-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CPyZUj9kKFTcpsDbZcIW07Dt2rg1AXFzhOpm6/NNTI8qdpGT+BZR9H4tRiJ1jDXl ukM5aLEQls+f34pr/j2wEg== 0000950129-96-000285.txt : 19960306 0000950129-96-000285.hdr.sgml : 19960306 ACCESSION NUMBER: 0000950129-96-000285 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 22 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960305 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENRON OIL & GAS CO CENTRAL INDEX KEY: 0000821189 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 470684736 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-09743 FILM NUMBER: 96531359 BUSINESS ADDRESS: STREET 1: 1400 SMITH ST CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7138535482 10-K405 1 ENRON OIL & GAS FORM 10K PERIOD ENDED 12/31/95 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 --------------------- FORM 10-K --------------------- /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 1-9743 ENRON OIL & GAS COMPANY (Exact name of registrant as specified in its charter) DELAWARE 47-0684736 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 1400 SMITH STREET, HOUSTON, TEXAS 77002-7369 (Address of principal executive offices) (zip code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 713-853-6161 --------------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- ----------------------- Common Stock, $.01 par value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / /. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/. Aggregate market value of the voting stock held by nonaffiliates of the registrant, based on the closing sale price in the daily composite list for transactions on the New York Stock Exchange on March 1, 1996 was $1,535,085,875. As of March 1, 1996, there were 159,976,840 shares of the registrant's Common Stock, $.01 par value, outstanding. DOCUMENTS INCORPORATED BY REFERENCE. Certain portions of the registrant's definitive Proxy Statement for the May 7, 1996 Annual Meeting of Shareholders ("Proxy Statement") are incorporated in Part III by reference. ================================================================================ 2 TABLE OF CONTENTS PART I
PAGE ---- Item 1. Business General................................................................... 1 Business Segments......................................................... 2 Exploration and Production................................................ 2 Marketing................................................................. 5 Wellhead Volumes and Prices, and Lease and Well Expenses.................. 7 Other Natural Gas Marketing Volumes and Prices............................ 8 Competition............................................................... 8 Regulation................................................................ 8 Relationship Between the Company and Enron Corp. ......................... 11 Other Matters............................................................. 13 Current Executive Officers of the Registrant.............................. 15 Item 2. Properties.................................................................. 16 Oil and Gas Exploration and Production Properties and Reserves............ 16 Item 3. Legal Proceedings........................................................... 19 Item 4. Submission of Matters to a Vote of Security Holders......................... 19 PART II Item 5. Market for the Registrant's Common Equity and Related Shareholder Matters... 20 Item 6. Selected Financial Data..................................................... 21 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................................ 22 Item 8. Financial Statements and Supplementary Data................................. 30 Item 9. Disagreements on Accounting and Financial Disclosure........................ 30 PART III Item 10. Directors and Executive Officers of the Registrant.......................... 30 Item 11. Executive Compensation...................................................... 30 Item 12. Security Ownership of Certain Beneficial Owners and Management.............. 30 Item 13. Certain Relationships and Related Transactions.............................. 30 PART IV Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K............. 30
