes are an integral part of these financial statements.
25
PLAINS PETROLEUM COMPANY
Notes to Consolidated Financial Statements
NOTE ONE SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Plains
Petroleum Company (Plains) and its wholly-owned subsidiaries, which are
hereinafter referred to collectively as the "Company". All significant
intercompany transactions have been eliminated. Certain reclassifications have
been made to 1992 and 1993 amounts to conform to the 1994 presentation.
OIL AND GAS PROPERTIES
The Company follows the successful efforts method of accounting for
its oil and gas exploration and development activities. Acquisition costs,
successful exploration costs and all development costs are capitalized.
Unsuccessful exploratory drilling costs, seismic costs, and lease impairments
and rentals are expensed. Generally, gains or losses from disposal of properties
are recognized currently. The estimated salvage value of a property on its
sale, disposal or abandonment generally approximates the estimated
dismantlement, site restoration and abandonment costs. As a result, the accrued
liability for any excess cost is not material and not separately disclosed in
the financial statements.
For certain oil properties located in the Permian Basin in west Texas
and southeastern New Mexico, a property impairment reserve of $9.3 million was
recorded in 1993 to adjust the net book value to an approximate net realizable
market value.
DEPRECIATION, DEPLETION AND AMORTIZATION
The unit-of-production method is used for computing depreciation,
depletion and amortization for oil and gas properties. The Company accrues for
estimated dismantlement and abandonment costs as a part of the
unit-of-production amortization. The accrued costs are classified as a
component of accumulated depreciation, depletion and amortization of the oil and
gas properties. Depreciation and amortization of other assets are provided for
using the straight-line method.
26
Note One (Continued)
INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes". FAS 109
utilizes the liability method, with deferred taxes determined on the basis of
estimated future tax effects of differences between the financial statement and
tax bases of assets and liabilities. A valuation allowance must be established
for a deferred tax asset if a tax benefit may not be realized from the asset.
In 1993, the Company recognized the one-time, cumulative benefit of the
accounting change on prior years of $2 million and established a valuation
allowance for its deferred tax assets (see Note Four).
STOCKHOLDERS' EQUITY
Quarterly dividend payments charged to retained earnings were
$2,354,000 in 1994, $2,352,000 in 1993 and $2,350,000 in 1992. During these
three years, the Company has repurchased a total of approximately 48,000 shares
of its common stock, primarily for use in its employee benefit plans.
Plains has a rights plan designed to insure that stockholders receive
full value for their shares in the event of certain takeover attempts.
EARNINGS PER SHARE
Earnings per share are computed based on the weighted average number
of common shares outstanding during each year. There are no other securities or
common stock equivalents which have a dilutive effect on earnings per share.
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Company considers all highly liquid debt instruments purchased
with an original maturity of three months or less to be cash equivalents.
Supplemental disclosures of cash flow information:
In Thousands 1994 1993 1992
------------------------------- ------------------------
Cash paid during the year for:
Interest $624 $785 $652
Income taxes $207 $351 $503
27
Note One (Continued)
Supplemental information of noncash investing and financing activities:
In May 1994, the Company completed the contingent provisions of the
1990 McAdams, Roux and Associates, Inc. (MRA) Agreement and Plan of Merger, as
it related to the right of the MRA shareholders to receive additional shares of
the Company's common stock and cash ("Contingent Consideration"). The
Contingent Consideration was based on the determination that additional reserves
were attributed to certain property interests owned by MRA prior to the merger.
Under the Agreement, 31,873 additional shares of the Company's common stock
valued at $750,000 were issued to MRA's shareholders to satisfy a portion of the
Contingent Consideration. A cash payment of $1 1/2 million was made to the
MRA shareholders for the remainder of the obligation.
At yearend 1993, prior to the Contingent Consideration payments in
1994, an estimated current liability of $1,850,000 was reflected on the balance
sheet for the estimated cash payment, with the remainder of $650,000 related to
the common stock to be issued reflected as a long-term liability.
NOTE TWO ACQUISITIONS
The Company acquired interests in certain producing oil and gas
properties located in Colorado, Wyoming, Montana, North Dakota, Utah and
Oklahoma totaling approximately $27 million. Properties were acquired from
Anadarko Petroleum Corporation on November 1, 1994 for approximately $24
million. The acquisition was financed with a portion of the Company's bank line
of credit (see Note Three) and is reflected on the balance sheet using the
purchase method of accounting.
The accompanying Consolidated Statements of Earnings include the
operations of the acquired properties commencing with completion of the
purchases in 1994. The unaudited pro forma financial information which follows
represents condensed consolidated operating results as if the acquisitions had
been consummated as of January 1, 1993. Consequently, the unaudited pro forma
adjustments to historical information reflect the addition of the revenues and
direct operating expenses of the acquired properties for the respective periods
in addition to pro forma adjustments for depreciation, depletion and
amortization expense, interest expense, general and administrative expense and
related income tax effects. Earnings per share is based on the weighted average
number of common shares outstanding of Plains' stock during each year. The pro
forma financial information is provided for comparative purposes only and should
be read in conjunction with the historical consolidated financial statements of
the Company. The pro forma financial information presented is not necessarily
indicative of the combined financial results as they may be in the future, or
might have been during the periods presented had the acquisition been
consummated at the beginning of 1993.
28
As Pro Forma Pro Forma
In thousands, except per share (unaudited) Reported Adjustments Consolidated
---------------------------------------------------------------------------------------------------
For the year ended December 31, 1994
Revenues $61,693 $6,968 (1) $68,661
Net earnings 6,650 817 (1) 7,467
Earnings per share .68 .08 (1) .76
-------------------------------------------------------------------------------------------------
For the year ended December 31, 1993
Revenues $64,280 $9,298 $73,578
Net earnings 1,727 1,609 3,336
Earnings per share .18 .16 .34
(1) REPRESENTS THE PORTION OF 1994 ACTIVITIES PRIOR TO CLOSING DATE.
NOTE THREE LONG-TERM DEBT
On February 17, 1995 (effective date), a new credit agreement was
entered into which replaced the previous $60 million unsecured, revolving line
of credit with a $150 million bank line. The new bank line has an initial
borrowing base limitation of $110 million, which will be redetermined annually.
Under the new agreement, outstanding borrowings at the end of the revolving
period in January 1997 convert to a term loan. The new agreement also provides
for a maximum of treasury stock purchases, which are not to exceed $75 million
during the eighteen-month period following the effective date. Subsequent to
that period, aggregate treasury stock purchases during the previous four fiscal
quarters may not exceed 50% of net earnings based upon the preceding two years.
Interest only payments are required during the revolving period;
thereafter, principal is to be repaid over six years in equal quarterly
installments beginning in April 1997. The outstanding principal balance shall
bear interest at the prime rate (8 1/2% per annum at yearend 1994) during
the revolving period. In addition, if the aggregate amount of treasury stock
purchases is greater than $50 million, and the principal outstanding is 80% or
greater of the borrowing base, then the interest rate margin is increased an
additional one-half of one percent per annum. The Company may also elect at any
time to borrow funds at more favorable rates offered by the interbank
eurocurrency market (LIBOR), which it utilizes frequently, or by domestic
certificates of deposit. LIBOR was elected for the entire outstanding debt
balance at yearend 1994 at an effective rate of 6.76% per annum.
29
Note Three (Continued)
The margin on fixed interest rates and the commitment fee rates vary
depending upon the percentage of the loan principal outstanding in relation to
the borrowing base as determined under the agreement. The rates are on a
sliding scale from five-eighths of one percent to one and one-half percent per
annum. The commitment fee is from one-quarter of one percent to
seventeen-fortieths of one percent per annum.
The Company must also maintain a book net worth of at least $80
million and a ratio of current assets to current liabilities of at least 1 to 1.
In addition, the Company may pay cash dividends as long as the aggregate
payments during the previous four fiscal quarters do not exceed 50% of its net
earnings based upon the preceding two years.
NOTE FOUR INCOME TAXES
The effective tax rate on income from operations before taxes and
the cumulative effect of changes in accounting methods is different from the
prevailing federal income tax rate as follows:
Year Ended December 31,
-----------------------
1994 1993
------ ------
Statutory income tax rate 34% 34%
Tax rate effect (decrease) of:
Changes in valuation allowance (14) (24)
State income taxes 4 4
Alternative minimum tax 2 2
Other items 2 2
------ ------
28% 18%
------ ------
------ ------
For 1992, income tax expense differs from the amounts computed by
applying the statutory Federal income tax rate to earnings before income taxes.
The reasons for these differences are shown as a percent of earnings as follows:
1992
----
Statutory income tax rate 34%
Utilization of tax loss carryforward (25)
Alternative minimum tax 2
Other items, net
(includes state taxes)
4
----
15%
----
----
30
Note Four (Continued)
The tax effect of temporary differences giving rise to the Company's
consolidated deferred income tax asset (liability) at December 31, 1994, is as
follows:
(In thousands)
Long-term deferred tax assets:
Operating loss carryforwards $ 9,173
Depletion and other credit carryforwards 4,804
Deferred postretirement benefits and other 719
-------
$14,696
Valuation allowance (112)
-------
Subtotal $14,584
Long-term deferred tax liabilities:
Depreciation, depletion and amortization (24,596)
-------
Deferred income tax liability $(10,012)
-------
-------
The Company has established a valuation allowance to the extent that
it may not be able to utilize its deferred tax assets. As of December 31, 1994,
the Company's estimate of taxable income increased for future periods which
resulted in a decrease in the valuation allowance from the prior yearend.
As of December 31, 1994, the Company had estimated alternative minimum
tax loss carryforwards totaling $12 million. Such carryforwards are subject to
separate return limitation year provisions and they expire, if not utilized,
during the years 1998 through 2005. The Company has no loss carryforwards for
state income tax purposes. The Company also has available depletion and other
credit carryforwards which may be utilized upon expiration of the loss
carryforwards.
31
NOTE FIVE EMPLOYEE BENEFIT PLANS
The Company has a qualified, defined benefit retirement plan covering
substantially all of its employees. The benefits are based on a specified level
of the employee's compensation during plan participation. The Company's funding
policy is to contribute annually an amount that provides not only for benefits
attributed to service to date, but also for benefits expected to be earned in
the future. Plan assets consist of U.S. Treasury obligations, corporate stocks
and bonds, insured annuity contracts, cash and cash equivalents and accrued
interest. Contributions by the Company were $312,000, $341,000 and $239,000
for the 1994, 1993 and 1992 plan years, respectively.
The following table sets forth the plan's funded status:
DECEMBER 31,
---------------------------
In Thousands 1994 1993 1992
--------------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $1,637,000, $1,290,000 and
$818,000, respectively $(1,666) $(1,383) $ (880)
-------- -------- --------
-------- -------- --------
Projected benefit obligation $(2,396) $(2,321) $(2,099)
Plan assets at fair value 2,205 1,977 1,504
----------------------------------------------------------------------------------------
Projected benefit obligation in excess of
plan assets (191) (344) (595)
Unrecognized net (gain) loss (141) 16 285
Prior service cost not yet recognized in
net periodic pension costs 93 64 70
Unrecognized net obligation being recognized
Over 9 1/2, 10 1/2 and 11 1/2 Years, respectively 132 146 160
----------------------------------------------------------------------------------------
Accrued pension cost $(107) $(118) $ (80)
-------- -------- --------
-------- -------- --------
Net pension cost included the following components:
Service cost - benefits earned $290 $346 $273
Interest cost on projected benefit obligation 157 150 128
Actual loss (return) on plan assets 70 (145) (130)
Net amortization of unrecognized obligation
And deferral (216) 28 55
----------------------------------------------------------------------------------------
Net periodic pension cost $301 $ 379 $ 326
-------- -------- --------
-------- -------- --------
The weighted average discount rate used in determining the
actuarial present value of the projected benefit obligation was 8%. The rate of
increase used for compensation levels was 5% in 1994 and 1993 and 6% in 1992.
The expected long-term rate of return on assets was 8 1/2%.
32
Note Five (Continued)
The Company also contributes the lesser of 10% of its net
earnings or 10% of employee compensation to a profit sharing plan of the
Company. For 1994, 1993, and 1992, the Company contributed $334,000, $188,000
and $471,000, respectively.
During 1993 and 1992, employees were allowed to defer from 1% to
10% of their salary under a 401(k) salary redirection plan. Effective January
1, 1994, three changes were made to the 401(k) plan. First, employee deferrals
are limited to 9% of current salary. Second, the Company began matching
deferrals with contributions equal to 50% of each deferral up to 6% of current
salary. Company contributions are invested in Company stock and are subject to
a vesting schedule. Third, the payroll-based employee stock ownership plan
(PAYSOP) was terminated and merged into the 401(k) plan. Prior to its
termination and merger with the 401(k) plan, PAYSOP contributions were based
upon 1/2 of 1% of compensation and amounted to $22,700 for 1993 and $23,500 for
1992.
Plains has established three incentive stock option plans for
employees and a non-qualified stock option plan for its non-employee directors.
Stock options are granted at not less than 100% of the market value of the stock
on the date of grant. Plains has reserved one million shares under the employee
plans and 50,000 shares under the non-employee directors' plan. Options
granted, exercised and outstanding are as follows:
Number of Option Price
Shares Per Share
--------- ----------------
Outstanding at December 31, 1991 280,728
Granted 100,848 $26.94 - $27.50
Exercised or canceled (27,300) 16.25 - 33.56
--------
Outstanding at December 31, 1992 354,276
Granted 14,755 27.25 - 28.94
Exercised or canceled (42,350) 16.25 - 33.69
--------
Outstanding at December 31, 1993 326,681
Granted 202,952 20.69 - 26.25
Exercised or canceled (12,605) 26.19 - 33.56
--------
Outstanding at December 31, 1994 517,028 16.25 - 33.69
--------
--------
33
Note Five (Continued)
The Company has established an executive deferred compensation
plan and a directors' deferred fee plan which permit the deferral of current
salary or directors' fees for the purpose of providing funds at retirement or
death for employees, directors and their beneficiaries. The total accrued
liability under these plans at December 31, 1994 and 1993 was $1,006,000 and
$838,000, respectively.
The Company provides postretirement healthcare benefits to
retiring employees and their spouses and a salary continuation (death) benefit
to certain eligible retirees. These benefits are subject to a medical cost
escalation limit, deductibles, co-payments, lifetime limits and other
limitations. The Company reserves the right to change or terminate the benefits
at any time.
Effective January 1, 1993, the Company adopted Statement No. 106
(FAS 106) issued by the Financial Accounting Standards Board on accounting for
postretirement benefits other than pensions. This statement requires the accrual
of the cost of providing postretirement benefits over the active service period
of the employee. FAS 106 requires recognition of the Company's accumulated
postretirement benefit obligation for its healthcare plan and salary
continuation plan existing at the time of adoption, as well as incremental
expense recognition for changes in the obligation attributable to each
successive fiscal period. The Company elected to immediately recognize the
accumulated liability as of the effective date, totaling approximately $800,000
(pretax). Prior to 1993, the Company recognized postretirement costs in the
year the benefits were paid.
As of yearend, the status of the obligation, after reflecting
anticipated changes in plan provisions, is as follows:
(In Thousands) December 31,
-------------- -------------
1994 1993
------ ------
Accumulated postretirement benefit obligation:
Active plan participants $(458) $(492)
Retirees (302) (320)
------ ------
(760) (812)
Plan assets 0* 0 *
------ ------
Net accumulated postretirement benefit obligation (760) (812)
Unrecognized net gain from past experience different from
that assumed and from changes in assumptions (167) (48)
------ ------
Accrued postretirement benefit cost $(927) $(860)
------ ------
------ ------
* THE COMPANY HAS SPECIFICALLY IDENTIFIED CERTAIN ASSETS, PRIMARILY
INSURANCE POLICIES OWNED BY THE COMPANY, TO FUND POSTRETIREMENT
BENEFIT OBLIGATIONS. HOWEVER, THESE ASSETS ARE NOT CONSIDERED "PLAN
ASSETS" AS DEFINED IN THE TAX REGULATIONS. AS OF DECEMBER 31, 1994
AND 1993, THE INSURANCE POLICIES HAVE A TOTAL CASH SURRENDER VALUE OF
APPROXIMATELY $860,000 AND $770,000, RESPECTIVELY.
34
Note Five (Continued)
Net periodic postretirement benefit cost included the following components:
1994 1993
---- ----
Service cost of benefits earned $ 41 $ 36
---- ----
Interest cost on accumulated postretirement
benefit obligation 61 60
Net periodic postretirement benefit cost $102 $ 96
---- ----
---- ----
The Company has utilized independent actuaries to estimate the
expected costs of healthcare benefits using current data from the Company and
various assumptions. The estimates are subject to significant revisions based
on a number of factors, including possible changes in the assumed healthcare
cost trend rate and the discount rate used in the calculations.
The accumulated postretirement benefit obligation was computed
using an assumed discount rate of 8%. The future healthcare cost trend rate was
assumed to be 11 1/2%, then it declines by 1.5 percentage points for each
of three successive years and remains constant at 7% thereafter. If the
healthcare cost trend rate was increased one percent for all future years, both
the accumulated postretirement benefit obligation and the aggregate of service
and interest costs for 1994 would have increased 1%.
NOTE SIX COMMITMENTS AND CONTINGENCIES
The Company leases office facilities in Lakewood, Colorado; Midland, Texas;
Lakin, Kansas and Gillette, Wyoming under operating leases with 6 to 60 months
remaining on the lease terms as of December 31, 1994. The Company's computer
and phone system leases terminate in 2 to 31 months. Minimum annual rental
commitments amount to approximately $725,514 in 1995, $370,215 in 1996, $124,310
in 1997, $112,404 in 1998 and $3,800 in 1999.
On October 20, 1994, the Company issued a press release stating that it had
authorized its financial advisors to help the Company study strategic
alternatives in light of a recent Schedule 13-D filing by Cross Timbers Oil
Company. The press release stated that as part of the study, the financial
advisors would seek indications of interest from certain possible merger
partners. The press release also indicated that the Company's board had amended
its shareholder rights plan.
On November 2, 1994, a putative class action was filed in Delaware Chancery
Court. In that case, entitled MILLER V. CODY, et al., the plaintiff has alleged
that certain named directors and the Company have, among other things, breached
their fiduciary duties by unreasonably amending the Company's shareholder rights
plan and otherwise acting to entrench themselves in office. Plaintiff seeks
various forms of injunctive relief, damages and an award of plaintiff's costs
and disbursements.
35
Note Six (Continued)
The Company and the named directors deny the principal allegations of
wrongdoing in the complaint and intend to pursue a vigorous defense. A putative
class action entitled BEHRENS V. MILLER, et al., that was filed on October 21,
1994, was voluntarily dismissed without prejudice by the plaintiff. The
allegations and relief sought in the BEHRENS case were similar to those in the
MILLER action, described above.
At December 31, 1994, the Company was a party to certain legal proceedings
which have arisen out of the ordinary course of business. Based on the facts
currently available, in management's opinion the liability, individually or in
the aggregate, if any, to the Company resulting from such actions will not have
a material adverse effect on the Company's consolidated financial position or
results of operations.
ENVIRONMENTAL CONTROLS
At yearend 1994, there were no known environmental or other regulatory
matters related to the Company's operations which are reasonably expected to
result in a material liability to the Company. Compliance with environmental
laws and regulations has not had, and is not expected to have, a material
adverse effect on the Company's capital expenditures, earnings or competitive
position.
36
NOTE SEVEN COMPARATIVE QUARTERLY RESULTS (UNAUDITED)
1994
------------------------------------------------
IN THOUSANDS 1st 2nd 3rd 4th Year
---------------------------------------------------------------------------------------
Revenues $16,176 $14,705 $12,616 $18,196 $61,693
Direct operating expenses (a) 11,080 9,355 9,189 12,423 42,047
Other expenses 2,280 2,650 2,087 3,393 10,410
------ ------- ------ ------ -------
Earnings before taxes 2,816 2,700 1,340 2,380 9,236
Income tax provision 788 756 376 666 2,586
------ ------- ------ ------ -------
Net earnings $2,028 $1,944 $964 $1,714 $ 6,650
------ ------- ------ ------ -------
------ ------- ------ ------ -------
Earnings per share $ .21 $ .20 $ .10 $ .18 $ .68*
------ ------- ------ ------ -------
------ ------- ------ ------ -------
1993
---------------------------------------------------------------------------------------
IN THOUSANDS 1st 2nd 3rd 4th Year
---------------------------------------------------------------------------------------
Revenues $17,215 $16,487 $15,331 $15,247 $64,280
Direct operating expenses (a) (b) 13,975 10,203 10,328 17,407 51,913
Other expenses 3,149 3,295 2,891 2,565 11,900
------ ------- ------ ------ -------
Earnings (loss) before taxes 91 2,989 2,112 (4,725) 467
Income tax provision (benefit) 16 538 380 (850) 84
------ ------- ------ ------ -------
Earnings (loss) before accounting changes 75 2,451 1,732 (3,875) 383
Cumulative effect on prior years
of accounting changes 1,344 1,344
---------------------------------------------------------------------------------------
Net earnings (loss) $1,419 $2,451 $1,732 $(3,875) $ 1,727
------ ------- ------ ------ -------
------ ------- ------ ------ -------
Earnings per share
Earnings (loss) before accounting
changes $ .01 $ .25 $ .18 ($ .39) $ .04*
Accounting changes .13 .14*
------ ------- ------ ------ -------
Net earnings (loss) per share $ .14 $ .25 $ .18 $ (.39) $ .18
------ ------- ------ ------ -------
------ ------- ------ ------ -------
* DIFFERENCE DUE TO ROUNDING.
(A) DIRECT OPERATING EXPENSES ARE THOSE ASSOCIATED DIRECTLY WITH OIL AND GAS
REVENUES AND INCLUDE LEASE OPERATIONS, PRODUCTION AND PROPERTY TAXES,
TRANSPORTATION AND PROCESSING, NET PROFIT PAYMENTS, AND DEPRECIATION,
DEPLETION AND AMORTIZATION. GROSS PROFIT WOULD BE COMPUTED AS THE EXCESS
OF REVENUES OVER DIRECT OPERATING EXPENSES.
(B) ALSO INCLUDED IN 1993 DIRECT OPERATING EXPENSES IS A $3.3 MILLION CHARGE IN
THE FIRST QUARTER AND $6 MILLION CHARGE IN THE FOURTH QUARTER FOR PROPERTY
IMPAIRMENT.
37
NOTE EIGHT OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED)
The following disclosures concerning the Company's oil and gas
producing activities are presented in accordance with FAS No. 69, "Disclosures
about Oil and Gas Producing Activities".
December 31
----------------------------
IN THOUSANDS 1994 1993 1992
-------------------------------------------------------------------------
Capitalized Costs at Yearend
Oil and gas properties --
Producing $207,036 $166,626 $153,817
Proved undeveloped 14,301 14,297 14,242
-------- ------- -------
221,337 180,923 168,059
Undeveloped leases 4,568 2,350 2,252
-------- ------- -------
225,905 183,273 170,311
Accumulated depreciation,
depletion and amortization 85,353 71,848 49,512
-------- ------- -------
Net capitalized costs $140,552 $111,425 $120,799
-------- ------- -------
-------- ------- -------
Costs Incurred During the Year
(capitalized or expensed) --
Acquisition of properties:
proved $25,808 $ 4,171 $12,162
unproved 1,606
Exploration costs 6,898 3,567 4,034
Development costs 14,956 14,074 12,360
-------- ------- -------
Total costs incurred $49,268 $21,812 $28,556
-------- ------- -------
-------- ------- -------
ESTIMATED OIL AND GAS RESERVE QUANTITIES
All of the Company's proved developed reserve quantities were
estimated at yearend 1994 by Netherland, Sewell & Associates, Inc., an
independent petroleum engineering firm. Proved undeveloped reserves were
estimated by the Company's petroleum engineers and amounted to approximately 11%
of total proved reserve equivalents at December 31, 1994. Proved developed
reserve quantities in prior years were also estimated annually by independent
petroleum engineers.
38
Note Eight (Continued)
The reserve balances presented below are estimates of net quantities
which can be expected to be recovered commercially at current prices and with
existing conventional equipment and operating methods. Proved developed
reserves are only those reserves expected to be recovered from existing wells.
Proved undeveloped reserves, estimated to be 20.1 Bcf of gas and 3.5 million
barrels of oil at yearend 1994, include those reserves expected to be recovered
from new wells and improved recovery projects where additional expenditures are
required. The Company's reserves are in the lower 48 states, principally in the
Kansas and Oklahoma portions of the Hugoton Field, the Permian Basin of West
Texas and southeastern New Mexico, and in the Powder River and Green River
Basins of Wyoming.
Gas Oil
(MMcF) (MBbls)
-------- -------
Proved developed and undeveloped reserves --
Balance, December 31, 1991 338,309 11,122
Extensions, discoveries and other additions 1,993 171
Acquisitions 769 2,193
Production (21,654) (1,039)
Revisions (3,652) (2,406)
Sales of reserves ( 177) (36)
------- -------
Balance, December 31, 1992 315,588 10,005
Extensions, discoveries and other additions 6,288 1,194
Acquisitions 1,537 216
Production (23,757) (1,220)
Revisions (38) (3,444)
Sales of reserves ( 130) (66)
-------- -------
Balance, December 31, 1993 299,488 6,685
Extensions, discoveries and other additions 19,639 2,297
Acquisitions 20,277 2,461
Production (23,925) (1,236)
Revisions (2,958) 828
Sales of reserves (42) (62)
-------- -------
Balance, December 31, 1994 312,479 10,973
-------- -------
-------- -------
Proved Developed Reserves
December 31, 1992 307,262 6,945
December 31, 1993 293,814 5,286
December 31, 1994 292,321 7,466
39
Note Eight (Continued)
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
AND CHANGE THEREIN RELATING TO PROVED RESERVES (UNAUDITED)
December 31
---------------------------------------
IN THOUSANDS 1994 1993 1992
-------------------------------------------------------------------------------
Future cash inflows $698,988 $654,658 $748,881
Future production costs (259,628) (238,715) (300,609)
Future development costs (16,624) (8,316) (13,135)
--------- --------- ----------
Future net cash flows
before taxes 422,736 407,627 435,137
10% annual discount factor (187,735) (182,071) (208,407)
--------- --------- ----------
Discounted future cash flows
before taxes 235,001 225,556 226,730
Discounted future income taxes (70,500) (63,156) (63,484)
--------- --------- ----------
Standardized measure of discounted
future net cash flows $164,501 $162,400 $163,246
--------- --------- ----------
--------- --------- ----------
December 31
---------------------------------------
IN THOUSANDS 1994 1993 1992
-------------------------------------------------------------------------------
Standardized measure --
beginning of year $162,400 $163,246 $169,629
Increases (Decreases):
Purchase of reserves 21,546 250 12,663
Sales, net of production costs (36,999) (38,905) (34,798)
Net changes in future prices and
production costs (10,507) 11,309 (3,554)
Extensions, discoveries and additions,
less related costs 21,772 6,859 2,734
Changes in future development costs 3,506 4,868 13,275
Revisions of previous quantity estimates 1,298 (13,501) (10,835)
Sale of reserves (246) (521) (150)
Accretion of discount 22,555 22,673 23,237
Net change in income taxes (7,344) 328 (745)
Changes in production rates related to
timing of demand (13,480) 5,794 (8,210)
--------- --------- ----------
Standardized measure -- end of year $164,501 $162,400 $163,246
--------- --------- ----------
--------- --------- ----------
40
Note Eight (Continued)
The 1994, 1993 and 1992 standardized measure of discounted future
net cash flows and related changes were computed using either yearend prices or
prices under contractual arrangements for oil and gas and yearend costs. A
significant portion of the Company's gas reserves are dedicated under a long-
term contract with its principal purchaser, K N Energy, Inc. (K N). The price
applicable to this contract is subject to annual renegotiation. Sales of gas to
K N during 1994, 1993 and 1992 represented 34%, 48% and 47%, respectively, of
total revenues of the Company. During 1994 and 1993, Associated Natural Gas,
Inc. purchased natural gas representing 11% of total revenues. A second major
customer during 1992 was Scurlock Oil Company which purchased oil representing
13% of total revenues of the Company. There were no other sales to customers
which accounted for more than 10% of total revenues of the Company during the
three years presented.
Estimated dismantlement and abandonment costs, net of estimated
salvage values of the properties, if material, are included as future costs in
computing discounted future net cash flows.
The Company periodically performs an impairment test by comparing
total capitalized costs with future undiscounted net revenues of its properties
on a geographic basis, by field or basin. No impairment was recognized in 1994.
An impairment of $9.3 million was recorded in 1993.
Effective tax rates of 30% for 1994 and 28% for 1993 and 1992
were used in computing discounted future income taxes, respectively, which
reflect the benefits which will accrue to the Company because of the reduction
from statutory tax rates due to the utilization of available tax loss
carryforwards which are present at yearend (see Note Four). Accretion of
discount recognizes the increase resulting from the passage of time.
41
Report of Independent Public Accountants
To the Board of Directors and Stockholders of Plains Petroleum Company:
We have audited the accompanying consolidated balance sheets of Plains
Petroleum Company (a Delaware corporation) and subsidiaries as of December 31,
1994 and 1993, and the related consolidated statements of earnings,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Plains
Petroleum Company and subsidiaries as of December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
Denver, Colorado
January 31, 1995.
42
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
-------------------------------------------------------------------------------
YEAR
FIRST OTHER BUSINESS
ELECTED POSITIONS EXPERIENCE
AS AGE HELD WITH DURING PAST 5
DIRECT THE COMPANY YEARS; OTHER
OR DIRECTORSHIPS
-------------------------------------------------------------------------------------------------
DIRECTORS WHOSE TERMS EXPIRE IN 1995 (CLASS I)
-------------------------------------------------------------------------------------------------
WILLIAM W. GRANT, 1987 62 Director Advisory Director of Colorado
III National Bankshares, Inc. and
Colorado National Bank since
1993. Director of Colorado
National Bankshares, Inc. from
1982 through 1993, and
Chairman of the Board of
Colorado National Bank,
Denver, Colorado from 1986
through 1993. Chairman of the
Board of Colorado Capital
Advisors from 1989 through
1994.
CHARLES E. WRIGHT 1992 62 Director Attorney at Law in private
practice in Lincoln, Nebraska,
since 1959. Director of
FirsTier Bank, N.A., Lincoln,
Nebraska, since 1990.
-------------------------------------------------------------------------------------------------
DIRECTORS WHOSE TERMS EXPIRE IN 1996 (CLASS II)
-------------------------------------------------------------------------------------------------
DERRILL CODY 1990 56 Director Attorney at Law in private
practice in Oklahoma City,
Oklahoma, since January 1990.
Director of the General
Partner of TEPPCO Partners,
L.P. since January 1990.
Vice- President of Texas
Eastern Corporation from 1986
until December 1989. Chief
Executive Officer of Texas
Eastern Pipeline Company
43
from 1987 to 1989.
WILLIAM F. WALLACE 1994 55 Director. President Regional Vice President of
and Chief Operating Texaco Exploration and
Officer of Plains Production, Inc., New Orleans,
Petroleum Operating Louisiana, from 1989 to 1994.
Company, the Company's
operating subsidiary.
--------------------------------------------------------------------------------------------------
DIRECTORS WHOSE TERMS EXPIRE IN 1997 (CLASS III)
--------------------------------------------------------------------------------------------------
HARRY S. WELCH 1986 71 Director Attorney at Law in private
practice in Houston, Texas,
from August 1989 to present.
Served as Vice-President and
General Counsel of Texas
Eastern Corporation from 1988
through July 1989.
JAMES A. MILLER 1988 60 Director. Chairman
and Chief Executive
Officer.
The additional information regarding executive officers required by
Item 401, Regulation S-K is included in Part I, Item 4 of this Form 10-K under
"Additional Item - Executive Officers of the Registrant."
44
ITEM 11: EXECUTIVE COMPENSATION
-------------------------------------------------------------------------------
The table below provides compensation information for the Company's chief
executive officer and the Company's four most highly compensated executive
officers, other than the chief executive officer, who were serving as executive
officers at the end of 1994 and whose total annual salary and bonus exceeded
$100,000.
-------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
-------------------------------------------------------------------------------
ANNUAL LONG TERM
COMPENSATION(1) COMPENSATION(2)
--------------- ---------------
SECURITIES
UNDERLYING
OPTIONS/SARS ALL OTHER
NAME AND PRINCIPAL YEAR SALARY(3) BONUS(4) (#) COMPENSATION(5)
POSITION
---------------------------------------------------------------------------------------
James A. Miller 1994 $221,448 $0 12,843 $1,500
Chairman and 1993 221,448 0 0 539
Chief Executive Officer 1992 215,541 0 3,712 21,321
Robert M. Danos(6) 1994 200,856 0 4,833 1,500
President of 1993 200,856 0 0 539
Plains Petroleum 1992 195,488 0 3,712 20,896
Operating Company
Lee B. VanRamshorst 1994 135,960 20,000 7,228 1,500
Senior Vice President- 1993 135,960 0 0 539
Business Development of 1992 132,330 0 3,712 14,536
Plains Petroleum
Operating Company
Eugene A. Lang, Jr. 1994 127,560 8,000 25,460 1,500
Senior Vice President, 1993 127,560 0 0 539
General Counsel and 1992 124,150 0 3,712 13,501
Secretary
Robert W. Wagner 1994 117,120 0 6,283 1,500
Vice President, 1993 117,120 0 0 539
Land & Marketing of 1992 113,985 0 2,500 11,271
Plains Petroleum
Operating Company
-------------------------------------------------------------------------------
(1) No named executive officer received perquisites and other personal benefits
in excess of the lesser of $50,000 or ten percent of his salary, as
reported in this table.
(2) The Company did not make restricted stock awards or payouts under long term
incentive plans in 1994, 1993 or 1992.
(3) Includes cash compensation deferred at the election of the named executive
officers under the Company's 401(k) Plan and Trust and the Company's
Executive Deferred Compensation Plan.
(4) The bonus figures reflect amounts paid in 1995 for services performed in
1994.
(5) The amounts disclosed in this column for 1994 represent the Company's
matching contribution, paid in Company Common Stock, under the 401(k) Plan
and Trust. The amounts disclosed in this column for 1993 represent the
45
Company's contributions to the Company's Payroll-Based Tax Credit Employee
Stock Ownership Plan, which plan was terminated on January 1, 1994. The
amounts disclosed in this column for 1992 include the following:
(a) the Company's contributions to the Company's Profit Sharing Plan and
Trust on behalf of Messrs. Miller ($20,789), Danos ($20,364),
VanRamshorst ($13,824), Lang ($12,969) and Wagner ($10,739), and
(b) the Company's contributions to the Company's Payroll-Based Tax Credit
Employee Stock Ownership Plan on behalf of Messrs. Miller ($532),
Danos ($532), VanRamshorst ($532), Lang ($532) and Wagner ($532).
As discussed in the Report of the Compensation Committee, effective January
1, 1993, officers no longer participate in the Company's Profit Sharing
Plan and Trust.
(6) From October 3, 1994 through January 3, 1995, Mr. Danos served as President
of Plains Petroleum Company. Mr. Danos retired on January 3, 1995.
William F. Wallace became a director of the Company and President of Plains
Petroleum Operating Company on October 3, 1994.
The table below provides information on the grants of stock options to the named
executive officers during 1994.(1)
------------------------------------------------------------------------------------------------------
NUMBER PERCENT
OF OF TOTAL POTENTIAL REALIZABLE
SECURITIES OPTIONS/SARS EXERCISE VALUE AT ASSUMED
UNDERLYING GRANTED TO OR BASE ANNUAL RATES OF
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION STOCK PRICE APPRECIATION
NAME GRANTED 1994 ($/SHARE) DATE FOR OPTION TERM
(#)
------------------------------------------------------------------------------------------------------
5% ($) 10% ($)
-------- --------
James A. Miller 12,843 6.4% 20.6875 4/12/04 $167,091 $423,441
Robert M. Danos 4,833 2.4 20.6875 4/03/95(2) 62,879 159,451
Lee B. VanRamshorst 7,228 3.6 20.6875 4/12/04 94,038 238,311
Eugene A. Lang, Jr. 7,460 3.7 20.6875 4/12/04 97,056 245,960
18,000 9.0 22.1875 9/08/04 251,165 636,501
Robert W. Wagner 6,283 3.1 20.6875 4/12/04 81,743 207,154
___________
(1) Included in this table are 4,833 option shares for Mr. Miller, 2,395 shares
for Mr. VanRamshorst, 2,627 shares for Mr. Lang and 1,450 shares for Mr. Wagner
which were granted in 1994 but were first exercisable on January 1, 1995. Also
included are 3,177 option shares granted to Mr. Miller in 1994 that are first
exercisable on January 1, 1996. These 3,177 option shares granted to Mr. Miller
would become immediately exercisable upon certain events constituting a change
in control of the Company. The last reported sales price of the Company's
Common Stock on the New York Stock Exchange on December 31, 1994 was $23.375 per
share.
(2) Mr. Danos retired on January 3, 1995. Under the Company's employee option
plans, a retiree must exercise his or her options within three
months of retirement.
The table below provides information on the value of the named executive
officers' unexercised options. No stock options were exercised by the named
individuals during 1994.
OPTION VALUES AT DECEMBER 31, 1994(1)
---------------------------------------------------------------------------------------------
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
AT 12-31-94(1) AT 12-31-94(1)
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
NAME (#) ($)
---------------------------------------------------------------------------------------------
James A. Miller 19,542/8,010 $ 12,989/21,527
46
Robert M. Danos 19,019/0 12,989/0
Lee B. VanRamshorst 33,169/2,395 65,720/6,437
Eugene A. Lang, Jr. 33,303/2,627 34,364/7,060
Robert W. Wagner 26,012/1,450 30,837/3,897
---------------------------------------------------------------------------------------------
(1) The last reported sales price of the Company's Common Stock on the New York
Stock Exchange on December 31, 1994 was $23.375 per
share.
47
The following table shows the estimated annual benefits payable upon retirement
to Company employees under the Company's retirement plan and supplemental
retirement plan.
HIGH THREE YEARS OF SERVICE
YEAR AVERAGE --------------------------------------------------------------------
------------ 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
$125,000 $30,989 $41,319 $ 51,649 $ 61,978 $ 72,308
150,000 37,552 50,069 62,586 75,103 87,620
175,000 44,114 58,819 73,524 88,228 102,933
200,000 50,677 67,669 84,461 101,353 118,245
225,000 57,239 76,319 95,399 114,478 133,538
250,000 63,802 85,069 106,336 127,603 148,870
-----------------------------------------------------------------------------------------
Annual pension benefits under such plan at the normal retirement age of 65 are
equal to accrued annuity credits. The yearly retirement credit for each plan
year from September 13, 1985 until December 31, 1988 equaled 1.3 percent of the
first $8,400 of compensation and 2.1 percent of amounts in excess of $8,400.
For participants who complete a year of service after December 31, 1988, the
credits are equal to the greater of (a) the foregoing credits plus those based
on 2.0 percent of total monthly compensation after January 1, 1989 or (b)
credits based upon 1.25 percent of average compensation during the three
consecutive years within the last ten years of employment when compensation was
the highest, times years of service, plus 0.50 percent of such average
compensation that exceeds the Social Security taxable wage base in effect for
each year of service, times years of service (not to exceed 35 years). For
purposes of the pension plan, compensation includes salary, overtime and special
duty compensation and excludes bonuses and commissions. For each of the named
executive officers, the compensation covered by the plan is the amount reported
as such officer's salary in the summary compensation table above. Benefits
under the plan are paid monthly after retirement for the life of the participant
(straight-life annuity amount). Benefits under the plan are not subject to the
deduction for Social Security benefits or other offset amounts. The named
executive officers have accrued the following years of service for funding of
benefits under the plan: Mr. Miller, 7 years; Mr. Danos, 6 years; Mr.
VanRamshorst, 10 years; Mr. Lang, 5 years; and Mr. Wagner, 10 years. Mr. Danos
retired on January 3, 1995. The benefits illustrated in this table do not
reflect Internal Revenue Code Sections 415 and 401(a) limitations to which the
plan is subject. If payment of actual retirement benefits is limited by such
provisions, an amount equal to any reduction in retirement benefits will be paid
as supplemental benefits under the Plains Petroleum Supplemental Retirement
Plan.
EMPLOYMENT CONTRACTS
--------------------------------------------------------------------------------
Mr. Miller is a party to an agreement with the Company which provides, among
other things, that if, within three years after a "change in control" (as
defined in such agreement), Mr. Miller's employment with the Company is
involuntarily terminated or is terminated by Mr. Miller for "Good Reason," he is
to be paid promptly a cash amount equal to 299 percent of the higher of (a) his
then annual compensation (including salary, bonuses and incentive compensation)
or (b) the highest annual compensation (including salary, bonuses and incentive
compensation) paid or payable during any of the three calendar years ending with
the year of his termination. "Good Reason" is defined as a reduction in Mr.
Miller's compensation or employment responsibilities, a required relocation
outside the greater Denver, Colorado area or, generally, any conduct by the
Company which renders the executive unable to discharge his employment duties
effectively.
Messrs. VanRamshorst, Wagner and Lang are also parties to severance agreements
identical to the agreement with Mr. Miller, except that the agreements with
Messrs. VanRamshorst, Wagner and Lang provide for payment equal to two times the
then annual compensation or the highest annual compensation paid or payable
during either one of the two calendar years immediately preceding termination.
48
COMPENSATION OF DIRECTORS
--------------------------------------------------------------------------------
Effective December 1, 1993, a director who is otherwise not employed by the
Company or its subsidiaries receives a retainer of $1,300 per month and a fee of
$900 per day of each Board or committee meeting attended. Directors who are
full-time employees of the Company or its subsidiary receive no additional
compensation for their services as directors. All directors, however, are
reimbursed for reasonable travel expenses incurred in attending all meetings.
Directors who are not also employees of the Company participate in the 1985
Stock Option Plan for Non-Employee Directors (the "Directors Plan"). Options
granted pursuant to the Directors Plan are not intended to qualify as incentive
stock options. Under the Directors Plan, each Director who is not a salaried
employee of the Company, within 30 days after election or re-election to the
Company's Board of Directors, will be granted options to purchase a number of
shares of Common Stock equal to 1,000 multiplied by the number of years in the
term to which he or she is elected. If any person is elected by the Board of
Directors to fill an unexpired term or vacancy on the Board of Directors, within
30 days of the election, such person will be granted options for a number of
shares equal to 1,000 multiplied by the number of twelve-month periods of the
director's term (rounded up for any fraction of a twelve-month period). In
1994, Harry S. Welch received options to purchase 3,000 shares at the exercise
price of $21.00 per share.
49
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------------------------
The following table sets forth, as of March 15, 1995, the beneficial ownership
of the Company's Common Stock by the Company's directors, each of the executive
officers listed in the Summary Compensation Chart and all executive officers and
directors as a group.
NUMBER OF SHARES
NAME BENEFICIALLY OWNED(1) PERCENTAGE OF CLASS
--------------------------------------------------------------------------------
Derrill Cody 5,200 *
William W. Grant, III 15,500 *
Eugene A. Lang, Jr. 38,882(2) *
James A. Miller 38,056(3) *
Lee B. VanRamshorst 39,733(4) *
Robert W. Wagner 28,899(5) *
William F. Wallace 11,637(6) *
Harry S. Welch 10,000 *
Charles E. Wright 5,254(7) *
All executive officers and 266,728 2.72%
directors as a group (12 persons)
--------------------------------------------------------------------------------
(1) For purposes of determining the numbers of shares beneficially owned by the
named individuals and by all executive officers and directors as a group,
with respect to any director or executive officer who held options to
purchase shares of the Company's Common Stock exercisable within 60 days of
March 15, 1995, it was assumed that such options had been exercised and
the shares issued were outstanding. The following number of shares
representing such unexercised options were added to the holdings of each
of the following directors and officers: Mr. Cody 5,000 shares; Mr. Grant
8,000 shares; Mr. Lang 35,932 shares; Mr. Miller 27,552 shares;
Mr. VanRamshorst 35,564 shares; Mr. Wagner, 27,462; Mr. Wallace
11,428 shares; Mr. Welch 8,000 shares; Mr. Wright 3,000 shares; and all
executive officers and directors as a group 218,073 shares. The respective
directors and executive officers have sole voting power and sole
investment power over all shares reflected in the table and in this note,
except as described in the notes to this table.
(2) Includes 1,000 shares as to which Mr. Lang has shared investment power and
shared voting power and 1950 shares as to which Mr. Lang has no investment
power and sole voting power.
(3) Includes 85 shares owned by Mr. Miller's wife individually or as custodian
for their child over which Mr. Miller disclaims beneficial ownership and
over which he has neither investment nor voting power, 1,000 shares as to
which Mr. Miller has shared investment power and shared voting power and
4,419 shares as to which Mr. Miller has no investment power and sole voting
power.
(4) Includes 200 shares owned by Mr. VanRamshorst's children over which Mr.
VanRamshorst disclaims beneficial ownership and over which he has neither
investment power nor voting power and 3,969 shares as to which Mr.
VanRamshorst has no investment power and sole voting power.
(5) Includes 300 shares as to which Mr. Wagner has shared investment power and
shared voting power and 992 shares as to which Mr. Wagner has no investment
power and sole voting power.
50
(6) Includes 209 shares as to which Mr. Wallace has no investment power and
sole voting power.
(7) Includes 254 shares owned by Mr. Wright's wife over which Mr. Wright
disclaims beneficial ownership and over which he has neither investment
nor voting power.
* Less than 1 percent of the outstanding shares of Common Stock.
According to publicly available information, as of March 15, 1995, the only
entities that owned more than 5 percent of the outstanding shares of Common
Stock of the Company were as follows:
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENTAGE
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
---------------------------------------------------------------------------------------------
State Farm Mutual Automobile Insurance Company 711,410 7.25%
and related entity (1)
One State Farm Plaza
Bloomington, Illinois 61710
Cross Timbers Oil Company and related entity(2) 644,500 6.57%
810 Houston Street, Suite 2000
Fort Worth, Texas 76102
---------------------------------------------------------------------------------------------
(1) According to its Schedule 13G dated January 24, 1995 filed with the
Securities and Exchange Commission. The Schedule 13G states that State
Farm Mutual Automobile Insurance Company has sole voting and sole
investment power with respect to 611,410 shares of the Common Stock of the
Company, and State Farm Fire and Casualty Company has sole voting power and
sole investment power with respect to 100,000 shares of the Common Stock of
the Company.
(2) According to its Schedule 13D dated September 19, 1994, Amendment No. 1
thereto dated October 20, 1994, Amendment No. 2 thereto dated November 18,
1994 and Amendment No. 3 thereto dated February 10, 1995 filed with the
Securities and Exchange Commission. Amendment No. 3 to such Schedule 13D
states that Cross Timbers Oil Company has sole voting power and sole
investment power with respect to 644,400 shares of Common Stock of the
Company and shares voting and investment power with WTW Properties, Inc., a
newly-formed and wholly-owned subsidiary of Cross Timbers Oil Company, with
respect to 100 shares of Common Stock of the Company.
51
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------------------------------
The Company had a loan commitment through February 17, 1995 from three banks,
one of which was Colorado National Bank ("CNB"), a wholly owned subsidiary of
Colorado National Bankshares, Inc. CNB's portion of the commitment was $9
million, and it received an annual commitment fee of approximately $17,978 in
1994. William W. Grant, III, a director of the Company, was Chairman of the
Board of CNB and a director of Colorado National Bankshares, Inc. through June
1993, and he now serves as an advisory director of CNB and Colorado National
Bankshares, Inc.
52
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
--------------------------------------------------------------------------------
(A) See Item 8 of Form 10-K with respect to financial statements.
(B) The Financial Data Schedule included as an exhibit to this report on
Form 10-K should be read in conjunction with the financial statements
in Item 8. Schedules not included with these financial statement
schedules have been omitted because they are not applicable or the
required information is shown in the financial statements or notes
thereto.
(C) The Exhibit Index which follows lists the exhibits to this report
which are filed herewith, except those incorporated by reference as
indicated.
(D) REPORTS ON FORM 8-K:
The following report on Form 8-K was filed by the Company during the
last quarter of the year ended December 31, 1994 included in this Form
10-K, and is incorporated by reference in this report:
(1) Date of Report: October 19, 1994
Items Reported:
ITEM 5 - OTHER EVENTS
Amendment to Rights Agreement dated October 19, 1994 between the
Registrant and Chemical Bank, as successor Rights Agent, to
Rights Agreement dated May 12, 1988, to preserve the ability of
the Board of Directors to control the study process and to pursue
business combinations to the best interest of the shareholders.
ITEM 7 - FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
Exhibits related to Amendment to Rights Agreement dated
October 19, 1994, noted in Item 5.
(2) Date of Report: November 15, 1994
Items Reported:
ITEM 2 - ACQUISITION OR DISPOSITION OF ASSETS
Acquisition of certain oil and gas properties from Anadarko
Petroleum Corporation.
ITEM 7 - FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
No financial information was available at the time of the report
filing. Information was subsequently provided in an amended
report in January 1995.
53
EXHIBIT INDEX
Exhibit Footnote
Number Reference Description of Document
------ --------- -----------------------
3(a) Restated Certificate of Incorporation of Plains
Petroleum Company.
3(b) Certificate of Correction of Restated Certificate
of Incorporation of Plains Petroleum Company.
3(c) (1) By-laws of Plains Petroleum Company.
4(a) (2) Preferred Stock Rights Purchase Agreement made as
of May 12, 1988 between Plains Petroleum Company
and Manufacturers Hanover Trust Company.
4(b) (24) Amendment dated October 19, 1994 between Plains
Petroleum Company and Manufacturers Hanover Trust
to Exhibit 4(a).
The provisions in Registrant's Restated
Certificate of Incorporation and By-laws defining
the rights of holders of its equity securities
are included in Exhibits 3(a), 3(b) and 3(c).
4(c) (15) Credit Agreement effective January 1, 1991
between Plains Petroleum Company, Plains
Petroleum Operating Company and NCNB Texas
National Bank, et.al.
4(d) (17) Amendment to Credit Agreement effective January
1, 1992 between Plains Petroleum Company, Plains
Petroleum Operating Company and NationsBank of
Texas, N.A., et.al.
4(e) (20) Second amendment to Credit Agreement effective
January 1, 1993 between Plains Petroleum Company,
Plains Petroleum Operating Company and
NationsBank of Texas, N.A., et.al.
4(f) (22) Third Amendment to Credit Agreement effective
January 1, 1994 between Plains Petroleum Company,
Plains Petroleum Operating Company and
NationsBank of Texas, N.A., et al.
4(g) Credit Agreement effective February 17, 1995
between Plains Petroleum Operating Company and
NationsBank of Texas, N.A., et.al.
10(a) (3) Service Agreement between Plains Petroleum
Company and K N Energy, Inc.
10(b) (6) Amendment dated August 11, 1986 between Plains
Petroleum Company and K N Energy, Inc. to Exhibit
Number 10(a).
10(c) (1) Amendment as of January 1, 1988 between Plains
Petroleum Company and K N Energy, Inc. to Exhibit
Number 10(a).
54
Exhibit Footnote
Number Reference Description of Document
------- --------- -----------------------
10(d) (4) Gas Purchase Contract. No. P-1090, dated April
20, 1984, as amended June 25, 1985, between
Plains Petroleum Company and K N Energy, Inc.
10(e) (6) Amendment dated October 30, 1986 between Plains
Petroleum Company and K N Energy, Inc. to Exhibit
Number 10(d).
10(f) (12) Amendment dated April 11, 1990 between Plains
Petroleum Operating Company and K N Energy, Inc.
to Exhibit Number 10(d).
10(g) (17) Amendments dated July 12, July 24 and July 25 of
1991 between Plains Petroleum Operating Company
and K N Energy, Inc. to Exhibit Number 10(d).
10(h) (19) Agreement dated September 3, 1992 to Redetermine
Price Under Purchase Contract No. P-1090 and
Conditions of Future Amendment for Release of
Contract Gas Purchases between K N Energy, Inc.
and Plains Petroleum Operating Company
10(i)-1 (21) Agreement dated August 25, 1993 to Redetermine
Price Under Purchase Contract No. P-1090 between
KN Energy, Inc. and Plains Petroleum Operating
Company.
10(i)-2 (23) Agreement to Release of Pre-636 Exchange Gas
P-1090 dated July 13, 1994 between Plains
Petroleum Operating Company and K N Gas Supply
Services, Inc.
10(i)-3 Agreement dated December 8, 1994 between Plains
Petroleum Operating Company and K N Energy, Inc.
to Exhibit Number 10(d).
21 Subsidiaries of the registrant.
23(a) Consent of Independent Public Accountants.
23(b) Consent of Independent Reservoir Engineer.
27 Financial Data Schedule for the year ended
December 31, 1994.
99(a) Form 11-K for the year ended December 31, 1992
dated March 31, 1995.
99(b) Form 11-K for the year ended December 31, 1993
dated March 31, 1995.
99(c) Form 11-K for the year ended December 31, 1994
dated March 31, 1995.
55
Exhibit Footnote
Number Reference Description of Document
------- --------- -----------------------
COMPENSATION PLANS AND AGREEMENTS
10(j) (4) 1985 Incentive Stock Option Plan.
10(k) (4) 1985 Stock Option Plan for Non-Employee Directors
10(l) (9) 1989 Stock Option Plan
10(m) (18) 1992 Stock Option Plan
10(n) (4) Employment Agreement dated April 1, 1985 between
Plains Petroleum Company and Elmer J. Jackson.
10(o) (10) Amended and Restated Employment Agreement dated
March 17, 1989 between Plains Petroleum Company
and Elmer J. Jackson.
10(p) (4) Severance Agreement dated May 1, 1985 between
Plains Petroleum Company and Robert W. Wagner.
10(q) (6) Severance Agreements between Plains Petroleum
Company and Darrel M. Reed, Robert A. Miller,
Jr., David L. Cook, and Lee B. VanRamshorst, and
dated July 22, 1985; September 16, 1985; August
26, 1985; and November 18, 1985, respectively.
10(r) (8) Amendment to Severance Agreements dated June 1,
1988 between Plains Petroleum Company and Darrel
M. Reed, Robert A. Miller, Jr., Robert W. Wagner,
and Lee B. VanRamshorst, respectively.
10(s) (20) Director's Deferred Fee Plan dated August 8,
1987.
10(t) (20) Executive Deferred Compensation Plan dated
August 8, 1987.
10(u) (20) First and Second Amendments to the Executive
Deferred Compensation Plan dated December 1, 1988
and August 26, 1992, respectively.
10(v) (13) Plains Petroleum Company 401(k) Plan & Trust.
10(w) (7) Severance Agreement dated May 1, 1988 between
Plains Petroleum Company and James A. Miller.
56
Exhibit Footnote
Number Reference Description of Document
------ --------- -----------------------
10(x) (10) Severance Agreement dated January 23, 1989
between Plains Petroleum Company and Robert M.
Danos.
10(y) (11) Amendment to Severance Agreements dated May 12,
1989 between Plains Petroleum Company and James
A. Miller and Robert M. Danos, respectively.
10(z) (14) Severance Agreement dated September 26, 1990
between Plains Petroleum Company and Eugene A.
Lang, Jr.
10(aa) (16) Severance Agreement dated May 13, 1991 between
Plains Petroleum Company and John N. Wood.
10(bb) (20) Incentive Compensation Plan dated February 18,
1993.
10(cc) (24) Amendment to 1985, 1989 and 1992 Stock Option
Plans, dated September 8, 1994.
10(dd) (24) Employment Agreement dated August 7, 1994 between
Plains Petroleum Operating Company and William F.
Wallace.
10(ee) (24) Amendment of Employment Agreement dated
October 3, 1994 between Plains Petroleum
Operating Company and William F. Wallace.
______________________________
(1) Incorporated by reference to Plains Petroleum Company's Annual Report on
Form 10-K dated March 28, 1988. [SEC file number 1-8975] [available on]
microfiche at the SEC]
(2) Incorporated by reference to Plains Petroleum Company's Registration
Statement on Form 8-A dated May 20, 1988.
(3) Incorporated by reference to Plains Petroleum Company's Annual Report on
Form 10-K dated March 27, 1986. [SEC file number 1-8975] [available on]
microfiche at the SEC]
(4) Incorporated by reference to Plains Petroleum Company's Registration
Statement on Form 10 dated August 21, 1985.
(5) [Intentionally omitted]
57
(6) Incorporated by reference to Plains Petroleum Company's Annual Report on
Form 10-K dated March 30, 1987. [SEC file number 1-8975] [available on]
microfiche at the SEC]
(7) Incorporated by reference to Plains Petroleum Company's Quarterly Report on
Form 10-Q dated May 13, 1988. [SEC file number 1-8975] [available on]
microfiche at the SEC]
(8) Incorporated by reference to Plains Petroleum Company's Quarterly Report on
Form 10-Q dated August 11, 1988. [SEC file number 1-8975] [available on]
microfiche at the SEC]
(9) Incorporated by reference to Plains Petroleum Company's Proxy Statement,
Exhibit A, dated March 21, 1989. [SEC file number 1-8975] [available on]
microfiche at the SEC]
(10) Incorporated by reference to Plains Petroleum Company's Quarterly Report on
Form 10-Q dated May 12, 1989. [SEC file number 1-8975] [available on]
microfiche at the SEC]
(11) Incorporated by reference to Plains Petroleum Company's Annual Report on
Form 10-K dated March 28, 1990. [SEC file number 1-8975] [available on]
microfiche at the SEC]
(12) Incorporated by reference to Plains Petroleum Company's Quarterly Report on
Form 10-Q dated May 7, 1990. [SEC file number 1-8975] [available on]
microfiche at the SEC]
(13) Incorporated by reference to Plains Petroleum Company's Registration
Statement on Form S-8 (Amendment No. 1) dated June 18, 1990 and (Amendment
No. 2) dated December 21, 1993.
(14) Incorporated by reference to Plains Petroleum Company's Quarterly Report on
Form 10-Q dated November 13, 1990. [SEC file number 1-8975] [available on]
microfiche at the SEC]
(15) Incorporated by reference to Plains Petroleum Company's Annual Report on
Form 10-K dated March 27, 1991.
(16) Incorporated by reference to Plains Petroleum Company's Quarterly Report on
Form 10-Q dated August 13, 1992.
(17) Incorporated by reference to Plains Petroleum Company's Annual Report on
Form 10-K dated March 26, 1992.
(18) Incorporated by reference to Plains Petroleum Company's Proxy Statement,
Exhibit A, dated March 26, 1992.
(19) Incorporated by reference to Plains Petroleum Company's Quarterly Report on
Form 10-Q dated November 12, 1992.
(20) Incorporated by reference to Plains Petroleum Company's Annual Report on
Form 10-K dated March 26, 1993.
58
(21) Incorporated by reference to Plains Petroleum Company's Quarterly Report on
Form 10-Q dated November 11, 1993.
(22) Incorporated by reference to Plains Petroleum Company's Annual Report on
Form 10-K dated March 28, 1994.
(23) Incorporated by reference to Plains Petroleum Company's Quarterly Report on
Form 10-Q dated August 12, 1994.
(24) Incorporated by reference to Plains Petroleum Company's Quarterly Report on
Form 10-Q dated November 11, 1994.
59
ADDITIONAL ITEM -
For purposes of complying with the amendments to the rules governing Form
S-8 (effective July 13, 1990) under the Securities Act of 1933, the registrant
hereby undertakes as follows, which undertaking shall be incorporated by
reference into registrant's Registration Statements on Form S-8 Nos. 33-30507
(filed August 11, 1989), 33-35306 (filed June 18, 1990 and December 21, 1993)
and 33-54636 (filed November 16, 1992);
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
60
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PLAINS PETROLEUM COMPANY
March 30, 1995 By: /s/ Darrel Reed
--------------------------------
Darrel Reed
Vice President and Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date
indicated.
/s/ James A. Miller Chairman, Chief Executive March 30, 1995
-------------------------- Officer and Director
James A. Miller
/s/ William F. Wallace President and Chief Operating March 30, 1995
-------------------------- Officer (Plains Petroleum
William F. Wallace Operating Company) and Director
/s/ Derrill Cody Director March 30, 1995
--------------------------
Derrill Cody
/s/ William W. Grant, III Director March 30, 1995
--------------------------
William W. Grant, III
/s/ Harry S. Welch Director March 30, 1995
--------------------------
Harry S. Welch
/s/ Charles E. Wright Director March 30, 1995
--------------------------
Charles E. Wright
61
EX-3.(A)
2
EXHIBIT 3(A)
EXHIBIT 3(a)
RESTATED CERTIFICATE OF INCORPORATION
OF
PLAINS PETROLEUM COMPANY
(Pursuant to Sections 242 and 245 of the
Delaware General Corporation Law)
PLAINS PETROLEUM COMPANY, a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
1. The name of the Corporation is PLAINS PETROLEUM COMPANY. The date
of filing the Corporation's original Certificate of Incorporation with the
Secretary of State of Delaware was November 30, 1983.
2. The text of Certificate of Incorporation of the Corporation, as
amended or supplemented heretofore and herewith, is hereby restated to read as
herein set forth in full:
FIRST. The name of this corporation is Plains Petroleum Company.
SECOND. The address of this corporation's registered office in the
State of Delaware is 1209 Orange Street in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
THIRD. The purpose of this corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH. The total number of shares of stock that this corporation
shall have authority to issue is 21,000,000 shares, consisting of 20,000,000
shares of Common Stock of the par value of $0.01 per share and 1,000,000 shares
of Preferred Stock of the par value of $0.01 per share. The Preferred Stock
shall be issued from time to time in one or more series with such distinctive
serial designations and preferences and (a) may have such voting powers, full or
limited, or no voting powers; (b) may be subject to redemption at such time or
times and at such prices; (c) may be entitled to receive dividends (which may be
cumulative or non-cumulative) at such rate or rates, on such conditions and at
such times, and payable in preference to, or in such relation to, the dividends
payable on any other class or classes or series of stock; (d) may have such
rights upon the dissolution of, or upon any distribution of the assets of, the
corporation; (e) may be made convertible into, or exchangeable for, shares of
any other class or classes or of any other series of the same or any other class
or classes or stock of the corporation, at such price or prices or at such rates
of exchange, and with such adjustments; and (f) shall have such
other relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof, all as shall hereafter be
stated and expressed in the resolution or resolutions providing for the issue of
such Preferred Stock from time to time adopted by the Board of Directors
pursuant to authority so to do which is hereby vested in the Board.
The number of authorized shares of any class of stock of this
corporation, including without limitation the Preferred Stock and the Common
Stock, may be increased or decreased (but not below the number of shares thereof
then outstanding) by the affirmative vote of the holders of at least 50% of the
total voting power of all shares of stock of the corporation entitled to vote in
the election for directors generally, considered for purposes of this Article
Fourth as one class.
FIFTH. Any and all right, title, interest and claim in or to any
dividends by this corporation, whether in cash, stock or otherwise, which are
unclaimed by the stockholder entitled thereto for a period of four years after
the close of business on the payment date, shall be and be deemed to be
extinguished and abandoned, and such unclaimed dividends in the possession of
this corporation, its transfer agent or other agents or depositaries, shall at
such time become the absolute property of this corporation, free and clear of
any and all claims of any persons whatsoever.
SIXTH. A. In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors of this corporation is expressly
authorized to make, alter or repeal the by-laws of this corporation.
Stockholders may alter, amend or repeal the by-laws by an affirmative vote of
two-thirds of the total voting power of ALL shares of stock of the corporation
entitled to vote in the election of directors generally, considered for the
purposes of this Article Sixth as one class.
B. (1) Any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall be indemnified by the corporation against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or
-2-
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to be-
lieve that his conduct was unlawful.
(2) The corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation. No indemnification shall be made in respect
of any claim, issue or matter as to which such person shall have been adjudged
to be liable to the corporation, however, unless and only to the extent that the
Court of Chancery of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expense which the Court of
Chancery of Delaware or such other court shall deem proper.
(3) To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections B(l) and (2) of this
Article SIXTH, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(4) Any indemnification under subsections B(l) and (2) of this
Article SIXTH shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections B(l) and (2) of this
Article SIXTH. Except as otherwise expressly required in subsections B(l) and
(2), such determination shall be made (i) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (ii) if a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) by the stockholders.
-3-
(5) Expenses incurred by any person who may have a right of
indemnification hereunder in defending any civil or criminal action, suit or
proceeding shall be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such person to repay such amount if it is ultimately determined that
he is not entitled to be indemnified hereunder.
(6) The right to indemnification and the advancement of expenses
provided by this Article SIXTH shall not be deemed exclusive of any other rights
to which those seeking indemnification may be entitled under any by-law,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(7) The corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liability under the provisions of this Article SIXTH and regardless
of whether he would have been entitled to indemnification by the corporation.
(8) For the purposes of Article SIXTH, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents, so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Article SIXTH with respect to
the resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
(9) For purposes of Article SIXTH, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
-4-
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this Article
SIXTH.
(10) Notwithstanding the foregoing provisions of Article SIXTH, the
corporation shall indemnify any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise to the fullest extent
permitted by the Delaware General Corporation Law or any other applicable law,
as may from time to time be in effect.
(11) All rights to indemnification and advancement of expenses
provided by this section B of Article SIXTH shall be deemed to be a contract
between the corporation and each person entitled to indemnification and
advancement of expenses hereunder. Any repeal or modification of this Article
SIXTH or of relevant provisions of the Delaware General Corporation Law or any
other applicable law shall not diminish any rights to indemnification or
advancement of expenses with respect to any state of facts then or theretofore
existing or any action, suit or proceeding theretofore or thereafter brought or
threatened based in whole or in part upon any such state of facts.
C. If a claim under section B of this Article SIXTH is not paid in
full by the corporation within thirty days after a written claim has been
received by the corporation, the claimant may at any time thereafter bring suit
against the corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking has been tendered to the corporation) that the claimant has not met
the standards of conduct which make it permissible under the Delaware General
Corporation Law for the corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the corporation.
Neither the failure of the corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he has met the applicable standard of con-
duct set forth in the Delaware General Corporation Law, nor an actual
determination by the corporation
-5-
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
D. A director of the corporation shall not be personally liable to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for the unlawful payment of dividends or unlawful stock
repurchases under Section 174 of the General Corporation Law of Delaware, or
(iv) for any transaction from which the director derived an improper personal
benefit.
SEVENTH. A. The number of directors which shall constitute the whole
board of directors of this corporation shall nor be less than five nor more than
eleven with the actual number, if to be greater than five, to be fixed by
resolution of a majority of the directors. Initially, the number of directors
which shall constitute the whole Board of Directors of this corporation shall be
five. Effective as of the annual meeting of stockholders occurring in 1985, the
Board of Directors shall be divided into three classes, the first of which shall
consist of one director and each remaining class consisting of two directors.
The initial term of office of the first class ("Class I") shall expire at the
annual meeting of stockholders occurring in 1986, the initial term of office of
the second class ("Class II") shall expire at the annual meeting of stockholders
occurring in 1987, and the initial term of office of the third class ("Class
III") shall expire at the annual meeting of stockholders occurring in 1988. At
each annual meeting of stockholders following such initial classification and
election, directors elected to succeed those directors whose terms expire shall
be elected for a term of office to expire at the third succeeding annual meeting
of stockholders after their election. The foregoing notwithstanding, each
director shall serve until his successor shall have been duly elected and
qualified, unless he shall cease to serve by reason of death, resignation,
removal or other cause. If the number of directors is changed, any increase or
decrease shall be apportioned among the classes so as to maintain the number of
directors in each class as nearly equal as possible, but in no case shall a
decrease in the number of directors shorten the term of any incumbent director.
B. The business and affairs of the corporation shall be managed by
or under the direction of the Board of Directors, and the Board of Directors
shall determine the rights, powers, duties, rules and procedures that shall af-
fect the power of the
-6-
Board of Directors to manage and direct the business and affairs of the
corporation.
C. Subject to the rights of any class or series of stock having
preference over the Common Stock as to dividends or upon liquidation to elect
directors under specified circumstances, any director may be removed from office
only for "Cause" (as hereinafter defined), and only by the affirmative vote of
the holders of at least 50 percent of the total voting power of all shares of
stock of the corporation entitled to vote in the election of directors
generally, considered for purposes of this Article SEVENTH as one class. For
purposes of this paragraph C of this Article SEVENTH, "Cause" shall require
either (1) a felony conviction, or (2) an adjudication by a court of competent
jurisdiction following a trial on the merits of gross negligence or misconduct
in the performance of the director's duty to the corporation.
D. Newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, removal or other cause may be filed only by a
majority vote of the directors then in office, though less than a quorum, or by
a sole remaining director. In the event that all of the directorships have been
vacated by reason of deaths, resignations, removals or other causes, then within
ten (10) days of the date on which the last director ceased to serve as a
director, the then highest ranking officer of the corporation shall direct that
written notice be sent to the stockholders informing them of the place, date and
hour of a special stockholders' meeting which shall be held for the purpose of
filling the vacated directorships. Such stockholders' meeting shall be held not
less than ten (10) days after the mailing of the notices described in the
preceding sentence, but not more than sixty (60) days after the date of such
notice. In the event the then highest ranking officer fails to provide notice
or no such officer is available, any stockholder may request the Chancery Court
of the State of Delaware to schedule a special stockholders' meeting for the
purpose of electing directors. Any director chosen pursuant to the provisions
of this paragraph shall hold office for a term expiring at the annual meeting of
stockholders at which the term of office of the class to which he has been
elected expires and until his successor is duly elected and qualified.
E. The provisions set forth in paragraphs A and D of this Article
SEVENTH are subject to the rights of the holders of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation to
elect additional directors under specified circumstances as set forth in this
Restated Certificate of Incorporation or in a resolution providing for the
issuance of such stock adopted by the Board of Directors pursuant to authority
vested in it by this Restated Certificate of Incorporation.
-7-
F. In addition to the voting requirements imposed by law or by any
other provision of this Restated Certificate of Incorporation this Article
SEVENTH may not be amended, altered or repealed in any respect, nor may any
provision inconsistent with this Article SEVENTH be adopted, unless such action
is approved by the affirmative vote of the holders of at least 90 percent of the
total voting power of all shares of stock of the corporation entitled to vote in
the election of directors generally, considered for purposes of this Article
SEVENTH as one class.
EIGHTH. A. Subject to the rights of holders of any class or series of
stock having a preference over the Common Stock as to dividends or upon
liquidation to elect additional directors under specified circumstances as set
forth in this Restated Certificate of Incorporation or in a resolution providing
for the issuance of such stock adopted by the Board of Directors pursuant to
authority vested in it by this Restated Certificate of Incorporation,
nominations for the election of directors may be made by the Board of Directors
or by a committee appointed by the Board of Directors, or by any stockholder of
record of the corporation entitled to vote in the election of directors
generally provided that such stockholder has given actual written notice of such
stockholder's intent to make such nomination or nominations to the Secretary of
the corporation not later than (1) with respect to an election to be held at an
annual meeting of stockholders, 90 days in advance of such meeting (or, if
later, 90 days prior to the anniversary date of the immediately preceding annual
meeting of stockholders if such meeting involved the public solicitation of
proxies for the election of directors), and (2) with respect to an election to
be held at a special meeting of stockholders for the election of directors, the
close of business on the seventh day following (a) the date on which notice of
such meeting is first given to stockholders or (b) the date on which public
disclosure of such meeting is made, whichever is earlier. Each such notice
submitted by a stockholder of record intending to make a nomination shall
include: (1) the name and address of the stockholder of record who intends to
make the nomination and of the person or persons to be nominated; (2) a
representation that the stockholder intends to appear in person or by proxy at
the meeting to nominate the person or persons specified in the notice; (3) a
description of all arrangements or understandings between the stockholder and
each nominee or between the Stockholder or the nominee and any other person or
persons (naming such person or persons), pursuant to which the nomination or
nominations are to be made by the stockholder or relating to the corporation or
its securities or to such nominee's service as a director if elected; (4) such
other information regarding each nominee proposed by such stockholder as would
be required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission had the nominee been nominated,
or intended to be nominated, by the Board of Directors; (5) a representation
that each person to be nominated,
-8-
has been a beneficial or record owner of shares of stock of the corporation for
a period of not less than 90 days prior to the date of such notice; and (6) the
written consent of each nominee to serve as a director of the corporation if so
elected. The Secretary of the corporation shall deliver any such notices of
nominations submitted by stockholders to the person who shall serve as chairman
of the stockholder's meeting at which such nominations are to be considered for
election. The chairman of the meeting shall review such notices of nomination
and shall accept for nomination only those candidates for whom proper notice has
been submitted in accordance with the provisions of the Restated Certificate of
Incorporation and by-laws of this corporation. The nomination of any person not
made in compliance with such provisions shall be of no effect.
B. In addition to the voting requirements imposed by law or by any
other provision of this Restated Certificate of Incorporation, this Article
EIGHTH may not be amended, altered or repealed in any respect, nor may any
provision inconsistent with this Article EIGHTH be adopted, unless such action
is approved by the affirmative vote of the holders of at least 90 percent of the
total voting power of all shares of stock of the corporation entitled to vote in
the election of directors generally, considered for purposes of this Article
EIGHTH as one class.
NINTH. A. Any stockholder action required or permitted by the
General Corporation Law of the State of Delaware to be taken by the stockholders
of the corporation at any annual or special meeting of such stockholders must be
effected at a duly called annual or special meeting of stockholders of the
corporation and may not be effected by any consent in writing by such
stockholders unless such consent shall be unanimous.
B. The Chairman of the Board, if any, or in his absence, the
President, or in the absence of both the Chairman of the Board and the
President, such officer or director of the corporation as the Board of Directors
shall prescribe from time to time by resolution, shall call meetings of the
stockholders to order and shall act as chairman of such meetings. In the event
the Chairman of the Board, the President and any person prescribed from time to
time by resolution, are not present, the meeting shall be adjourned until such
time as there shall be present the Chairman of the Board, the President or a
person prescribed by resolution. The chairman of the meeting shall have plenary
power to set the agenda, determine the procedure and rules of order, and make
definitive rulings at meetings of the stockholders. The Secretary or an
Assistant Secretary of the corporation shall act as secretary at all meetings of
the stockholders, but in their absence the chairman of the meeting may appoint
any person present at the meeting to act as secretary of the meeting.
-9-
C. At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To
be properly brought before an annual meeting business must be (1) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (2) brought before the meeting by or at the direction
of the Board of Directors, or (3) otherwise properly brought before the meeting
by a stockholder. For business to be properly brought before an annual meeting
by a stockholder, the stockholder must have given timely notice thereof in
writing to the Secretary of the corporation. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the corporation, not less than 90 days prior to such meeting (or, if
later, not less than 90 days prior to the anniversary date of the immediately
preceding annual meeting of stockholders if such meeting involved the public
solicitation of proxies for the election of directors). A stockholder's notice
to the Secretary shall set forth as to each matter the stockholder proposes to
bring before the annual meeting (a) a brief description of the business desired
to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (b) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, (c) the class
and number of shares of the corporation which are beneficially owned by the
stockholder, and (d) any material interest of the stockholder in such business.
Notwithstanding anything in the by-laws to the contrary, no business shall be
conducted at an annual meeting except in accordance with the procedures set
forth in this Article NINTH. The chairman of an annual meeting shall, if the
facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this Article NINTH, and if he should so determine, he shall so declare to the
meeting and any such business not properly brought before the meeting shall not
be transacted.
D. Special meetings of the stockholders of the corporation may be
called by the Chairman of the Board, if any, or the President of the
corporation, in his discretion, and shall be called by the President or
Secretary at the direction in writing of not less than three directors of the
corporation then holding office. Such written direction shall state the purpose
or purposes of the proposed meeting. No business may be conducted at a special
meeting of the stockholders unless set forth in the notice of such meeting (or
any supplement thereto) given by or at the direction of an appropriate officer
of the corporation as identified herein. Special meetings of the stockholders
may also be called by the then highest ranking officer of the corporation or as
otherwise provided in paragraph D of Article SEVENTH of this Restated
Certificate of Incorporation in the event that all of the directorships of the
corporation have been vacated.
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E. In addition to the voting requirements imposed by law or by any
other provision of this Restated Certificate of Incorporation, this Article
NINTH may not be amended, altered or repealed in any respect, nor may any
provision inconsistent with this Article NINTH be adopted, unless such action is
approved by the affirmative vote of the holders of at least 90 percent of the
total voting power of all shares of stock of the corporation entitled to vote in
the election of directors generally, considered for purposes of this Article
NINTH as one class.
TENTH. Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class or stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
ELEVENTH. A. In addition to the vote or consent of the holders of
stock of this corporation otherwise required by law, by agreement or by this
Restated Certificate of Incorporation, and except as set forth in paragraph (B)
of this Article ELEVENTH, any Business Transaction (as hereinafter defined)
shall require the affirmative vote of the holders of that number of outstanding
shares of all classes of stock of this corporation entitled to vote in elections
of directors (considered for the purposes of this Article ELEVENTH as one class)
which equals the sum of (a) the number of outstanding shares of such voting
stock beneficially owned (as hereinafter defined) by any Interested Related
Party (as hereinafter defined) plus (b) ninety percent (90%) of the remaining
number of outstanding shares of such voting stock that are not beneficially
owned by any Interested Related Party.
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B. The provisions of this Article ELEVENTH shall not be applicable
to any Business Transaction if either:
1. such Business Transaction shall have been approved by a
resolution adopted by not less than three-fourths of those members of
the Board of Directors of this corporation holding office at the time
such resolution is adopted who are not themselves Related Party
Directors (as hereinafter defined); or
2. all of the following conditions have been met: (a) the
aggregate amount of the cash and the fair market value (as determined
by the investment banking firm referred to in clause (d) below) of
consideration other than cash to be received per share in the Business
Transaction by holders of Common Stock of this corporation is not less
than the higher of (i) the highest per share price (including any
brokerage commissions, transfer taxes, soliciting dealer's fees,
dealer-management compensation and similar expenses) paid or payable
by any Interested Related Party to acquire beneficial ownership of any
shares of Common Stock within the three-year period immediately prior
to the record date for the determination of stockholders of this
corporation entitled to vote on or consent to such Business
Transaction, or (ii) the per share book value of the Common Stock
(computed in accordance with generally accepted accounting principles)
at the end of the fiscal quarter of this corporation immediately
preceding the record date for the determination of stockholders of
this corporation entitled to vote on or consent to such Business
Transaction; (b) the consideration to be received by holders of Common
Stock other than any Interested Related Party shall be either in cash
or in the form used by any Interested Related Party to acquire the
largest number of shares of Common Stock previously acquired by any
Interested Related Party; (c) at the record date for the determination
of stockholders of this corporation entitled to vote on the proposed
Business Transaction, there shall be one or more directors of this
corporation who are not Related Party Directors; and (d) a proxy
statement describing the proposed Business Transaction and complying
with the requirements of the Securities Exchange Act of 1934 and the
rules and regulations thereunder (or any subsequent provisions
replacing such Act, rules or regulations) shall be mailed to the
holders of outstanding shares of stock of this corporation entitled to
vote in elections of directors as of the record date for the
determination of stockholders of this corporation entitled to vote on
or consent to such proposed Business Transaction, at least 30 days
prior to the consummation of such Business
-12-
Transaction (whether or not such proxy statement is required to be mailed
pursuant to such Act or subsequent provisions), and such proxy statement
shall contain in a prominent place (i) any recommendations as to the
advisability (or inadvisability) of the proposed Business Transaction that
the members of the Board of Directors of this corporation who are not
Related Party Directors may choose to state, and (ii) the opinion of an
investment banking firm as to both (I) the fair market value of any
consideration other than cash to be received per share of Common Stock (as
required by clause (a) above), and (II) the fairness of the terms of the
proposed Business Transaction from the point of view of the holders of
Common Stock other than Interested Related Parties. Such investment bank-
ing firm shall be engaged solely on behalf of the holders of Common Stock
other than Interested Related Parties, shall be selected by a majority of
the directors of this corporation who are not themselves Related Party
Directors, shall be paid a reasonable fee for its services by this
corporation upon receipt of such opinion and shall be a major investment
banking firm of national reputation that has not previously been associated
with any Interested Related Party. For purposes of clause (a) above, the
term "consideration other than cash to be received" shall include Common
Stock of this corporation retained by its stockholders in the event of a
Business Transaction in which this corporation is the surviving
corporation.
C. Except as otherwise provided in this Article ELEVENTH, any direct
or indirect purchase or other acquisition by the corporation of any shares of
stock of the corporation owned by any Related Party (as hereinafter defined) who
has beneficially owned such shares of stock for less than three years preceding
the date of such proposed purchase or other acquisition shall require the
affirmative vote or consent of the holders of that number of outstanding shares
of all classes of stock of this corporation entitled to vote in elections of
directors (considered for the purposes of this Article ELEVENTH as one class)
which equals the sum of (a) the number of outstanding shares proposed to be
purchased from such Related Party (as hereinafter defined) plus (b) ninety
percent (90%) of the remaining number of outstanding shares of such voting
stock.
D. The provisions of paragraph C of this Article ELEVENTH shall not
apply to (i) any offer to purchase made by the corporation which is made on the
same terms and conditions to the holders of all shares of stock of the corpora-
tion, (ii) any purchase by the corporation of shares owned by a Related Party
occurring after the end of three years following the date of the last
acquisition by such Related Party of stock of the corporation, (iii) any
transaction which may be deemed to be a
-13-
purchase by the corporation of shares of its stock which is made in accordance
with the terms of any stock option or other employee benefit plan now or
hereafter maintained by the corporation, or (iv) any purchase by the corporation
of shares of its stock at prevailing market prices pursuant to a stock
repurchase program.
E. Except as otherwise provided in this Article ELEVENTH, a Related
Party may not, pursuant to a tender offer, one or more market purchases, or
otherwise, acquire directly or indirectly, beneficial ownership of greater than
twenty percent (20%) of the outstanding Common Stock of this corporation without
the prior approval of a majority of the Board of Directors unless, prior to such
acquisition, the Related Party makes a cash tender offer for all of the
outstanding Common Stock of this corporation not already owned, directly or
indirectly, or controlled by the Related Party at a price which is at least
equal to the higher of (i) the highest per share price (including any brokerage
commissions, transfer taxes, soliciting dealer's fees, dealer-management
compensation and similar expenses) paid or payable by the Related Party to
acquire beneficial ownership of any shares of Common Stock of this Corporation
during the twelve month period immediately preceding the commencement of such
tender offer; or (ii) the highest market price of this corporation's Common
Stock, during such twelve month period, and the Related Party purchases all
shares of this corporation's Common Stock properly tendered pursuant to the
cash tender offer.
F. For the purposes of this Article ELEVENTH:
1. the term "Business Transaction" shall mean:
(a) any merger or consolidation of this corporation or
any of its subsidiaries with or into any Related Party or
any Affiliate or Associate of a Related Party, or
(b) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of any assets of this
corporation or any of its subsidiaries to or with any
Related Party or any Affiliate or Associate of a Related
Party if such assets have a book value in excess of 10
percent of the book value (determined in accordance with
generally accepted accounting principles) of the total
consolidated assets of the corporation and all subsidiaries
which are consolidated for public financial reporting
purposes at the end of its most recent fiscal period ending
prior to the time the determination is made for which
financial information is available, or
-14-
(c) any issuance, sale, exchange, transfer or other
disposition by this corporation or any of its subsidiaries
of any securities of this corporation or any of its
subsidiaries to or with any Related Party or any Affiliate
or Associate of a Related Party, or
(d) any recapitalization of this corporation or any
subsidiary, or merger or consolidation of this corporation
with any subsidiary, which has the effect, directly or in-
directly, of increasing the proportionate interest of any
Related Party or any Affiliate or Associate of a Related
Party in the outstanding stock of any class of this corpo-
ration or any subsidiary;
2. the term "Person" shall mean any corporation, partnership,
association, trust, business entity, estate or individual;
3. the terms "Affiliate" and "Associate" shall have the meanings
given them in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on May 1, 1985;
4. a Person shall be deemed to be the beneficial owner of any shares
of stock of this corporation
(a) which such Person beneficially owns, as determined pursuant
to Rule 13d-3 of the General Rules and Regulations under the Secu-
rities Exchange Act of 1934, as in effect on May 1, 1985, or
(b) which such Person has the right to acquire pursuant to any
agreement, or upon exercise of conversion rights, warrants or options,
or otherwise, regardless of whether such right to acquire is presently
exercisable, or
(c) which are beneficially owned, directly or indirectly
(including shares deemed owned through application of clause (b)
above), (i) by any Affiliate or Associate of such Person, or (ii) by
any Person acting in concert with it, or
(d) which are beneficially owned, directly or indirectly
(including shares deemed owned through application of clause (b)
above), by any Person with which it or any Affiliate or Associate of
it, or any Person acting in concert with it or with any Affiliate or
Associate of it, has any agreement, arrangement or
-15-
understanding with respect to acquiring, holding, voting or disposing
of stock of this corporation;
5. the term "Related Party" shall mean and include any Person which
is the beneficial owner, directly or indirectly, of 5% or more of the
outstanding shares of stock of this corporation entitled to vote in
elections of directors (considered for the purposes of this Article
ELEVENTH as one class);
6. the term "Related Party Director" shall mean and include each
director of this corporation who is himself or herself a Related Party or
an Affiliate or Associate of a Related Party or an officer, director or
employee of a Related Party or of an Affiliate or Associate of a Related
Party; and
7. the term "Interested Related Party" shall mean a Related Party
that is a party to a Business Transaction or is an Affiliate or Associate
of a party to a Business Transaction or will experience an increase in its
proportionate interest in the outstanding stock of any class of this
corporation as a result of a Business Transaction. For the purposes of
determining whether a Person is a Related Party under this Article
ELEVENTH, the outstanding shares of any class of stock of this corporation
shall include shares deemed owned through application of clauses (a), (b),
(c) and (d) of subparagraph (4) above, but shall not include any other
share which may be issuable pursuant to any agreement, or upon exercise of
conversion rights, warrants or options, or otherwise.