i 3 PART I ITEM 1. BUSINESS GENERAL Enron Oil & Gas Company (the "Company"), a Delaware corporation organized in 1985, is engaged, either directly or through a marketing subsidiary with regard to domestic operations or through various subsidiaries with regard to international operations, in the exploration for, and the development, production and marketing of, natural gas and crude oil primarily in major producing basins in the United States, as well as in Canada, Trinidad and India and, to a lesser extent, selected other international areas. The Company's principal producing areas are further described under "Exploration and Production" below. At December 31, 1995, the Company's estimated net proved natural gas reserves were 3,343 billion cubic feet ("Bcf"), including 1,180 Bcf of proved undeveloped methane reserves in the Big Piney deep Paleozoic formations and amounts related to a volumetric production payment and estimated net proved crude oil, condensate and natural gas liquids reserves were 50 million barrels ("MMBbl"). (See "Supplemental Information to Consolidated Financial Statements"). At such date, approximately 78% of the Company's reserves (on a natural gas equivalent basis) was located in the United States, 10% in Canada, 8% in Trinidad and 4% in India. As of December 31, 1995, the Company employed approximately 740 persons. The Company's business strategy is to maximize the rate of return on investment of capital by controlling both operating and capital costs and enhancing the certainty of future revenues through the use of various marketing mechanisms. This strategy enhances the generation of both income and cash flow from each unit of production and allows for the growth of production on a cost-effective basis by optimizing the reinvestment of cash flow. The Company refocused its 1995 drilling activity away from natural gas deliverability and toward natural gas reserve enhancement and crude oil exploitation in the United States in response to the decline in United States natural gas prices in recent periods. The Company is also focusing on the cost-effective utilization of advances in technology associated with gathering, processing and interpretation of 3-D seismic data, developing reservoir simulation models and drilling operations through the use of new and/or improved drill bits, mud motors, mud additives, formation logging techniques and reservoir fracturing methods. These advanced technologies are used, as appropriate, throughout the Company to reduce the risks associated with all aspects of oil and gas reserve exploration, exploitation and development. The Company implements its strategy by emphasizing the drilling of internally generated prospects in order to find and develop low cost reserves. Achieving and maintaining the lowest possible cost structure are also important goals in the implementation of the Company's strategy. Consistent with the Company's desire to optimize the use of its assets, it also maintains a strategy of selling select oil and gas properties that for various reasons may no longer fit into future operating plans, or which are not assessed to have sufficient future growth potential and when the economic value to be obtained by selling the properties and reserves in the ground is evaluated to be greater than what would be obtained by holding the properties and producing the reserves over time. As a result, the Company typically receives each year a varying but substantial level of proceeds related to such sales which proceeds are available for general corporate use. The closing on December 13, 1995 of the sale by Enron Corp. of approximately 31 million outstanding shares of the common stock of the Company reduced Enron Corp.'s ownership in the Company from 80% to 61%. (See "Relationship Between the Company and Enron Corp."). Unless the context otherwise requires, all references herein to the Company include Enron Oil & Gas Company, its predecessors and subsidiaries, and any reference to the ownership of interest or pursuit of operations in any international areas by the Company recognizes that all such interests are owned and operations are pursued by subsidiaries of Enron Oil & Gas Company. Unless the context otherwise requires, all references herein to Enron Corp. include Enron Corp., its predecessors and affiliates, other than the Company and its predecessors and subsidiaries. With respect to information on the Company's working interest in wells or acreage, "net" oil and gas wells or acreage are determined by multiplying "gross" oil and gas wells or acreage by the Company's working interest in the wells or acreage. Unless otherwise defined, all references to wells are gross. 1 4 BUSINESS SEGMENTS The Company's operations are all natural gas and crude oil exploration and production related. Accordingly, such operations are classified as one business segment. EXPLORATION AND PRODUCTION NORTH AMERICAN OPERATIONS The Company's seven principal United States producing areas are the Big Piney area, South Texas area, East Texas area, Offshore Gulf of Mexico area, Canyon Trend area, Pitchfork Ranch area and Vernal area. Properties in these areas comprised approximately 67% of the Company's United States reserves (on a natural gas equivalent basis) and 90% of the Company's maximum United States net natural gas deliverability as of December 31, 1995 and are substantially all operated by the Company. The Company's other United States natural gas and crude oil producing properties are located primarily in other areas of Texas, Utah, New Mexico, Oklahoma, California and Kansas. At December 31, 1995, 95% of the Company's proved United States