G. On the basis of information known to this corporation, the Board
of Directors of this corporation, acting by resolutions adopted by a majority of
those members of the board of directors who are not themselves Related Party Di-
rectors, shall make all determinations to be made under this Article ELEVENTH,
including whether (1) a Person beneficially owns 5% or more of the outstanding
shares of stock of this corporation entitled to vote in elections of directors,
or (2) a Person has the right to acquire shares of stock of this corporation, or
(3) a Person is an Affiliate or Associate of another, or (4) a Person has any
agreement, arrangement or understanding with respect to acquiring, holding,
voting or disposing of stock of this corporation, or (5) a Person is acting in
concert with any other Person, or (6) an amount equals or exceeds the highest
per share price paid or payable by an Interested Related Party for Common Stock,
or (7) an amount equals or exceeds the per share book value of Common Stock, or
(8) a form of consideration other than cash is the same form as used by an
Interested Related Party to acquire the largest number of shares of Common Stock
previously acquired by an Interested Related Party, or (9) an investment banking
firm is a firm of national reputation, or (10) a fee to
-16-
be paid an investment banking firm is reasonable, or (11) an investment banking
firm has been previously associated with an Interested Related Party; and all
such determinations shall be conclusive.
H. In addition to any other requirements for amendments to this
Restated Certificate of Incorporation, no amendment to this Restated Certificate
of Incorporation shall amend, alter, change or repeal any of the provisions of
this Article ELEVENTH unless such amendment shall receive the affirmative vote
or consent of the holders of that number of outstanding shares of all classes of
stock of this corporation entitled to vote in elections of directors (considered
for the purposes of this Article ELEVENTH as one class) which equals the sum of
(a) the number of outstanding shares of such voting stock beneficially owned by
all Related Parties, plus (b) ninety percent (90%) of the remaining number of
outstanding shares of such voting stock that are not beneficially owned by any
Related Party; provided that this paragraph H of Article ELEVENTH shall not
apply to any amendment to this Certificate of Incorporation approved by a
resolution adopted by not less than three-fourths of those members of the Board
of Directors of this corporation holding office at the time such resolution is
adopted who are not themselves Related Party Directors.
TWELFTH. This corporation reserves the right to amend this
Certificate of Incorporation, and thereby to change or repeal any provisions
herein contained from time to time, and all rights conferred upon stockholders
by the Certificate of Incorporation are granted subject to this reservation.
3. The amendments to the Corporation's Certificate of Incorporation,
as heretofore amended or supplemented, effected by this Restated Certificate of
Incorporation were proposed by the directors and adopted by the stockholders in
the manner and by the vote prescribed by Section 242 of the General Corporation
Law of the State of Delaware. Except as set forth in the foregoing sentence,
this Restated Certificate of Incorporation merely restates and integrates but
does not further amend the Corporation's Certificate of Incorporation, as
heretofore amended or supplemented, and was duly adopted by the Corporation's
Board of Directors without a vote of the stockholders, in accordance with the
provisions of Section 245 of the General Corporation Law of the State of
Delaware.
-17-
IN WITNESS WHEREOF, Plains Petroleum Company has caused this Restated
Certificate of Incorporation to be signed by E. J. Jackson, its President and
Chief Executive Officer, and attested by Robert A. Miller, Jr., its Secretary,
this 27th of May, 1987.
PLAINS PETROLEUM COMPANY
By: /s/ Elmer J. Jackson
-----------------------------
Elmer J. Jackson
President and
Chief Executive Officer
ATTEST:
/s/ Robert A. Miller, Jr.
-------------------------
Robert A. Miller, Jr.
Secretary
-18-
EX-3.(B)
3
EXHIBIT 3(B)
EXHIBIT 3(b)
CERTIFICATE OF CORRECTION
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
PLAINS PETROLEUM COMPANY
It is hereby certified that:
1. The name of the corporation is PLAINS PETROLEUM COMPANY.
2. The Restated Certificate of Incorporation of the Corporation,
which was filed by the Secretary of State of Delaware on June 1, 1987, is hereby
corrected.
3. The defects to be corrected in said instrument are as follows:
a. The last sentence of paragraph D. of Article NINTH was added
inadvertently and should be deleted.
b. The word "themselves" in paragraph B.1. of Article ELEVENTH
was added inadvertently and should be deleted.
c. Paragraph E. of Article ELEVENTH was incorrectly transcribed
in said Restated Certificate of Incorporation.
d. The definition of "Related Party" contained in Paragraph F.5.
of Article ELEVENTH should refer to "10%" rather than "5%."
4. The portions of the instrument in corrected form are as follows:
a. PARAGRAPH D. OF ARTICLE NINTH:
"D. Special meetings of the stockholders of the corporation may be
called by the Chairman of the Board, if any, or the President of the
corporation, in his discretion, and shall be called by the President or
Secretary at the direction in writing of not less than three directors of the
corporation then holding office. Such written direction shall state the purpose
or purposes of the proposed meeting. No business may be conducted at a special
meeting of the stockholders unless set forth in the notice of such meeting (or
any supplement thereto) given by or at the direction of an appropriate officer
of the corporation as identified herein."
b. PARAGRAPH B.1 OF ARTICLE ELEVENTH:
"1. such Business Transaction shall have been approved by a
resolution adopted by not less than three-fourths of those members of the Board
of Directors of this corporation holding office at the time such resolution is
adopted who are not Related Party Directors (as hereinafter defined); or"
c. PARAGRAPH E. OF ARTICLE ELEVENTH:
"E. Except as otherwise provided in this Article ELEVENTH, a Related
Party may not, pursuant to a tender offer, one or more market purchases, or
otherwise, acquire directly or indirectly, beneficial ownership of greater than
twenty percent (20%) of the outstanding Common Stock of this corporation without
the prior approval of a majority of the Board of Directors who are not Related
Party Directors unless, prior to such acquisition, the Related Party (a) makes a
cash tender offer for all of the outstanding Common Stock of this corporation
not already beneficially owned by the Related Party at a price which is at least
equal to the higher of (i) the highest per share price (including any brokerage
commissions, transfer taxes, soliciting dealer's fees, dealer-management
compensation and similar expenses) paid or payable by the Related Party to
acquire beneficial ownership of any shares of Common Stock of this corporation
during the twelve month period immediately preceding the commencement of such
tender offer or (ii) the highest reported market price of this corporations's
Common Stock during such twelve month period, and (b) purchases all shares of
this corporation's Common Stock properly tendered pursuant to such offer."
d. PARAGRAPH F.5 OF ARTICLE ELEVENTH:
"5. the term "Related Party" shall mean and include any Person which
is the beneficial owner, directly or indirectly, of 10% or more of the
outstanding shares of stock of this corporation entitled to vote in elections of
directors (considered for purposes of this Article ELEVENTH as one class);"
IN WITNESS WHEREOF, Plains Petroleum Company has caused this
Certificate of Correction to be signed by its Chairman of the Board and attested
by its Secretary this 17th day of May, 1988.
PLAINS PETROLEUM COMPANY
By: /s/ E. J. Jackson
---------------------------
ATTEST: E. J. Jackson
Chairman of the Board
/s/ Robert A. Miller, Jr.
-------------------------
Robert A. Miller, Jr.
Secretary
EX-4.(G)
4
EXHIBIT 4(G)
EXECUTION COPY
-------------------------------------------------------------------------------
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CREDIT AGREEMENT
--------------------------------------------------
PLAINS PETROLEUM OPERATING COMPANY,
as Borrower,
PLAINS PETROLEUM COMPANY,
as Parent,
NATIONSBANK OF TEXAS, N.A.,
as Agent,
and NATIONSBANK OF TEXAS, N.A.,
and CERTAIN BANKS
as Lenders
--------------------------------------------------
$150,000,000
February 17, 1995
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
CREDIT AGREEMENT
TABLE OF CONTENTS
Page
----
CREDIT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I - Definitions and References . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Exhibits and Schedules. . . . . . . . . . . . . . . . . . 15
Section 1.3. Amendment of Defined Instruments. . . . . . . . . . . . . 15
Section 1.4. References and Titles . . . . . . . . . . . . . . . . . . 15
Section 1.5. Calculations and Determinations . . . . . . . . . . . . . 16
ARTICLE II - The Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.1. Advances. . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.2. Requests for Advances . . . . . . . . . . . . . . . . . . 16
Section 2.3. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . 17
Section 2.4. Rate Elections. . . . . . . . . . . . . . . . . . . . . . 18
Section 2.5. Commitment Fees . . . . . . . . . . . . . . . . . . . . . 19
Section 2.6. Optional Prepayments. . . . . . . . . . . . . . . . . . . 19
Section 2.7. Mandatory Prepayments . . . . . . . . . . . . . . . . . . 20
Section 2.8. Payments to Lenders . . . . . . . . . . . . . . . . . . . 20
Section 2.9. Initial Borrowing Base. . . . . . . . . . . . . . . . . . 21
Section 2.10. Subsequent Determinations of Borrowing Base. . . . . . . 21
Section 2.11. Capital Reimbursement. . . . . . . . . . . . . . . . . . 22
Section 2.12. Increased Cost of Fixed Rate Portions. . . . . . . . . . 22
Section 2.13. Availability . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.14. Funding Losses . . . . . . . . . . . . . . . . . . . . . 24
Section 2.15. Reimbursable Taxes . . . . . . . . . . . . . . . . . . . 24
Section 2.16. Limitation on Reimbursement; Mitigation. . . . . . . . . 26
Section 2.17. Replacement of Lenders . . . . . . . . . . . . . . . . . 26
ARTICLE III - Conditions Precedent to Lending. . . . . . . . . . . . . . . . 27
Section 3.1. Documents to be Delivered . . . . . . . . . . . . . . . . 27
Section 3.2. Additional Conditions Precedent . . . . . . . . . . . . . 28
ARTICLE IV - Representations and Warranties. . . . . . . . . . . . . . . . . 29
Section 4.1. Borrower's and Parent's Representations
and Warranties. . . . . . . . . . . . . . . . . . . . . . 29
Section 4.2. Representation by Lenders . . . . . . . . . . . . . . . . 34
ARTICLE V - Covenants of Borrower. . . . . . . . . . . . . . . . . . . . . . 35
Section 5.1. Affirmative Covenants . . . . . . . . . . . . . . . . . . 35
Section 5.2. Negative Covenants. . . . . . . . . . . . . . . . . . . . 43
ARTICLE VI - Bank Accounts, Etc. . . . . . . . . . . . . . . . . . . . . . . 48
Section 6.1. Bank Accounts; Offset . . . . . . . . . . . . . . . . . . 48
Section 6.2. Guaranties of Borrower's Subsidiaries . . . . . . . . . . 48
i
ARTICLE VII - Events of Default and Remedies . . . . . . . . . . . . . . . . 48
Section 7.1. Events of Default . . . . . . . . . . . . . . . . . . . . 48
Section 7.2. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.3. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE VIII - Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 8.1. Appointment and Authority . . . . . . . . . . . . . . . . 52
Section 8.2. Exculpation, Agent's Reliance, Etc. . . . . . . . . . . . 53
Section 8.3. Lenders' Credit Decisions . . . . . . . . . . . . . . . . 53
Section 8.4. Indemnification . . . . . . . . . . . . . . . . . . . . . 54
Section 8.5. Rights as Lender. . . . . . . . . . . . . . . . . . . . . 54
Section 8.6. Sharing of Set-Offs and Other Payments. . . . . . . . . . 54
Section 8.7. Investments . . . . . . . . . . . . . . . . . . . . . . . 55
Section 8.8. Benefit of Article VIII . . . . . . . . . . . . . . . . . 55
Section 8.9. Resignation . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE IX - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 9.1. Waivers and Amendments; Acknowledgements. . . . . . . . . 56
Section 9.2. Survival of Agreements; Cumulative
Nature. . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 9.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 9.4. Joint and Several Liability; Parties in
Interest. . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 9.5. Governing Law; Submission to Process. . . . . . . . . . . 59
Section 9.6. Limitation on Interest. . . . . . . . . . . . . . . . . . 59
Section 9.7. Termination; Limited Survival . . . . . . . . . . . . . . 61
Section 9.8. Severability. . . . . . . . . . . . . . . . . . . . . . . 61
Section 9.9. Counterparts. . . . . . . . . . . . . . . . . . . . . . . 61
Section 9.10. Assignments; Participations. . . . . . . . . . . . . . . 61
SECTION 9.11. WAIVER OF JURY TRIAL, PUNITIVE DAMAGES,
ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Exhibits:
EXHIBIT A -- Promissory Note
EXHIBIT B-1 -- Request for Advance
EXHIBIT B-2 -- Solvency Certificate
EXHIBIT C -- Rate Election
EXHIBIT D -- Officer's Certificate Accompanying Financial Statements
EXHIBIT E -- Opinion of Eugene A. Lang, Jr., Esq., general counsel of Borrower
and Parent
EXHIBIT F -- Parent Guaranty
EXHIBIT G -- Notice of Final Agreement
EXHIBIT H -- Agreement to be Bound
ii
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made as of February 17, 1995, by and among Plains
Petroleum Operating Company, a Delaware corporation (herein called "Borrower"),
Plains Petroleum Company, a Delaware corporation (herein called "Parent"),
NationsBank of Texas, N.A., a national banking association, as agent (herein
called "Agent") and the Lenders referred to below. In consideration of the
mutual covenants and agreements contained herein the parties hereto agree as
follows:
ARTICLE I - DEFINITIONS AND REFERENCES
Section 1.1. DEFINED TERMS. As used in this Agreement, each of the
following terms has the meaning given it in this Section 1.1 or in the sections
and subsections referred to below:
"ADJUSTED CD RATE" means, with respect to each particular CD Portion and
the associated CD Rate and Reserve Percentage, the rate per annum calculated by
Agent (rounded upwards, if necessary, to the next higher 0.01%) determined on a
daily basis pursuant to the following formula:
Adjusted CD Rate =
CD Rate + Assessment Rate + Fixed Rate Spread
---------------------------
100.0% - Reserve Percentage
The Adjusted CD Rate for any CD Portion shall change whenever the Fixed Rate
Spread, Assessment Rate or Reserve Percentage changes. The Adjusted CD Rate
shall in no event, however, exceed the Highest Lawful Rate.
"ADJUSTED EURODOLLAR RATE" means, with respect to each particular
Eurodollar Portion and the associated Eurodollar Rate and Reserve Percentage,
the rate per annum calculated by Agent (rounded upwards, if necessary, to the
next higher 0.01%) determined on a daily basis pursuant to the following
formula:
Adjusted Eurodollar Rate =
Eurodollar Rate + Fixed Rate Spread
-------------------------
100.0% - Reserve Percentage
The Adjusted Eurodollar Rate for any Eurodollar Portion shall change whenever
the Fixed Rate Spread or Reserve Percentage changes. The Adjusted Eurodollar
Rate shall in no event, however, exceed the Highest Lawful Rate.
"ADVANCE" has the meaning given it in Section 2.1.
1
"AFFILIATE" means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person. A Person shall be
deemed to be "controlled by" any other Person if such other Person possesses,
directly or indirectly, power to direct or cause the direction of the management
or policies of such Person whether by contract or otherwise.
"AGENT" means NationsBank of Texas, N.A., as Agent hereunder, and its
successors in such capacity.
"AGREEMENT" means this Credit Agreement.
"ASSESSMENT RATE" means, on any day with respect to any CD Portion in a
Tranche, the net annual assessment rate, as determined by Agent (expressed as a
percentage rounded to the next higher 0.01%), which is in effect on such day
under the regulations of the Federal Deposit Insurance Corporation (or any
successor) for insuring time deposits made in dollars at the principal office of
Agent in Dallas, Texas. If such net assessment rate changes after the date
hereof, the Assessment Rate shall be automatically increased or decreased
correspondingly, from time to time as of the effective time of each change in
such net assessment rate.
"AVAILABLE BORROWING BASE" means, at the particular time in question, an
amount equal to the Borrowing Base in effect at such time MINUS Other Funded
Debt. "Other Funded Debt" means the aggregate principal amount of all Funded
Debt of all Related Persons outstanding at such time MINUS the aggregate
outstanding principal balance of the Loans at such time.
"BASE RATE" means either:
(a) on any day that either
(i) the amount of Treasury Stock Purchases is less than or equal
to $50,000,000, OR
(ii) the Utilized Percentage of Borrowing Base is less than
eighty percent (80%),
a rate of interest equal to Agent's Prime Rate (as defined below) from
time to time in effect; or
2
(b) on any day that
(i) the amount of Treasury Stock Purchases is greater than
$50,000,000, AND
(ii) the Utilized Percentage of Borrowing Base is equal to or
greater than eighty percent (80%),
a rate of interest equal to Agent's Prime Rate from time to time in
effect plus one-half of one percent (0.5%) per annum.
As used in this definition, Agent's "Prime Rate" means the rate of interest
established by NationsBank from time to time as its "prime rate". Such rate is
set by NationsBank as a general reference rate of interest, taking into account
such factors as it may deem appropriate, it being understood that many of
NationsBank's commercial or other loans are priced in relation to such rate,
that it is not necessarily the lowest or the best rate actually charged to any
customer, that it may not correspond with further increases or decreases in
interest rates charged by other lenders or market rates in general and that
NationsBank may make various commercial or other loans at rates of interest
having no relationship to such rate. If Agent's Prime Rate changes after the
date hereof the Base Rate shall be automatically increased or decreased, as the
case may be, without notice to Borrower from time to time as of the effective
time of each change in Agent's Prime Rate. The Base Rate shall in no event,
however, exceed the Highest Lawful Rate.
"BASE RATE PORTION" means that portion of the unpaid principal balance of
the Loans which is not made up of Fixed Rate Portions.
"BORROWER" means Plains Petroleum Operating Company, a Delaware
corporation, a wholly-owned Subsidiary of Parent.
"BORROWING BASE" means, at the particular time in question, either the
amount provided for in Section 2.9 or the amount determined by Agent in
accordance with the provisions of Section 2.10, provided, however, that in no
event shall the Borrowing Base ever exceed the Maximum Loan Amount.
"BORROWING BASE DEFICIENCY" means the amount, if any, by which (i) the
aggregate outstanding principal balance of the Loans exceeds (ii) the Available
Borrowing Base.
"BUSINESS DAY" means a day, other than a Saturday or Sunday, on which
commercial banks are open for business with the public in Dallas, Texas. Any
Business Day in any way relating to CD Portions (such as the day on which a CD
Interest Period begins or
3
ends) must also be a day on which significant transactions are carried out in
the market for certificates of deposit. Any Business Day in any way relating to
Eurodollar Portions (such as the day on which a Eurodollar Interest Period
begins or ends) must also be a day on which significant transactions in dollars
are carried out in the London interbank market.
"CD INTEREST PERIOD" means, with respect to each particular CD Portion of a
Loan, a period of 30, 60, 90 or 180 days (or 360 days, as available) as
specified in the Rate Election applicable thereto, beginning on and including
the date specified in such Rate Election (which must be a Business Day), and
ending on but not including the day which is 30, 60, 90 or 180 days (or 360
days) thereafter (e.g., a 30-day period beginning on March 1 will end on but not
include March 31), provided that each CD Interest Period which would otherwise
end on a day which is not a Business Day shall end on the next succeeding
Business Day. No CD Interest Period may be elected which would extend past the
date on which the associated Note is due and payable in full.
"CD PORTION" means any portion of the unpaid principal balance of a Loan
which Borrower designates as such in a Rate Election.
"CD RATE" means, with respect to each particular CD Portion within a
Tranche and with respect to the related Interest Period, the rate of interest
per annum determined by Agent in accordance with its customary general practices
to be representative of the bid rates quoted to Agent at approximately 9:00 a.m.
Dallas, Texas time on the first day of such Interest Period (by certificate of
deposit dealers of recognized standing selected by Agent in accordance with its
customary general practices) for the purchase at face value of a domestic
certificate of deposit issued by Agent in an amount equal or comparable to the
amount of Agent's CD Portion within such Tranche and for a period of time equal
or comparable to such Interest Period. The CD Rate determined by Agent with
respect to a particular CD Portion shall be fixed at such rate for the duration
of the associated Interest Period. If Agent is unable so to determine the CD
Rate for any CD Portion, Borrower shall be deemed not to have elected such CD
Portion.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
acquisition by any Person (or group of Persons acting together) of a direct or
indirect interest in more than twenty percent (20%) of the voting power of the
voting stock of Borrower or Parent, by way of merger or consolidation or
otherwise, or (ii) the first day on which a majority of the directors of the
board of Borrower or Parent are not Continuing Directors.
4
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL EVENT" means the occurrence of either of the following: (i) a
Borrowing Base Deficiency exists and is not eliminated within ten (10) days
after notice to Borrower from Agent, or (ii) the amount of Treasury Stock
Purchases is greater than $50,000,000 and the Utilized Percentage of Borrowing
Base is equal to or greater than eighty percent (80%).
"COMMITMENT PERIOD" means the period from and including the date hereof
until and including January 1, 1997 (or, if earlier, the day on which the Notes
first become due and payable in full).
"CONSOLIDATED" refers to the consolidation of any Person, in accordance
with GAAP, 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.
"CONTINUING DIRECTOR" means, as of the date of any determination, any
member of the board of directors of Borrower or Parent who (i) is a member of
either board of directors as of the date hereof or (ii) was nominated for
election or elected to such board of directors with the affirmative vote of a
majority of the Continuing Directors who were members of such board at the time
of such nomination or election.
"DEBT" means, as to any Person, all indebtedness, liabilities and
obligations of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or indirect, absolute, fixed or
contingent, and whether or not required to be considered pursuant to GAAP.
"DEFAULT" means any Event of Default, default, event or condition which
would, with the giving of any requisite notices and the passage of any requisite
periods of time, constitute an Event of Default.
"DETERMINATION DATE" has the meaning given it in Section 2.10.
"DISCLOSURE REPORT" means either a notice given by Borrower under Section
5.1(d) or a certificate given by Borrower's chief financial officer under
Section 5.1(b)(ii).
"DISCLOSURE SCHEDULE" means that certain disclosure letter of even date
herewith from Borrower and Parent to Agent and Lenders.
5
"ENGINEERING REPORT" means the Initial Engineering Report and each
engineering report delivered pursuant to Section 5.1(b)(iv).
"ENVIRONMENTAL LAWS" means any and all applicable federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges, releases or threatened releases of pollutants or contaminants, or
toxic or hazardous substances or wastes into the environment including ambient
air, surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution use, treatment, storage, disposal,
transport, or handling of pollutants or contaminants, or toxic or hazardous
substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
"ERISA AFFILIATE" means, as to any Person, any trade or business (whether
or not incorporated) which is a member of a group of which such Person is a
member and which is treated as a single employer under Section 414(b), (c), (m)
or (o) of the Code.
"ERISA PLAN" means any employee pension benefit plan subject to Title IV of
ERISA maintained by any Related Person or any ERISA Affiliate thereof with
respect to which any Related Person has a fixed or contingent liability.
"EURODOLLAR INTEREST PERIOD" means, with respect to each particular
Eurodollar Portion, a period of 1, 2, 3 or 6 months (or 12 months, as available)
as specified in the Rate Election applicable thereto, beginning on and including
the date specified in such Rate Election (which must be a Business Day), and
ending on but not including the same day of the month as the day on which it
began (e.g., a period beginning on the third day of one month shall end on but
not include the third day of another month), provided that each Eurodollar
Interest Period which would otherwise end on a day which is not a Business Day
shall end on the next succeeding Business Day (unless such next succeeding
Business Day is the first Business Day of a calendar month, in which case such
Eurodollar Interest Period shall end on the immediately preceding Business Day).
No Eurodollar Interest Period may be elected which would extend past the date on
which the associated Note is due and payable in full.
6
"EURODOLLAR PORTION" means any portion of the unpaid principal balance of a
Loan which Borrower designates as such in a Rate Election.
"EURODOLLAR RATE" means, with respect to each particular Eurodollar Portion
within a Tranche and with respect to the related Interest Period, the rate of
interest per annum determined by Agent in accordance with its customary general
practices to be representative of the rates at which deposits of dollars are
offered to Agent at approximately 11:00 a.m. London time two Business Days prior
to the first day of such Interest Period (by prime banks in the London interbank
market which have been selected by Agent in accordance with its customary
general practices) for delivery on the first day of such Interest Period in an
amount equal or comparable to the amount of Agent's Eurodollar Portion within
such Tranche and for a period of time equal or comparable to the length of such
Interest Period. The Eurodollar Rate determined by Agent with respect to a
particular Eurodollar Portion shall be fixed at such rate for the duration of
the associated Interest Period. If Agent is unable so to determine the
Eurodollar Rate for any Eurodollar Portion, Borrower shall be deemed not to have
elected such Eurodollar Portion.
"EVALUATION DATE" means each of the following dates:
(a) April 1 of each year;
(b) if the Utilized Percentage of Borrowing Base shall at any time be
greater than sixty-six and two-thirds percent (66 2/3%) and Majority Lenders
elect a semi-annual redetermination of the Borrowing Base, the date in each year
which is 30 days after the date on which Agent gives notice of such election to
Borrower and which shall occur during the last six months of such year;
(c) such date as Majority Lenders may designate as an Evaluation Date
pursuant to a Borrowing Base redetermination as contemplated under Section
5.1(d)(iv); and
(d) in the event that there is a Write-down of Oil and Gas Properties
valued in the Borrowing Base in an amount greater than $10,000,000 in the
aggregate at any time, such date within the six months following the effective
date of such Write-down of Oil and Gas Properties as Majority Lenders may
designate as an Evaluation Date.
"EVENT OF DEFAULT" has the meaning given it in Section 7.1.
"FISCAL QUARTER" means a three-month period ending on March 31, June 30,
September 30 or December 31 of any year.
7
"FISCAL YEAR" means a twelve-month period ending on December 31 of any
year.
"FIXED RATE" means, with respect to any Fixed Rate Portion, the related
Adjusted CD Rate or Adjusted Eurodollar Rate.
"FIXED RATE PORTION" means any CD Portion or Eurodollar Portion.
"FIXED RATE SPREAD" means, with respect to each Fixed Rate Portion:
(a) on each day on which the Utilized Percentage of Borrowing Base is
less than thirty percent (30%), five-eighths of one percent (0.625%) per
annum;
(b) on each day on which the Utilized Percentage of Borrowing Base is
equal to or greater than thirty percent (30%), but less than sixty percent
(60%), three-quarters of one percent (0.75%) per annum;
(c) on each day on which the Utilized Percentage of Borrowing Base is
equal to or greater than sixty percent (60%), but less than eighty percent
(80%), one percent (1%) per annum;
(d) on each day on which the Utilized Percentage of Borrowing Base is
equal to or greater than eighty percent (80%), but less than ninety percent
(90%), either
(i) if the amount of Treasury Stock Purchases is less than or
equal to $50,000,000, one and one-quarter percent (1.25%) per annum,
or
(ii) if the amount of Treasury Stock Purchases is greater than
$50,000,000, one and three-quarters percent (1.75%) per annum; and
(e) on each day on which the Utilized Percentage of Borrowing Base is
equal to or greater than ninety percent (90%), either
(i) if the amount of Treasury Stock Purchases is less than or
equal to $50,000,000, one and one-half percent (1.5%) per annum, or
(ii) if the amount of Treasury Stock Purchases is greater than
$50,000,000, two percent (2%) per annum.
"FUNDED DEBT" of any Person means, without duplication, Debt in any of the
following categories:
8
(a) Debt for borrowed money, including the Obligations,
(b) Debt constituting an obligation to pay the deferred purchase
price of property,
(c) Debt evidenced by a bond, debenture, note or similar instrument,
and
(d) Debt owing under direct or indirect guaranties of Funded Debt of
any other Person (without duplication if such Person is a Related Person
and such guaranteed Funded Debt is described in clauses (a), (b) or (c)
above) or constituting obligations to purchase or acquire or to otherwise
protect or insure a creditor against loss in respect of Funded Debt of any
other Person (such as obligations under working capital maintenance
agreements, agreements to keep-well, or agreements to purchase Funded Debt,
assets, goods, securities or services), but excluding (i) endorsements in
the ordinary course of business of negotiable instruments in the course of
collection and (ii) bonds in favor of the United States of America securing
obligations to plug abandoned wells and to clean up and restore the land on
which such wells are located.
provided, however, that the "Funded Debt" of any Person shall not include Debt
that was incurred by such Person on ordinary trade terms to vendors, suppliers,
or other Persons providing goods and services for use by such Person in the
ordinary course of its business.
"GAAP" means those generally accepted accounting principles and practices
which are recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor) and which, in the case of Borrower and its
Consolidated subsidiaries, are applied for all periods after the date hereof in
a manner consistent with the manner in which such principles and practices were
applied to the audited Initial Financial Statements. If any change in any
accounting principle or practice is required by the Financial Accounting
Standards Board (or any such successor) in order for such principle or practice
to continue as a generally accepted accounting principle or practice, the
parties hereto agree to enter into negotiations in order to amend such
provisions so as to equitably reflect such changes with the desired result that
the criteria for evaluating compliance with such covenants, standards and terms
by Borrower and Parent shall be the same after such changes as if such changes
had not been made; PROVIDED, HOWEVER, that no change in GAAP that would affect
any of such covenants, standards or terms (or the method of calculation of any
such covenants, standards or terms) shall be given effect in such calculations
until such
9
provisions are amended to reflect such change in accounting principles.
"GUARANTOR" means Parent and any other Person who has guaranteed some or
all of the Obligations pursuant to a guaranty delivered and accepted
concurrently herewith or any other Person who has guaranteed some or all of the
Obligations and who has been accepted by Agent as a Guarantor or any Subsidiary
of Borrower which now or hereafter executes and delivers a guaranty to Agent
pursuant to Section 6.2. Parent is hereby recognized as a Guarantor hereunder.
"HAZARDOUS MATERIALS" means any substances regulated under any applicable
Environmental Law, whether as pollutants, or contaminants, or as toxic or
hazardous substances or wastes, or otherwise.
"HIGHEST LAWFUL RATE" means, with respect to each Lender, the maximum
nonusurious rate of interest that such Lender is permitted under applicable law
to contract for, take, charge, or receive with respect to its Loan. All
determinations herein of the Highest Lawful Rate, or of any interest rate
determined by reference to the Highest Lawful Rate, shall be made separately for
each Lender as appropriate to assure that the Loan Documents are not construed
to obligate any Person to pay interest to any Lender at a rate in excess of the
Highest Lawful Rate applicable to such Lender.
"INITIAL ENGINEERING REPORT" means the engineering report concerning oil
and gas properties of Borrower dated January 14, 1994, prepared by Netherland
Sewell & Associates as of December 31, 1993.
"INITIAL FINANCIAL STATEMENTS" means (i) the audited annual Consolidated
financial statements of Borrower and Parent dated as of December 31, 1993, and
(ii) the unaudited quarterly Consolidated financial statements of Borrower and
Parent dated as of September 30, 1994.
"INTEREST PERIOD" means, with respect to any Fixed Rate Portion, the
related CD Interest Period or Eurodollar Interest Period.
"LATE PAYMENT RATE" means, at the time in question, two percent (2.0%) per
annum plus the Base Rate then in effect; provided that, with respect to any
Fixed Rate Portion with an Interest Period extending beyond the date such Fixed
Rate Portion becomes due and payable, "Late Payment Rate" shall mean two percent
(2.0%) per annum plus the related Fixed Rate. The Late Payment Rate shall in no
event, however, exceed the Highest Lawful Rate.
10
"LENDERS" means each signatory hereto (other than Borrower and Parent),
including NationsBank of Texas, N.A. in its capacity as a lender hereunder
rather than as Agent, and the successors of each as holder of a Note.
"LIEN" means, with respect to any property or assets, any right or interest
therein of a creditor to secure Debt owed to him or any other arrangement with
such creditor which provides for the payment of such Debt out of such property
or assets or which allows him to have such Debt satisfied out of such property
or assets prior to the general creditors of any owner thereof, including any
lien, mortgage, security interest, pledge, deposit, production payment, rights
of a vendor under any title retention or conditional sale agreement or lease
substantially equivalent thereto, tax lien, mechanic's or materialman's lien, or
any other charge or encumbrance for security purposes, whether arising by law or
agreement or otherwise, but excluding any right of offset which arises without
agreement in the ordinary course of business. "Lien" also means any filed
financing statement, any registration of a pledge (such as with an issuer of
uncertificated securities), or any other arrangement or action which would serve
to perfect a Lien described in the preceding sentence, regardless of whether
such financing statement is filed, such registration is made, or such
arrangement or action is undertaken before or after such Lien exists.
"LOAN" has the meaning given it in Section 2.1.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Parent Guaranty, and
all other agreements, certificates, documents, instruments and writings at any
time delivered in connection herewith or therewith (exclusive of term sheets,
commitment letters, correspondence and similar documents used in the negotiation
hereof, except to the extent the same contain information about the Related
Persons or their properties, business or prospects.)
"MAJORITY LENDERS" means at any time Lenders collectively having Percentage
Shares totaling in the aggregate at least sixty-six and two-thirds percent (66
2/3%).
"MAXIMUM LOAN AMOUNT" means the amount of $150,000,000.
"NATIONSBANK" means NationsBank of Texas, N.A., and its successors and
assigns.
"NET PRESENT VALUE OF RESERVES" means the amount determined by Majority
Lenders, in their sole and absolute discretion, as the net present value of the
future oil and gas production from the properties to which value has been
attributed in determining the Borrowing Base.
11
"NOTE" has the meaning given it in Section 2.1.
"OBLIGATIONS" means all Debt from time to time owing by any of the Related
Persons to Agent or any Lender under or pursuant to any of the Loan Documents.
"OBLIGATION" means any part of the Obligations.
"PARENT" means Plains Petroleum Company, a Delaware corporation, which owns
all of the outstanding capital stock of Borrower.
"PARENT GUARANTY" means that certain Guaranty of even date herewith by
Parent in favor of Agent and Lenders, substantially in the form of Exhibit F
attached hereto.
"PERCENTAGE SHARE" means, with respect to any Lender (a) when used in
Sections 2.1 or 2.5, in any Request for Advance or when no Loans are outstanding
hereunder, the percentage set forth opposite such Lender's name on the signature
pages of this Agreement, and (b) when used otherwise, the percentage equal to
the unpaid principal balance of such Lender's Loan at the time in question
divided by the aggregate unpaid principal balance of all Loans at such time.
"PERMITTED INVESTMENTS" means investments:
(a) in open market commercial paper, maturing within 270 days after
acquisition thereof, which has the highest or second highest credit rating
given by either Rating Agency.
(b) in marketable obligations issued or unconditionally guaranteed by
the United States of America or an instrumentality or agency thereof and
entitled to the full faith and credit of the United States of America.
(c) in demand deposits, and time deposits (including certificates of
deposit) maturing within 12 months from the date of deposit thereof, with
any office of any Lender or with a domestic office of any national or state
bank or trust company which is organized under the laws of the United
States of America or any state therein, which has capital, surplus and
undivided profits of at least $500,000,000, and whose certificates of
deposit have at least the third highest credit rating given by either
Rating Agency.
(d) of not more than $10,000,000 in the aggregate in marketable
security investments publicly traded on the New York Stock Exchange, the
American Stock Exchange or listed by the National Association of Securities
Dealers Automated
12
Quotations (NASDAQ) issued by companies engaged in the exploration and
development of oil and gas properties.
(e) by Parent in Borrower, or by Borrower in Parent.
(f) by Parent in its wholly owned Subsidiaries other than Borrower,
or by Borrower in its wholly owned Subsidiaries, so long as Agent is given
10 days' advance notice of each such investment in a Subsidiary and, until
such Subsidiary has become a Guarantor at the request of Agent pursuant to
Section 6.2, the aggregate amount paid, contributed, lent, or otherwise
invested in such Subsidiary does not exceed $5,000,000.
As used in the foregoing definition (and elsewhere herein), "RATING AGENCY"
means either Standard & Poor's Ratings Group (a division of McGraw Hill, Inc.)
or Moody's Investors Service, Inc., or their respective successors.
"PERSON" means an individual, corporation, partnership, limited liability
company, association, joint stock company, trust or trustee thereof, estate or
executor thereof, unincorporated organization or joint venture, court or
governmental unit or any agency or subdivision thereof, or any other legally
recognizable entity.
"PROHIBITED LIEN" means any Lien not expressly allowed under Section
5.2(b).
"RATE ELECTION" has the meaning given it in Section 2.3.
"REGULATION D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect.
"REGULATION G" means Regulation G of the Board of Governors of the Federal
Reserve System as from time to time in effect.
"REGULATION U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect.
"RELATED PERSON" means any of Borrower, Parent, each Subsidiary of Borrower
or Parent, and each Guarantor.
"REQUEST FOR ADVANCE" means a written or telephonic request, or a written
confirmation, made by Borrower which meets the requirements of Section 2.2.
"RESERVE PERCENTAGE" means, on any day with respect to each particular
Fixed Rate Portion in a Tranche, the maximum reserve requirement, as determined
by Agent (including without limitation any basic, supplemental, marginal,
emergency or similar
13
reserves), expressed as a percentage and rounded to the next higher 0.01%, which
would then apply to Agent under Regulation D with respect to: (a) if such Fixed
Rate Portion is a CD Portion, any new nonpersonal time deposit (as defined in
Regulation D) equal in amount to Agent's Fixed Rate Portion in such Tranche and
with a maturity comparable to the associated Interest Period, were Agent to take
such a deposit, and (b) if such Fixed Rate Portion is a Eurodollar Portion,
"Eurocurrency liabilities" (as such term is defined in Regulation D) equal in
amount to Agent's Fixed Rate Portion in such Tranche, were Agent to have any
such "Eurocurrency liabilities". If such reserve requirement shall change after
the date hereof, the Reserve Percentage shall be automatically increased or
decreased, as the case may be, from time to time as of the effective time of
each such change in such reserve requirement.
"RESTRICTED DEBT" of any Person means, without duplication, Debt in any of
the following categories:
(a) Funded Debt,
(b) Debt which (i) would under GAAP be shown on such Person's balance
sheet as a liability, and (ii) is payable more than one year from the date
of creation thereof (other than reserves for taxes, reserves for contingent
obligations, and reserves for pensions, retiree medical benefits and other
similar liabilities),
(c) Liquidated Debt arising under futures contracts, swap contracts,
or similar agreements,
(d) Debt constituting principal under leases capitalized in
accordance with GAAP,
(e) Debt arising under conditional sales or other title retention
agreements,
(f) Debt (for example, repurchase agreements) consisting of an
obligation to purchase securities or other property, if such Debt arises
out of or in connection with the sale of the same or similar securities or
property,
(g) Debt with respect to letters of credit or applications or
reimbursement agreements therefor,
(h) Debt with respect to payments received by such Person in
consideration of: oil, gas, or other minerals yet to be acquired or
produced at the time of payment (including obligations under "take-or-pay"
contracts to deliver gas in return for payments already received, the
undischarged balance of any production payment created by such Person or
14
for the creation of which such Person directly or indirectly received
payment and obligations arising from gas imbalances), OR
(i) Debt with respect to other obligations to deliver goods or
services in consideration of advance payments therefor;
provided, however, that the "Restricted Debt" of any Person shall not include
Debt that was incurred by such Person on ordinary trade terms to vendors,
suppliers, or other Persons providing goods and services for use by such Person
in the ordinary course of its business, unless and until such Debt is
outstanding more than one hundred twenty (120) days past the original invoice or
billing date therefor and is not being validly contested as provided under
Section 5.1(g).
"RIGHTS AGREEMENT" means that certain Rights Agreement, dated as of May 12,
1988, as amended as of October 19, 1994, between Parent and Chemical Bank (as
successor to Manufacturers Hanover Trust Company).
"SEC" means the Securities and Exchange Commission, or any governmental
agency substituted therefor.
"SUBSIDIARY" means, with respect to any Person, 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 percent or more by such Person;
provided that Whiskey Springs shall not constitute a Subsidiary of Borrower or
Parent.
"TERMINATION EVENT" means (a) the occurrence with respect to any ERISA Plan
of (i) a reportable event described in Sections 4043(b)(5) or (6) of ERISA or
(ii) any other reportable event described in Section 4043(b) of ERISA other than
a reportable event not subject to the provision for 30-day notice to the Pension
Benefit Guaranty Corporation pursuant to a waiver by such corporation under
Section 4043(a) of ERISA, or (b) the withdrawal of any Related Person or of any
ERISA Affiliate thereof from an ERISA Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA, or (c) the
filing of a notice of intent to terminate any ERISA Plan or the treatment of any
ERISA Plan amendment as a termination under Section 4041 of ERISA, or (d) the
institution of proceedings to terminate any ERISA Plan by the Pension Benefit
Guaranty Corporation under Section 4042 of ERISA, or (e) any other event or
condition which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any ERISA Plan.
15
"TREASURY STOCK PURCHASES" means the aggregate amount expended by the
Related Persons after the date hereof to redeem or repurchase any outstanding
shares of the common stock of Parent.
"TRANCHE" has the meaning given it in Section 2.4.
"UTILIZED PERCENTAGE OF BORROWING BASE" means, on any day the aggregate
principal amount of all Funded Debt of all Related Persons outstanding on such
day divided by the Borrowing Base on such day.
"WHISKEY SPRINGS" means Whiskey Springs Oil Pipeline Company, a Texas
general partnership.
"WRITE-DOWN OF OIL AND GAS PROPERTIES" means that the net book value of oil
and gas properties of Parent, Borrower or any of their Subsidiaries, as
reflected on the Consolidated balance sheet of Parent, is reduced.
Section 1.1. EXHIBITS AND SCHEDULES. All Exhibits and Schedules attached
to this Agreement are a part hereof for all purposes.
Section 1.2. AMENDMENT OF DEFINED INSTRUMENTS. Unless the context
otherwise requires or unless otherwise provided herein the terms defined in this
Agreement which refer to a particular agreement, instrument or document also
refer to and include all renewals, extensions, modifications, amendments and
restatements of such agreement, instrument or document, provided that nothing
contained in this section shall be construed to authorize any such renewal,
extension, modification, amendment or restatement.
Section 1.3. REFERENCES AND TITLES. All references in this Agreement to
Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any subdivisions are for convenience only and do
not constitute any part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The words "this
Agreement", "this instrument", "herein", "hereof", "hereby", "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The phrases "this section"
and "this subsection" and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. The word "or" is not exclusive,
and the word "including" (in its various forms) means "including without
limitation". Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular
16
form shall be construed to include the plural and vice versa, unless the context
otherwise requires.
Section 1.4 CALCULATIONS AND DETERMINATIONS. All calculations under the
Loan Documents of interest chargeable with respect to Fixed Rate Portions and of
fees shall be made on the basis of actual days elapsed (including the first day
but excluding the last) and a year of 360 days. All other calculations of
interest made under the Loan Documents shall be made on the basis of actual days
elapsed (including the first day but excluding the last) and a year of 365 or
366 days, as appropriate. Each determination by Agent or a Lender of amounts to
be paid under Sections 2.11 through 2.15 or any other matters which are to be
determined hereunder by Agent or a Lender (such as any Adjusted CD Rate,
Adjusted Eurodollar Rate, Assessment Rate, CD Rate, Eurodollar Rate, Business
Day, Interest Period, or Reserve Percentage) shall, in the absence of manifest
error, be presumed conclusive and binding. Unless otherwise expressly provided
herein or unless Majority Lenders otherwise consent all financial statements and
reports furnished to Agent or any Lender hereunder shall be prepared and all
financial computations and determinations pursuant hereto shall be made in
accordance with GAAP.
ARTICLE II - THE LOANS
Section 2.1 ADVANCES. Subject to the terms and conditions hereof, each
Lender agrees to make advances to Borrower (herein called such Lender's
"Advances") upon request from time to time during the Commitment Period so long
as (a) each Advance by such Lender does not exceed such Lender's Percentage
Share of the aggregate amount of Advances then requested from all Lenders, and
(b) the aggregate amount of such Lender's Advances outstanding at any time does
not exceed such Lender's Percentage Share of the Available Borrowing Base
determined as of the date on which the requested Advance is to be made. The
aggregate amount of all Advances requested of all Lenders in any Request for
Advance must be greater than or equal to $1,000,000 or must equal the unadvanced
portion of the Available Borrowing Base. The obligation of Borrower to repay to
each Lender the aggregate amount of all Advances made by such Lender (herein
called such Lender's "Loan"), together with interest accruing in connection
therewith, shall be evidenced by a single promissory note (herein called such
Lender's "Note") made by Borrower payable to the order of such Lender in the
form of Exhibit A with appropriate insertions. The amount of principal owing on
any Lender's Note at any given time shall be the aggregate amount of all
Advances theretofore made by such Lender minus all payments of principal
theretofore received by such Lender on such Note. Interest on each Note shall
accrue and be due and payable as provided herein
17
and therein. Subject to the terms and conditions hereof, Borrower may borrow,
repay, and reborrow hereunder.
Section 2.2 REQUESTS FOR ADVANCES. Borrower must give to Agent written
notice (or telephonic notice promptly confirmed in writing) of any requested
Advance (i) if such Advance is to consist of Base Rate Portions, by 11:00 a.m.
one Business Day prior the date of such Advance, (ii) if such Advance is to
consist of CD Portions, two Business Days prior to the date of such Advance or
(iii) if such Advance is to consist of Eurodollar Portions, three Business Days
prior to the date of such Advance, after which Agent shall give each Lender
prompt notice thereof. Each such written request or confirmation must be made
in the form and substance of the "Request for Advance" attached hereto as
Exhibit B-1 (and, if such Advance shall be used in whole or in part to finance
Treasury Stock Purchases, an accompanying "Solvency Certificate" in the form of
Exhibit B-2 attached hereto), duly completed. Each such telephonic request
shall be deemed a representation, warranty, acknowledgment and agreement by
Borrower as to the matters which are required to be set out in such written
confirmation. If all conditions precedent to such Advances have been met, each
Lender will on the date requested promptly remit to Agent at Agent's office in
Dallas, Texas the amount of such Lender's Advance in immediately available
funds, and upon receipt of such funds, unless to its actual knowledge any
conditions precedent to such Advances have been neither met nor waived as
provided herein, Agent shall promptly make the Advances available to Borrower.
Each Request for Advance shall be irrevocable and binding on Borrower. Unless
Agent shall have received prompt notice from a Lender that such Lender will not
make available to Agent such Lender's Advance, Agent may in its discretion
assume that such Lender has made such Advance available to Agent in accordance
with this section and Agent may if it chooses, in reliance upon such assumption,
make such Advance available to Borrower. If and to the extent such Lender shall
not so make its Advance available to Agent, such Lender and Borrower severally
agree to pay or repay to Agent within three days after demand the amount of such
Advance together with interest thereon, for each day from the date such amount
is made available to Borrower until the date such amount is paid or repaid to
Agent, at the interest rate applicable at the time to the other Advances made on
such date. The failure of any Lender to make any Advance to be made by it
hereunder shall not relieve any other Lender of its obligation hereunder, if
any, to make its Advance, but no Lender shall be responsible for the failure of
any other Lender to make any Advance to be made by such other Lender.
Section 2.3 USE OF PROCEEDS. Borrower shall use all funds from Advances
to (a) finance oil and gas reserve acquisitions (including acquisitions of
Persons the assets of which consist
18
primarily of oil and gas properties), the exploration and development of oil and
gas properties, or equipment and facilities used to gather, compress, treat or
transport natural gas or oil, (b) finance Treasury Stock Purchases by Parent,
(c) purchase not more than $10,000,000 of marketable security investments
publicly traded on the New York Stock Exchange, the American Stock Exchange or
listed by the National Association of Securities Dealers Automated Quotations
(NASDAQ) issued by companies engaged in the exploration and development of oil
and gas properties, and (d) provide working capital for its operations; provided
that the use of any funds from any Advances pursuant to clauses (b) or (c) shall
be in full compliance with the provisions of Regulation U and Regulation G. In
no event shall the funds from any Advance be used directly or indirectly by any
Persons for personal, family, household or agricultural purposes or for the
purpose, whether immediate, incidental or ultimate, of purchasing, acquiring or
carrying any "margin stock" or any "margin securities" (as such terms are
defined respectively in Regulation U and Regulation G) in violation of
Regulation U or Regulation G or to extend credit to others directly or
indirectly for the purpose of purchasing or carrying any such margin stock or
margin securities in violation of Regulation U or Regulation G.
Section 2.4 RATE ELECTIONS. Borrower may from time to time designate all
or any portions of the Loans (including any yet to be made Advances which are to
be made prior to or at the beginning of the designated Interest Period but
excluding any portions of the Loans which are required to be repaid prior to the
end of the designated Interest Period) as a "Tranche", which term refers to a
set of Fixed Rate Portions of the same type (either CD Portions or Eurodollar
Portions) with identical Interest Periods and with each Lender participating in
such Tranche in accordance with its Percentage Share. Without the consent of
Majority Lenders, Borrower may make no such election during the continuance of
an Event of Default, and Borrower may make such an election with respect to
already existing Fixed Rate Portions only if such election will take effect at
or after the termination of the Interest Period applicable thereto. Each
election by Borrower of a Tranche shall:
(a) Be made in writing in the form and substance of the "Rate
Election" attached hereto as Exhibit C, duly completed;
(b) Specify the aggregate amount of the Loans which Borrower desires
to designate as such Tranche, (which must equal or exceed $1,000,000)
whether such Tranche is to consist of Eurodollar Portions or CD Portions,
the first day of the Interest Period which is to apply thereto, and the
length of such Interest Period; and
19
(c) If relating to CD Portions, be received by Agent not later than
11:00 a.m., Dallas, Texas time, on the first Business Day immediately
preceding the first day of the specified Interest Period, and if relating
to a Eurodollar Portion, be received by Agent not later than 11:00 a.m.,
Dallas, Texas time, on the third Business Day preceding the first day of
the specified Interest Period.
Promptly after receiving any such election (herein called a "Rate Election")
which meets the requirements of this section, Agent shall notify each Lender
thereof. Each Rate Election shall be irrevocable. Borrower may make no Rate
Election which does not specify an Interest Period complying with the definition
of "CD Interest Period" or "Eurodollar Interest Period" in Section 1.1, and the
aggregate amount of the Tranche elected in any Rate Election must be $1,000,000
or a higher integral multiple of $500,000. Upon the termination of each
Interest Period the portion of each Loan within the related Tranche shall,
unless the subject of a new Rate Election then taking effect, automatically
become a part of the Base Rate Portion of such Loan and become subject to all
provisions of the Loan Documents governing such Base Rate Portion. Borrower
shall have no more than ten (10) Tranches in effect at any time.
Section 2.5 COMMITMENT FEES. In consideration of each Lender's commitment
to make Advances, Borrower will pay to Agent for the account of each Lender a
commitment fee determined on a daily basis by applying the applicable Commitment
Fee Rate to such Lender's Percentage Share of the unused portion of the
Borrowing Base on each day during the Commitment Period, determined for each
such day by deducting from the amount of the Borrowing Base at the end of such
day the aggregate unpaid principal balance of the Loans at the end of such day.
This commitment fee shall be due and payable in arrears on the first day of the
next succeeding Fiscal Quarter and at the end of the Commitment Period. The
applicable "Commitment Fee Rate" shall be based on the Utilized Percentage of
Borrowing Base in effect on each such day and calculated pursuant to the
following table:
20
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Utilized Percentage of
Borrowing Base Applicable Commitment Fee Rate
-------------- ------------------------------
-------------------------------------------------------------------------------
less than thirty percent (30%) one-quarter of one percent
(0.25%) per annum
-------------------------------------------------------------------------------
equal to or greater than three-tenths of one percent
thirty percent (30%), but less (o.3%) per annum
than sixty percent (60%)
-------------------------------------------------------------------------------
equal to or greater than sixty seven-twentieths of one
percent (60%), but less than percent (0.35%) per annum
eighty percent (80%)
-------------------------------------------------------------------------------
equal to or greater than three-eighths of one percent
eighty percent (80%), but less (0.375%) per annum
than ninety percent (90%)
-------------------------------------------------------------------------------
equal to or greater than seventeen-fortieths of one
ninety percent (90%) percent (0.425%) per annum
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Section 2.6 OPTIONAL PREPAYMENTS. Borrower may, upon one Business Day's
notice to each Lender, from time to time and without premium or penalty, but
subject to any reimbursement obligations under Section 2.14 in connection with
the prepayment of any Fixed Rate Portion, prepay the Notes, in whole or in part,
so long as the aggregate amounts of all partial prepayments of principal on the
Notes equals $500,000 or any higher integral multiple of $250,000, and so long
as Borrower does not make any prepayments which would reduce the unpaid
principal balance of any Loan to less than $100,000 without first either (a)
terminating this Agreement or (b) providing assurance satisfactory to Agent in
its discretion that Lenders' legal rights under the Loan Documents are in no way
affected by such reduction. Each partial prepayment of principal made after the
end of the Commitment Period shall be ratably applied to the regular
installments of principal due under the Notes. Each prepayment of principal
under this section shall be accompanied by all interest then accrued and unpaid
on the principal so prepaid. Any principal or interest prepaid pursuant to this
section shall be in addition to, and not in lieu of, all payments otherwise
required to be paid under the Loan Documents at the time of such prepayment.
Section 2.7 MANDATORY PREPAYMENTS. Upon the occurrence of a Borrowing
Base Deficiency Borrower shall, within two Business Days after Agent gives
notice to Borrower of such Borrowing Base Deficiency, give notice to Agent
electing to prepay the principal of the Loans (a) in an amount at least equal to
such Borrowing Base Deficiency within ninety (90) days of Agent's notice to
Borrower or (b) in six (or fewer) installments in an aggregate amount at least
equal to such Borrowing Base Deficiency. Each
21
such installment shall equal or exceed one-sixth of such Borrowing Base
Deficiency; the first such installment shall be paid with the giving of such
notice and the subsequent installments shall be due and payable at one month
intervals thereafter until such Borrowing Base Deficiency has been eliminated.
Each prepayment of principal under this section shall be accompanied by all
interest then accrued and unpaid on the principal so prepaid. Any principal or
interest prepaid pursuant to this section shall be in addition to, and not in
lieu of, all payments otherwise required to be paid under the Loan Documents at
the time of such prepayment.
Section 2.8 PAYMENTS TO LENDERS. Borrower will make each payment which it
owes under the Loan Documents to Agent for the account of the Lender to whom
such payment is owed. Each such payment must be received by Agent not later
than 11:00 a.m., Dallas, Texas time, on the date such payment becomes due and
payable, in lawful money of the United States of America, without set-off,
deduction or counterclaim, and in immediately available funds. Any payment
received by Agent after such time will be deemed to have been made on the next
following Business Day. Should any such payment become due and payable on a day
other than a Business Day, the maturity of such payment shall be extended to the
next succeeding Business Day, and, in the case of a payment of principal or past
due interest, interest shall accrue and be payable thereon for the period of
such extension as provided in the Loan Document under which such payment is due.
Each payment under a Loan Document shall be due and payable at the place
provided therein and, if no specific place of payment is provided, shall be due
and payable at the place of payment of Agent's Note. When Agent collects or
receives money on account of the Obligations, Agent shall distribute all money
so collected or received, and Lenders shall apply all such money they receive
from Agent, as follows:
(a) first, for the payment of all Obligations which are then due (and
if such money is insufficient to pay all such Obligations, first to any
reimbursements due Agent under Section 5.1(i) or (j) and then to the
partial payment of all other Obligations then due in proportion to the
amounts thereof, or as Lenders shall otherwise agree);
(b) then for the prepayment of amounts owing under the Loan Documents
(other than principal on the Notes) if so specified by Borrower;
(c) then for the prepayment of principal on the Notes, together with
accrued and unpaid interest on the principal so prepaid; and
22
(d) last, for the payment or prepayment of any other Obligations.
All payments applied to principal or interest on any Note shall be applied first
to any interest then due and payable, then to principal then due and payable,
and last to any prepayment of principal and interest in compliance with Sections
2.6 and 2.7. All distributions of amounts described in any of subsections (b),
(c) or (d) above shall be made by Agent pro rata to Agent and each Lender then
owed Obligations described in such subsection in proportion to all amounts owed
to Agent and all Lenders which are described in such subsection.
Section 2.9 INITIAL BORROWING BASE. During the period from the date
hereof to the first Determination Date the Borrowing Base shall be $110,000,000.
Section 2.10 SUBSEQUENT DETERMINATIONS OF BORROWING BASE. By each
Evaluation Date, Borrower shall furnish to each Lender all information, reports
and data which Agent has then requested concerning the Related Persons'
businesses and properties (including their oil and gas properties and interests
and the reserves and production relating thereto), together with the Engineering
Report described in Section 5.1(b)(iv). Within sixty (60) days after receiving
such information, reports and data, Majority Lenders shall agree upon an amount
for the Borrowing Base and Agent shall by notice to Borrower designate such
amount as the new Borrowing Base available to Borrower hereunder, which
designation shall take effect immediately on the date such notice is given
(herein called a "Determination Date") and shall remain in effect until but not
including the next date as of which the Borrowing Base is redetermined. If
Borrower does not furnish all such information, reports and data by the date
specified in the first sentence of this section, Agent may nonetheless designate
the Borrowing Base at any amount which Majority Lenders determine and may
redesignate the Borrowing Base from time to time thereafter until each Lender
receives all such information, reports and data, whereupon Majority Lenders
shall designate a new Borrowing Base as described above. Majority Lenders shall
determine the amount of the Borrowing Base based upon the loan collateral value
which they in their discretion assign to the various oil and gas properties of
Borrower and its Subsidiaries at the time in question and based upon such other
credit factors (including without limitation the assets, liabilities, cash flow,
business, properties, prospects, management and ownership of Borrower and its
Affiliates) as they in their discretion deem significant. It is expressly
understood that Lenders and Agent have no obligation to agree upon or designate
the Borrowing Base at any particular amount, whether in relation to the Maximum
Loan Amount or otherwise, and that Lenders' commitments to advance funds
hereunder is determined by reference to the Borrowing Base
23
from time to time in effect, which Borrowing Base shall be used for calculating
commitment fees under Section 2.5 and, to the extent permitted by law and
regulatory authorities, for the purposes of Section 2.11.
Section 2.11 CAPITAL REIMBURSEMENT. If at any time after the date hereof,
and from time to time, any Lender determines that the adoption or modification
after June 30, 1994 of any applicable law, rule or regulation regarding
taxation, such Lender's required levels of reserves, deposits, insurance or
capital (including any allocation of capital requirements or conditions), or
similar requirements, or any interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation, administration or compliance of such Lender with any of such
requirements, has or would have the effect of (a) increasing such Lender's costs
relating to the Obligations owing to such Lender, or (b) reducing the yield or
rate of return of such Lender on such Obligations, to a level below that which
such Lender could have achieved but for the adoption or modification of any such
requirements, Borrower shall, within 15 days after any request sent by such
Lender to Borrower (with a copy to Agent), pay to Agent for the account of such
Lender such additional amounts as (in such Lender's sole judgment, after
reasonable computation) will compensate such Lender for such increase in costs
or reduction in yield or rate of return of such Lender. Subject to the
provisions of Section 2.16, no failure by such Lender to immediately demand
payment of any additional amounts payable under this section shall constitute a
waiver of such Lender's right to demand payment of such amounts at any
subsequent time. Nothing herein contained shall be construed or so operate as
to require Borrower to pay any interest, fees, costs or charges not permitted by
Section 9.6.
Section 2.12 INCREASED COST OF FIXED RATE PORTIONS. If any applicable
domestic or foreign law, treaty, rule or regulation (whether now in effect or
hereinafter enacted or promulgated, including Regulation D) or any
interpretation or administration thereof after June 30, 1994 by any governmental
authority charged with the interpretation or administration thereof (whether or
not having the force of law):
(a) shall change the basis of taxation of payments to any Lender of
any principal, interest, or other amounts attributable to any Fixed Rate
Portion or otherwise due under this Agreement in respect of any Fixed Rate
Portion (other than taxes imposed on the overall income of such Lender or
any lending office of such Lender by any jurisdiction in which such Lender
or any such lending office is located); or
24
(b) shall change, impose, modify, apply or deem applicable any
reserve, special deposit or similar requirements in respect of any Fixed
Rate Portion of any Lender (excluding those for which such Lender is fully
compensated pursuant to adjustments made in the definition of Adjusted CD
Rate or Adjusted Eurodollar Rate) or against assets of, deposits with or
for the account of, or credit extended by, such Lender; or
(c) shall impose on any Lender, the certificate of deposit market, or
the London interbank market any other condition relating to any Fixed Rate
Portion, the result of which is to increase the cost to any Lender of
funding or maintaining any Fixed Rate Portion or to reduce the amount of
any sum receivable by any Lender in respect of any Fixed Rate Portion by an
amount deemed by such Lender to be material,
then such Lender shall promptly notify Agent and Borrower in writing of the
happening of such event and of the amount required to compensate such Lender for
such event (on an after-tax basis, taking into account any taxes on such
compensation), whereupon (i) Borrower shall pay such amount to Agent for the
account of such Lender and (ii) Borrower may elect, by giving to Agent and
Lender not less than three Business Days' notice, to convert all (but not less
than all) of any such Fixed Rate Portion into a part of the Base Rate Portion.
Section 2.13 AVAILABILITY. If (a) any change after June 30, 1994 in
applicable laws, treaties, rules or regulations or in the interpretation or
administration thereof of or in any jurisdiction whatsoever, domestic or
foreign, shall make it unlawful or impracticable for any Lender to fund or
maintain Fixed Rate Portions, or shall materially restrict the authority of any
Lender to purchase, sell or take certificates of deposit or offshore deposits of
dollars (i.e., "eurodollars"), or (b) any Lender determines that matching
deposits appropriate to fund or maintain any Fixed Rate Portion are not
available to it, or (c) any Lender determines that the formula for calculating
the Adjusted CD Rate or Adjusted Eurodollar Rate does not fairly reflect the
cost to such Lender of making or maintaining loans based on such rate and the
amount of such unreflected cost is not paid by Borrower pursuant to Section
2.12(c), then, upon notice by such Lender to Borrower and Agent, Borrower's
right to elect Fixed Rate Portions of such Lender's Loan shall be suspended to
the extent and for the duration of such illegality, impracticability or
restriction and all Fixed Rate Portions of such Lender's Loan (or portions
thereof) which are then outstanding or are then the subject of any Rate Election
and which cannot lawfully or practicably be maintained or funded
25
shall immediately become or remain part of the Base Rate Portion of such
Lender's Loan.
Section 2.14 FUNDING LOSSES. In addition to its other obligations
hereunder, Borrower will indemnify Agent and each Lender against, and reimburse
Agent and each Lender on demand for, any loss or expense incurred or sustained
by Agent or such Lender (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by a Lender to
fund or maintain Fixed Rate Portions or Advances but excluding any amount
attributed to the applicable Fixed Rate Spread), as a result of (a) any payment
or prepayment (whether authorized or required hereunder or otherwise) of all or
a portion of a Fixed Rate Portion on a day other than the day on which the
applicable Interest Period ends, (b) any payment or prepayment, whether required
hereunder or otherwise, of a Loan made after the delivery, but before the
effective date, of a Rate Election, if such payment or prepayment prevents such
Rate Election from becoming fully effective, (c) the failure of any Advance to
be made or of any Rate Election to become effective due to any condition
precedent not being satisfied or due to any other action or inaction of any
Related Person, or (d) any conversion (whether authorized or required hereunder
or otherwise) of all or any portion of any Fixed Rate Portion into a Base Rate
Portion or into a different Fixed Rate Portion on a day other than the day on
which the applicable Interest Period ends. Such indemnification shall be on an
after-tax basis, taking into account any taxes imposed on the amounts paid as
indemnity.
Section 2.15 REIMBURSABLE TAXES. Borrower covenants and agrees that:
(a) Borrower will indemnify Agent and each Lender against and
reimburse Agent and each Lender for all present and future stamp and other
taxes, levies, costs and charges whatsoever imposed, assessed, levied or
collected on or in respect of this Agreement or any Fixed Rate Portions
(whether or not legally or correctly imposed, assessed, levied or
collected), excluding, however, any taxes imposed on or measured by the
overall income of Agent or such Lender or any lending office of Agent or
such Lender by any jurisdiction in which Agent or such Lender or any such
lending office is located (all such non-excluded taxes, levies, costs and
charges being collectively called "Reimbursable Taxes" in this section).
Such indemnification shall be on an after-tax basis, taking into account
any taxes imposed on the amounts paid as indemnity.
(b) All payments on account of the principal of, and interest on,
each Lender's Loan and each Lender's Note, and all other amounts payable by
Borrower to Agent and each
26
Lender hereunder, shall be made in full without set-off or counterclaim and
shall be made free and clear of and without deductions or withholdings of
any nature by reason of any Reimbursable Taxes, all of which will be for
the account of Borrower. In the event of Borrower being compelled by law
or other regulations to make any such deduction or withholding from any
payment to Agent or any Lender, Borrower shall pay on the due date of such
payment, by way of additional interest, such additional amounts as are
needed to cause the amount receivable by Agent or such Lender after such
deduction or withholding to equal the amount which would have been
receivable in the absence of such deduction or withholding. If Borrower
should make any deduction or withholding as aforesaid, Borrower shall
within 60 days thereafter forward to Agent or such Lender an official
receipt or other official document evidencing payment of such deduction
or withholding.
(c) If Borrower is ever required to pay any Reimbursable Tax with
respect to any Fixed Rate Portion Borrower may elect, by giving to Agent
and each Lender not less than three Business Days' notice, to convert all
(but not less than all) of any such Fixed Rate Portion into a part of the
Base Rate Portion, but such election shall not diminish Borrower's
obligation to pay all Reimbursable Taxes then accrued with respect to such
Fixed Rate Portion.
(d) Notwithstanding the foregoing, unless, prior to the date of its
initial Advance (in the case of a Lender listed on the signature pages
hereto), and prior to the effective date of the assignment and Agreement to
be Bound by which it became a Lender (in the case of a financial
institution that became a Lender pursuant to such assignment and Agreement
to be Bound), and in each case from time to time thereafter, if reasonably
requested by Borrower, each Lender organized under the laws of a
jurisdiction outside the United States shall have provided Borrower with
the forms prescribed by the Internal Revenue Service of the United States
of America certifying as to such Lender's status for purposes of
determining exemption from United States withholding taxes with respect to
all payments to be made to such Lender hereunder, or other documents
reasonably satisfactory to Borrower which shall indicate that all payments
to be made to such Lender hereunder are not subject to United States
withholding tax or are subject to such taxes at a rate reduced to zero by
an applicable tax treaty, Borrower shall have no obligation under Section
2.15 to make any payments to or for the benefit of such Lender in excess of
the amounts otherwise payable under this Agreement. Unless Borrower shall
have received forms or other documents, including Form 1001, Form 4224 or
any other
27
applicable tax forms, such forms to be reasonably satisfactory to Borrower,
indicating that payments to any Lender organized under the laws of a
jurisdiction outside the United States hereunder are not subject to any
withholding tax or are subject to such tax at a rate reduced to zero by an
applicable tax treaty, Borrower shall withhold taxes from such payments at
the applicable statutory rate in the case of payments to or for such
Lender. Should any Lender become subject to taxes because of its failure
or inability to deliver a form required hereunder, Borrower shall take such
steps not requiring the expenditure of money as such Lender shall request
to assist such Lender to recover such taxes.
Section 2.16 LIMITATION ON REIMBURSEMENT; MITIGATION.
(a) Notwithstanding the provisions of Sections 2.11 and 2.12, (i) if any Lender
fails to give notice to Borrower of any event that would obligate Borrower to
pay any amount owing pursuant to Section 2.11 or 2.12 within ninety (90) days
after such Lender obtains knowledge of such event, and subsequently gives notice
to Borrower of such event, Borrower shall pay only such amounts for costs
incurred for the ninety-day period immediately prior to such notice, and (ii)
any Lender requesting any payment under Section 2.11 or 2.12 shall furnish to
Borrower a certificate setting forth the basis and amount of such request for
payment thereunder, which shall, in the absence of manifest error, be presumed
conclusive and binding.
(b) Any Lender claiming any additional amounts payable pursuant to Section
2.11, 2.12 or 2.15 or subject to Section 2.13 shall use reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions) to
change the jurisdiction of its lending office for the Loans, if the making of
such a change would avoid the need for, or reduce the amount of, any such
additional amounts which may thereafter accrue under Sections 2.11, 2.12 or 2.15
or would avoid the unavailability of Fixed Rate Portions under Section 2.13 and
would not, in any such case, in the judgment of such Lender, be otherwise
disadvantageous.
Section 2.17 REPLACEMENT OF LENDERS. If any Lender (an "Affected Lender")
shall have (i) failed to fund any Advance that such Lender is obligated to fund
hereunder and such failure has not been cured, (ii) requested compensation from
Borrower under Sections 2.11, 2.12 or 2.15 to recover costs or Reimbursable
Taxes incurred by such Lender which are not being incurred generally by other
Lenders, or (iii) given notice pursuant to Section 2.13 that such Lender has
suspended Borrower's right to elect Fixed Rate Portions of such Lender's Loan
for reasons not generally applicable to other Lenders, then, in any such case,
Borrower may make written demand on such Affected Lender (with a
28
copy to Agent and each other Lender) for such Affected Lender to assign to one
or more financial institutions (a "Replacement Lender"), all of such Affected
Lender's rights and obligations under this Agreement and the other Loan
Documents (including such Affected Lender's commitment and all Loans owing to
such Affected Lender), PROVIDED, such assignment shall be consummated in
accordance with and shall be subject to the terms of Section 9.10(a). Pursuant
to Section 9.10(a), upon any such assignment, such Affected Lender shall cease
to be a party hereto, PROVIDED, HOWEVER, such Affected Lender shall continue to
be entitled to the benefits of Sections 2.11, 2.12, 2.15 and 7.3 accruing with
respect to such Affected Lender prior to such assignment, as well as any fees
accrued for its account and not yet paid.
ARTICLE III - CONDITIONS PRECEDENT TO LENDING
Section 3.1 DOCUMENTS TO BE DELIVERED. No Lender has any obligation to
make its first Advance unless Agent shall have received all of the following, at
Agent's office in Dallas, Texas, duly executed and delivered and in form,
substance and date satisfactory to Agent:
(a) This Agreement and any other documents that Lenders are to
execute in connection herewith.
(b) Each Note.
(c) The following certificates of Borrower:
(i) An "Omnibus Certificate" of the Secretary and of the
Chairman of the Board or President of Borrower, which shall contain
the names and signatures of the officers of Borrower authorized to
execute Loan Documents and which shall certify to the truth,
correctness and completeness of the following exhibits attached
thereto: (1) a copy of resolutions duly adopted by the Board of
Directors of Borrower and in full force and effect at the time this
Agreement is entered into, authorizing the execution of this Agreement
and the other Loan Documents delivered or to be delivered in
connection herewith and the consummation of the transactions
contemplated herein and therein, (2) a copy of the charter documents
of Borrower and all amendments thereto, certified by the appropriate
official of Borrower's state of organization, and (3) a copy of any
bylaws of Borrower; and
(ii) A "Compliance Certificate" of the Chairman of the Board or
President and of the chief financial
29
officer of Borrower, of even date with such Advance, in which such
officers certify to the satisfaction of the conditions set out in
subsections (a), (b), (c) and (d) of Section 3.2.
(d) A certificate (or certificates) of the due formation, valid
existence and good standing of Borrower in its state of organization,
issued by the appropriate authorities of such jurisdiction.
(e) A favorable opinion of Eugene A. Lang, Jr., Esq., general counsel
for Borrower and Parent, substantially in the form set forth in Exhibit E,
together with the certificate provided for in such Exhibit.
(f) Documents similar to those specified in subsections (c)(i) and
(d) of this section with respect to Parent and the execution by Parent of
the Parent Guaranty.
(g) Solvency Certificates of each of Borrower and Parent.
(h) A Notice of Final Agreement in the form of the attached
Exhibit G.
(i) All other documents and instruments which Agent has then
reasonably requested, in addition to those described above (including
opinions of legal counsel for the Related Persons and Agent; corporate
documents and records; documents evidencing governmental authorizations,
consents, approvals, licenses and exemptions; and certificates of public
officials and of officers and representatives of Borrower, Parent and other
Persons), as to (i) the accuracy and validity of or compliance with all
representations, warranties and covenants made by any of the Related
Persons in this Agreement and the other Loan Documents, and (ii) the
satisfaction of all conditions contained herein or therein. All such
additional documents and instruments shall be satisfactory to Agent in
form, substance and date.
Section 3.2 ADDITIONAL CONDITIONS PRECEDENT. No Lender has any obligation
to make any Advance (including its first) unless the following conditions
precedent have been satisfied:
(a) All representations and warranties made by any Related Person in
any Loan Document shall be true on and as of the date of such Advance
(except to the extent that any representation or warranty is expressly
limited to a particular date and except to the extent the facts upon which
such representations are based have been changed by the extension of credit
hereunder) as if such
30
representations and warranties had been made as of the date of such
Advance.
(b) No Default shall exist at the date of such Advance.
(c) If at the date of such Advance the amount of Treasury Stock
Purchases exceeds $35,000,000, no material adverse change shall have
occurred to the individual or Consolidated financial condition of Borrower
or Parent or their businesses since the date of this Agreement.
(d) The making of such Advance shall not be prohibited by any law or
any regulation or order of any court or governmental agency or authority
and shall not subject any Lender to any penalty or other onerous condition
under or pursuant to any such law, regulation or order.
(e) If such Advance shall be used in whole or in part to finance
Treasury Stock Purchases, Agent shall have received a solvency certificate
of Parent in the form of Exhibit B-2 attached hereto.
(f) If such Advance shall be used in whole or in part to finance the
purchase of "margin stock" or "margin securities", Borrower shall, upon the
request of Agent, provide to Agent Federal Reserve Form U-1 as provided for
in Regulation U, which shall contain statements that, in the judgment of
Agent, permit the transactions contemplated thereby to be made in
accordance with Regulation U.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES
Section 4.1 BORROWER'S AND PARENT'S REPRESENTATIONS AND WARRANTIES. To
confirm each Lender's understanding concerning Borrower, Parent and their
respective businesses, properties and obligations, and to induce Agent and each
Lender to enter into this Agreement and to make the Loans, each of Borrower and
Parent represents and warrants to Agent and each Lender that:
(a) NO DEFAULT. No Related Person is in default in the performance
of any of the covenants and agreements contained herein. No event has
occurred and is continuing which constitutes a Default.
(b) ORGANIZATION AND GOOD STANDING. Each Related Person is a
corporation duly incorporated, validly existing and in good standing under
the laws of their respective states of incorporation, and is duly licensed
or qualified to transact business in all jurisdictions where the
31
character of the property owned or leased or the nature of the business
transacted by such Related Person makes such licensing or qualification
necessary and the failure to obtain such license or to so qualify might
impair its title to its properties or the right of such Related Person to
enforce material contracts against others or expose such Related Person to
substantial liabilities. Each Related Person has taken all actions and
procedures customarily taken in order to enter, for the purpose of
conducting business or owning property, each jurisdiction outside the
United States where the character of the property owned or leased or the
nature of the business transacted by such Related Person makes such actions
and procedures desirable. Each Related Person has all requisite power and
authority, corporate or otherwise, to conduct its businesses and to own its
properties, and each Related Person has all requisite authority, corporate
or otherwise, to execute and deliver, and to perform all of its obligations
under the Loan Documents to which it is a party.
(c) AUTHORIZATION. The execution, delivery and performance by each
Related Person of the Loan Documents to which it is a party, and the
borrowings hereunder, have been duly authorized by all necessary corporate
action.
(d) NO CONFLICTS OR CONSENTS. The execution, delivery and
performance by each Related Person of the Loan Documents to which it is a
party, do not and will not (i) require any consent or approval of the
stockholders of any Related Person, or any authorization, consent or
approval by any governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, (ii) violate any provisions of any
law, rule or regulation or of any order, writ, injunction or decree
presently in effect having applicability to any Related Person or to any
Related Person's articles or certificate of incorporation or bylaws, (iii)
result in a breach of or constitute a default under any indenture or loan
or credit agreement or under any material partnership agreement or any
other material agreement, lease or instrument to which any Related Person
is a party or by which any Related Person or any of their respective
properties may be bound or affected, or (iv) result in or require the
creation of any Lien upon any assets or properties of any Related Person
except as expressly contemplated in the Loan Documents. Except as
expressly contemplated in the Loan Documents, no consent, approval,
authorization or order of, and no notice to or filing with, any court or
governmental authority or third party is required in connection with the
execution, delivery or performance by any Related Person of any Loan
Document or
32
to consummate any transactions contemplated by the Loan Documents.
(e) ENFORCEABLE OBLIGATIONS. This Agreement and the other Loan
Documents constitute the legal, valid and binding obligations of each
Related Person which is a party hereto or thereto, enforceable against each
such Related Person in accordance with their respective terms except as
such enforcement may be limited by bankruptcy, insolvency or similar laws
of general application relating to the enforcement of creditors' rights or
general equitable principles.
(f) INITIAL FINANCIAL STATEMENTS. Borrower and Parent have
heretofore furnished Agent and each Lender with the Initial Financial
Statements. Such Initial Financial Statements fairly present the
Consolidated financial condition of each Related Person on the dates
thereof (subject in the case of unaudited statements to normal year-end
adjustments) and were prepared in accordance with GAAP. As of the date
hereof, there has been no material adverse change in the Consolidated
business, properties or condition (financial or otherwise) of any Related
Person since September 30, 1994, except as otherwise disclosed in the
Disclosure Schedule.
(g) OTHER OBLIGATIONS AND RESTRICTIONS. No Related Person has any
outstanding Debt of any kind (including contingent obligations, tax
assessments, and unusual forward or long-term commitments) which is, in the
aggregate, material to Borrower or material with respect to Borrower's
Consolidated financial condition and not shown in the Initial Financial
Statements or disclosed in the Disclosure Schedule or a Disclosure Report.
Except with respect to taxes and claims which are being contested by such
Related Person in good faith, each Related Person has paid and discharged
all federal or state taxes, assessments and governmental obligations levied
or imposed upon it or upon its income or profits, or upon any properties
belonging to it now due and payable, and has paid all lawful claims for
labor, materials and supplies (other than as a result of a judgment) which,
if not paid, might by law become a lien or charge upon any properties of
such Related Person. Except as shown in the Initial Financial Statements
or disclosed in the Disclosure Schedule or a Disclosure Report, no Related
Person is subject to or restricted by any franchise, contract, deed,
charter restriction, or other instrument or restriction which is reasonably
likely in the foreseeable future to materially and adversely affect the
businesses, properties, prospects, operations, or financial condition of
such Related Person or of Borrower on a Consolidated basis.
33
(h) FULL DISCLOSURE. No certificate, written statement or other
written information delivered herewith or heretofore by any Related Person
to Agent or any Lender in connection with the negotiation of this Agreement
or in connection with any transaction contemplated hereby contains any
untrue statement of a material fact or omits to state any material fact
known to any Related Person (other than industry-wide risks normally
associated with the types of businesses conducted by the Related Persons)
necessary to make the statements contained herein or therein not misleading
as of the date made or deemed made. There is no fact known to any Related
Person (other than industry-wide risks normally associated with the types
of businesses conducted by the Related Persons) that has not been disclosed
to Agent and each Lender in writing which could reasonably be expected to
materially and adversely affect Borrower's properties, business, prospects
or condition (financial or otherwise) or Borrower's Consolidated
properties, businesses, prospects or condition (financial or otherwise).
There are no statements or conclusions in any Engineering Report which are
based upon or include misleading information or fail to take into account
material information regarding the matters reported therein, it being
understood that each Engineering Report is necessarily based upon
professional opinions, estimates and projections and that Borrower does not
warrant that such opinions, estimates and projections will ultimately prove
to have been accurate. Borrower has heretofore delivered to Agent and each
Lender true, correct and complete copies of the Initial Financial
Statements and the Initial Engineering Report.
(i) LITIGATION. As of the date hereof, and except as disclosed in
the Disclosure Schedule, (i) there are no actions, suits or proceedings
pending or, to the knowledge of any Related Person, threatened against or
affecting any Related Person or any of their properties before any court or
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which could reasonably be expected to
be determined adversely to such Related Person and, if determined
adversely, would have a material adverse effect on the financial condition,
properties, or operations of either Borrower or Parent and their respective
properly Consolidated subsidiaries, taken as a whole, or the right or
ability of any Related Person to enter into the Loan Documents to which it
is a party or to consummate the transactions contemplated thereby or to
perform its obligations thereunder and (ii) there are no outstanding
judgments, injunctions, writs, rulings or orders by any such governmental
entity against any Related Person or any Related Person's stockholders,
partners, directors or officers which have or may have any such effect.
34
(j) ERISA LIABILITIES. All currently existing ERISA Plans are listed
in the Disclosure Schedule or a Disclosure Report. No Termination Event
has occurred with respect to any ERISA Plan and each Related Person and
each of its ERISA Affiliates are in compliance with ERISA in all material
respects. No Related Person nor any of its ERISA Affiliates is required to
contribute to, or has any other absolute or contingent liability in respect
of, any "multiemployer plan" as defined in Section 4001 of ERISA. Except
as set forth in the Disclosure Schedule or a Disclosure Report: (i) no
"accumulated funding deficiency" (as defined in Section 412(a) of the Code)
exists with respect to any ERISA Plan, whether or not waived by the
Secretary of the Treasury or his delegate, and (ii) the current value of
each ERISA Plan's benefits does not exceed the current value of such ERISA
Plan's assets available for the payment of such benefits by more than
$500,000.
(k) ENVIRONMENTAL AND OTHER LAWS. Except as disclosed in the
Disclosure Schedule or a Disclosure Report: (i) the Related Persons are
conducting their businesses in material compliance with all applicable
federal, state or local laws, including Environmental Laws, and have and
are in material compliance with all licenses and permits required under any
such laws; (ii) no Related Person has notice of or is otherwise aware that
any operation or property of any Related Person is the subject of federal,
state or local investigation evaluating whether any material remedial
action is needed to respond to a release of any Hazardous Materials into
the environment or to the improper storage or disposal (including storage
or disposal at offsite locations) of any Hazardous Materials; (iii) no
Related Person (and to the best knowledge of Borrower, no other Person) has
filed any notice under any Environmental Law indicating that any Related
Person is responsible for the improper release into the environment, or the
improper storage or disposal, of any material amount of any Hazardous
Materials or that any Hazardous Materials have been improperly released, or
are improperly stored or disposed of, upon any property of any Related
Person; (iv) no Related Person has transported or arranged for the
transportation of any Hazardous Material to any location which is, to the
best of Borrower's knowledge (1) listed on the National Priorities List
under the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, listed for possible inclusion on such National
Priorities List by the Environmental Protection Agency in its Comprehensive
Environmental Response, Compensation and Liability Information System List,
or listed on any similar state list or (2) the subject of federal, state or
local enforcement actions or other investigations which may lead
35
to claims against the Related Persons in an aggregate amount in excess of
$1,000,000 for clean-up costs, remedial work, damages to natural resources
or for personal injury claims (whether under Environmental Laws or
otherwise); and (v) no Related Person otherwise has any known material
contingent liability under any Environmental Laws or in connection with the
release into the environment, or the storage or disposal, of any Hazardous
Materials.