reserves, including the reserves in the Big Piney deep Paleozoic formations, (on a natural gas equivalent basis) was natural gas and 5% was crude oil, condensate and natural gas liquids. A substantial portion of the Company's United States natural gas reserves is in long-lived fields with well-established production histories. The Company believes that opportunities exist to increase production in many of these fields through continued infill and other development drilling. The Company also has natural gas and crude oil producing properties located in Western Canada, primarily in the provinces of Alberta, Saskatchewan and Manitoba. Big Piney Area. The Company's largest reserve accumulation is located in the Big Piney area in Sublette and Lincoln counties in southwestern Wyoming. The Company is the holder of the largest productive acreage base in this area, with approximately 245,000 net acres under lease directly within field limits. The Company operates approximately 535 natural gas wells in this area in which it owns an 87% average working interest. Deliveries from the area net to the Company averaged 90 million cubic feet ("MMcf") per day of natural gas and 2.0 thousand barrels ("MBbl") per day of crude oil, condensate, and natural gas liquids in 1995. At December 31, 1995, natural gas deliverability net to the Company was approximately 140 MMcf per day. The current principal producing intervals are the Frontier and Mesaverde formations. The Frontier formation, which occurs at 6,500 to 10,000 feet, contains approximately 54% of the Company's Big Piney proved developed reserves. The Company drilled 26 wells in the Big Piney area in 1995. Although natural gas drilling has been curtailed in this area during 1995 in response to market conditions, numerous drilling opportunities will be available for several years. In 1995, the Company recorded as proved undeveloped reserves 1,180 Bcf of methane contained, along with high concentrations of carbon dioxide as well as small amounts of other gaseous substances, in the deep Wyoming Paleozoic formation located under acreage leased by the Company and held by production in the Big Piney area. The Company is actively pursuing the consummation of a market or markets from several different potential sources to facilitate realizing the value of these reserves. South Texas Area. The Company's activities in South Texas are focused in the Lobo, Wilcox and Frio producing horizons. The principal areas of activity are in the Lobo and Wilcox Trends which occur primarily in Webb, Zapata and Starr counties. The Company operates approximately 320 wells in the South Texas area. Production is primarily from the Upper Wilcox and Lobo sands at depths ranging from 5,000 to 13,000 feet. The Company has approximately 197,000 net acres under lease in this area. Natural gas deliveries net to the Company averaged approximately 158 MMcf per day in 1995. At December 31, 1995, natural gas deliverability from this area net to the Company was approximately 155 MMcf per day which was impacted during 1995 by the sale of selected properties. The Company drilled 45 wells in the South Texas area in 1995 and participated in a 2 5 sizable 3-D seismic acquisition effort. An active drilling program in this area is anticipated to continue for several years. East Texas Area. The Company's activities in the East Texas area are primarily in the Carthage field, located in Panola County, and the North Milton field, located in northern Harris County. The Carthage field is the Company's newest area of concentration. This field is one of the most prolific fields in East Texas with production primarily from the Cotton Valley, Travis Peak and Pettit formations. In 1995, properties were acquired that doubled the Company's acreage position to 17,000 acres. The Company drilled 36 wells in the East Texas area in 1995 and anticipates an active drilling program will continue for several years. The Company has an average 71% working interest in its holdings. The Company has continued its activity in the North Milton field where it now operates 19 wells and holds a 100% working interest in the acreage. Further drilling is planned for 1996. At December 31, 1995, deliverability from the East Texas area was approximately 50 MMcf per day of natural gas with almost 1.2 MBbl per day of crude oil, condensate and natural gas liquids both net to the Company. Offshore Gulf of Mexico Area. At December 31, 1995, the Company held an interest in 174 blocks in the Offshore Gulf of Mexico area totaling approximately 485,000 net acres. Of the 174 blocks, 119 are operated by the Company. These interests are located predominantly in federal waters offshore Texas and Louisiana. During 1995, the Company acquired a 50% interest in essentially all of the Offshore Gulf of Mexico properties previously owned by Santa Fe Minerals, Inc. complementing the Company's previously owned interests and adding significantly to the Company's offshore