(1) BORROWER'S SUBSIDIARIES. As of the date hereof, the only
Subsidiary of Parent is Borrower and the only Subsidiary of Borrower is
Plains Petroleum Gathering Company. Borrower does not presently have any
Subsidiary or own any stock in any other corporation or association except
those listed in the Disclosure Schedule or a Disclosure Report. Except for
Whiskey Springs and joint operating or exploration agreements arising in
the ordinary course of business, neither Borrower nor any Related Person is
a member of any general or limited partnership, joint venture or
association of any type whatsoever except those listed in the Disclosure
Schedule or a Disclosure Report and associations, joint ventures or other
relationships (i) which are established pursuant to a standard form
operating agreement or similar agreement or which are partnerships for
purposes of federal income taxation only, (ii) which are not corporations
or partnerships (or subject to the Uniform Partnership Act) under
applicable state law, AND (iii) whose businesses are limited to the
exploration, development and operation of oil, gas or mineral properties
and interests owned directly by the parties in such associations, joint
ventures or relationships. Except as otherwise revealed in a Disclosure
Report, each of Borrower and Parent owns, directly or indirectly, the
equity interest in each of its Subsidiaries which is indicated in the
Disclosure Schedule.
(m) TITLE TO PROPERTIES. Each Related Person has good and defensible
title to each of the properties valued in the Borrowing Base, free and
clear of all Prohibited Liens except for covenants, easements and minor
irregularities in title which do not materially interfere with the business
or operations of any Related Person, the value of the properties valued in
the Borrowing Base or the usefulness of such properties for the production
of oil and gas.
(n) GOVERNMENT REGULATION. Neither Borrower nor any other Related
Person owing Obligations is subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Investment Company
Act of 1940 (as any of the preceding acts have been amended) or any other
statute, law, regulation or decree which regulates the
36
incurring of Debt by such Person, including statutes, laws, regulations or
decrees relating to common contract carriers or the sale of electricity,
gas, steam, water or other public utility services.
(o) INSIDER. Neither Borrower, Parent nor any other Related Person,
nor to Borrower's or Parent's knowledge, any Person having "control" (as
that term is defined in 12 U.S.C. Section 375b(9) or in regulations
promulgated pursuant thereto) of Borrower or Parent, is a "director" or an
"executive officer" or "principal shareholder" (as those terms are defined
in 12 U.S.C. Section 375b(8) or (9) or in regulations promulgated pursuant
thereto) of Lender, of a bank holding company of which Lender is a
Subsidiary or of any Subsidiary of a bank holding company of which Lender
is a Subsidiary.
(p) REGULATION U. No Related Person is engaged in the business of
extending credit to others for the purpose of purchasing or carrying margin
stock or margin securities (within the meanings of Regulation U and
Regulation G), and no part of the proceeds of any Advance will be used to
purchase or carry margin stock or margin securities (except as permitted
under Section 2.3(b) and (c)) or to extend credit to others for the purpose
of purchasing or carrying any margin stock or margin securities.
(q) SOLVENCY. No Related Person is "insolvent" on the date hereof
(that is, the sum of its absolute and contingent liabilities, including the
Obligations, does not exceed the fair market value of its assets). Each
Related Person's capital is adequate for the businesses in which it is
engaged or intends to be engaged. No Related Person has hereby incurred,
nor does any Related Person intend to incur or believe that it will incur,
debts which will be beyond its ability to pay as such debts mature.
Section 4.2 REPRESENTATION BY LENDERS. Each Lender hereby represents that
it will acquire its Note for its own account in the ordinary course of its
commercial lending business; however, the disposition of such Lender's property
shall at all times be and remain within its control and, in particular and
without limitation, such Lender may sell or otherwise transfer its Note, any
participation interest or other interest in its Note, or any of its other rights
and obligations under the Loan Documents pursuant to Section 9.10.
ARTICLE V - COVENANTS OF BORROWER AND PARENT
37
Section 5.1 AFFIRMATIVE COVENANTS. To conform with the terms and
conditions under which each Lender is willing to have credit outstanding to
Borrower, and to induce Agent and each Lender to enter into this Agreement and
make the Loans, each of Borrower and Parent warrants, covenants and agrees that
until the full and final payment of the Obligations and the termination of this
Agreement, unless Majority Lenders agree otherwise:
(a) PAYMENT AND PERFORMANCE. Each Related Person will pay all
amounts due under the Loan Documents in accordance with the terms thereof
and will observe, perform and comply with every covenant, term and
condition set forth in the Loan Documents. Borrower and Parent will cause
the other Related Persons to observe, perform and comply with every such
term, covenant and condition.
(b) BOOKS, FINANCIAL STATEMENTS AND REPORTS. Each Related Person
will keep accurate books of record and account for itself in which true and
complete entries will be made in accordance with GAAP consistently applied.
Each of Borrower and Parent shall deliver the following statements and
reports to Agent and each Lender at Borrower's or Parent's expense:
(i) As soon as available, and in any event within ninety (90)
days after the end of each Fiscal Year, (A) a copy of Parent's annual
report for such Fiscal Year and Form 10-K filed with the SEC with
respect to such Fiscal Year (which may be a hard copy of Parent's
"EDGAR" filing), which annual report shall include the audit report of
Parent's independent certified public accountants, and (B) a
certificate of the chief financial officer of each of Parent and
Borrower in the form of Exhibit D attached hereto, stating (I) that
such financial statements have been prepared in accordance with GAAP
and fairly present the financial condition of Parent and its
Consolidated Subsidiaries as at such date and the Consolidated results
of the operations of Parent and its Consolidated Subsidiaries for the
period ended on such date, (II) whether or not he or she has knowledge
of the occurrence of any Default hereunder and, if so, stating in
reasonable detail the facts with respect thereto, (III) that he or she
has reviewed the Loan Documents, containing calculations showing
compliance (or non-compliance) at the end of such Fiscal Year with the
requirements of Sections 5.2 (e), (k) and (l), and (IV) that no
Default exists at the end of such Fiscal Year or at the time of such
certificate or specifying the nature and period of existence of any
such Default.
38
(ii) As soon as available, and in any event within forty-five
(45) days after the end of each of the first three Fiscal Quarters of
each Fiscal Year, (A) a copy of Parent's Form 10-Q filed with the SEC
with respect to such Fiscal Quarter (which may be a hard copy of
Parent's "EDGAR" filing), and (B) a certificate of the chief financial
officer of each of Parent and Borrower in the form of Exhibit D
attached hereto, stating (I) that such financial statements have been
prepared in accordance with GAAP and fairly present the financial
condition of Parent and its Consolidated Subsidiaries as at such date
and the Consolidated results of the operations of Parent and its
Consolidated Subsidiaries for the period ended on such date, (II)
whether or not he or she has knowledge of the occurrence of any
Default hereunder and, if so, stating in reasonable detail the facts
with respect thereto, (III) that he or she has reviewed the Loan
Documents, containing calculations showing compliance (or
non-compliance) at the end of such Fiscal Quarter with the
requirements of Sections 5.2 (e), (k) and (l), and (IV) that no
Default exists at the end of such Fiscal Quarter or at the time of
such certificate or specifying the nature and period of existence of
any such Default.
(iii) Promptly upon the mailing thereof to the shareholders of
any Related Person, copies of all other financial statements, reports
and proxy statements so mailed, and promptly upon their becoming
available, copies of all registration statements and regular periodic
reports, if any, which any Related Person shall have filed with the
SEC or any national securities exchange;
(iv) On each Evaluation Date, a written report in format and
substance satisfactory to Majority Lenders and using price and other
economic parameters required to be used by Borrower and Parent for SEC
reporting purposes or otherwise identified therein, taking into
account any "over-produced" status under gas balancing arrangements,
and containing information and analysis comparable in scope to that
contained in the Initial Engineering Report, setting forth:
(A) a schedule of proved reserves of those oil and gas
properties owned by any Related Person which are situated within
the United States of America, and which Borrower has designated
as properties to be valued in the Borrowing Base, and, separately
with respect to each property
39
covered thereby the projected gross and net volumes of production
reasonably expected to be produced therefrom;
(B) separately for each property covered thereby, a
projection of the gross and net values of production by years for
each of the ten (10) years next succeeding the effective date
thereof and the remainder thereafter; and
(C) separately with respect to each property covered thereby
the projected gross revenues, costs and expenses of operation,
net revenues and the discounted present value of the projected
net revenues from each such property, including a projection and
computation by years for each of the ten (10) years next
succeeding the effective date, which projections and computations
shall set forth the economic parameters used in their
calculation. The net revenues shall be adjusted for any
production, severance, crude oil windfall profits or other taxes
required to be paid in connection with the production and sale of
oil and gas. The estimated operating expenses shall be the
current operating expenses and other cash expenditure at the time
of determination.
The annual Engineering Report due on April 1 of each year (in this
paragraph, the "Annual Engineering Report") shall be prepared as of
December 31 of the preceding year. Any Engineering Report due on an
Evaluation Date described in clause (b) of the definition of
"Evaluation Date" shall be prepared as of July 1 of the year in which
such Evaluation Date occurs. Any Engineering Report other than the
Annual Engineering Report may be an update or supplement to the most
recent Annual Engineering Report.
The information described in clause (A) of this Section 5.1(b)(iv)
shall in each Engineering Report be prepared by Borrower's in-house
engineers, or by Netherland, Sewell & Associates, Inc. or other
independent petroleum engineering firm reasonably acceptable to
Majority Lenders; if such information in the Annual Engineering Report
is prepared by Borrower's in-house engineers, Netherland Sewell &
Associates or other independent petroleum engineering firm reasonably
acceptable to Majority Lenders shall audit such information with
respect to properties constituting not less than eighty percent (80%)
of the Net Present Value
40
of Reserves of all properties as reflected in such Engineering Report.
The information described in clauses (B) and (C) of this Section
5.1(b)(iv) may be prepared by Borrower or Parent unless, following a
Borrowing Base Deficiency or Collateral Event, Agent at the direction
of Majority Lenders shall provide Borrower with written notice that
such information shall be prepared by Netherland Sewell & Associates
or other independent petroleum engineering firm acceptable to Majority
Lenders.
(c) OTHER INFORMATION AND INSPECTIONS. Each Related Person will
furnish to Agent and each Lender any information which Agent may from time
to time reasonably request in writing concerning any representation,
warranty, covenant, provision or condition of the Loan Documents, the
satisfaction of all conditions contained therein, and all other matters
pertaining thereto, or such other information respecting the financial
condition and results of operations of any Related Person as Agent may from
time to time reasonably request. Upon the request of Agent, each Related
Person will give any Agent or its representative access to, and will permit
such representative to examine, copy or make extracts from, any and all of
such Related Person's books, records and documents, and each Related Person
shall permit Agent or its representatives to investigate and verify the
accuracy of the information furnished to Agent or any Lender in connection
with the Loan Documents and to discuss all such matters with its officers,
employees and representatives. Each of Agent and Lenders agrees that it
will take all reasonable steps to keep confidential any proprietary
information given to it by any Related Person, provided, however, that this
restriction shall not apply to information which (i) has at the time in
question entered the public domain (other than as a result of disclosure by
Agent or any Lender in violation of the terms hereof), (ii) is required to
be disclosed by law or by any order, rule or regulation (whether valid or
invalid) of any court or governmental agency or authority, (iii) is
disclosed by Agent or any Lender in connection with the enforcement of
Agent's or such Lender's rights hereunder, (iv) is disclosed to Agent's or
any Lender's Affiliates, auditors, attorneys, or agents, or (v) is
furnished to any other Lender or to any purchaser or prospective purchaser
of participations or other interests in any Loan or Loan Document;
provided, however, in the case of clause (iv), such purchaser or
prospective purchaser agrees to keep such information confidential on the
terms set forth in this Section 5.1(c).
41
(d) NOTICE OF MATERIAL EVENTS AND CHANGE OF ADDRESS. Borrower and
Parent will promptly notify Agent and each Lender:
(i) of the occurrence of any Default, and as promptly as
practicable (but in any event not later than five (5) Business Days)
after an officer of either Borrower or Parent obtains knowledge of the
occurrence of any event which constitutes a Default or an Event of
Default, together with a detailed statement of the steps being taken
to cure the effect of such event;
(ii) as soon as practicable (but in any event not later than ten
(10) Business Days) after Related Persons incur (A) Funded Debt, other
than the Obligations, as permitted under Section 5.2(a), in the
aggregate principal amount in excess of $1,000,000, including notice
of the amount and terms of such Funded Debt and the lender with
respect thereto; and (B) Restricted Debt (other than Funded Debt), as
permitted under Section 5.2(a), in the aggregate principal amount in
excess of $10,000,000, including notice of the amount and terms of
such Restricted Debt and the lender with respect thereto;
(iii) of the acceleration of the maturity of any Debt owed by
any Related Person or of any default under any indenture, mortgage,
agreement, contract or other instrument to which any of them is a
party or by which any of them or any of their properties is bound, if
such acceleration or default could reasonably be expected to have a
material adverse effect upon Borrower's or Parent's Consolidated
financial condition,
(iv) of the occurrence of any Termination Event,
(v) of any material adverse claim (or any claim of $5,000,000 or
more) asserted against any Related Person, or any notice of any
Related Person's potential liability under any Environmental Laws
which might exceed such amount, and
(vi) of the filing of any suit or proceeding against any Related
Person in which an adverse decision could reasonably be expected to
occur and, if adversely determined, could reasonably be expected to
have a material adverse effect upon any Related Person's financial
condition, business or operations,
42
Upon the occurrence of any of the foregoing the Related Persons will take
all necessary or appropriate steps to remedy promptly any such material
adverse change, Default, acceleration, default or Termination Event, to
protect against any such adverse claim, to defend any such suit or
proceeding, and to resolve all controversies on account of any of the
foregoing. Borrower will also notify Agent and Agent's counsel in writing
at least twenty Business Days prior to the date that any Related Person
changes its name or the location of its chief executive office or principal
place of business.
(e) MAINTENANCE OF PROPERTIES. Each Related Person will carry on and
conduct its business in a commercially reasonable manner. Each Related
Person will do all things necessary to maintain, preserve, protect and keep
its properties (other than equipment which is worthless or obsolete or
interests in oil and gas properties to which no proved reserves of oil, gas
or other liquid or gaseous hydrocarbons are properly attributed) in good
repair, working order and condition, ordinary wear and tear excepted, and
in compliance with all applicable laws, rules and regulations in all
material respects, and will make all necessary and proper repairs, renewals
and replacements so that its business carried on in connection therewith
may be promptly conducted at all times.
(f) MAINTENANCE OF EXISTENCE AND QUALIFICATIONS. Each Related Person
which is a corporation or partnership will maintain and preserve its
corporate or partnership existence and its rights and franchises in full
force and effect and will qualify to do business as a foreign corporation
or partnership in all states or jurisdictions where required by applicable
law, except where the failure so to qualify could not reasonably be
expected to have any material adverse effect on Borrower or Parent.
(g) PAYMENT OF TRADE DEBT, TAXES, ETC. Each Related Person will (i)
timely file all required tax returns; (ii) pay when due all taxes,
assessments, and governmental charges and levies upon it or its income,
profits or property; (iii) within one hundred twenty (120) days after the
same becomes due pay all Debt owed by it on ordinary trade terms to
vendors, suppliers and other Persons providing goods and services used by
it in the ordinary course of its business; (iv) pay and discharge when due
all other Debt now or hereafter owed by it; and (v) maintain appropriate
accruals and reserves for all of the foregoing in accordance with GAAP.
Each Related Person may, however, delay paying or discharging any of the
foregoing so long as such amount is being contested in good faith by
appropriate
43
proceedings and with respect to which adequate reserves have been set
aside.
(h) INSURANCE. Each Related Person will keep or cause to be kept
insured by a financially sound and reputable insurer all property of a
character usually insured by corporations engaged in the same or similar
businesses similarly situated against loss or damage of the kinds and in
the amounts customarily insured against by such corporations engaged in the
same or a similar business similarly situated. Upon the occurrence of a
Collateral Event and upon demand by Agent any insurance policies covering
any such property shall be endorsed (i) to provide that such policies may
not be cancelled, reduced or affected in any manner for any reason without
fifteen days prior notice to Agent, and (ii) to provide for insurance
against fire, casualty and any other hazards normally insured against, in
the amount of the full value (less a reasonable deductible not to exceed
amounts customary in the industry for similarly situated businesses and
properties) of the property insured. Each Related Person shall at all
times maintain adequate insurance against its liability for injury to
persons or property, which insurance shall be by financially sound and
reputable insurers and shall be reasonably acceptable to Agent.
(i) PAYMENT OF EXPENSES. Whether or not the transactions
contemplated by this Agreement are consummated, Borrower will promptly (and
in any event, within thirty (30) days after any invoice or other statement
or notice) pay all reasonable costs and expenses incurred by or on behalf
of (i) Agent (including reasonable attorneys' fees) in connection with (1)
the negotiation, preparation, execution and delivery of the Loan Documents,
and any and all consents, waivers or other documents or instruments
relating thereto, (2) the filing, recording, refiling and re-recording of
any Loan Documents and any other documents or instruments or further
assurances required to be filed or recorded or refiled or re-recorded by
the terms of any Loan Document, and (3) the borrowings hereunder and other
action reasonably required in the course of administration hereof, and (ii)
Agent or any Lender (including reasonable attorneys' fees) in connection
with the defense or enforcement of the Loan Documents or the defense of
Agent's or any Lender's exercise of its rights thereunder (including costs
and expenses of determining whether and how to carry out such defense or
enforcement), provided that Lenders shall not retain separate counsel in
connection with such defense or enforcement except with respect to those
matters as to which the interests of Lenders become adverse to each other
in a material respect or applicable rules of
44
professional responsibility prohibit a single counsel from representing
such Lenders.
(j) INTEREST. Borrower hereby promises to Agent and Lenders to pay
interest at the Late Payment Rate on all Obligations which Borrower has in
this Agreement promised to pay (including Obligations to pay fees or to
reimburse or indemnify Agent or any Lender) and which are not paid when due
within thirty days thereafter. Such interest shall accrue from the date
such Obligations become due until they are paid.
(k) COMPLIANCE WITH AGREEMENTS AND LAW. Each Related Person will
perform all material obligations it is required to perform under the terms
of each indenture, mortgage, deed of trust, security agreement, lease,
franchise, agreement, contract or other instrument or obligation to which
it is a party or by which it or any of its properties is bound. Each
Related Person will conduct its business and affairs in material compliance
with all laws, regulations, and orders applicable thereto, including
Environmental Laws in all material respects.
(l) AGREEMENT TO DELIVER SECURITY DOCUMENTS. Upon the occurrence of a
Collateral Event, each of Borrower and Parent agrees to deliver, to secure
the Obligations whenever requested by Majority Lenders in their sole and
absolute discretion, deeds of trust, mortgages, chattel mortgages, security
agreements, financing statements and other security documents in form and
substance satisfactory to Agent for the purpose of granting, confirming,
and perfecting first and prior liens or security interests, other than
Liens permitted under Section 5.2(b), in any oil and gas properties now
owned or hereafter acquired by any Related Person having a value equal to
at least eighty percent (80%) of the Net Present Value of Reserves. Each
of Borrower and Parent also agrees to deliver in connection with such
security documents, whenever requested by Agent in its sole and absolute
discretion, with respect to any oil and gas properties of any Related
Person hereafter mortgaged to Agent: (i) a list, by name and address, of
those Persons who have purchased production during the most recent Fiscal
Quarter from such properties, giving each such purchaser's owner number and
property number for each such property, (ii) executed letters in lieu
addressed to such purchasers, (iii) favorable title opinions from legal
counsel acceptable to Agent which are designated by Agent constituting in
the aggregate eighty percent (80%) of the value attributed to such
properties as such properties are valued in the Borrowing Base, based upon
abstract or record examinations to dates acceptable to Agent: (A) stating
that such Person
45
has good and defensible title to such properties and interests, free and
clear of all Prohibited Liens, (B) confirming that such properties and
interests are subject to security documents securing the Obligations that
constitute and create legal, valid and duly perfected first deed of trust
or mortgage liens in such properties and interests and perfected
assignments of and security interests in the oil and gas attributable to
such properties and interests and the proceeds thereof, and (C) covering
such other matters as Agent may reasonably request, and (iv) such other
information, agreements, documents or instruments as Agent may reasonably
require. Each Related Person will from time to time deliver to Agent any
financing statements, continuation statements, extension agreements and
other documents, properly completed and executed (and acknowledged when
required) by such Related Person in form and substance satisfactory to
Agent, which Agent requests for the purpose of perfecting, confirming, or
protecting any Liens or other rights in collateral securing any
Obligations.
(m) RELEASE OF SECURITY DOCUMENTS. If Borrower or Parent shall have
delivered to Agent security documents pursuant to Section 5.1(l) above, and
thereafter the Utilized Percentage of Borrowing Base shall be less than or
equal to fifty percent (50%) for a period of not less than thirty (30)
consecutive days, Agent shall, at the written request of Borrower or
Parent, and at the expense of Borrower, release all of its Liens and
security interests thereunder and shall deliver such release and
termination instruments as reasonably requested by Borrower and Parent;
PROVIDED, HOWEVER, if subsequent to any such release, a Collateral Event
shall occur, Borrower's and Parent's obligation to deliver security
documents to Agent pursuant to Section 5.1(l) above shall be reinstated.
Section 5.2 NEGATIVE COVENANTS. To conform with the terms and conditions
under which each Lender is willing to have credit outstanding to Borrower, and
to induce Agent and each Lender to enter into this Agreement and make the Loans,
each of Borrower and Parent warrants, covenants and agrees that until the full
and final payment of the Obligations and the termination of this Agreement,
unless Majority Lenders agree otherwise:
(a) RESTRICTED DEBT. Except as otherwise expressly permitted by this
subsection, no Related Person will incur, create, assume or permit to
exist, any Restricted Debt except:
(i) the Obligations.
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(ii) other Restricted Debt (taking into account all such
Restricted Debt of all Related Persons) which does not exceed more
than $25,000,000 in principal in the aggregate at any time
outstanding; PROVIDED, that the terms of such Restricted Debt shall
not have a weighted average life to maturity shorter than that of the
Obligations.
(iii) intercompany Debt owed by Parent to Borrower in respect
of loans and advances made by Borrower to fund Treasury Stock
Purchases.
(iv) Liquidated Debt arising under futures contracts or swap
contracts, provided that:
(1) all such contracts are entered into with the purpose
and effect of fixing prices (including caps, floors, collars,
exchange transactions, forward agreements or other exchange or
protection agreements) on oil and/or gas expected to be sold by
the Related Persons in the ordinary course of their businesses;
(2) no such contract requires any Related Person to put up
money or other assets to any Person other than any Lender against
the event of its nonperformance, prior to actual default by such
Related Person in performing its obligations thereunder;
PROVIDED, if any Related Person puts up any money or other assets
to any Lender pursuant to any such contract, such collateral
shall ratably secure all Obligations as well as such contract
obligations, and, PROVIDED, FURTHER, if any Related Person shall
have delivered to Agent security documents pursuant to Section
5.1(l) above, such security documents shall secure any such
contracts between any Related Person and any Lender; and
(3) the aggregate amount of oil and/or gas reserves covered
by such contracts for any production year shall not exceed
seventy-five percent (75%) of the projected production of Related
Persons' oil and/or gas reserves for such year, as projected in
the most recent Engineering Report.
(b) LIMITATION ON LIENS. No Related Person will create, incur,
assume or suffer to exist any Lien on any
47
of the properties or assets which it now owns or hereafter acquires,
except:
(i) Liens which secure Obligations only.
(ii) Liens which secure Debt, in an aggregate amount not to
exceed $1,000,000, incurred to finance the purchase of any assets of
such Person, which assets constitute collateral for such Debt under a
security or other collateral arrangement executed and delivered on a
substantially simultaneous basis with the incurrence of such Debt.
(iii) statutory Liens for taxes, statutory mechanics' and
materialmen's Liens incurred in the ordinary course of business, and
other similar statutory Liens incurred in the ordinary course of
business, provided such Liens do not secure Restricted Debt and secure
only Debt which is not delinquent or which is being contested as
provided in Section 5.1(g).
(iv) Liens on "margin stock" or "margin securities" as defined in
Regulation U and Regulation G, respectively.
(c) LIMITATION ON MERGERS, ISSUANCES OF SECURITIES.
(i) No Related Person shall be a party to any merger,
consolidation or other combination, unless, as to Borrower or Parent,
Borrower or Parent is the surviving corporation, or, as to any other
Related Person, Borrower, Parent or such Related Person is the
surviving corporation.
(ii) If, subsequent to the date hereof, Borrower or Parent shall
create or acquire a Subsidiary, Borrower and Parent shall within ten
(10) days thereafter notify Agent and each Lender of the creation or
acquisition of such Subsidiary.
(iii) Neither Borrower nor Parent will issue any securities
other than (A) shares of its common stock and any options or warrants
giving the holders thereof only the right to acquire such shares or
(B) rights for and shares of Parent's preferred stock pursuant to the
Rights Agreement. No Subsidiary of Borrower or Parent will issue any
additional shares of its capital stock or other securities or any
options, warrants or other rights to acquire such additional shares or
other securities except to Borrower or Parent and only to the extent
not otherwise forbidden under the terms hereof.
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Notwithstanding the foregoing, Parent may amend, extend or replace the
Rights Agreement. No Subsidiary of Borrower or Parent which is a
partnership will allow any diminution of Borrower's or Parent's
interest (direct or indirect) therein.
(d) LIMITATION ON SALES OF PROPERTY. No Related Person will sell,
lease, assign, transfer or otherwise dispose of any properties valued in
the Borrowing Base except:
(i) "margin stock" or "margin securities" as defined in
Regulation U and Regulation G, respectively.
(ii) equipment which is worthless or obsolete or which is
replaced by equipment of equal suitability and value.
(iii) inventory (including oil and gas sold as produced and
seismic data) which is sold in the ordinary course of business on
ordinary trade terms.
(iv) interests in oil and gas properties, or portions thereof, to
which no proved reserves of oil, gas or other liquid or gaseous
hydrocarbons are properly attributed.
(v) sales of properties valued in the Borrowing Base, PROVIDED,
that if such Related Person shall receive net proceeds in excess of
$500,000 from any such sale, ALL net proceeds of such sale shall be
used to prepay the Obligations, PROVIDED, HOWEVER, no Related Person
shall sell, lease, assign, transfer or otherwise dispose of any such
property if immediately thereafter a Borrowing Base Deficiency would
exist, or a Collateral Event shall have occurred, and, PROVIDED
FURTHER, if properties having an aggregate Net Present Value of
Reserves in excess of $25,000,000 shall be sold subsequent to the most
recent Determination Date, Majority Lenders shall have the right to
and may redetermine the Borrowing Base.
No Related Person will sell, transfer or otherwise dispose of capital stock
of any of its Subsidiaries. No Related Person will discount, sell, pledge
or assign any notes payable to it, accounts receivable or future income in
an aggregate amount in excess of $250,000 except to the extent expressly
permitted under the Loan Documents.
(e) LIMITATION ON DIVIDENDS AND REDEMPTIONS. Parent will not declare
or pay any dividends (other than dividends
49
payable solely in stock of Parent) on any class of its capital stock or
make any payment on account of the purchase, redemption (other than
redemptions of rights attached to Parent's common stock pursuant to the
Rights Agreement in an amount not exceeding $0.01 per share) or other
retirement of any shares of such stock or make any distribution in respect
thereof, either directly or indirectly; PROVIDED, HOWEVER, that (i) during
the eighteen (18) month period commencing the date hereof, Parent may (A)
make Treasury Stock Purchases not to exceed $75,000,000 in the aggregate,
and (B) pay cash dividends, provided that the aggregate amount of cash
dividends paid during the immediately preceding four Fiscal Quarters does
not exceed fifty percent (50%) of Parent's Consolidated after-tax net
income for the immediately preceding eight Fiscal Quarters, and (ii)
thereafter, Parent may pay cash dividends or make Treasury Stock Purchases,
provided that the aggregate amount of such dividends paid and Treasury
Stock Purchases made do not exceed fifty percent (50%) of Parent's
Consolidated after-tax net income for the immediately preceding eight
Fiscal Quarters (plus up to $15,000,000 of additional Treasury Stock
Purchases). Notwithstanding the foregoing, no such dividends or Treasury
Stock Purchases shall be permitted upon the occurrence or during the
continuance of a Default or Event of Default, or during the period that a
Borrowing Base Deficiency exists.
(f) LIMITATION ON INVESTMENTS AND NEW BUSINESSES. No Related Person
will (i) make any expenditure or commitment or incur any obligation or
enter into or engage in any transaction except in the ordinary course of
business, (ii) engage directly or indirectly in any business or conduct any
operations except in connection with or incidental to its present
businesses and operations, provided, however, that (A) any Related Person
may expand into other facets of the petroleum industry including gas
marketing and the acquisition and/or operation of gas gathering and gas
processing facilities, but specifically excluding refining of crude oil,
and (B) Parent may purchase an office building to be used for the Related
Persons' office space, and may lease any excess space which may exist in
such building, (iii) make any acquisitions of or capital contributions to
or other investments in any Person, other than Permitted Investments, (iv)
make any significant acquisitions or investments in any properties other
than (A) oil and gas properties (including acquisitions of Persons the
assets of which consist primarily of oil and gas properties) or (B)
equipment and facilities used to gather, compress, treat or transport
natural gas or oil or (v) in the aggregate with all other Related Persons
at any time own more than $10,000,000 in "margin stock" and "margin
50
securities" (other than Parent's common stock) as defined in Regulation U
and Regulation T, respectively.
(g) LIMITATION ON CREDIT EXTENSIONS. Except for Permitted
Investments, no Related Person will extend credit, make advances or make
loans other than (i) normal and prudent extensions of credit to customers
buying goods and services in the ordinary course of business, which
extensions shall not be for longer periods than those extended by similar
businesses operated in a normal and prudent manner, (ii) loans among
Borrower and Parent and (iii) loans to employees of any Related Person, so
long as the aggregate outstanding amount of all such loans made by all
Related Persons does not at any time exceed $250,000.
(h) TRANSACTIONS WITH AFFILIATES. Except as expressly permitted
hereby, no Related Person will engage in any material transaction with any
of its Affiliates on terms which are less favorable to it than those which
would have been obtainable at the time in arm's-length dealing with Persons
other than such Affiliates, provided that such restriction shall not apply
to transactions among Borrower, Parent and their wholly owned Subsidiaries.
(i) ERISA PLANS. No Related Person nor any of its ERISA Affiliates
will incur any obligation to contribute to any "multiemployer plan" as
defined in Section 4001 of ERISA.
(j) FISCAL YEAR. No Related Person will change its fiscal year.
(k) CURRENT RATIO. The ratio of Parent's Consolidated current assets
to Parent's Consolidated current liabilities will never be less than 1 to
1. For purposes of this subsection, Parent's Consolidated current assets
will include up to $25,000,000 of the unused portion of the Available
Borrowing Base which is then available for borrowing, and Parent's
Consolidated current liabilities will be calculated without including any
payments of principal on long-term Debt which is required to be repaid
within one year from the time of calculation.
(l) TANGIBLE NET WORTH. Parent's Consolidated Tangible Net Worth
will never be less than $80,000,000, minus any Treasury Stock Purchases.
As used in this subsection the term "Parent's Consolidated Tangible Net
Worth" means the remainder of (I) all Consolidated assets of Parent, other
than intangible assets (including without limitation as intangible assets
such assets as patents, copyrights, licenses, franchises, goodwill, trade
names,
51
trade secrets and leases other than oil, gas or mineral leases or leases
required to be capitalized under GAAP), minus (II) Parent's Consolidated
Debt, and the term "Parent's Consolidated Debt" means all Consolidated
liabilities and similar balance sheet items of Parent, together with all
other Restricted Debt of any Related Person, to the extent reflected on
Parent's Consolidated balance sheet. In calculating Parent's Consolidated
Tangible Net Worth (I) the value of Parent's Consolidated assets shall not
be reduced by a Write-down of Oil and Gas Properties to the extent that the
properties affected thereby are included in the Borrowing Base and (II) the
value of Parent's Consolidated assets shall be reduced by a Write-down of
Oil and Gas Properties to the extent that the properties affected thereby
are not included in the Borrowing Base.
ARTICLE VI - BANK ACCOUNTS, ETC.
Section 6.1 BANK ACCOUNTS; OFFSET. To secure the repayment of the
Obligations Borrower hereby grants to Agent and each Lender and to each
financial institution which hereafter acquires a participation or other interest
in any Loan or Note (in this section called a "Participant") a security
interest, a lien, and a right of offset, each of which shall be in addition to
all other interests, liens, and rights of Agent or any Lender or Participant at
common law, under the Loan Documents, or otherwise, and each of which shall be
upon and against (a) any and all moneys, securities or other property (and the
proceeds therefrom) of Borrower now or hereafter held or received by or in
transit to Agent or any Lender or Participant from or for the account of
Borrower, whether for safekeeping, custody, pledge, transmission, collection or
otherwise, (b) any and all deposits (general or special, time or demand,
provisional or final) of Borrower with Agent or any Lender or Participant, and
(c) any other credits and claims of Borrower at any time existing against Agent
or any Lender or Participant, including claims under certificates of deposit.
Upon the occurrence of any Event of Default, each of Agent and Lenders and
Participants is hereby authorized to foreclose upon, offset, appropriate, and
apply, at any time and from time to time, without notice to Borrower, any and
all items hereinabove referred to against the Obligations then due and payable.
Section 6.2 GUARANTIES OF BORROWER'S SUBSIDIARIES. Each Subsidiary of
Parent and Borrower now existing or created, acquired or coming into existence
after the date hereof shall, promptly upon request by Agent, execute and deliver
to Agent an absolute and unconditional guaranty of the timely repayment of the
Obligations and the due and punctual performance of the
52
obligations of Borrower hereunder, which guaranty shall be satisfactory to Agent
in form and substance. Borrower will cause each of its Subsidiaries to deliver
to Agent, simultaneously with its delivery of such a guaranty, written evidence
satisfactory to Agent and its counsel that such Subsidiary has taken all
corporate or partnership action necessary to duly approve and authorize its
execution, delivery and performance of such guaranty and any other documents
which it is required to execute.
ARTICLE VII - EVENTS OF DEFAULT AND REMEDIES
Section 7.1 EVENTS OF DEFAULT. Each of the following events constitutes
an Event of Default under this Agreement:
(a) Any Related Person fails to pay the principal portion of any
Obligation when due and payable, whether at a date for the payment of a
fixed installment or as a contingent or other payment becomes due and
payable or as a result of acceleration or otherwise;
(b) Any Related Person fails to pay any Obligation other than as set
forth in clause (a) above when due and payable (other than Obligations
under Sections 2.11, 2.12, 2.14, 2.15 and 7.3) whether at a date for the
payment of a fixed installment or as a contingent or other payment becomes
due and payable or as a result of acceleration or otherwise, within five
(5) Business Days after the due date;
(c) Any Related Person fails to pay any Obligation under Sections
2.11, 2.12, 2.14, 2.15 or 7.3 within thirty (30) days after any invoice or
other statement or notice;
(d) Any "default" or "event of default" occurs under any Loan
Document which defines either such term, and the same is not remedied
within the applicable period of grace (if any) provided in such Loan
Document;
(e) Any Related Person fails to duly observe, perform or comply with
any covenant, agreement or provision of Section 5.1(d) or Section 5.2;
(f) Any Related Person fails (other than as referred to in
subsections (a), (b), (c) or (d) above) to duly observe, perform or comply
with any covenant, agreement, condition or provision of any Loan Document,
and such failure remains unremedied for a period of thirty (30) days after
notice of such failure is given by Agent to Borrower;
(g) Any representation or warranty previously, presently or hereafter
made in writing by or on behalf of
53
any Related Person in connection with any Loan Document shall prove to have
been false or incorrect in any material respect on any date on or as of
which made, or any Loan Document at any time ceases to be valid, binding
and enforceable as warranted in Section 4.1(e) for any reason other than
its release or subordination by Agent or Majority Lenders;
(h) Any Related Person (i) fails to pay any portion, when such
portion is due, of any of its Debt in excess of $2,500,000, or (ii)
breaches or defaults in the performance of any agreement or instrument by
which any such Debt is issued, evidenced, governed, or secured, and any
such failure, breach or default continues beyond any applicable period of
grace provided therefor;
(i) Either (i) any "accumulated funding deficiency" (as defined in
Section 412(a) of the Code) in excess of $100,000 exists with respect to
any ERISA Plan, whether or not waived by the Secretary of the Treasury or
his delegate, or (ii) any Termination Event occurs with respect to any
ERISA Plan, such Plan is terminated by the PBGC and the then current value
of such ERISA Plan's benefit liabilities exceeds the then current value of
such ERISA Plan's assets available for the payment of such benefit
liabilities by more than $100,000 (or in the case of a Termination Event
involving the withdrawal of a substantial employer, the withdrawing
employer's proportionate share of such excess exceeds such amount);
(j) A Change of Control occurs;
(k) Borrower or Parent:
(i) suffers the entry against it of a judgment, decree or order
for relief by a court of competent jurisdiction in an involuntary
proceeding commenced under any applicable bankruptcy, insolvency or
other similar law of any jurisdiction now or hereafter in effect,
including the federal Bankruptcy Code, as from time to time amended,
or has any such proceeding commenced against it which remains
undismissed for a period of sixty days; or
(ii) commences a voluntary case under any applicable bankruptcy,
insolvency or similar law now or hereafter in effect, including the
federal Bankruptcy Code, as from time to time amended; or applies for
or consents to the entry of an order for relief in an involuntary case
under any such law; or makes a general assignment for the benefit of
creditors; or fails
54
generally to pay (or admits in writing its inability to pay) its debts
as such debts become due; or takes corporate or other action to
authorize any of the foregoing; or
(iii) suffers the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of all or a substantial part of its assets in a
proceeding brought against or initiated by it, and such appointment is
neither made ineffective nor discharged within thirty days after the
making thereof, or such appointment or taking possession is at any
time consented to, requested by, or acquiesced to by it; or
(iv) suffers the entry against it of a final judgment for the
payment of money in excess of $2,500,000 (not covered by insurance
reasonably satisfactory to Agent), 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 such period
and a stay of execution pending such appeal is obtained; or
(v) 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, and such writ or warrant of attachment or any similar
process is not stayed or released prior to the seizure thereunder of
any such property (and in any event within thirty days after the entry
or levy thereof or after any stay is vacated or set aside); and
Upon the occurrence of an Event of Default described in subsection (k)(i),
(k)(ii) or (k)(iii) of this section with respect to Borrower, all of the
Obligations shall thereupon be immediately due and payable, without demand,
presentment, notice of demand or of dishonor and nonpayment, protest, notice of
protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly waived by Borrower and each Related Person who at any time
ratifies or approves this Agreement. During the continuance of any other Event
of Default, Agent at any time and from time to time may (and upon written
instructions from Majority Lenders, Agent shall), without notice to Borrower or
any other Related Person, declare any or all of the Obligations immediately due
and payable, and all such Obligations shall thereupon be immediately due and
payable, without demand, presentment, notice of demand or of dishonor and
nonpayment, protest, notice of protest, notice of intention to accelerate,
declaration or notice of acceleration, or any other
55
notice or declaration of any kind, all of which are hereby expressly waived by
Borrower and each Related Person who at any time ratifies or approves this
Agreement. After any such acceleration (whether automatic or due to any
declaration by Agent), any obligation of any Lender to make any further Advances
shall be permanently terminated.
Section 7.2 REMEDIES. If any Event of Default shall occur and be
continuing, each Lender may protect and enforce its rights under the Loan
Documents by any appropriate proceedings, including proceedings for specific
performance of any covenant or agreement contained in any Loan Document, and
each Lender may enforce the payment of any Obligations due it or enforce any
other legal or equitable right which it may have. All rights, remedies and
powers conferred upon Agent and Lenders under the Loan Documents shall be deemed
cumulative and not exclusive of any other rights, remedies or powers available
under the Loan Documents or at law or in equity.
Section 7.3 INDEMNITY. BORROWER AGREES TO INDEMNIFY AGENT AND EACH
LENDER, UPON DEMAND, FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS,
CLAIMS, LOSSES, DAMAGES, PENALTIES, FINES, ACTIONS, JUDGMENTS, SUITS,
SETTLEMENTS, COSTS, EXPENSES OR DISBURSEMENTS (INCLUDING REASONABLE FEES OF
ATTORNEYS, ACCOUNTANTS, EXPERTS AND ADVISORS) OF ANY KIND OR NATURE WHATSOEVER
(IN THIS SECTION COLLECTIVELY CALLED "LIABILITIES AND COSTS") WHICH TO ANY
EXTENT (IN WHOLE OR IN PART) MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST
AGENT OR SUCH LENDER GROWING OUT OF, RESULTING FROM OR IN ANY OTHER WAY
ASSOCIATED WITH ANY OF THE COLLATERAL, THE LOAN DOCUMENTS AND THE TRANSACTIONS
AND EVENTS (INCLUDING THE ENFORCEMENT OR DEFENSE THEREOF) AT ANY TIME ASSOCIATED
THEREWITH OR CONTEMPLATED THEREIN (INCLUDING ANY VIOLATION OR NONCOMPLIANCE WITH
ANY ENVIRONMENTAL LAWS BY ANY RELATED PERSON OR ANY LIABILITIES OR DUTIES OF ANY
RELATED PERSON, AGENT OR ANY LENDER WITH RESPECT TO HAZARDOUS MATERIALS FOUND IN
OR RELEASED INTO THE ENVIRONMENT). THE FOREGOING INDEMNIFICATION SHALL APPLY
WHETHER OR NOT SUCH LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT
CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY
AGENT OR ANY LENDER, PROVIDED ONLY THAT NEITHER AGENT NOR ANY LENDER SHALL BE
ENTITLED UNDER THIS SECTION TO RECEIVE INDEMNIFICATION FOR THAT PORTION, IF ANY,
OF ANY LIABILITIES AND COSTS WHICH IS PROXIMATELY CAUSED BY ITS OWN INDIVIDUAL
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, AS DETERMINED IN A FINAL JUDGMENT. IF
ANY PERSON (INCLUDING BORROWER OR ANY OF ITS AFFILIATES) EVER ALLEGES SUCH GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT BY AGENT OR ANY LENDER, THE INDEMNIFICATION
PROVIDED FOR IN THIS SECTION SHALL NONETHELESS BE PAID UPON DEMAND, SUBJECT TO
LATER ADJUSTMENT OR REIMBURSEMENT, UNTIL SUCH TIME AS A COURT OF COMPETENT
JURISDICTION ENTERS A FINAL JUDGMENT AS TO THE EXTENT AND EFFECT
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OF THE ALLEGED GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. AS USED IN THIS SECTION
THE TERMS "AGENT" AND "LENDER" SHALL REFER NOT ONLY TO THE PERSONS DESIGNATED AS
SUCH IN SECTION 1.1 BUT ALSO TO EACH DIRECTOR, OFFICER, AGENT, ATTORNEY,
EMPLOYEE, REPRESENTATIVE AND AFFILIATE OF SUCH PERSON.
ARTICLE VIII - AGENT
Section 8.1 APPOINTMENT AND AUTHORITY. Each Lender hereby irrevocably
authorizes Agent, and Agent hereby undertakes, to receive payments of principal,
interest and other amounts due hereunder as specified herein and to take all
other actions and to exercise such powers under the Loan Documents as are
specifically delegated to Agent by the terms hereof or thereof, together with
all other powers reasonably incidental thereto. The relationship of Agent to
Lenders is only that of one commercial bank acting as administrative agent for
others, and nothing in the Loan Documents shall be construed to constitute Agent
a trustee or other fiduciary for any holder of any of the Notes or of any
participation therein nor to impose on Agent duties and obligations other than
those expressly provided for in the Loan Documents. With respect to any matters
not expressly provided for in the Loan Documents and any matters which the Loan
Documents place within the discretion of Agent, Agent shall not be required to
exercise any discretion or take any action, and it may request instructions from
Lenders with respect to any such matter, in which case it shall be required to
act or to refrain from acting (and shall be fully protected and free from
liability to all Lenders in so acting or refraining from acting) upon the
instructions of Majority Lenders (including itself), provided, however, that
Agent shall not be required to take any action which exposes it to a risk of
personal liability that it considers unreasonable or which is contrary to the
Loan Documents or to applicable law. Upon receipt by Agent from Borrower of any
communication calling for action on the part of Lenders or upon notice from any
Lender to Agent of any Default or Event of Default, Agent shall promptly notify
each Lender thereof.
Section 8.2 EXCULPATION, AGENT'S RELIANCE, ETC. NEITHER AGENT NOR ANY OF
ITS DIRECTORS, OFFICERS, AGENTS, ATTORNEYS, OR EMPLOYEES SHALL BE LIABLE FOR ANY
ACTION TAKEN OR OMITTED TO BE TAKEN BY ANY OF THEM UNDER OR IN CONNECTION WITH
THE LOAN DOCUMENTS, INCLUDING THEIR NEGLIGENCE OF ANY KIND, EXCEPT THAT EACH
SHALL BE LIABLE FOR ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. Without
limiting the generality of the foregoing, Agent (a) may treat the payee of any
Note as the holder thereof until Agent receives written notice of the assignment
or transfer thereof in accordance with this Agreement, signed by such payee and
in form satisfactory to Agent; (b) may consult with legal counsel (including
counsel for Borrower), independent public
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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; (c) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations made in or in connection with the Loan
Documents; (d) 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 the
Loan Documents on the part of any Related Person or to inspect the property
(including the books and records) of any Related Person; (e) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of any Loan Document or any
instrument or document furnished in connection therewith; (f) may rely upon the
representations and warranties of the Related Persons and the Lenders in
exercising its powers hereunder; and (g) shall incur no liability under or in
respect of the Loan Documents by acting upon any notice, consent, certificate or
other instrument or writing (including any telecopy, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper Person or Persons.
Section 8.3 LENDERS' CREDIT DECISIONS. Each Lender acknowledges that it
has, independently and without reliance upon Agent or any other Lender, made its
own analysis of Parent and Borrower and the transactions contemplated hereby and
its own independent decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and
without reliance upon Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Loan Documents.
Section 8.4 INDEMNIFICATION. Each Lender agrees to indemnify Agent (to
the extent not reimbursed by Borrower within ten (10) days after demand) from
and against such Lender's Percentage Share of any and all liabilities,
obligations, claims, losses, damages, penalties, fines, actions, judgments,
suits, settlements, costs, expenses or disbursements (including reasonable fees
of attorneys, accountants, experts, and advisors) of any kind or nature
whatsoever (in this section collectively called "liabilities and costs") which
to any extent (in whole or in part) may be imposed on, incurred by, or asserted
against Agent growing out of, resulting from or in any other way associated with
any of the Loan Documents and the transactions and events (including the
enforcement thereof) at any time associated therewith or contemplated therein
(including any violation or noncompliance with any Environmental Laws by any
Person or any liabilities or duties of any Person with respect to Hazardous
Materials found in or released into the environment).
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The foregoing indemnification shall apply whether or not such liabilities and
costs are in any way or to any extent caused, in whole or in part, by any
negligent act or omission of any kind by Agent, provided only that no Lender
shall be obligated under this section to indemnify Agent for that portion, if
any, of any liabilities and costs which is proximately caused by Agent's own
individual gross negligence or willful misconduct, as determined in a final
judgment. Cumulative of the foregoing, each Lender agrees to reimburse Agent
promptly upon demand for such Lender's Percentage Share of any costs and
expenses to be paid to Agent by Borrower under Section 5.1(i) to the extent that
Agent is not timely reimbursed for such expenses by Borrower as provided in such
section. As used in this section the term "Agent" shall refer not only to the
Person designated as such in Section 1.1 but also to each director, officer,
agent attorney, employee, representative and Affiliate of such Person.
Section 8.5 RIGHTS AS LENDER. In its capacity as a Lender, Agent shall
have the same rights and obligations as any Lender and may exercise such rights
as though it were not Agent. Agent may accept deposits from, lend money to, act
as Trustee under indentures of, and generally engage in any kind of business
with any of the Related Persons or their Affiliates, all as if it were not Agent
hereunder and without any duty to account therefor to any other Lender.
Section 8.6 SHARING OF SET-OFFS AND OTHER PAYMENTS. Agent and each Lender
agrees that if it shall, whether through the exercise of rights under Security
Documents or rights of banker's lien, set off, or counterclaim against Borrower
or otherwise, obtain payment of a portion of the aggregate Obligations owed to
it which, taking into account all distributions made by Agent under Section 2.8,
causes Agent or such Lender to have received more than it would have received
had such payment been received by Agent and distributed pursuant to Section 2.8,
then (a) it shall be deemed to have simultaneously purchased and shall be
obligated to purchase interests in the Obligations as necessary to cause Agent
and all Lenders to share all payments as provided for in Section 2.8, and (b)
such other adjustments shall be made from time to time as shall be equitable to
ensure that Agent and all Lenders share all payments of Obligations as provided
in Section 2.8; provided, however, that nothing herein contained shall in any
way affect the right of Agent or any Lender to obtain payment (whether by
exercise of rights of banker's lien, set-off or counterclaim or otherwise) of
indebtedness other than the Obligations. Borrower expressly consents to the
foregoing arrangements and agrees that any holder of any such interest or other
participation in the Obligations, whether or not acquired pursuant to the
foregoing arrangements, may to the fullest extent permitted by law exercise any
and all rights of banker's lien, set-off, or counterclaim as fully as if such
holder were a holder
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of the Obligations in the amount of such interest or other participation. If
all or any part of any funds transferred pursuant to this section is thereafter
recovered from the seller under this section which received the same, the
purchase provided for in this section shall be deemed to have been rescinded to
the extent of such recovery, together with interest, if any, if interest is
required pursuant to court order to be paid on account of the possession of such
funds prior to such recovery.
Section 8.7 INVESTMENTS. Whenever Agent in good faith determines that it
is uncertain about how to distribute to Lenders any funds which it has received,
or whenever Agent in good faith determines that there is any dispute among
Lenders about how such funds should be distributed, Agent may choose to defer
distribution of the funds which are the subject of such uncertainty or dispute.
If Agent in good faith believes that the uncertainty or dispute will not be
promptly resolved, or if Agent is otherwise required to invest funds pending
distribution to Lenders, Agent shall invest such funds pending distribution; all
interest on any such investment shall be distributed upon the distribution of
such investment and in the same proportion and to the same Persons as such
investment. All moneys received by Agent for distribution to Lenders (other
than to the Person who is Agent in its separate capacity as a Lender) shall be
held by Agent pending such distribution solely as Agent for such Lenders, and
Agent shall have no equitable title to any portion thereof.
Section 8.8 BENEFIT OF ARTICLE VIII. The provisions of this Article
(other than the following Section 8.9) are intended solely for the benefit of
Agent and Lenders, and no Related Person shall be entitled to rely on any such
provision or assert any such provision in a claim or defense against Agent or
any Lender. Agent and Lenders may waive or amend such provisions as they desire
without any notice to or consent of Borrower or any Related Person.
Section 8.9 RESIGNATION. Agent may resign at any time by giving written
notice thereof to Lenders and Borrower. Each such notice shall set forth the
date of such resignation, which shall be at least thirty (30) days after the
date such notice is given. Upon any such resignation Borrower may, with the
written concurrence of Majority Lenders designate a successor Agent. If within
fifteen days after the date of such resignation Borrower makes no such
designation or such written concurrence is not given, Majority Lenders shall
have the right to appoint a successor Agent. A successor must be appointed for
any retiring Agent, and such Agent's resignation shall become effective when
such successor accepts such appointment. If, within thirty days after the date
of the retiring Agent's resignation, no successor Agent has been appointed and
has accepted such appointment, then the retiring Agent may appoint a successor
Agent, which shall be
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a commercial bank organized or licensed to conduct a banking or trust business
under the laws of the United States of America or of any state thereof. Upon
the acceptance of any appointment as Agent hereunder by a successor Agent, the
retiring Agent shall be discharged from its duties and obligations under this
Agreement and the other Loan Documents. After any retiring Agent's resignation
hereunder the provisions of this Article VIII shall continue to inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under the Loan Documents.
ARTICLE IX - MISCELLANEOUS
Section 9.1 WAIVERS AND AMENDMENTS; ACKNOWLEDGEMENTS.
(a) WAIVERS AND AMENDMENTS. No failure or delay (whether by course
of conduct or otherwise) by Agent or any Lender in exercising any right,
power or remedy which Agent or such Lender may have under any of the Loan
Documents shall operate as a waiver thereof or of any other right, power or
remedy, nor shall any single or partial exercise by Agent or such Lender of
any such right, power or remedy preclude any other or further exercise
thereof or of any other right, power or remedy. No waiver of any provision
of any Loan Document and no consent to any departure therefrom shall ever
be effective unless it is in writing and signed as provided below in this
section, and then such waiver or consent shall be effective only in the
specific instances and for the purposes for which given and to the extent
specified in such writing. No notice to or demand on any Related Person
shall in any case of itself entitle any Related Person to any other or
further notice or demand in similar or other circumstances. This Agreement
and the other Loan Documents set forth the entire understanding between the
parties hereto with respect to the transactions contemplated herein and
therein and supersede all prior discussions and understandings with respect
to the subject matter hereof and thereof, and no waiver, consent, release,
modification or amendment of or supplement to this Agreement or the other
Loan Documents shall be valid or effective against any party hereto unless
the same is in writing and signed by (i) if such party is Borrower or
Parent, by Borrower or Parent, as the case may be, (ii) if such party is
Agent, by Agent and (iii) if such party is a Lender, by such Lender or by
Agent on behalf of Lenders with the written consent of Majority Lenders
(which consent has already been given as provided in Section 9.7).
Notwithstanding the foregoing or anything to the contrary herein, Agent
shall not, without the prior consent of each individual Lender, execute and
deliver on behalf of such
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Lender any waiver or amendment which would: (1) waive any of the
conditions specified in Article III (provided that Agent may in its
discretion withdraw any request it has made under Section 3.2(g)), (2)
increase the Commitment of such Lender or subject such Lender to any
additional obligations, (3) reduce the rate at which any fees hereunder are
calculated, or the principal of, or the stated rate of interest on, such
Lender's Note, (4) postpone any date fixed for any payment of any fees
hereunder, or principal of, or interest on, such Lender's Note, (5) amend
the definition herein of "Majority Lenders" or otherwise change the
aggregate amount of Percentage Shares which is required for Agent, Lenders
or any of them to take any particular action under the Loan Documents, or
(6) release Borrower from its obligation to pay such Lender's Note or
Parent from its guaranty of such payment.
(b) ACKNOWLEDGEMENTS AND ADMISSIONS. Borrower hereby represents,
warrants, acknowledges and admits that (i) it has been advised by counsel
in the negotiation, execution and delivery of the Loan Documents to which
it is a party, (ii) it has made an independent decision to enter into this
Agreement and the other Loan Documents to which it is a party, without
reliance on any representation, warranty, covenant or undertaking by Agent
or any Lender, whether written, oral or implicit, other than as expressly
set out in this Agreement or in another Loan Document delivered on or after
the date hereof, (iii) there are no representations, warranties, covenants,
undertakings or agreements by Agent or any Lender as to the Loan Documents
except as expressly set out in this Agreement or in another Loan Document
delivered on or after the date hereof, (iv) neither Agent nor any Lender
has any fiduciary obligation toward Borrower with respect to any Loan
Document or the transactions contemplated thereby, (v) the relationship
pursuant to the Loan Documents between Borrower, on one hand, and Agent and
each Lender, on the other hand, is and shall be solely that of debtor and
creditor, respectively, (vi) no partnership or joint venture exists with
respect to the Loan Documents between any of Borrower, Agent and Lenders,
(vii) Agent is not Borrower's Agent, but Agent for Lenders, (viii) should
an Event of Default or Default occur or exist Agent and each Lender will
determine in its sole discretion and for its own reasons what remedies and
actions it will or will not exercise or take at that time, (ix) without
limiting any of the foregoing, Borrower is not relying upon any
representation or covenant by Agent or any Lender, or any representative
thereof, and no such representation or covenant has been made, that Agent
or any Lender will, at the time of an Event of Default or Default, or at
any other time, waive, negotiate, discuss, or take or
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refrain from taking any action permitted under the Loan Documents with
respect to any such Event of Default or Default or any other provision of
the Loan Documents, and (x) Agent and all Lenders have relied upon the
truthfulness of the acknowledgements in this section in deciding to execute
and deliver this Agreement and to make their Loans.
THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 9.2 SURVIVAL OF AGREEMENTS; CUMULATIVE NATURE. All of the Related
Persons' various representations, warranties, covenants and agreements in the
Loan Documents shall survive the execution and delivery of this Agreement and
the other Loan Documents and the performance hereof and thereof, including the
making or granting of the Loans and the delivery of the Notes and the other
Loan Documents, and shall further survive until all of the Obligations are paid
in full to Agent and Lenders and all of Agent's and Lenders' obligations to
Borrower are terminated. All statements and agreements contained in any
certificate or other instrument delivered by any Related Person to Agent or any
Lender under any Loan Document shall be deemed representations and warranties by
Borrower or agreements and covenants of Borrower under this Agreement. The
representations, warranties, indemnities, and covenants made by the Related
Persons in the Loan Documents, and the rights, powers, and privileges granted to
Agent and Lenders in the Loan Documents, are cumulative, and, except for
expressly specified waivers and consents, no Loan Document shall be construed in
the context of another to diminish, nullify, or otherwise reduce the benefit to
Agent or any Lender of any such representation, warranty, indemnity, covenant,
right, power or privilege. In particular and without limitation, no exception
set out in this Agreement to any representation, warranty, indemnity, or
covenant herein contained shall apply to any similar representation, warranty,
indemnity, or covenant contained in any other Loan Document, and each such
similar representation, warranty, indemnity, or covenant shall be subject only
to those exceptions which are expressly made applicable to it by the terms of
the various Loan Documents.
Section 9.3 NOTICES. All notices, requests, consents, demands and other
communications required or permitted under any Loan Document shall be in
writing, unless otherwise specifically provided in such Loan Document (provided
that Agent may give telephonic notices to Lenders), and shall be deemed
sufficiently given or furnished if delivered by personal delivery, by telecopy
or telex, by delivery service with proof of delivery, or by
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registered or certified United States mail, postage prepaid, to Borrower and the
Related Persons at the address of Borrower specified on the signature pages
hereto and to Agent and the other Lenders at their addresses specified on the
signature pages hereto (unless changed by similar notice in writing given by the
particular Person whose address is to be changed). Any such notice or
communication shall be deemed to have been given (a) in the case of personal
delivery or delivery service, as of the date of first attempted delivery at the
address provided herein, (b) in the case of telecopy or telex, upon receipt, or
(c) in the case of registered or certified United States mail, three days after
deposit in the mail; provided, however, that no Request for Advance or Rate
Election shall become effective until actually received by Agent.
Section 9.4 JOINT AND SEVERAL LIABILITY; PARTIES IN INTEREST. All
Obligations which are incurred by two or more Related Persons shall be their
joint and several obligations and liabilities. All grants, covenants and
agreements contained in the Loan Documents shall bind and inure to the benefit
of the parties thereto and their respective successors and assigns; provided,
however, that no Related Person may assign or transfer any of its rights or
delegate any of its duties or obligations under any Loan Document without the
prior consent of Majority Lenders. Neither Borrower nor any Affiliates of
Borrower shall directly or indirectly purchase or otherwise retire any
Obligations owed to any Lender nor will any Lender accept any offer to do so,
unless each Lender shall have received substantially the same offer with respect
to the same Percentage Share of the Obligations owed to it. If Borrower or any
Affiliate of Borrower at any time purchases some but less than all of the
Obligations owed to Agent and all Lenders, such purchaser shall not be entitled
to any rights of Agent or Lender under the Loan Documents unless and until
Borrower or its Affiliates have purchased all of the Obligations.
Section 9.5 GOVERNING LAW; SUBMISSION TO PROCESS. Except to the extent
that the law of another jurisdiction is expressly elected in a Loan Document,
the Loan Documents shall be deemed contracts and instruments made under the laws
of the State of Texas and shall be construed and enforced in accordance with and
governed by the laws of the State of Texas and the laws of the United States of
America, without regard to principles of conflicts of law. Chapter 15 of Texas
Revised Civil Statutes Annotated Article 5069 (which regulates certain revolving
credit loan accounts and revolving tri-party accounts) does not apply to this
Agreement or to the Notes. Each of Borrower and Parent hereby irrevocably
submits itself and each other Related Person to the non-exclusive jurisdiction
of the state and federal courts sitting in the State of Texas and agrees and
consents that service of process may be made upon it or any of the Related
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Persons in any legal proceeding relating to the Loan Documents or the
Obligations by any means allowed under Texas or federal law. Each of Parent and
Borrower agrees to appoint CT Corporation as its agent for service of process in
Texas.
Section 9.6 LIMITATION ON INTEREST. Agent, Lenders, the Related Persons
and any other parties to the Loan Documents intend to contract in strict
compliance with applicable usury law from time to time in effect. In
furtherance thereof such Persons stipulate and agree that none of the terms and
provisions contained in the Loan Documents shall ever be construed to create a
contract to pay, for the use, forbearance or detention of money, interest in
excess of the maximum amount of interest permitted to be charged by applicable
law from time to time in effect. Neither any Related Person nor any present or
future guarantors, endorsers, or other Persons hereafter becoming liable for
payment of any Obligation shall ever be liable for unearned interest thereon or
shall ever be required to pay interest thereon in excess of the maximum amount
that may be lawfully charged under applicable law from time to time in effect,
and the provisions of this section shall control over all other provisions of
the Loan Documents which may be in conflict or apparent conflict herewith.
Agent and Lenders expressly disavow any intention to charge or collect excessive
unearned interest or finance charges in the event the maturity of any Obligation
is accelerated. If (a) the maturity of any Obligation is accelerated for any
reason, (b) any Obligation is prepaid and as a result any amounts held to
constitute interest are determined to be in excess of the legal maximum, or (c)
Agent or any Lender or any other holder of any or all of the Obligations shall
otherwise collect moneys which are determined to constitute interest which would
otherwise increase the interest on any or all of the Obligations to an amount in
excess of that permitted to be charged by applicable law then in effect, then
all sums determined to constitute interest in excess of such legal limit shall,
without penalty, be promptly applied to reduce the then outstanding principal of
the related Obligations or, at Agent's or such Lender's or holder's option,
promptly returned to Borrower or the other payor thereof upon such
determination. In determining whether or not the interest paid or payable,
under any specific circumstance, exceeds the maximum amount permitted under
applicable law, Agent, Lenders and the Related Persons (and any other payors
thereof) shall to the greatest extent permitted under applicable law, (i)
characterize any non-principal payment as an expense, fee or premium rather than
as interest, (ii) exclude voluntary prepayments and the effects thereof, and
(iii) amortize, prorate, allocate, and spread the total amount of interest
throughout the entire contemplated term of the instruments evidencing the
Obligations in accordance with the amounts outstanding from time to time
thereunder and the maximum legal rate of interest from time to time in effect
under
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applicable law in order to lawfully charge the maximum amount of interest
permitted under applicable law. In the event applicable law provides for an
interest ceiling under Texas Revised Civil Statutes Annotated article 5069-1.04,
that ceiling shall be the indicated rate ceiling and shall be used when
appropriate in determining the Highest Lawful Rate. As used in this section the
term "applicable law" means the laws of the State of Texas or the laws of the
United States of America, whichever laws allow the greater interest, as such
laws now exist or may be changed or amended or come into effect in the future.
Section 9.7 TERMINATION; LIMITED SURVIVAL. In its sole and absolute
discretion Borrower may at any time that no Obligations are owing elect in a
written notice delivered to Agent to terminate this Agreement. Upon receipt by
Agent of such a notice, if no Obligations are then owing this Agreement and all
other Loan Documents shall thereupon be terminated and the parties thereto
released from all prospective obligations thereunder. Notwithstanding the
foregoing or anything herein to the contrary, any waivers or admissions made by
any Related Person in any Loan Document, any Obligations under Sections 2.12
through 2.16, and any obligations which any Person may have to indemnify or
compensate Agent or any Lender shall survive any termination of this Agreement
or any other Loan Document. At the request and expense of Borrower, Agent shall
prepare and execute all necessary instruments to reflect and effect such
termination of the Loan Documents. Agent is hereby authorized to execute all
such instruments on behalf of all Lenders, without the joinder of or further
action by any Lender.
Section 9.8 SEVERABILITY. If any term or provision of any Loan Document
shall be determined to be illegal or unenforceable all other terms and
provisions of the Loan Documents shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable law.
Section 9.9 COUNTERPARTS. This Agreement may be separately executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement.
Section 9.10 ASSIGNMENTS; PARTICIPATIONS.
(a) ASSIGNMENTS. Each Lender shall have the right to sell, assign or
transfer all or any part of such Lender's Note, Advances, Loans and the
associated rights and obligations under all Loan Documents to one or more
financial institutions, pension plans, investment funds, or similar purchasers;
PROVIDED, that in connection with each sale, assignment or transfer, the
applicable Lender will consider the opinion and recommendation of Borrower,
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which opinion and recommendation shall in no way be binding upon such Lender,
but each such sale, assignment, or transfer shall be with the consent of
Borrower, which consent will not be unreasonably withheld, and with the consent
of Agent, and the assignee, transferee or recipient shall have, to the extent of
such sale, assignment, or transfer, the same rights, benefits and obligations as
it would if it were such Lender and a holder of such Note, including, without
limitation, the right to vote on decisions requiring consent or approval of all
Lenders or Majority Lenders and the obligation to fund its Percentage Share of
any Advances or Loans; PROVIDED FURTHER, that (i) each Lender in making each
such sale, assignment, or transfer must dispose of a pro rata portion of each
Loan made by such Lender, (ii) each such sale, assignment, or transfer shall be
in a principal amount not less than $10,000,000, (iii) each Lender shall at all
times maintain Loans then outstanding in an aggregate amount at least equal to
$10,000,000, (iv) each Lender may not offer to sell its Note and Loans or
interests therein in violation of any securities laws, and (v) no such
assignments shall become effective until (I) the assigning Lender delivers to
Agent copies of all written assignments and other documents evidencing any such
assignment or related thereto and an Agreement to be Bound in the form of
Exhibit H, providing for the assignee's ratification and agreement to be bound
by the terms of this Agreement and the other Loan Documents. Notwithstanding
the provisions of clauses (ii) and (iii) above, a Lender may make a sale,
assignment or transfer, or maintain Loans then outstanding, in an amount which
is less than that required above provided that Borrower and such Lender have
agreed to modify such requirements and have delivered to Agent prior written
evidence of their agreement to make such modification. An assignment fee in the
amount of $2,500 for each such assignment will be payable to Agent by assignor
or assignee. Within five (5) Business Days after its receipt of notice that the
Agent has received copies of any assignment and the other documents relating
thereto, the assignee shall notify Borrower of the outstanding principal balance
of the Notes payable to such Lender and shall execute and deliver to Agent (for
delivery to the relevant assignee) new Notes evidencing such assignee's assigned
Loans and, if the assignor Lender has retained a portion of its Loans,
replacement Notes in the principal amount of the Loans retained by the assignor
Lender (such Notes to be in exchange for, but not in payment of, the Notes held
by such Lender).
(b) PARTICIPATIONS. Each Lender shall have the right to grant
participations in all or any part of such Lender's Note, Advances, Loans and the
associated rights and obligations under all Loan Documents to one or more
pension plans, investment funds, financial institutions or similar purchasers;
PROVIDED that (i) each Lender granting a participation shall use its best
efforts to give prior notice of any such participation, but in
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any event shall promptly notify Agent and Borrower thereof, (ii) each Lender
granting a participation shall retain the right to vote hereunder, and no
participant shall be entitled to vote hereunder on decisions requiring consent
or approval of Majority Lenders (except as set forth in (iv) below), (iii) each
Lender and Borrower shall be entitled to deal with the Lender granting a
participation in the same manner as if no participation had been granted, and
(iv) no participant shall ever have any right by reason of its participation to
exercise any of the rights of Lenders hereunder, except that any Lender may
agree with any participant that such Lender will not, without the consent of
such participant, consent to any amendment or waiver described in Section 9.1(a)
requiring approval of 100% of the Lenders.
(c) DISTRIBUTION OF INFORMATION. It is understood and agreed that any
Lender may provide to assignees and participants and prospective assignees and
participants financial information and reports and data concerning Borrower's
properties and operations which was provided to such Lender pursuant to this
Agreement, subject to Section 5.1(c).
SECTION 9.11 WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. EACH OF
BORROWER, AGENT AND LENDERS HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND
IRREVOCABLY (a) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH
THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED
THEREWITH, BEFORE OR AFTER MATURITY; (b) WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (c) CERTIFIES THAT NO PARTY
HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (d)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION.
BORROWER HEREBY REPRESENTS AND ACKNOWLEDGES THAT IT IS A "BUSINESS CONSUMER" FOR
THE PURPOSES OF THE TEXAS DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION ACT,
THAT IT HAS ASSETS OF $5,000,000 OR MORE ACCORDING TO ITS MOST RECENT FINANCIAL
STATEMENTS PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES,
THAT IT HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT
ENABLE IT TO EVALUATE THE MERITS AND RISKS OF CREDIT TRANSACTIONS GENERALLY AND
OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS IN PARTICULAR, AND THAT
IT IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING
68
POSITION WITH RESPECT TO THE PARTIES TO AND THE TRANSACTIONS CONTEMPLATED BY THE
LOAN DOCUMENTS; BORROWER HEREBY WAIVES THE PROVISIONS OF THE TEXAS DECEPTIVE
TRADE PRACTICES - CONSUMER PROTECTION ACT (OTHER THAN SECTION 17.555 THEREOF),
AS FROM TIME TO TIME AMENDED.
Section 9.12 NO INDIRECT SECURITY. Notwithstanding any Section or
provision of this Agreement to the contrary, nothing in this Agreement shall (i)
restrict or limit the right or ability of any Related Person to pledge,
mortgage, sell, assign, or otherwise encumber or dispose of any "margin stock"
or "margin securities" as defined in Regulation U and Regulation G,
respectively, or (ii) create a Default arising out of or relating to any such
pledge, mortgage, sale, assignment or other encumbrance or disposition.
69
IN WITNESS WHEREOF, this Agreement is executed as of the date first written
above.
PLAINS PETROLEUM OPERATING COMPANY
Borrower
By:/s/ William F. Wallace
-------------------------------
William F. Wallace
President and Chief Operating
Officer
PLAINS PETROLEUM COMPANY
Parent
By:/s/ James A. Miller
-------------------------------
James A. Miller
Chairman and Chief Executive
Officer
Address:
12596 West Bayaud, Suite 400
Lakewood, Colorado 80228
Attention: James A. Miller
Telephone: (303) 969-9325
Telecopy: (303) 969-3157
Percentage NATIONSBANK OF TEXAS, N.A.
Share of Agent and Lender
Percentage Maximum
Share Loan Amount
---------- -----------
By:/s/ Franklyn L. Muscara
-------------------------------
Franklyn L. Muscara
Senior Vice President
100% $150,000,000
Address:
NationsBank Plaza
901 Main Street, 49th Floor
Dallas, Texas 75202
Attention: Energy Banking Group
With a copy to:
NationsBank of Texas, N.A.
Denver Energy Group
370 Seventeenth, Suite 3250
Denver, Colorado 80202-5632
Attention: David Rubenking
70
Telephone: (303) 629-6969
Telecopy: (303) 629-6303
71
EXHIBIT A
PROMISSORY NOTE
$150,000,000 Dallas, Texas February 17, 1995
FOR VALUE RECEIVED, the undersigned, Plains Petroleum Operating Company, a
Delaware corporation (herein called "Borrower"), hereby promises to pay to the
order of NATIONSBANK OF TEXAS, N.A., a national banking association (herein
called "Lender"), the principal sum of ONE HUNDRED FIFTY MILLION AND NO/100
DOLLARS ($150,000,000), or, if greater or less, the aggregate unpaid principal
amount of the Loan made under this Note by Lender to Borrower pursuant to the
terms of the Credit Agreement (as hereinafter defined), together with interest
on the unpaid principal balance thereof as hereinafter set forth, both principal
and interest payable as herein provided in lawful money of the United States of
America at the offices of the Agent under the Credit Agreement, 901 Main Street,
Dallas, Texas 75202 or at such other place within Dallas County, Texas, as from
time to time may be designated by the holder of this Note.
This Note (a) is issued and delivered under that certain Credit Agreement
of even date herewith among Borrower, Plains Petroleum Company, NationsBank of
Texas, N.A., as Agent, and the lenders (including Lender) referred to therein
(herein, as from time to time supplemented, amended or restated, called the
"Credit Agreement"), and is a "Note" as defined therein, and (b) is subject to
the terms and provisions of the Credit Agreement, which contains provisions for
payments and prepayments hereunder and acceleration of the maturity hereof upon
the happening of certain stated events. Payments on this Note shall be made and
applied as provided herein and in the Credit Agreement. Reference is hereby
made to the Credit Agreement for a description of certain rights, limitations of
rights, obligations and duties of the parties hereto and for the meanings
assigned to terms used and not defined herein.
For the purposes of this Note, the following terms have the meanings
assigned to them below:
"Base Rate Payment Date" means (i) the first day of each January,
April, July and October of each year, beginning April 1, 1995, and (ii) any
day on which past due interest or principal is owed hereunder and is
unpaid. If the terms hereof or of the Credit Agreement provide that
payments of interest or principal hereon shall be deferred from one Base
Rate Payment Date to another day, such other day shall also be a Base Rate
Payment Date.
1
"Fixed Rate Payment Date" means, with respect to any Fixed Rate
Portion: (i) the day on which the related Interest Period ends and if such
Interest Period is more than 90 days, the day which is 90 days after the
first day
2
of such Interest Period shall also be a Fixed Rate Payment Date, and (ii)
any day on which past due interest or past due principal is owed hereunder
with respect to such Fixed Rate Portion and is unpaid. If the terms hereof
or of the Credit Agreement provide that payments of interest or principal
with respect to such Fixed Rate Portion shall be deferred from one Fixed
Rate Payment Date to another day, such other day shall also be a Fixed Rate
Payment Date.
The principal amount of this Note shall be due and payable in twenty-four
quarterly installments, each of which shall be equal to one-twenty-fourth
(1/24th) of the aggregate unpaid principal balance of this Note at the end of
the Commitment Period, and shall be due and payable on the first day of January,
April, July, and October of each year, beginning April 1, 1997 and continuing
regularly thereafter until January 1, 2004, at which time the unpaid principal
balance of this Note and all interest accrued hereon shall be due and payable in
full.
The Base Rate Portion of the Loan (exclusive of any past due principal or
interest) from time to time outstanding shall bear interest on each day
outstanding at the Base Rate in effect on such day. On each Base Rate Payment
Date Borrower shall pay to the holder hereof all unpaid interest which has
accrued on the Base Rate Portion to but not including such Base Rate Payment
Date. Each Fixed Rate Portion of the Loan (exclusive of any past due principal
or interest) shall bear interest on each day during the related Interest Period
at the related Fixed Rate in effect on such day. On each Fixed Rate Payment
Date relating to such Fixed Rate Portion Borrower shall pay to the holder hereof
all unpaid interest which has accrued on such Fixed Rate Portion to but not
including such Fixed Rate Payment Date. All past due principal of and past due
interest on the Loan shall bear interest on each day outstanding at the Late
Payment Rate in effect on such day, and such interest shall be due and payable
daily as it accrues. Notwithstanding the foregoing provisions of this
paragraph: (a) this Note shall never bear interest in excess of the Highest
Lawful Rate, and (b) if at any time the rate at which interest is payable on
this Note is limited by the Highest Lawful Rate (by the foregoing clause (a) or
by reference to the Highest Lawful Rate in the definitions of Base Rate, Fixed
Rate, and Late Payment Rate), this Note shall bear interest at the Highest
Lawful Rate and shall continue to bear interest at the Highest Lawful Rate until
such time as the total amount of interest accrued hereon equals (but does not
exceed) the total amount of interest which would have accrued hereon had there
been no Highest Lawful Rate applicable hereto.
Notwithstanding the foregoing paragraph and all other provisions of this
Note, in no event shall the interest payable hereon, whether before or after
maturity, exceed the maximum
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amount of interest which, under applicable law, may be charged on this Note, and
this Note is expressly made subject to the provisions of the Credit Agreement
which more fully set out the limitations on how interest accrues hereon. In the
event applicable law provides for a ceiling under Texas Revised Civil Statutes
Annotated article 5069-1.04, that ceiling shall be the indicated rate ceiling
and shall be used in this Note for calculating the Highest Lawful Rate and for
all other purposes. The term "applicable law" as used in this Note shall mean
the laws of the State of Texas or the laws of the United States, whichever laws
allow the greater interest, as such laws now exist or may be changed or amended
or come into effect in the future.
If this Note is placed in the hands of an attorney for collection after
default, or if all or any part of the indebtedness represented hereby is proved,
established or collected in any court or in any bankruptcy, receivership, debtor
relief, probate or other court proceedings, Borrower and all endorsers, sureties
and guarantors of this Note jointly and severally agree to pay reasonable
attorneys' fees and collection costs to the holder hereof in addition to the
principal and interest payable hereunder.
Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment, notice of demand and of dishonor and
nonpayment of this Note, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, declaration or notice of acceleration of
the maturity of this Note, diligence in collecting, the bringing of any suit
against any party and any notice of or defense on account of any extensions,
renewals, partial payments or changes in any manner of or in this Note or in any
of its terms, provisions and covenants, or any releases or substitutions of any
security, or any delay, indulgence or other act of any trustee or any holder
hereof, whether before or after maturity.
THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL BE GOVERNED
BY THE LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW), EXCEPT TO THE EXTENT THE SAME ARE GOVERNED BY APPLICABLE FEDERAL LAW.
PLAINS PETROLEUM OPERATING COMPANY
By:/s/ William F. Wallace
-------------------------------
William F. Wallace
President and Chief Operating
Officer
-4-
EXHIBIT B-1
REQUEST FOR ADVANCE
Reference is made to that certain Credit Agreement dated as of February 17,
1995 (as from time to time amended, the "Agreement"), by and among Plains
Petroleum Operating Company ("Borrower"), Plains Petroleum Company ("Parent"),
NationsBank of Texas, N.A., as Agent, and certain financial institutions
("Lenders"). Terms which are defined in the Agreement are used herein with the
meanings given them in the Agreement. Pursuant to the terms of the Agreement
Borrower hereby requests Lenders to make Advances to Borrower in the aggregate
principal amount of $ __________ and specifies ____________, 19__, as the date
Borrower desires for Lenders to make such Advances and for Agent to deliver to
Borrower the proceeds thereof.
To induce Lenders to make such Advances, Borrower and Parent hereby
represent, warrant, acknowledge, and agree to and with Agent and each Lender
that:
(a) The officer of Borrower and the officer of Parent signing this
instrument are the duly elected, qualified and acting officers of Borrower
and Parent respectively as indicated below such officer's signature hereto
having all necessary authority to act for Borrower and Parent respectively
in making the request herein contained.
(b) The representations and warranties of each Related Person set
forth in the Agreement and the other Loan Documents are true and correct on
and as of the date hereof (except to the extent that any representation or
warranty is expressly limited to a particular date and except to the extent
the facts on which such representations and warranties are based have been
changed by the extension of credit under the Agreement), with the same
effect as though such representations and warranties had been made on and
as of the date hereof.
(c) There does not exist on the date hereof any condition or event
which constitutes a Default which has not been waived in writing as
provided in Section 9.1(a) of the Agreement; nor will any such Default
exist upon Borrower's receipt and application of the Advances requested
hereby. Borrower will use the Advances hereby requested in compliance with
Section 2.3 of the Agreement.
(d) [Neither Borrower nor Parent will use any of the Advances hereby]
requested to finance Treasury Stock Purchases or to purchase "margin stock"
or "margin securities" as defined in Regulation U and Regulation T,
-1-
respectively.] [Borrower or Parent will use $___________ of the Advances]
hereby requested to finance Treasury Stock Purchases; accompanying this
Request for Advances is a Solvency Certificate of Parent in the form of
Exhibit B-2 to the Agreement.] [Borrower or Parent will use $___________]
of the Advances hereby requested to finance the purchase of "margin stock"
or "margin securities" as defined in Regulations U or T, respectively.]
(e) Each of the conditions precedent to Advances contained in the
Agreement remains satisfied.
(f) [The amount of Treasury Stock Purchases as of the date hereof is]
less than $35,000,000] [No material adverse change has occurred to the]
individual or Consolidated financial condition of Borrower or Parent or
their businesses since the date of this Agreement.]
(g) The aggregate unpaid principal balances of the Loans, after the
making of the Advances requested hereby, will not be in excess of the
Available Borrowing Base on the date requested for the making of such
Advances.
(h) The Loan Documents have not been modified, amended or
supplemented by any unwritten representations or promises, by any course of
dealing, or by any other means not provided for in Section 9.1(a) of the
Agreement. The Agreement and the other Loan Documents are hereby ratified,
approved, and confirmed in all respects.
The officer of Borrower and the officer of Parent signing this instrument
hereby certifies that, to the best of his knowledge after due inquiry, the above
representations, warranties, acknowledgements, and agreements of Borrower and
Parent are true, correct and complete.
IN WITNESS WHEREOF, this instrument is executed as of ____________, 19__.
PLAINS PETROLEUM OPERATING COMPANY
By:_______________________________
Name:
Title:
PLAINS PETROLEUM COMPANY
By:_______________________________
Name:
Title:
-2-
EXHIBIT B-2
SOLVENCY CERTIFICATE
Reference is made to that certain Credit Agreement dated as of February 17,
1995 (as from time to time amended, the "Agreement"), by and among Plains
Petroleum Operating Company ("Borrower"), Plains Petroleum Company ("Parent"),
NationsBank of Texas, N.A., as Agent, and certain financial institutions
("Lenders"). Terms which are defined in the Agreement are used herein with the
meanings given them in the Agreement.
In order to confirm to each Lender certain fundamental factors in each
Lender's decision to make Advances requested by Borrower pursuant to a Request
for Advance of even date herewith, the undersigned hereby certifies to Agent and
each Lender as follows:
1. I am the chief accounting officer of Parent and have principal
responsibility for the management of the financial affairs and accounting of
Parent. I have carefully reviewed the contents of this Certificate and have
made such investigations and inquiries (including consultation with counsel) as
I have deemed necessary or prudent in connection with the matters set forth
herein. I am familiar with the properties, businesses, assets and liabilities
of Parent, and I have reviewed (or caused to be reviewed) the Agreement and any
other agreements, instruments, or documents in respect of Debt (as defined
below). This Certificate is based, in part, on certain information, estimates
and assumptions. I am making this Certificate in good faith, believing that the
estimates and assumptions which underlie and form the basis for the statements
made in this Certificate are reasonable on the date hereof, and that such
information is the best reasonably available on the date hereof.
2. For the purposes of this Certificate:
(a) "TRANSACTIONS" means (i) the Advance of funds by Lenders to
Borrower pursuant to the Request for Advance of even date herewith, and
(ii) the use of $___________ of such Advance to make Treasury Stock
Purchases.
(b) "DEBT" means all obligations and liabilities of Parent, whether
matured or unmatured; liquidated or unliquidated; disputed or undisputed;
secured or unsecured; senior or subordinated; absolute, fixed or
contingent; full-recourse, limited-recourse, or non-recourse; and whether
or not required to be disclosed pursuant to generally accepted accounting
principles.
-1-
3. After giving effect to the Transactions, the present fair salable
value of the assets of Parent will exceed the Debt of Parent, including the
Obligations.
4. Parent is able on the date hereof, before giving effect to the
Transactions, to realize upon its assets and pay its presently existing Debt as
such Debt matures in the expected course of business. After giving effect to
the Transactions and to the Debt incurred as a part thereof, Parent will remain
able to realize upon its assets and pay its Debt as such Debt matures in the
expected course of business. In making the above statements I have taken into
account estimated future transfers of cash and other assets (whether as
dividends, loans, repayments or otherwise) among Parent and its affiliates, as
well as any restrictions on their abilities to make such transfers.
5. With respect to the businesses and transactions in which Parent is
engaged or about to engage: (a) on the date hereof, before giving effect to the
Transactions, Parent does not have an unreasonably small capital, and (b) after
giving effect to the Transactions, Parent will not have an unreasonably small
capital.
6. Taking into account the Transactions and all other businesses and
transactions in which Parent is engaged or intend to engage, Parent does not
intend or believe that it will incur Debt that will be beyond its ability to pay
as such Debt matures.
7. In consummating the Transactions, Parent does not intend to disturb,
hinder, delay or defraud any of its present or future creditors or any other
Person to which it is or will become, on or after the date hereof, obligated or
indebted.
IN WITNESS WHEREOF, I have executed this Certificate in my capacity as the
chief accounting officer of Parent as of ________________, 199__.
-----------------------------
Name:
Chief Accounting Officer of
Plains Petroleum Company
-2-
EXHIBIT C
RATE ELECTION
Reference is made to that certain Credit Agreement dated as of February 17,
1995 (as from time to time amended, the "Agreement"), by and among Plains
Petroleum Operating Company ("Borrower"), Plains Petroleum Company, NationsBank
of Texas, N.A., as Agent, and certain financial institutions ("Lenders"). Terms
which are defined in the Agreement are used herein with the meanings given them
in the Agreement. Pursuant to the terms of the Agreement Borrower hereby elects
a Tranche of ____________ Portions in the aggregate amount of $ __________ with
an Interest Period beginning on _____________ and continuing for a period of
_________________.
To meet the conditions set out in the Agreement for the making of such
election, Borrower hereby represents, warrants, acknowledges and agrees that:
(a) The officer of Borrower signing this instrument is a duly
elected, qualified and acting ____________ of Borrower, having all
necessary authority to act for Borrower in making the election herein
contained.
(b) There does not exist on the date hereof any condition or event
which constitutes a Default which has not been waived in writing as
provided in Section 9.1(a) of the Agreement.
(c) The Loan Documents have not been modified, amended or
supplemented by any unwritten representations or promises, by any course of
dealing, or by any other means not provided for in Section 9.1(a) of the
Agreement. The Agreement and the other Loan Documents are hereby ratified,
approved, and confirmed in all respects.
The officer of Borrower signing this instrument hereby certifies that, to
the best of his knowledge after due inquiry, the above representations,
warranties, acknowledgements, and agreements of Borrower are true, correct and
complete.
IN WITNESS WHEREOF this instrument is executed as of __________________.
PLAINS PETROLEUM OPERATING COMPANY
By:_______________________________
Name:
Title:
EXHIBIT D
CERTIFICATE ACCOMPANYING
FINANCIAL STATEMENTS
Reference is made to that certain Credit Agreement dated as of February 17,
1995 (as from time to time amended, the "Agreement"), by and among Plains
Petroleum Operating Company ("Borrower"), Plains Petroleum Company ("Parent"),
NationsBank of Texas, N.A., as Agent, and certain financial institutions
("Lenders"), which Agreement is in full force and effect on the date hereof.
Terms which are defined in the Agreement are used herein with the meanings given
them in the Agreement.
This Certificate is furnished pursuant to Section 5.1(b)*[(i)(ii)] of the
Agreement. Together herewith Borrower and Parent are furnishing to Agent and
each Lender Parent's *[audited/unaudited] financial statements (the "Financial
Statements") as at ____________ (the "Reporting Date"). Each of Borrower and
Parent hereby represents, warrants, and acknowledges to Agent and each Lender
that:
(a) the officer of Borrower and the officer of Parent signing this
instrument is the duly elected, qualified and acting ____________ of
Borrower and Parent respectively and as such is Borrower's and Parent's
respective chief financial officer;
(b) the Financial Statements have been prepared in accordance with
GAAP and fairly present the financial condition of Parent and its
Consolidated Subsidiaries as at such date and the Consolidated results of
the operations of Parent and its Consolidated Subsidiaries for the period
ended on such date and satisfy the requirements of the Agreement;
(c) attached hereto is a schedule of calculations showing Borrower's
and Parent's compliance as of the Reporting Date with the requirements of
Sections 5.2 (e), (k) and (l) of the Agreement *[and Borrower's or']
Parent's] non-compliance as of such date with the requirements of
Section(s) ______________________ of the Agreement];
(d) on the Reporting Date Borrower and Parent were, and on the date
hereof Borrower and Parent are, in full compliance with the disclosure
requirements of Section 5.1(d) of the Agreement, and no Default otherwise
existed on the Reporting Date or otherwise exists on the date of this
instrument *[except for Default(s) under Section(s) ____________ of the]
Agreement, which [is/are] more fully described on a schedule attached
hereto].
-1-
The officer of Borrower and the officer of Parent signing this instrument
hereby certifies that he has reviewed the Loan Documents and the Financial
Statements and has otherwise undertaken such inquiry as is in his opinion
necessary to enable him to express an informed opinion with respect to the above
representations, warranties and acknowledgments of Borrower and Parent and, to
the best of his knowledge, such representations, warranties, and acknowledgments
are true, correct and complete.
IN WITNESS WHEREOF, this instrument is executed as of ____________, 19__.
PLAINS PETROLEUM OPERATING COMPANY
By:-------------------------------
Name:
Title
PLAINS PETROLEUM COMPANY
By:-------------------------------
Name:
Title:
-2-
EXHIBIT E
FORM OF OPINION OF EUGENE A. LANG, JR., ESQ.
[Letterhead of Eugene A. Lang, Jr., Esq.,]
General Counsel of Plains Petroleum Operating Company
and Plains Petroleum Company]
February 17, 1995
NationsBank of Texas, N.A.
Individually and as Agent
901 Main Street
Dallas, Texas 75202
Attention: Energy Lending Group
Ladies and Gentlemen:
This opinion is being delivered to you pursuant to Section 3.1(e) of the
Credit Agreement dated of even date herewith (the "Agreement"), by and among
Plains Petroleum Operating Company, a Delaware corporation ("Borrower"), Plains
Petroleum Company, a Delaware corporation ("Parent"), NationsBank of Texas,
N.A., as Agent, and the Lenders named therein. The Agreement provides for
credit in the maximum principal amount of $150,000,000 to be made available by
Lenders to Borrower, in accordance with the terms and provisions therein
contained. Terms which are defined in the Agreement and which are used but not
defined herein shall have the meanings given them in the Agreement. Terms
defined in Schedule 1 hereto shall have the same meanings when used in the body
of this opinion.
I am general counsel of Borrower and Parent and have acted as counsel for
Borrower and Parent in connection with the transactions provided for in the
Agreement. As such counsel I have assisted in the negotiation of the Agreement
and the other Loan Documents and have advised my clients in connection with
issues raised thereunder. I have examined executed counterparts (or, where
indicated, photostatic copies of executed counterparts) of the documents listed
in Schedule 1. (The documents listed in Section I of Schedule 1 are hereinafter
referred to as the "Principal Documents".) I have discussed the matters
addressed in this opinion with officers and representatives of Borrower and
Parent to the extent I have deemed appropriate to enable me to render this
opinion. In particular, but without limitation, I have confirmed that Borrower
and Parent acknowledge, understand and agree that the Loan Documents as written
set forth the entire understanding and agreement of the parties thereto, and I
have received a
-3-
certificate of Borrower and Parent to this effect which is attached hereto as
Exhibit A.
In rendering the opinions set forth herein, I have also examined originals
or copies, certified to my satisfaction, of such (i) certificates of public
officials, (ii) certificates of officers and representatives of Borrower and
Parent, and (iii) other documents and records, as I have deemed relevant or
necessary as the basis for such opinions. I have relied upon, and assumed the
accuracy of, such certificates, the representations and warranties made by
Borrower and Parent in the Principal Documents, and other statements, documents
and records supplied to me by Borrower and Parent, in each case with respect to
the factual matters set forth therein, and I have assumed the genuineness of all
signatures (other than signatures of officers of Borrower and Parent) and the
authenticity of all documents submitted to me as originals and the conformity to
original documents of all documents submitted to me as certified or photostatic
copies.
In rendering the opinions set forth herein, I have assumed that:
(i) all the parties to the Principal Documents, other than Borrower
and Parent, are duly organized, validly existing, and in good standing
under the laws of their respective jurisdictions or organization and have
the requisite corporate power to enter into such Principal Documents; and
(ii) the execution and delivery of the Principal Documents have been
duly authorized by all necessary corporate action and proceedings on the
part of all parties thereto other than Borrower and Parent, the Principal
Documents have been duly executed and delivered by all parties thereto
other than Borrower and Parent and constitute the valid and binding
obligations of such parties, enforceable against such parties in accordance
with their respective terms.
Based upon the foregoing, and subject to the qualifications and exceptions
hereinafter set forth, I am of the opinion that, as of the date hereof:
1. Borrower and Parent are each duly incorporated, validly existing and
in good standing under the laws of the State of Delaware. Each of Borrower and
Parent has all requisite corporate power to make or enter into the Principal
Documents to which it is a party and to perform its obligations thereunder.
-4-
2. Each of Borrower and Parent is duly qualified to transact business and
in good standing in the State of Colorado and Borrower is qualified to do
business in the States of Kansas, Louisiana, Mississippi, Montana, Nevada, New
Mexico, North Dakota, Oklahoma, Texas, Utah and Wyoming.
3. All of the outstanding capital stock of Borrower is owned of record
and, to my knowledge, beneficially by Parent. To my knowledge Borrower has no
obligation or commitment to issue any other shares of capital stock, nor has it
granted any options with respect thereto.
4. The Principal Documents have been duly authorized, executed and
delivered by Borrower and Parent (to the extent that each is a party thereto).
Assuming that funds will be lent as required under the Agreement, the Principal
Documents constitute the legal, valid and binding instruments and agreements of
Borrower and Parent (to the extent that each is a party thereto) under Colorado
law, and the obligations of Borrower and Parent thereunder are enforceable under
Colorado law in accordance with the terms thereof.
5. The execution, delivery and performance by Borrower and Parent of the
Principal Documents to which each is a party, and the consummation of the
transactions contemplated by the Principal Documents, including, without
limitation, the use of proceeds of the Loans to finance Treasury Stock
Purchases, will not and did not (a) violate or contravene any provision of the
charter or bylaws of Borrower or Parent or, (b) to my knowledge, conflict with
or result in a breach of any material term or provision of or constitute a
default under or result in the maturing of any indebtedness pursuant to any
indenture, mortgage, deed of trust, note or loan agreement, or other material
agreement or instrument of which I have knowledge and to which Borrower or
Parent is a party or by which either of them or any of their various properties
are bound, or, (c) result in a violation of any law, rule or regulation,
including without limitation, Regulation U, or, to my knowledge, any judgment,
order, decree, determination or award of any court or governmental authority
which is now in effect and applicable to Borrower or Parent or to any of their
properties. To my knowledge neither Borrower nor Parent is (x) in default under
or in violation of any judgment, order, decree, determination, award, indenture,
mortgage, deed of trust, note, loan agreement or other material agreement or
instrument of which I have knowledge in each case in a manner that could
reasonably be expected to have a material adverse effect on Borrower and Parent
or (y) in violation of its charter or bylaws.
6. Except for those which have been obtained by Borrower or Parent, to my
knowledge no consent, approval, authorization or
-5-
order of any court or governmental agency or of any third party is or was
required (a) for the execution and delivery by Borrower or Parent of any of the
Principal Documents to which it is a party, (b) for the consummation of the
transactions contemplated thereby, or (c) for the performance by Borrower or
Parent of their various obligations thereunder.
7. Other than as previously revealed to Agent and Lenders in the
Disclosure Schedule, to my knowledge there are no actions, suits, proceedings or
investigations pending or threatened against or affecting Borrower or Parent or
any of their various properties in any court or governmental agency (a) seeking
to enjoin, or questioning the legality or validity of, the performance by
Borrower or Parent of any of their various obligations under the Principal
Documents to which it is a party, or (b) which have, or would have if adversely
determined, a material adverse effect on the ability of Borrower or Parent to
perform such obligations.
8. Neither Borrower nor Parent is an "investment company" or, to my
knowledge, a company "controlled" by an "investment company," or an "open-end
investment company," a "unit investment trust" or a "face-amount certificate
company," as such terms are defined in the Investment Company Act of 1940, as
amended.
9. Neither Borrower nor Parent is a "holding company" or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company," as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended.
10. In a properly presented case, a Colorado court or a federal court
applying Colorado choice of law rules should give effect to the choice of law
provisions of the Principal Documents and should hold that such Principal
Documents are to be governed by the laws of the State of Texas rather than the
laws of the State of Colorado. In rendering the foregoing opinion, I note that
by their terms the Principal Documents expressly select the laws of the State of
Texas as the laws governing their interpretation, that advances to be made by
the Lenders pursuant to the Credit Agreement will be made by the Lenders in the
State of Texas, and that payments required to be made under the Credit Agreement
are payable in the State of Texas. The choice of law provisions of the
Principal Documents are not voidable under the laws of the State of Colorado.
Even if a Colorado court or a federal court holds that the Principal Documents
are to be governed by the laws of the State of Colorado, in a properly presented
case, a Colorado court or a federal court applying Colorado law should hold that
none of the provisions of the Principal Documents violate Colorado usury laws.
-6-
This opinion is limited by, subject to and based on the following:
(a) This opinion is limited in all respects to the General Corporation Law
of the State of Delaware, the laws of the State of Colorado and applicable
federal law; however, I am not a member of the bar of the State of Delaware and
my knowledge of its General Corporation Law is derived from a reading of that
statute without consideration of any judicial or administrative interpretations
thereof.
(b) In connection with opinions expressed herein as being limited "to my
knowledge", my examination has been limited to discussions with the officers and
representatives of Borrower and Parent in the course of this transaction and my
knowledge of the affairs of Borrower and Parent as their general counsel, and I
have made no independent investigation as to the accuracy or completeness of any
representations, warranties, data or other information, written or oral, made or
furnished by either of them to me, to Agent or to any Lender.
(c) The enforceability of the respective obligations of the parties to the
Loan Documents, and the availability of certain rights and remedies provided for
therein, may be limited by (i) applicable state and federal laws and judicial
decisions, but the remedies provided for in the Principal Documents are adequate
for the practical realization of the benefits provided thereby, (ii) equitable
principles which may limit the availability of certain equitable remedies (such
as specific performance) in certain instances, or (iii) applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally.
I express no opinion as to the effect of the compliance or noncompliance of
Agent or any of the Lenders with any state or federal laws or regulations
applicable to any such party because of such party's legal or regulatory status,
the nature of such party's business or the authority of such party to conduct
business in any jurisdiction.
I express no opinion, either implicitly or otherwise, on any issue not
expressly addressed in numbered Paragraphs 1 through 10. The opinions expressed
above are based solely on facts, laws and regulations in effect or the date
hereof, and I assume no obligation to revise or supplement this opinion should
such facts change or should such laws or regulations be changed by legislative
or regulatory action, judicial decision or otherwise, notwithstanding that such
changes may affect the legal analysis or conclusions contained herein.
-7-
The opinions herein expressed are for the benefit of Agent and the Lenders
and may be relied upon only by Agent, each Lender and by Thompson & Knight, a
Professional Corporation, in connection with any opinion delivered by them to
Agent.
Respectfully submitted,
/s/ Eugene A. Lang, Jr.
------------------------
Eugene A. Lang, Jr.
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SCHEDULE 1
DOCUMENTS REVIEWED
SECTION I. PRINCIPAL DOCUMENTS
1. The Agreement.
2. The Note of even date herewith in the principal amount of $150,000,000.
3. The Parent Guaranty of even date herewith.
SECTION II. CORPORATE RECORDS AND PROCEEDINGS
4. Omnibus Certificate of even date herewith by President and Chief Operating
Officer and Senior Vice President, General Counsel and Secretary of
Borrower, with attached specimen and incumbency certificate, resolutions of
Board of Directors of Borrower, Certificate of Incorporation of Borrower,
and Bylaws of Borrower.
5. Omnibus Certificate of even date herewith by Chairman and Chief Executive
Officer and Senior Vice President, General Counsel and Secretary of Parent,
with attached specimen and incumbency certificate, resolutions of Executive
Committee of Board of Directors of Parent, Certificate of Incorporation of
Parent, and Bylaws of Parent.
6. Compliance Certificate of even date herewith by President and Chief
Operating Officer of Borrower, the Chairman and Chief Executive Officer of
Parent and the Vice President, Controller and Treasurer of Borrower and
Parent.
7. Certificate dated January 23, 1995 of Borrower's due incorporation, valid
existence and good standing issued by Delaware Secretary of State and
certificate dated January 12, 1995 of Borrower's due qualification to do
business and good standing issued by Colorado Secretary of State.
8. Certificate dated January 23, 1995 of Parent's due incorporation, valid
existence and good standing issued by Delaware Secretary of State and
certificate dated January 12, 1995 of Parent's due qualification to do
business and good standing issued by Colorado Secretary of State.
9. Solvency Certificate of even date herewith by Treasurer of Borrower.
10. Solvency Certificate of even date herewith by Treasurer of Parent.
SECTION III. MISCELLANEOUS DOCUMENTS
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11. Request for Advance of even date herewith.
12. Notice of Final Agreement of even date herewith among Borrower, Parent,
Agent and Lenders.
-10-
EXHIBIT A TO LEGAL OPINION
Certificate
Reference is made to that certain Credit Agreement of even date herewith
(the "Agreement") by and among Plains Petroleum Operating Company, a Delaware
corporation ("Borrower"), Plains Petroleum Company, a Delaware corporation
("Parent"), NationsBank of Texas, N.A., as Agent, and the Lenders named therein.
Section 3.1(e) of the Agreement requires, as a condition precedent to Lenders'
advancing funds thereunder, that Agent and Lenders receive the legal opinion of
Eugene A. Lang, Jr., Esq., general counsel of the undersigned ("Counsel"). The
undersigned hereby authorize Counsel to give such legal opinion and waive any
attorney-client privilege which we may have as to the matters discussed therein.
To enable Counsel to deliver such legal opinion and thereby to induce Lenders to
extend the credit provided for in the Agreement, the undersigned hereby
represent and acknowledge to Counsel and to Agent and each Lender that:
(a) The undersigned have discussed Section 9.1 of the Agreement with
Counsel and fully understand that Section 9.1 provides that the Agreement and
the other "Loan Documents" (as such term is defined therein) set forth, as
written, the entire understanding and agreement of the parties thereto with
respect to the transactions contemplated in the Agreement;
(b) Section 9.1 of the Agreement is true and correct, and there are no
unwritten representations, promises, Supplemental Agreements or other statements
upon which the undersigned are relying in entering into the Agreement and the
other Loan Documents referred to therein;
(c) The undersigned have had all discussions with Counsel, and have made
available to Counsel all documents and instruments, which Counsel has requested
to enable him to give such legal opinion; and
(d) The undersigned have consulted with Counsel throughout the negotiation
of the Loan Documents in order to understand the legal effect of the Loan
Documents and our duties and rights thereunder, and we are making a fully
informed decision to enter into the Loan Documents and to undertake such duties
and rights.
IN WITNESS WHEREOF, this Certificate has been executed as of February 17,
1995.
PLAINS PETROLEUM OPERATING COMPANY
By:/s/ William F. Wallace
-------------------------------
William F. Wallace
President and Chief Operating
Officer
PLAINS PETROLEUM COMPANY
By:/s/ James A. Miller
----------------------------------
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James A. Miller
Chairman and Chief Executive Officer
-12-
EXHIBIT F
GUARANTY
THIS GUARANTY is made as of February 17, 1995 by PLAINS PETROLEUM COMPANY,
a Delaware corporation ("Guarantor"), in favor of NationsBank of Texas, N.A., a
national banking association ("NationsBank"), acting for itself and as agent for
other Lenders that may hereafter become parties to the Credit Agreement, as
hereinafter defined and described ("Agent"), and in favor of Lenders.
RECITALS:
1. Plains Petroleum Operating Company, a Delaware corporation ("Borrower")
has executed in favor of NationsBank that certain promissory note of even date
herewith, payable to the order of NationsBank in the principal amount of
$150,000,000 (such promissory note, as from time to time amended, and all
promissory notes given in substitution, renewal or extension therefor or
thereof, in whole or in part, being herein collectively called the "Note").
2. The Note was executed pursuant to a Credit Agreement of even date
herewith (herein, as from time to time amended, supplemented or restated, called
the "Credit Agreement"), by and between Borrower, Guarantor, NationsBank,
individually and as Agent, and Lenders, pursuant to which Lenders have agreed to
advance funds to Borrower under the Note, which may be advanced by Borrower to
Guarantor.
3. It is a condition precedent to Lenders' obligation to advance funds
pursuant to the Credit Agreement that Guarantor shall execute and deliver to
Agent and Lenders a satisfactory guaranty of Borrower's obligations under the
Note and the Credit Agreement.
4. Guarantor owns directly all of the outstanding shares of capital stock
of Borrower.
5. Borrower, Guarantor, and the other direct and indirect subsidiaries of
Guarantor are mutually dependent on each other in the conduct of their
respective businesses under a holding company structure, with the credit needed
from time to time by each often being provided by another or by means of
financing obtained by one such affiliate with the support of the others for
their mutual benefit and the ability of each to obtain such financing being
dependent on the successful operations of the others.
6. The Executive Committee of the board of directors of Guarantor has
determined that Guarantor's execution, delivery and performance of this Guaranty
may reasonably be expected to benefit Guarantor, directly or indirectly, and are
in the best interests of Guarantor.
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NOW, THEREFORE, in consideration of the premises, of the benefits which
will inure to Guarantor from Lenders' advances of funds to Borrower under the
Credit Agreement, and of Ten Dollars and other good and valuable consideration,
the receipt and sufficiency of all of which are hereby acknowledged, and in
order to induce Lenders to advance funds under the Credit Agreement, Guarantor
hereby agrees with Agent and Lenders as follows:
AGREEMENTS
Section 1 DEFINITIONS. Reference is hereby made to the Credit Agreement
for all purposes. All terms used in this Guaranty which are defined in the
Credit Agreement and not otherwise defined herein shall have the same meanings
when used herein. All references herein to any Obligation Document, Loan
Document, or other document or instrument refer to the same as from time to time
amended, supplemented or restated. As used herein the following terms shall
have the following meanings:
"OBLIGATIONS" means collectively all of the indebtedness, obligations, and
undertakings which are guaranteed by Guarantor and described in subsections (a)
and (b) of Section 2.
"OBLIGATION DOCUMENTS" means this Guaranty, the Note, the Credit Agreement,
the Loan Documents, all other documents and instruments under, by reason of
which, or pursuant to which any or all of the Obligations are evidenced,
governed, secured, or otherwise dealt with, and all other documents,
instruments, agreements, certificates, legal opinions and other writings
heretofore or hereafter delivered in connection herewith or therewith.
"OBLIGORS" means Borrower, Guarantor and any other endorsers, guarantors or
obligors, primary or secondary, of any or all of the Obligations.
"SECURITY" means any rights, properties, or interests of Agent or any
Lender, under the Obligation Documents or otherwise, which provide recourse or
other benefits to Agent or any Lender in connection with the Obligations or the
non-payment or non-performance thereof, including collateral (whether real or
personal, tangible or intangible) in which Agent or any Lender has rights under
or pursuant to any Obligation Documents, guaranties of the payment or
performance of any Obligation, bonds, surety agreements, keep-well agreements,
letters of credit, rights of subrogation, rights of offset, and rights pursuant
to which other claims are subordinated to the Obligations.
Section 2. GUARANTY.
(a) Guarantor hereby irrevocably, absolutely, and unconditionally
guarantees to Agent and each Lender the prompt, complete, and full payment when
due, and no matter how the same shall become due, of:
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(i) the Note, including all principal, all interest thereon and all
other sums payable thereunder;
(ii) Payment of and performance of any and all present or future
obligations of Borrower according to the terms of any present or future
swap agreements, cap, floor, collar, exchange transaction, forward
agreement or other exchange or protection agreements relating to crude oil,
natural gas or other hydrocarbons, or any option with respect to any such
transaction now existing or hereafter entered into between Borrower and
Agent or any Lender (or any affiliate of Agent or any Lender); and
(ii) All other sums payable under the other Obligation Documents,
whether for principal, interest, fees or otherwise, and whether fixed,
contingent, absolute, inchoate, liquidated or unliquidated, whether such
indebtedness or liability arises by notes, discounts, overdrafts, open
account indebtedness or in any other manner whatsoever, and including
interest, attorneys' fees and collection costs as may be provided by law or
in any instrument evidencing any such indebtedness or liability.
Without limiting the generality of the foregoing, Guarantor hereby agrees to pay
all post-petition interest, expenses, and other duties and liabilities of
Borrower described above in this subsection (a), or below in the following
subsection (b), which would be owed by Borrower but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization, or similar proceeding involving Borrower.
(b) Guarantor hereby irrevocably, absolutely, and unconditionally
guarantees to Agent and each Lender the prompt, complete and full performance,
when due, and no matter how the same shall become due, of all obligations and
undertakings of Borrower to Agent or any Lender under, by reason of, or pursuant
to any of the Obligation Documents.
(c) If Borrower shall for any reason fail to pay any Obligation, as and
when such Obligation shall become due and payable, whether at its stated
maturity, as a result of the exercise of any power to accelerate, or otherwise,
Guarantor will, forthwith upon demand by Agent or any Lender, pay such
Obligation in full to Agent or such Lender. If Borrower shall for any reason
fail to perform promptly any Obligation, Guarantor will, forthwith upon demand
by Agent or any Lender, cause such Obligation to be performed or, at Guarantor's
option, provide sufficient funds, in such amount and manner as Agent or such
Lender shall in good faith determine, for the prompt, full and faithful
performance of such Obligation by Agent or such Lender or such other Person as
Agent or such Lender shall designate.
(d) If either Borrower or Guarantor fails to pay or perform any Obligation
as described in the immediately preceding subsections (a), (b), or (c) Guarantor
will incur the additional obligation to pay to Agent and each Lender, and
Guarantor will
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forthwith upon demand by Agent or any Lender pay to Agent or such Lender, the
amount of any and all expenses, including reasonable fees and disbursements of
Agent's or such Lender's counsel and of any experts or agents retained by Agent
or such Lender, which Agent or such Lender may incur as a result of such
failure.
(e) As between Guarantor, Agent and Lenders, this Guaranty shall be
considered a primary and liquidated liability of Guarantor.
Section 3. UNCONDITIONAL GUARANTY.
(a) No action which Agent or any Lender may take or omit to take in
connection with any of the Obligation Documents, any of the Obligations (or any
other indebtedness owing by Borrower to Agent or any Lender), or any Security,
and no course of dealing of Agent or any Lender with any Obligor or any other
Person, shall release or diminish Guarantor's obligations, liabilities,
agreements or duties hereunder, affect this Guaranty in any way, regardless of
whether any such action or inaction may increase any risks to or liabilities of
Agent or any Lender or any Obligor or increase any risk to or diminish any
safeguard of any Security. Without limiting the foregoing, Guarantor hereby
expressly agrees that Agent or any Lender may, from time to time, without notice
to or the consent of Guarantor, do any or all of the following:
(i) Amend, change or modify, in whole or in part, any one or more of
the Obligation Documents and give or refuse to give any waivers or other
indulgences with respect thereto.
(ii) Neglect, delay, fail, or refuse to take or prosecute any action
for the collection or enforcement of any of the Obligations, to foreclose
or take or prosecute any action in connection with any Security or
Obligation Document, to bring suit against any Obligor or any other Person,
or to take any other action concerning the Obligations or the Obligation
Documents.
(iii) Accelerate, change, rearrange, extend, or renew the time,
terms, or manner for payment or performance of any one or more of the
Obligations.
(iv) Compromise or settle any unpaid or unperformed Obligation or any
other obligation or amount due or owing, or claimed to be due or owing,
under any one or more of the Obligation Documents.
(v) Take, exchange, amend, eliminate, surrender, release, or
subordinate any or all Security for any or all of the Obligations, accept
additional or substituted Security therefor, and perfect or fail to perfect
Agent's or any Lender's rights in any or all Security.
(vi) Discharge, release, substitute or add Obligors.
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(vii) Apply all monies received from Obligors or others, or from any
Security for any of the Obligations, as Agent or any Lender may determine
to be in its best interest, without in any way being required to marshall
Security or assets or to apply all or any part of such monies upon any
particular Obligations.
(b) No action or inaction of any Obligor or any other Person, and no
change of law or circumstances, shall release or diminish Guarantor's
obligations, liabilities, agreements, or duties hereunder, affect this Guaranty
in any way. Without limiting the foregoing, the obligations, liabilities,
agreements, and duties of Guarantor under this Guaranty shall not be released,
diminished, impaired, reduced, or affected by the occurrence of any or all of
the following from time to time, even if occurring without notice to or without
the consent of Guarantor:
(i) Any voluntary or involuntary liquidation, dissolution, sale of
all or substantially all assets, marshalling of assets or liabilities,
receivership, conservatorship, assignment for the benefit of creditors,
insolvency, bankruptcy, reorganization, arrangement, or composition of any
Obligor or any other proceedings involving any Obligor or any of the assets
of any Obligor under laws for the protection of debtors, or any discharge,
impairment, modification, release, or limitation of the liability of, or
stay of actions or lien enforcement proceedings against, any Obligor, any
properties of any Obligor, or the estate in bankruptcy of any Obligor in
the course of or resulting from any such proceedings.
(ii) The failure by Agent or any Lender to file or enforce a claim in
any proceeding described in the immediately preceding subsection (i) or to
take any other action in any proceeding to which any Obligor is a party.
(iii) The release by operation of law of any Obligor from any of the
Obligations or any other obligations to Agent or any Lender.
(iv) The invalidity, deficiency, illegality, or unenforceability of
any of the Obligations or the Obligation Documents, in whole or in part,
any bar by any statute of limitations or other law of recovery on any of
the Obligations, or any defense or excuse for failure to perform on account
of force majeure, act of God, casualty, impossibility, impracticability, or
other defense or excuse whatsoever.
(v) The failure of any Obligor or any other Person to sign any
guaranty or other instrument or agreement within the contemplation of any
Obligor, Agent or any Lender.
(vi) The fact that Guarantor may have incurred directly part of the
Obligations or is otherwise primarily liable therefor.
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(vii) Any change in the name, business, operations, organization or
structure, corporate or otherwise, of Guarantor or any other Obligor.
(viii) Without limiting any of the foregoing, any fact or event
(whether or not similar to any of the foregoing) which in the absence of
this provision would or might constitute or afford a legal or equitable
discharge or release of or defense to a guarantor or surety other than the
actual payment and performance by Guarantor under this Guaranty.
(c) Agent or any Lender may invoke the benefits of this Guaranty before
pursuing any remedies against any Obligor or any other Person and before
proceeding against any Security now or hereafter existing for the payment or
performance of any of the Obligations. Agent or any Lender may maintain an
action against Guarantor on this Guaranty without joining any other Obligor
therein and without bringing a separate action against any other Obligor.
(d) If any payment to Agent or any Lender by any Obligor is held to
constitute a preference or a voidable transfer under applicable state or federal
laws, or if for any other reason Agent or any Lender is required to refund such
payment to the payor thereof or to pay the amount thereof to any other Person,
such payment to Agent or such Lender shall not constitute a release of Guarantor
from any liability hereunder, and Guarantor agrees to pay such amount to Agent
or such Lender on demand and agrees and acknowledges that this Guaranty shall
continue to be effective or shall be reinstated, as the case may be, to the
extent of any such payment or payments. Any transfer by subrogation which is
made as contemplated in Section 6 prior to any such payment or payments shall
(regardless of the terms of such transfer) be automatically voided upon the
making of any such payment or payments, and all rights so transferred shall
thereupon revert to and be vested in Agent or such Lender.
(e) This is a continuing guaranty and shall apply to and cover all
Obligations and renewals and extensions thereof and substitutions therefor from
time to time.
Section 4 WAIVER. Guarantor hereby waives, with respect to the
Obligations, this Guaranty, and the other Obligation Documents:
(a) notice of the incurrence of any Obligation by Borrower, and notice of
any kind concerning the assets, liabilities, financial condition,
creditworthiness, businesses, prospects, or other affairs of Borrower (it being
understood and agreed that: (i) Guarantor shall take full responsibility for
informing itself of such matters, (ii) neither Agent nor any Lender shall have
any responsibility of any kind to inform Guarantor of such matters, and (iii)
Agent and each Lender is hereby authorized to assume that Guarantor, by virtue
of its relationships with Borrower which are independent of this Guaranty, has
full and complete knowledge of such matters at each time when Lenders extend
credit
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to Borrower or take any other action which may change or increase Guarantor's
liabilities or losses hereunder).
(b) notice that Agent, any Lender, any Obligor, or any other Person has
taken or omitted to take any action under any Obligation Document or any other
agreement or instrument relating thereto or relating to any Obligation.
(c) notice of acceptance of this Guaranty and all rights of Guarantor
under Section 34.02 of the Texas Business and Commerce Code.
(d) demand, presentment for payment, and notice of demand, dishonor,
nonpayment, or nonperformance.
(e) notice of intention to accelerate, notice of acceleration, protest,
notice of protest, notice of any exercise of remedies (as described in the
following Section 5 or otherwise), and all other notices of any kind whatsoever.
Section 5 EXERCISE OF REMEDIES. Agent and each Lender shall have the
right to enforce, from time to time, in any order and at Agent's or such
Lender's sole discretion, any rights, powers and remedies which Agent or such
Lender may have under the Obligation Documents or otherwise, including judicial
foreclosure, the exercise of rights of power of sale, the taking of a deed or
assignment in lieu of foreclosure, the appointment of a receiver to collect
rents, issues and profits, the exercise of remedies against personal property,
or the enforcement of any assignment of leases, rentals, oil or gas production,
or other properties or rights, whether real or personal, tangible or intangible;
and Guarantor shall be liable to Agent and each Lender hereunder for any
deficiency resulting from the exercise by Agent or any Lender of any such right
or remedy even though any rights which Guarantor may have against Borrower or
others may be destroyed or diminished by exercise of any such right or remedy.
No failure on the part of Agent or any Lender to exercise, and no delay in
exercising, any right hereunder or under any other Obligation Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right preclude any other or further exercise thereof or the exercise of any
other right. The rights, powers and remedies of Agent and each Lender provided
herein and in the other Obligation Documents are cumulative and are in addition
to, and not exclusive of, any other rights, powers or remedies provided by law
or in equity. The rights of Agent and each Lender hereunder are not conditional
or contingent on any attempt by Agent or any Lender to exercise any of its
rights under any other Obligation Document against any Obligor or any other
Person.
Section 6. LIMITED SUBROGATION. Until all of the Obligations have been
paid and performed in full Guarantor shall have no right to exercise any right
of subrogation, reimbursement, indemnity, exoneration, contribution or any other
claim which it may now or hereafter have against or to any Obligor or any
Security in connection with this Guaranty (including any right of subrogation
under Section 34.04 of the Texas Business and Commerce Code), and Guarantor
shall not enforce any
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remedy which Guarantor may have against Borrower and any right to participate in
any Security until such time. If any amount shall be paid to Guarantor on
account of any such subrogation or other rights, any such other remedy, or any
Security at any time when all of the Obligations and all other expenses
guaranteed pursuant hereto shall not have been paid in full, such amount shall
be held in trust for the benefit of Agent and each Lender, shall be segregated
from the other funds of Guarantor and shall forthwith be paid over to Agent, to
be held by Agent, for the benefit of Agent and each Lender, as collateral for,
or then or at any time thereafter applied in whole or in part by Agent and
Lenders against, all or any portion of the Obligations, whether matured or
unmatured, in such order as Agent and Lenders shall elect. If Guarantor shall
make payment to Agent or any Lender of all or any portion of the Obligations and
if all of the Obligations shall be finally paid in full, Agent or such Lender
will, at Guarantor's request and expense, execute and deliver to Guarantor
(without recourse, representation or warranty) appropriate documents necessary
to evidence the transfer by subrogation to Guarantor of an interest in the
Obligations resulting from such payment by Guarantor; provided that such
transfer shall be subject to Section 3(d) above.
Section 7. SUCCESSORS AND ASSIGNS. Guarantor's rights or obligations
hereunder may not be assigned or delegated, but this Guaranty and such
obligations shall pass to and be fully binding upon the successors of Guarantor,
as well as Guarantor. This Guaranty shall apply to and inure to the benefit of
Agent and each Lender and its successors or assigns. Without limiting the
generality of the immediately preceding sentence, Agent or any Lender may
assign, grant a participation in, or otherwise transfer any Obligation held by
it or any portion thereof, and Agent or any Lender may assign or otherwise
transfer its rights or any portion thereof under any Obligation Document, to any
other Person, and such other Person shall thereupon become vested with all of
the benefits in respect thereof granted to Agent and each Lender hereunder
unless otherwise expressly provided by Agent or such Lender in connection with
such assignment or transfer.
Section 8. SUBORDINATION. Guarantor hereby subordinates and makes
inferior to the Obligations any and all indebtedness now or at any time
hereafter owed by Borrower to Guarantor. Guarantor agrees that after the
occurrence of any Default or Event of Default it will neither permit Borrower to
repay such indebtedness or any part thereof nor accept payment from Borrower of
such indebtedness or any part thereof without the prior written consent of Agent
and Majority Lenders. If Guarantor receives any such payment without the prior
written consent of Agent and Majority Lenders, the amount so paid shall be held
in trust for the benefit of Agent and each Lender, shall be segregated from the
other funds of Guarantor, and shall forthwith be paid over to Agent, to be held
by Agent, for the benefit of Agent and each Lender, as collateral for, or then
or at any time thereafter applied in whole or in part by Agent and Lenders
against, all or any portions of the Obligations, whether matured or unmatured,
in such order as set forth in the Credit Agreement.
-20-
Section 9. REPRESENTATION AND WARRANTY. Guarantor hereby represents and
warrants to Agent and each Lender that the Recitals at the beginning of this
Guaranty are true and correct in all material respects.
Section 10. NO ORAL CHANGE. No amendment of any provision of this
Guaranty shall be effective unless it is in writing and signed as provided in
the Credit Agreement, and no waiver of any provision of this Guaranty, and no
consent to any departure by Guarantor therefrom, shall be effective unless it is
in writing and signed as provided in the Credit Agreement, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.
Section 11. INVALIDITY OF PARTICULAR PROVISIONS. If any term or provision
of this Guaranty shall be determined to be illegal or unenforceable all other
terms and provisions hereof shall nevertheless remain effective and shall be
enforced to the fullest extent permitted by applicable law.
Section 12. HEADINGS AND REFERENCES. The headings used herein are for
purposes of convenience only and shall not be used in construing the provisions
hereof. The words "this Guaranty," "this instrument," "herein," "hereof,"
"hereby" and words of similar import refer to this Guaranty as a whole and not
to any particular subdivision unless expressly so limited. The phrases "this
section" and "this subsection" and similar phrases refer only to the
subdivisions hereof in which such phrases occur. The word "or" is not
exclusive, and the word "including" (in its various forms) means "including
without limitation". Pronouns in masculine, feminine and neuter genders shall
be construed to include any other gender, and words in the singular form shall
be construed to include the plural and vice versa, unless the context otherwise
requires.
Section 13. TERM. This Guaranty shall be irrevocable until all of the
Obligations have been completely and finally paid and performed, no Lender has
any obligation to make any loans or other advances to Borrower, and all
obligations and undertakings of Borrower under, by reason of, or pursuant to the
Obligation Documents have been completely performed, and this Guaranty is
thereafter subject to reinstatement as provided in Section 3(d). All extensions
of credit and financial accommodations heretofore or hereafter made by Agent or
any Lender to Borrower shall be conclusively presumed to have been made in
acceptance hereof and in reliance hereon.
Section 14. NOTICES. Any notice or communication required or permitted
hereunder shall be given as provided in the Credit Agreement.
Section 15. LIMITATION ON INTEREST. Agent, each Lender and Guarantor
intend to contract in strict compliance with applicable usury law from time to
time in effect, and the provisions of the Credit Agreement limiting the interest
for which Guarantor is obligated are expressly incorporated herein by reference.
-21-
Section 16. LOAN DOCUMENT. This Guaranty is a Loan Document, as defined
in the Credit Agreement, and is subject to the provisions of the Credit
Agreement governing Loan Documents.
Section 17. COUNTERPARTS. This Guaranty may be executed in any number of
counterparts, each of which when so executed shall be deemed to constitute one
and the same Guaranty.
SECTION 18. GOVERNING LAW. THIS GUARANTY IS TO BE PERFORMED IN THE STATE
OF TEXAS AND SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAWS OF SUCH STATE WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty as
of the date first written above.
PLAINS PETROLEUM COMPANY
By:/s/ James A. Miller
-------------------------------
James A. Miller
Chairman and Chief Executive
Officer
-22-
EXHIBIT G
February 17, 1995
Date of Notice
NOTICE OF FINAL AGREEMENT
TO: Borrower and All Other Obligors with Respect to the Loan Which is
Identified Below
1. THE WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
2. As used in this Notice:
"Borrower" means the Borrower identified in the signature blocks below in
this Notice.
"Lender" means NationsBank of Texas, N.A.
"Loan" means the prospective loans by Lender which is to be evidenced by a
promissory note or other evidence of indebtedness dated of even date
herewith executed by Borrower, payable to the order of Lender, in the
original principal face amount of $150,000,000.
"Loan Agreement" means one or more promises, promissory notes, agreements,
undertakings, security agreements, deed of trust or other documents, or
commitments, or any combination of those actions or documents, relating to
the Loan.
3. This Notice is given by Lender with respect to the Loan, pursuant to
Section 26.02 of the Texas Business and Commerce Code. Borrower and each
other obligor with respect to the Loan who signs below acknowledges,
represents and warrants to Lender that Lender has given and such party has
received and retained a copy of this Notice on the Date of this Notice
stated above.
LENDER: NATIONSBANK OF TEXAS, N.A.
By:/s/ Franklyn L. Muscara
-------------------------------
Franklyn L. Muscara
Senior Vice President
BORROWER: PLAINS PETROLEUM OPERATING COMPANY
By:/s/ William F. Wallace
-------------------------------
William F. Wallace
President and Chief Operating
Officer
GUARANTOR(S) AND ALL PLAINS PETROLEUM COMPANY
OTHER OBLIGOR(S):
By:/s/ James A. Miller
-------------------------------
James A. Miller
Chairman and Chief Executive
Officer
EXHIBIT H
AGREEMENT TO BE BOUND
_______________, 199__
PLAINS PETROLEUM OPERATING COMPANY
12596 West Bayaud, Suite 400
Lakewood, Colorado 80228
Attention: William F. Wallace
NATIONSBANK OF TEXAS, N.A.
901 Main Street, 49th Floor
Dallas, Texas 75202
Attention: Energy Banking Group
Re: Assignment to ____________________ of __________ the Loans of
_____________________
Ladies and Gentlemen:
We refer to Section 9.9(a) of the Credit Agreement, dated as of February
17, 1995 (as from time to time supplemented, amended, or restated, the "CREDIT
AGREEMENT"), by and among Plains Petroleum Operating Company ("BORROWER"),
Plains Petroleum Company, NationsBank of Texas, N.A., as Agent ("AGENT"), and
the Lenders as are, or may from time to time become, party thereto. Unless
otherwise defined herein or the context otherwise requires, terms used herein
have the meanings provided in the Credit Agreement.
This Agreement constitutes notice to each of you, pursuant to Section
9.9(a) of the Credit Agreement, of the assignment to ____________________
("ASSIGNEE") of (i) an undivided __________ (the "DESIGNATED PERCENTAGE"),
($__________________), of the Loans of [NAME OF LENDER] ("ASSIGNOR") in effect
on the date hereof.
Assignee hereby acknowledges and confirms that it has received a copy of
the Credit Agreement and the exhibits related thereto, together with a copy of
the documents which were required to be delivered under the Credit Agreement as
a condition to the making of the Loans thereunder. Assignee further confirms
and agrees that in becoming a Lender and in making its Loans under the Credit
Agreement, such actions have and will be made without recourse to, or
representation or warranty by, Assignor, except as expressly set forth in the
Assignment and Assumption of even date herewith between Assignor and Assignee.
Assignor and Assignee hereby agree that [ASSIGNOR/ASSIGNEE] will pay the
processing fee referred to in Section 9.9(a) of the Credit Agreement to the
Agent upon the delivery thereof.
The assignment shall become effective on the date which is five (5)
Business Days after the later of (i) the receipt by the
-1-
Agent of this document and (ii) the receipt of the processing fee referred to in
the preceding paragraph.
Upon the effective date of this Agreement each Lender:
(a) shall have all the rights and benefits of a "Lender" under the Credit
Agreement as if it were an original signatory thereto; and
(b) agrees to be bound by the terms and conditions set forth in the Credit
Agreement and be obligated thereunder as if it were an original signatory
thereto.
Assignee hereby advises each of you of the following administrative details
with respect to the assigned Loans.
(A) Addresses for Notice: _______________________________________
_______________________________________
Institution Name: _______________________________________
Attention: _______________________________________
(B) Payment Instructions: _______________________________________
_______________________________________
_______________________________________
_______________________________________
This Agreement may be executed by Assignor and Assignee in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute one and the same
agreement.
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement
to be executed by its official, officer or agent thereunto duly authorized.
___________________________________ _______________________________________
As Assignor As Assignee
By:________________________________ By:____________________________________
Name: Name:
Title: Title:
-2-
The foregoing Agreement to be Bound and related assignment from Assignee to
Assignor is hereby CONSENTED TO this ____ day of
__________, 199__.
NATIONSBANK OF TEXAS, N.A., as Agent
By:____________________________
Name:
Title:
PLAINS PETROLEUM OPERATING COMPANY
By:____________________________
Name:
Title:
EX-10.(I)-3
5
EXHIBIT 10(I)-3
EXHIBIT 10(i)-3
K N LETTERHEAD
K N Gas Supply Services, Inc.
P.O. Box 281304
Lakewood, CO 80228-8304
(303) 989-1740
December 8, 1994
Plains Petroleum Operating Company
12596 West Bayaud Avenue, Suite 400
Lakewood, CO 80228
Attn: Robert W. Wagner, Vice President
Re: Gas Purchase Contract, Dated April 20, 1984, as Amended (Contract P-
1090)
Dear Bob:
Plains Petroleum Operating Company ("Plains") and K N Gas Supply Services, Inc.
("KNGSS"), as the successor-in-interest to K N Energy, Inc., are parties to that
certain Gas Purchase Contract, dated April 20, 1984, as amended, hereinafter
referred to as "Contract P-1090". The purpose of this Letter Agreement is to
set forth Plains' and KNGSS' agreement as to the quantity of gas to be purchased
and the redetermined prices to be paid by KNGSS during calendar year 1995 under
Contract P-1090. The agreement is as follows:
(1) The Parties have redetermined the prices for calendar year 1995 at
volumetric levels. Tier I shall be a fixed monthly price applicable to a
specified monthly volume of gas. Tier II shall be an indexed monthly price
applicable to the volume of gas determined by subtracting the Tier I specified
monthly volume for the month from the total MMBtu delivered to KNGSS for the
month. The redetermined Tier I and II prices are inclusive of reimbursement for
all taxes and royalties.
(2) The Tier I and Tier II volume and prices for calendar year 1995 are
set forth below.
TIER I VOLUME AND PRICES
Calendar Year 1995 Monthly Volume Wellhead Prices
Month (TBTU)(1) ($/MMBtu)(2)
Jan. 1.57 $2.14
Feb. 1.41 1.74
Mar. 1.54 1.74
Apr. 1.20 1.60
May 1.20 1.60
Jun. 1.20 1.60
Jul. 1.20 1.60
Aug. 1.20 1.60
Sept. 1.20 1.60
Oct. 0.97 1.74
Nov. 1.71 2.14
Dec. 1.60 2.14
----- -----
Total Tier I Vol. 16.0
--------------------------
(1) ONE TRILLION BTU AT 14.78 PPIS
(2) ONE MILLION BTU AT 14.79 PPIS
TIER II VOLUME AND PRICES
The volume of gas determined by subtracting the Tier I specified monthly volume
for the month from the total MMBtu delivered to KNGSS for the month shall be
priced at the arithmetical average of the first of the month index prices
published by Inside FERC, GAS MARKET REPORT for Panhandle Eastern Pipeline
Company (Texas, Oklahoma), Williams Natural Gas Company (Texas, Oklahoma,
Kansas) and Northern Natural Gas Company (Texas, Oklahoma, Kansas); less $0.294
per MMBtu gathering fee plus applicable fuel; less K N Interstate Gas
Transmission Co. ("KNI") PA-1 receipt to PA-1 delivery transportation rate plus
applicable mainline fuel; plus a premium of $0.02 per MMBtu.
(3) The first gas through each meter shall be considered Tier I volume,
then Tier II volumes.
(4) During calendar year 1995, gas which flows south through the valve
identified below to the Panhandle Eastern Pipeline Company ("PEPC") Grant County
No. 2 Interconnect, not to exceed a total volume of 3 TBTU, is hereby released
from Contract P-1090 and may be marketed by Plains to other purchasers. To
accommodate Plains' marketing of the released gas, K N Gas Gathering, Inc.
("KNGG") does hereby agree to amend the prior Letter Agreement, dated April 18,
1994, entered into between Plains and KNGG to operate the valve, as identified
therein, to cause released gas delivered into KNGG's gathering line from the
wells identified in the Letter Agreement to flow south to the interconnect
between the facilities of KNGG and PEPC at the Grant County, Kansas, No. 2
Interconnect. The Letter Agreement is hereby amended to provide that the term
thereof is extended through December 31, 1995 and the gathering rate shall be
$0.294 per MMBtu plus applicable fuel. Plains obligates itself to move its P-
1090 gas released at the $0.294 per MMBtu plus fuel rate under its Gas Gathering
Agreement(s) with KNGG (Contract Nos. 56012 or 64010). KNGG will consider
Plains' requests, from time-to-time, for discounted gathering fees and such
released gas in keeping with gathering fees charged to other similarly situated
producers in the field. In the event Plains delivers to KNGSS on any day a
volume of gas in excess of 65,000 MMBtu per day, then such excess gas will be
purchased by KNGSS at the Tier II applicable prices.
(5) To the extent that KNGSS incurs any deficient purchases under Contract
P-1090 for calendar year 1995 (i.e. fails to purchase during calendar year 1995
at least 16.0 TBTU), any deficiency payments to be made by KNGSS to Plains shall
be calculated on the basis of the Tier I prices in effect the month the
deficiency was incurred under Contract P-1090.
(6) The redetermined Tier I and Tier II volumes and prices for the
specific months of calendar year 1995 will be effective for the same months for
subsequent calendar years until the effective date of any subsequent price
redetermination requested by either party pursuant to Article IV, Section 4 of
Contract P-1090, as amended, or established by arbitration.
(7) Except as specifically provided for above, all other terms and
conditions of Contract P-1090 shall remain in full force and effect.
(8) Plains' press release announcing the 1995 price/volume agreement for
Contract P-1090 shall be in the form previously provided by Plains to KNGSS.
If the foregoing reflects Plains' understanding of the Agreement reached between
Plains and KNGSS, please so indicate by having Plains properly execute three
copies of this Letter Agreement in space provided below and return executed
copies to both KNGSS and KNGG. KNGG has executed this Letter Agreement only
insofar as required to reflect its agreement to amend the prior Letter
Agreement, dated April 20, 1994 as provided for in Paragraph (4) above.
Very truly yours, Very truly yours,
K N GAS SUPPLY SERVICES, INC. K N GAS GATHERING, INC.
/s/ Wesley Haun /s/ John N. DiNardo
--------------- -------------------
S. Wesley Haun John N. DiNardo
Vice President Vice President
ACCEPTED AND AGREED to this 8th day of December, 1994 by Plains Petroleum
Operating Company.
By: /s/ R. W. Wagner
--------------------------
R. W. Wagner
Vice President
EX-21
6
EXHIBIT 21
EXHIBIT 21
SUBSIDIARIES
Percentage of
State of Voting Securities
Name Incorporation Owned *
-------------------------- --------------- ------------------
Plains Petroleum Delaware 100%
Operating Company
Plains Petroleum Delaware 100%
Gathering Company
* Directly or indirectly
EX-23.(A)
7
EXHIBIT 23(A)
EXHIBIT 23(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Form 10-K, of our report dated January 31, 1995, included
in Plains Petroleum Company's 1994 Annual Report to Shareholders. It should be
noted that we have not audited any financial statements of the Company
subsequent to December 31, 1994, or performed any audit procedures subsequent to
the date of our report.
We also hereby consent to the incorporation by reference of our reports on
the financial statements and schedules included or incorporated by reference in
the Plains Petroleum Company Annual Report on Form 10-K for the year ended
December 31, 1994: (a) into the previously filed Registration Statements on
Forms S-8/S-3 (Registration Nos. 33-3646 and 33-3648), each dated February 28,
1986, (b) into the previously filed Registration Statement on Form S-3
(Registration No. 33-25095) dated November 8, 1988, (c) into the previously
filed Registration Statement on Form S-8 (Registration No. 33-30507) dated
August 11, 1989, (d) into the previously filed Registration Statement on Form
S-4 (Registration No. 33-34851) dated September 26, 1990, (e) into the
previously filed Registration Statement on Form S-3 (Registration No. 33-43277),
dated October 25, 1991, (f) into the previously filed Registration Statement on
Form S-8 (Registration No. 33-54636) dated November 16, 1992, and (g) into the
previously filed Registration Statement on Form S-8 (Registration No. 33-35306)
dated December 21, 1993.
/s/ Arthur Andersen LLP
Denver, Colorado
March 28, 1995
EX-23.(B)
8
EXHIBIT 23(B)
EXHIBIT 23 (b)
March 21, 1995
Plains Petroleum Company
12596 W. Bayaud Avenue, #400
Lakewood, CO 80228
Gentlemen:
We hereby consent to the incorporation by reference of the information from
our "Estimate of Reserves and Future Revenue to the Plains Petroleum Company (or
Plains Petroleum Operating Company) Interest in Certain Oil and Gas Properties"
in the "Properties" section (Item 2 (B)) appearing in your Annual Report on Form
10-K and in Note Eight of the "Notes to Consolidated Financial Statements" of
your Annual Report to Shareholders (a) for the years ended December 31, 1994,
1993, 1992, 1991, 1990, 1989 and 1988 into the previously filed Registration
Statements on Forms S-8/S-3 (Registration Nos. 33-3646 and 33-3648), each dated
February 28, 1986, and on Form S-3 (Registration No. 33-25095) dated November 8,
1988, (b) for the years ended December 31, 1994, 1993, 1992, 1991, 1990 and 1989
into the previously filed Registration Statement on Form S-8 (Registration No.
33-30507) dated August 11, 1989, (c) for the years ended December 31, 1994,
1993, 1992, 1991 and 1990 into the previously filed Registration Statement on
Form S-4 (Registration No. 33-34851) dated September 26, 1990, (d) for the years
ended December 31, 1994, 1993, 1992 and 1991 into the previously filed
Registration Statement on Form S-3 (Registration No. 33-43277) dated October 25,
1991, and (e) for the years ended December 31, 1994, 1993 and 1992 into the
previously filed Registration Statement on Form S-8 (Registration No. 33-54636)
dated November 16, 1992, and on Form S-8 (Registration No. 33-35306) dated
December 21, 1993.
Netherland, Sewell & Associates, Inc.
By: /s/ Clarence M. Netherland
------------------------------------
Chairman
EX-27
9
EXHIBIT 27
5
1,000
12-MOS
DEC-31-1994
JAN-01-1994
DEC-31-1994
2,331
0
7,057
0
643
10,453
234,532
88,041
156,944
8,532
37,000
98
0
0
99,358
156,944
61,693
61,693
21,447
42,047
10,410
0
762
9,236
2,586
6,650
0
0
0
6,650
.68
.68
Lease operations, prod., and prop. taxes, trans. & process.
CGS, plus net profit payments and DD&A.
See Note Seven of Financial Statements (Item 8).
Net of interest income.
EX-99.(A)
10
EXHIBIT 99(A) - FORM 11-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1992
-------------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from_______________________to_________________________
Commission file number__________________________________________________________
PLAINS PETROLEUM COMPANY
401 (k) PLAN AND TRUST
(Full title of the Plan)
PLAINS PETROLEUM COMPANY
(Name of issuer of the securities held pursuant to the Plan)
12596 W BAYAUD AVE., SUITE #400
LAKEWOOD, COLORADO 80228
(Address of principal executive offices)
PLAINS PETROLEUM COMPANY
401 (k) PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
(UNAUDITED)
December 31,
1992 1991
------------- ---------------
ASSETS
Cash $25,295 $ -
Investments, at fair value ( Note 4)
Common stock, Plains Petroleum Company 181,530 178,581
Common trust funds 417,296 -
Deposit with insurance company, at contract value
(Note 4) 387,169 878,937
------- -------
Total assets $1,011,290 $1,057,518
LIABILITIES
- -
------------ -------------
Net assets available for benefits $1,011,290 $1,057,518
---------- ----------
---------- ----------
The accompanying notes are an integral part of these financial statements.
PLAINS PETROLEUM COMPANY
401 (k) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
(Unaudited)
Yearend December 31,
---------------------
1992 1991 1990
-------- -------- --------
Additions to net assets attributed to:
Investment Income
Net appreciation/(depreciation) in fair value of
investments (Note 4) $17,057 $(64,314) $(17,905)
Interest and dividends 29,237 25,144 33,385
------ ------ ------
46,294 (39,170) 15,480
Less investment expenses -- -- --
------ ------ ------
46,294 (39,170) 15,480
------ ------ ------
Contributions
Participants 193,299 147,655 48,438
Transfers (Note 1 ) (213,504) -- 908,485
--------- --------- -------
(20,205) 147,655 956,923
-------- -------- -------
Total additions 26,089 108,485 972,403
Deductions from net assets attributed to:
Benefits paid to participants 72,317 18,490 4,880
------- -------- ------
Net Increase (46,228) 89,995 967,523
Net assets available for benefits
Beginning of year 1,057,518 967,523 --
---------- ----------- ----------
End of year $1,011,290 $1,057,518 $967,523
---------- ----------- ----------
---------- ----------- ----------
The accompany notes are an integral part of these financial statements.
PLAINS PETROLEUM COMPANY
401 (k) PLAN
Notes to Financial Statements
NOTE ONE DESCRIPTION OF PLAN
By Resolution of the Board of Directors of Plains Petroleum Company
(the "Company"), the Plains Petroleum Company 401(k) Plan & Trust (the "Plan")
was established effective July 1, 1990 for the benefit of eligible employees of
the Company. Through June 30, 1990, employees of the Company were permitted to
make elective deferral contributions to the Company's Profit Sharing Plan under
Section 401 (k) of the Internal Revenue Service Code (the "Code"). These
elective deferrals under the Profit Sharing Plan were transferred to the Plan
effective July 1, 1990. (See Transfers made in 1990 and 1992.) The employees
of the Company's subsidiariesPlains Petroleum Operating Company and Plains
Petroleum Gathering Company, are eligible to participate in the Plan.
The following description of the Plan provides only general
information. Participants should refer to the Plan document for a more complete
description of the Plan's provisions.
GENERAL
The Plan is a defined contribution plan covering employees who had an
elective deferral contribution under the Profit Sharing Plan on June 30, 1990
and any other employees who thereafter elect to participate in the Plan and have
executed an elective deferral agreement.
The Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974 ("ERISA").
CONTRIBUTIONS
Participants may elect through payroll deduction to contribute up to
10 percent of their annual wages including overtime but before bonuses,
commissions and other benefits, as defined. Contributions for any calendar year
are limited pursuant to requirements of the Code.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's
contribution. Allocations of Plan earnings are based on participant's account
balances. The benefit to which a participant is entitled is the benefit that
can be provided from the participant's account.
INVESTMENT OPTIONS
Participants may direct, as defined by the Plan, investment of their
contributions and accumulated earnings to Plains Petroleum Company common
stock and/or to various investment options offered by the insurance company with
which the Company has contracted with for separate pooled accounts.
With respect to investments made in Plains Petroleum Company
common stock, dividends on shares held by the Trust are re-invested in Plains
Petroleum common stock and allocated to participants' accounts. Further,
participants are entitled to exercise voting rights attributable to their shares
allocated to their account by instructing the Trustee of their voting
preference. The Trustee shall follow the directions of those Participants who
provide timely instructions to the Trustee. For voting rights attributed to
shares for which no instructions are provided at least ten days prior to time
that such shares are entitled to be voted, the Trustee will vote the
uninstructed shares in direct proportion to the voting instructions received
from responding participants.
VESTING
Participants are fully vested in their voluntary contributions plus
actual earnings thereon.
PAYMENTS OF BENEFITS
The Trustee of the Plan may make distributions to the Participants
subject to the following circumstances as defined by the Code: 1) termination
of service, 2) termination of the Plan, 3) sale of substantially all of the
Company's assets, 4) sale of the Company's interest in its subsidiary, 5)
Participant financial hardship, or 6) Participant attains age 59-1/2.
Distributions are made in cash, common stock or a combination as provided by the
Plan and may be made in the form of an annuity, lump-sum, installment or a
combination subject to the provisions of the Plan.
PARTICIPATING EMPLOYEES
As of December 31, 1992, a total of 113 persons were participants in
or beneficiaries of the Plan.
REPORTS TO PARTICIPATING EMPLOYEES
Annual statements are sent to participants covering the status of the
participants' accounts under the Plan.
PLAN ADMINISTRATION
The Plan is administered by an Advisory Committee of Trustees
comprised of three employees of the Company or its subsidiary. The Committee
members receive no compensation for their services. Any Trustee may be removed,
and a new Trustee appointed, by the Company upon 30 days' notice to the
Trustee.
NOTE TWO SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Quoted market prices are used to value the Company's common stock
investments at December 31. The contract value of investments with the
insurance company is provided by the insurance company.
Dividend income is accrued on the ex-dividend date. Purchases and
sales of securities are recorded on a trade-date basis. Realized gains and
losses from security transactions are reported on the average cost method.
NOTE THREE TAX STATUS
The Plan operates as a qualified plan under Sections 401(a) and 401(k)
of the Code. Qualification of the Plan means that a Participant will not be
subject to federal income taxes on Elective Deferral Contributions, or on
earnings or appreciation on all account balances held in the Plan, until such
amounts either are withdrawn by or distributed to the Participant, or are
distributed to the Participant's spouse or beneficiary in the event of the
Participant's death. Participant elective deferral contributions are not taxed
for purposes of federal income tax except for social security taxes.
Distributions of contributions and all accumulated earnings thereon to
Participants will be subject to federal income tax as defined by the Code.
The Plan has obtained a favorable tax determination letter from the
Internal Revenue Service and the Company believes that the Plan continues to
qualify and to operate as designed.
NOTE FOUR INVESTMENTS
The fair value of the Plan's investments held in a trust by the
Trustee, at December 31, are presented in the following table. Investments that
represent 5 percent or more of the Plan's net assets are separately identified.
Number of Shares Fair Value
INVESTMENTS AT FAIR VALUE AS DETERMINED BY
QUOTED MARKET PRICE
As of December 31, 1990:
Plains Petroleum Company
Common Stock (cost of $157,923) 5,334 $140,018
--------
--------
As of December 31, 1991:
Plains Petroleum Company
Common Stock (cost of $242,895) 6,266 $178,581
--------
--------
As of December 31, 1992:
Plains Petroleum Company
Common Stock (cost of $213,784) 7,277 $181,530
--------
--------
INVESTMENTS AT ESTIMATED FAIR VALUE 12/31/92
--------
Common Trust Funds:
Stable Return Fund $244,838
Common Stock Fund 172,458
-------
$417,296
--------
--------
DEPOSIT WITH INSURANCE COMPANY
In 1990, the Plan entered into a deposit contract with the United of Omaha
Life Insurance Co. (United). United maintains the contributions in a pooled
account. The account is credited with actual earnings on the underlying
investments. The contract is included in the financial statements at the
December 31st contract value as reported to the Plan by United.
NOTE FIVE PLAN AMENDMENT OR TERMINATION
The Plan has no specified duration. The Company has no current plans to
terminate the Plan, but reserves the right to amend, suspend, or terminate it at
any time. Rights or benefits previously acquired by or allocated for
Participants will not be adversely affected by any such action unless the
officers of the Company, on advice of legal counsel, determine such action to be
necessary or advisable to conform the Plan to the requirements of Sections 401
and 501 of the Code or other federal law. All account balances will be fully
vested in the event of a termination.
EX-99.(B)
11
EXHIBIT 99(B)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
-----------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______________________to_______________________
Commission file number________________________________________________________
PLAINS PETROLEUM COMPANY
401 (k) PLAN AND TRUST
(Full title of the Plan)
PLAINS PETROLEUM COMPANY
(Name of issuer of the securities held pursuant to the Plan)
12596 W BAYAUD AVE., SUITE #400
LAKEWOOD, COLORADO 80228
(Address of principal executive offices)
PLAINS PETROLEUM COMPANY
401 (k) PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
(UNAUDITED)
December 31,
1993 1992
----------- ----------
ASSETS
Cash $ 41,842 $25,295
Accounts Receivables 415 -
Investments, at fair value ( Note 4)
Common stock, Plains Petroleum Company 245,207 181,530
Common Trust Funds 919,321 417,296
Loans to Participants 24,734 -
Deposit with insurance company, at
contract value (Note 4) 239,540 387,169
----------- -----------
Total assets $1,471,059 $1,011,290
LIABILITIES
Payables 2,230 -
----------- -----------
Net assets available for benefits $1,468,829 $1,011,290
----------- -----------
----------- -----------
The accompanying notes are an integral part of these financial statements.
PLAINS PETROLEUM COMPANY
401 (k) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
(UNAUDITED)
Yearend December 31,
--------------------
1993 1992 1991
----------- ----------- -----------
Additions to net assets attributed to:
Investment Income
Net appreciation/(depreciation) in
fair value of investments
(Note 4) $126,545 $17,057 $(64,314)
Interest and dividends 39,240 29,237 25,144
----------- ----------- -----------
165,785 46,294 (39,170)
Less investment expenses -- -- --
----------- ----------- -----------
165,785 46,294 (39,170)
----------- ----------- -----------
Contributions
Participants 207,945 193,299 147,655
Transfers (Note 1 ) 96,079 (213,504) --
----------- ----------- -----------
304,024 (20,205) 147,655
----------- ----------- -----------
Total additions 469,809 26,089 108,485
Deductions from net assets attributed
to:
Benefits paid to Participants 12,270 72,317 18,490
----------- ----------- -----------
Net Increase 457,529 (46,228) 89,995
Net assets available for benefits
Beginning of year 1,011,290 1,057,518 967,523
----------- ----------- -----------
End of year $1,468,829 $1,011,290 $1,057,518
----------- ----------- -----------
----------- ----------- -----------
The accompany notes are an integral part of these financial statements.
PLAINS PETROLEUM COMPANY
401 (k) PLAN
Notes to Financial Statements
NOTE ONE DESCRIPTION OF PLAN
By Resolution of the Board of Directors of Plains Petroleum Company
(the "Company"), the Plains Petroleum Company 401(k) Plan & Trust (the "Plan")
was established effective July 1, 1990 for the benefit of eligible employees of
the Company. Through June 30, 1990, employees of the Company were permitted to
make elective deferral contributions to the Company's Profit Sharing Plan under
Section 401 (k) of the Internal Revenue Service Code (the "Code"). These
elective deferrals under the Profit Sharing Plan were transferred to the Plan
effective July 1, 1990. (See Transfers made in 1990 and 1992.) Effective
December 31, 1993, the Company's PAYSOP Plan and Trust was merged into the
Plan. The assets and liabilities of the Company's PAYSOP Plan and Trust were
transferred into this Plan as of that date. (See Transfers made in 1993.) The
employees of the Company's subsidiaries, Plains Petroleum Operating Company and
Plains Petroleum Gathering Company, are eligible to participate in the Plan.
The following description of the Plan provides only general
information. Participants should refer to the Plan document for a more complete
description of the Plan's provisions.
GENERAL
The Plan is a defined contribution plan covering employees who had an
elective deferral contribution under the Profit Sharing Plan on June 30, 1990 or
an deferral balance in the PAYSOP Plan on December 31, 1993, and any other
employees who thereafter elect to participate in the Plan and have executed an
elective deferral agreement.
The Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974 ("ERISA").
CONTRIBUTIONS
Participants may elect through payroll deduction to contribute up to
10 percent of their annual wages including overtime but before bonuses,
commissions and other benefits, as defined. Contributions for any calendar year
are limited pursuant to requirements of the Code.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's
contribution. Allocations of Plan earnings are based on participant's account
balances. The benefit to which a participant is entitled is the benefit that
can be provided from the participant's account.
INVESTMENT OPTIONS
Participants may direct, as defined by the Plan, investment of their
contributions and accumulated earnings to Plains Petroleum Company common
stock (the "Plains Fund") and/or to various investment options offered by a
Company designated bank-administered investment trust consisting of four
separate funds and by an insurance company with which the Company has contracted
with for separate pooled accounts.
With respect to investments made in Plains Petroleum Company
common stock, dividends on shares held by the Trust are re-invested in Plains
Petroleum common stock and allocated to participants' accounts. Further,
participants are entitled to exercise voting rights attributable to their shares
allocated to their account by instructing the Trustee of their voting
preference. The Trustee shall follow the directions of those Participants who
provide timely instructions to the Trustee. For voting rights attributed to
shares for which no instructions are provided at least ten days prior to time
that such shares are entitled to be voted, the Trustee will vote the
uninstructed shares in direct proportion to the voting instructions received
from responding participants.
PARTICIPANT LOAN POLICY
Effective July 1, 1993, the Plan established a Loan Policy within the
Internal Revenue Service guidelines for active Participant employees. This
Policy enables Participants to borrow up to the lesser of 50 percent of their
vested account or $50,000, but not less than $1,000. Loans are collateralized
by up to 50 percent of the Participant's vested account and supported by a
collateral promissory note for a maximum term of 5 years except for personal
resident loans which may not exceed 15 years. Interest rates will be fixed by
the Plan Administrator in accordance to the Policy. Payments must be made by
payroll deduction. Loan balances are due in full upon termination of employment
for any reason.
VESTING
Participants are fully vested in their voluntary contributions plus
actual earnings thereon.
PAYMENTS OF BENEFITS
The Trustee of the Plan may make distributions to the Participants
subject to the following circumstances as defined by the Code: 1) termination
of service, 2) termination of the Plan, 3) sale of substantially all of the
Company's assets, 4) sale of the Company's interest in its subsidiary, 5)
Participant financial hardship, or 6) Participant attains age 59-1/2.
Distributions are made in cash, common stock or a combination as provided by the
Plan and may be made in the form of an annuity, lump-sum, installment or a
combination subject to the provisions of the Plan.
PARTICIPATING EMPLOYEES
As of December 31, 1993, a total of 99 persons were participants in
or beneficiaries of the Plan.
REPORTS TO PARTICIPATING EMPLOYEES
Annual statements are sent to participants covering the status of the
participants' accounts
under the Plan.
PLAN ADMINISTRATION
The Plan is administered by an Advisory Committee of Trustees
comprised of three employees of the Company or its subsidiaries. The Committee
members receive no compensation for their services. Any Trustee may be removed,
and a new Trustee appointed, by the Company upon 30 days' notice to the
Trustee. Administrative expenses of the Plan are paid from the Trust to the
extent they are not paid by the Company.
NOTE TWO SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Quoted market prices are used to value the Company's common stock
investments at December 31. The contract value of investments with the
insurance company is provided by the insurance company.
Dividend income is accrued on the ex-dividend date. Purchases and
sales of securities are recorded on a trade-date basis. Realized gains and
losses from security transactions are reported on the average cost method.
NOTE THREE TAX STATUS
The Plan operates as a qualified plan under Sections 401(a) and 401(k)
of the Code. Qualification of the Plan means that a Participant will not be
subject to federal income taxes on Elective Deferral Contributions, or on
earnings or appreciation on all account balances held in the Plan, until such
amounts either are withdrawn by or distributed to the Participant, or are
distributed to the Participant's spouse or beneficiary in the event of the
Participant's death. Participant elective deferral contributions are not taxed
for purposes of federal income tax except for social security taxes.
Distributions of contributions and all accumulated earnings thereon to
Participants will be subject to federal income tax as defined by the Code.
The Plan has obtained a favorable tax determination letter from the
Internal Revenue Service and the Company believes that the Plan continues to
qualify and to operate as designed.
NOTE FOUR INVESTMENTS
The fair value of the Plan's investments held in a trust by the
Trustee, at December 31, are presented in the followin table. Investments that
represent 5 percent or more of the Plan's net assets are separately identified.
Number of Shares Fair Value
INVESTMENTS AT FAIR VALUE AS DETERMINED BY
QUOTED MARKET PRICE
As of December 31, 1991:
Plains Petroleum Company
Common Stock (cost of $242,895) 6,266 $178,581
--------
--------
As of December 31, 1992:
Plains Petroleum Company
Common Stock (cost of $213,784) 7,277 $181,530
--------
--------
As of December 31, 1993:
Plains Petroleum Company
Common Stock (cost of $292,634) 10,431 $245,207
--------
--------
INVESTMENTS AT ESTIMATED FAIR VALUE 12/31/93 12/31/92
-------- --------
Common Trust Funds:
Stable Return Fund $316,466 $244,838
Common Stock Fund 327,009 172,458
Moderate Balanced Fund 136,422 --
Intermediate US Government Bond Fund 139,424 --
-------- --------
$919,321 $417,296
-------- --------
-------- --------
DEPOSIT WITH INSURANCE COMPANY
In 1990, the Plan entered into a deposit contract with the United of Omaha
Life Insurance Co. (United). United maintains the contributions in a pooled
account. The account is credited with actual earnings on the underlying
investments. The contract is included in the financial statements at the
December 31st contract value as reported to the Plan by United.
NOTE FIVE PLAN AMENDMENT OR TERMINATION
Effective January 1, 1994, the Plan was amended to provide for employer
matching contributions of up to 50 percent of the first 6 percent of employee-
Participant elective deferred contributions. This matching contribution will be
made in Company common stock and will be subject to certain vesting
requirements. The amendment also included a reduction of the maximum
Participant elective deferral contribution from 10 percent to 9 percent.
The Plan has no specified duration. The Company has no current plans to
terminate the Plan, but reserves the right to amend, suspend, or terminate it at
any time. Rights or benefits previously acquired by or allocated for
Participants will not be adversely affected by any such action unless the
officers of the Company, on advice of legal counsel, determine such action to be
necessary or advisable to conform the Plan to the requirements of Sections 401
and 501 of the Code or other federal law. All account balances will be fully
vested in the event of a termination.
EX-99.(C)
12
EXHIBIT 99(C)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
-----------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______________________to________________________
Commission file number________________________________________________________
PLAINS PETROLEUM COMPANY
401 (k) PLAN AND TRUST
(Full title of the Plan)
PLAINS PETROLEUM COMPANY
(Name of issuer of the securities held pursuant to the Plan)
12596 W BAYAUD AVE., SUITE #400
LAKEWOOD, COLORADO 80228
(Address of principal executive offices)
PLAINS PETROLEUM COMPANY
401 (k) PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
(UNAUDITED)
December 31,
1994 1993
---------- -----------
ASSETS
Cash $30 $ 41,842
Accounts Receivables - 415
Investments, at fair value ( Note 4)
Common stock, Plains Petroleum Company 402,125 245,207
Common Trust Funds 1,059,269 919,321
Loans to participants 66,287 24,734
Deposit with insurance company, at contract value
(Note 4) 72,880 239,540
---------- -----------
Total assets $1,600,591 $1,471,059
LIABILITIES
Payables - 2,230
---------- -----------
Net assets available for benefits $1,600,591 $1,468,829
---------- -----------
---------- -----------
The accompanying notes are an integral part of these financial statements.
PLAINS PETROLEUM COMPANY
401 (k) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
(UNAUDITED)
Yearend December 31,
-------------------
1994 1993 1992
---------- ----------- -----------
Additions to net assets attributed to:
Investment Income
Net appreciation/(depreciation)
in fair value of
investments (Note 4) $ 4,189 $126,545 $17,057
Interest and Dividends 15,557 39,240 29,237
---------- ----------- -----------
19,746 165,785 46,294
Less investment expenses -- -- --
---------- ----------- -----------
19,746 165,785 46,294
-----------
Contributions
Participants 191,730 207,945 193,299
Employer 86,439 -- --
Transfers (Note 1 ) -- 96,079 (213,504)
---------- ----------- -----------
278,169 304,024 (20,205)
---------- ----------- -----------
Total additions 297,915 469,809 26,089
Deductions from net assets
attributed to:
Benefits paid to Participants 163,153 12,270 72,317
Reduction of Payables
and adjustments 3,000 -- --
---------- ----------- -----------
Total deductions 166,153 12,270 72,317
---------- ----------- -----------
Net Increase 131,762 457,529 (46,228)
Net assets available for benefits
Beginning of year 1,468,829 1,011,290 1,057,518
---------- ----------- -----------
End of year $1,600,591 $1,468,829 $1,011,290
---------- ----------- -----------
---------- ----------- -----------
The accompany notes are an integral part of these financial statements.
PLAINS PETROLEUM COMPANY
401 (k) PLAN
Notes to Financial Statements
NOTE ONE DESCRIPTION OF PLAN
By Resolution of the Board of Directors of Plains Petroleum Company (the
"Company"), the Plains Petroleum Company 401(k) Plan & Trust (the "Plan") was
established effective July 1, 1990 for the benefit of eligible employees of the
Company. Through June 30, 1990, employees of the Company were permitted to make
elective deferral contributions to the Company's Profit Sharing Plan under
Section 401 (k) of the Internal Revenue Service Code (the "Code"). These
elective deferrals under the Profit Sharing Plan were transferred to the Plan
effective July 1, 1990. (See Transfers made in 1990 and 1992.) Effective
December 31, 1993, the Company's PAYSOP Plan and Trust was merged into the
Plan. The assets and liabilities of the Company's PAYSOP Plan and Trust were
transferred into this Plan as of that date. (See Transfers made in 1993.) The
employees of the Company's subsidiaries, Plains Petroleum Operating Company and
Plains Petroleum Gathering Company, are eligible to participate in the Plan.
The following description of the Plan provides only general information.
Participants should refer to the Plan document for a more complete description
of the Plan's provisions.
GENERAL
The Plan is a defined contribution plan covering employees who had an
elective deferral contribution under the Profit Sharing Plan on June 30, 1990 or
a balance in the PAYSOP Plan on December 31, 1993 and any other
employees who thereafter elect to participate in the Plan and have executed an
elective deferral agreement.
The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA").
CONTRIBUTIONS
Participants may elect through payroll deduction to contribute up to 9
percent (10 percent prior to 1994) of their annual wages including overtime but
before bonuses, commissions and other benefits, as defined. Contributions for
any calendar year are limited pursuant to requirements of the Code.
Commencing January 1, 1994, the Company and its subsidiaries will make
employer matching contributions for each plan year in an amount equal to 50
percent of the first 6 percent of compensation deferred by a Participant as an
elective deferral contribution.
PARTICIPANT ACCOUNTS
Each Participant's account is credited with the Participant's contribution
and employer matching contributions. Allocations of Plan earnings are based on
Participant's account balances. The benefit to which a Participant is entitled
is the benefit that can be provided from the Participant's account.
INVESTMENT OPTIONS
Participants may direct, as defined by the Plan, investment of their
contributions and accumulated earnings to Plains Petroleum Company common
stock (the "Plains Fund") and/or to various bank-administered investment funds
consisting of four separate funds.
With respect to investments made in the Plains Fund, dividends on shares
held by the Trust are re-invested in Plains Petroleum common stock and
allocated to Participants' accounts. Further, Participants are entitled to
exercise voting rights attributable to their shares allocated to their account
by instructing the Trustee of their voting preference. The Trustee shall
follow the directions of those Participants who provide timely instructions
to the Trustee. For voting rights attributed to shares for which no
instructions are provided at least ten days prior to time that such shares
are entitled to be voted, the Trustee will vote the uninstructed shares
in direct proportion to the voting instructions received from responding
Participants.
Employer matching contributions are to be used by the Trustee to purchase
shares of the Company's common stock only and cannot be redirected by the
benefiting Participant to other Plan investment accounts. Earned dividends can
only be reinvested in common stock and are added to the matching account.
Voting rights are the same as those of Participant directed investments in
Company common stock.
PARTICIPANT LOAN POLICY
Effective July 1, 1993, the Plan established a Loan Policy within the
Internal Revenue Service guidelines for active Participant employees. This
Policy enables Participants to borrow up to the lesser of 50 percent of their
vested account or $50,000, but not less than $1,000. Loans are collateralized
by up to 50 percent of the Participant's vested account and supported by a
collateral promissory note for a maximum term of 5 years except for personal
residence loans which may not exceed 15 years. Interest rates will be fixed by
the Plan Administrator in accordance to the Policy. Payments must be made by
payroll deduction. Loan balances are due in full upon termination of employment
for any reason.
VESTING
Participants are fully vested in their voluntary contributions plus actual
earnings thereon. Vesting in employer matching contributions is based
on years of continuous service. A Participant is 100 percent vested after five
years of credited service. If a Participant retires or becomes disabled, or in
the event of a change in control of the Company, the employer matching
contribution account balance is 100 percent vested.
PAYMENTS OF BENEFITS
The Trustee of the Plan may make distributions to the Participants subject
to the following circumstances as defined by the Code: 1) termination of
service, 2) termination of the Plan, 3) sale of substantially all of the
Company's assets, 4) sale of the Company's interest in its subsidiary, 5)
Participant financial hardship, or 6) Participant attains age 59-1/2.
Distributions are made in cash, common stock or a combination as provided by the
Plan and may be made in the form of an annuity, lump-sum, installment or a
combination subject to the provisions of the Plan.
PARTICIPATING EMPLOYEES
As of December 31, 1994, a total of 96 persons were Participants in or
beneficiaries of the Plan.
REPORTS TO PARTICIPATING EMPLOYEES
Account statements are sent to Participants covering the status
of the Participants' accounts under the Plan as of the end of each quarter.
PLAN ADMINISTRATION
The Plan is administered by an Advisory Committee appointed by
the Company which currently consists of three employees of the
Company or its subsidiaries who are also serving as the Trustee.
The Committee members receive no compensation for their services.
Any Trustee may be removed, and a new Trustee appointed, by the Company
upon 30 days' notice to the Trustee. Administrative expenses of
the Plan are paid from the Trust to the extent they are not paid by the
Company.
NOTE TWO SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Quoted market prices are used to value the Company's common stock
investments at December 31. The contract value of investments with the
insurance company is provided by the insurance company.
Dividend income is accrued on the ex-dividend date. Purchases and sales of
securities are recorded on a trade-date basis. Realized gains and losses from
security transactions are reported on the average cost method.
NOTE THREE TAX STATUS
The Plan operates as a qualified plan under Sections 401(a) and 401(k) of
the Code. Qualification of the Plan means that a Participant will not be
subject to federal income taxes on Elective Deferral Contributions, or on
earnings or appreciation on all account balances held in the Plan, until such
amounts either are withdrawn by or distributed to the Participant, or are
distributed to the Participant's spouse or beneficiary in the event of the
Participant's death. Participant elective deferral contributions are not taxed
for purposes of federal income tax except for social security taxes.
Distributions of contributions and all accumulated earnings thereon to
Participants will be subject to federal income tax as defined by the Code.
The Plan has obtained a favorable tax determination letter from the
Internal Revenue Service and the Company believes that the Plan continues to
qualify and to operate as designed.
NOTE FOUR INVESTMENTS
The fair value of the Plan's investments held in a trust by the Trustee, at
December 31, are presented in the following table. Investments that represent 5
percent or more of the Plan's net assets are separately identified.
Number of Shares Fair Value
INVESTMENTS AT FAIR VALUE AS DETERMINED BY
QUOTED MARKET PRICE
As of December 31, 1992:
Plains Petroleum Company
Common Stock (cost of $213,784) 7,277 $181,530
--------
--------
As of December 31, 1993:
Plains Petroleum Company
Common Stock (cost of $292,634) 10,431 $245,207
--------
--------
As of December 31, 1994:
Plains Petroleum Company
Common Stock (cost of $431,714) 17,185 $402,125
--------
--------
INVESTMENTS AT ESTIMATED FAIR VALUE 12/31/94 12/31/93
---------- --------
Common Trust Funds:
Stable Return Fund $299,669 $316,466
Common Stock Fund - 327,009
Growth Equity 365,397 -
Moderate Balanced Fund 279,670 136,422
Intermediate US Government Bond Fund 114,533 139,424
---------- --------
$1,059,269 $919,321
---------- --------
---------- --------
DEPOSIT WITH INSURANCE COMPANY
In 1990, the Plan entered into a deposit contract with the United of Omaha
Life Insurance Co. ("United"). United maintains the contributions in a pooled
account. The account is credited with actual earnings on the underlying
investments. The contract is included in the financial statements at the
December 31st contract value as reported to the Plan by United.
NOTE FIVE PLAN AMENDMENT OR TERMINATION
Effective January 1, 1994, the Plan was amended to provide for employer
matching contributions of up to 50 percent of the first 6 percent of employee-
Participant elective deferral contributions. This matching contribution will be
made in Company common stock and will be subject to certain vesting requirements
(See NOTE ONE, vesting). The matching account shares cannot be redirected to
another investment account in the Plan and are not available for hardship
withdrawals or for loans. Earned dividends on these shares will be reinvested
in Company common stock that will be added to the matching account. The
amendment also included a reduction of the maximum Participant elective deferral
contribution from 10 percent to 9 percent.
The Plan has no specified duration. The Company has no current plans to
terminate the Plan, but reserves the right to amend, suspend, or terminate it at
any time. Rights or benefits previously acquired by or allocated for
Participants will not be adversely affected by any such action unless the
officers of the Company, on advice of legal counsel, determine such action to be
necessary or advisable to conform the Plan to the requirements of Sections 401
and 501 of the Code or other federal law. All account balances will be fully
vested in the event of a termination.