operations. Natural gas deliveries from this area averaged 124 MMcf per day during 1995 net to the Company. A substantial portion of such deliveries was from interests in the Matagorda trend with significant volumes also coming from the Mustang Island area. Deliverability from this area at December 31, 1995 was 155 MMcf per day net to the Company sourced principally as noted above. The Company has maintained an active drilling program in this area during 1995 and anticipates a similar program to continue for several years. Canyon Trend Area. The Company's activities in this area have been concentrated in Crockett, Sutton, Terrell and Val Verde Counties, Texas where the Company drilled 384 natural gas wells during the period 1992 through 1995. The Company holds approximately 99,000 net acres and now operates approximately 635 natural gas wells in this area in which it owns a 97% average working interest. Production is from the Canyon sands and Strawn limestone at depths from 5,500 to 12,500 feet. In 1995, natural gas deliveries net to the Company averaged 57 MMcf per day and at December 31, 1995, natural gas deliverability net to the Company was approximately 50 MMcf per day. The Company has maintained an active drilling program in the Canyon Trend area during 1995 and expects a similar program to continue for several years. Pitchfork Ranch Area. The Pitchfork Ranch area located in Lea County, New Mexico, produces primarily from the Bone Spring, Atoka and Morrow formations. In 1995, deliveries net to the Company averaged 28 MMcf per day of natural gas and approximately 2.8 MBbl per day of crude oil, condensate and natural gas liquids. At December 31, 1995, deliverability net to the Company was approximately 25 MMcf per day of natural gas and 2.6 MBbl per day of crude oil, condensate and natural gas liquids. The Company holds approximately 31,000 net acres and recently acquired a 3-D seismic survey over this area. The Company expects to maintain an active drilling program in this area for several years. Vernal Area. In the Vernal area, located primarily in Uintah County, Utah, the Company operates approximately 200 producing wells and presently controls approximately 75,000 net acres. In 1995, natural gas deliveries net to the Company from the Vernal area averaged 19 MMcf per day which represents deliverability. Production is from the Green River and Wasatch formations located at depths between 4,500 and 8,000 feet. The Company has an average working interest of approximately 60%. Although the drilling of natural gas wells was deferred in 1995 in the Vernal area in response to market conditions, numerous drilling opportunities will be available for several years. Canada. The Company is engaged in the exploration for and the development, production and marketing of natural gas and crude oil and the operation of natural gas processing plants in western Canada, principally in the provinces of Alberta, Saskatchewan, and Manitoba. The Company conducts operations from offices in 3 6 Calgary. The Company produces natural gas from seven major areas and crude oil from four major areas. The Sandhills area in Southwestern Saskatchewan is the largest single producing area where 75 wells were drilled in 1995 resulting in deliverability net to the Company from the field of approximately 38 MMcf per day at December 31, 1995. Canadian natural gas deliverability net to the Company at December 31, 1995 was approximately 95 MMcf per day, and the Company held approximately 347,000 net undeveloped acres in Canada. The Company expects to maintain an active drilling program for several years. OUTSIDE NORTH AMERICA OPERATIONS The Company has producing operations offshore Trinidad and India and was recently awarded by the government of Venezuela the rights to pursue exploration, exploitation and development of reserves in the Gulf of Paria East Block offshore the eastern state of Soucre and is conducting exploration in selected other international areas. Properties offshore Trinidad and India comprised 100% of the Company's proved reserves and production outside of North America at year end 1995. Trinidad. In November 1992, the Company was awarded a 95% working interest concession in the South East Coast Consortium ("SECC") Block offshore Trinidad, encompassing three undeveloped fields, previously held by three government-owned energy companies. The Kiskadee field has been developed, the Ibis field is under development and the Oil Bird field is anticipated to be developed over the next three to five years. Existing surplus processing and transportation capacity at the Pelican field facilities owned and operated by Trinidad and Tobago government-owned companies is being used to process and transport the production. Natural gas is being sold into the local market under a take-or-pay agreement with the National Gas Company of Trinidad and Tobago. In 1995, deliveries net to the Company averaged 107 MMcf per day of natural gas and 5.1 MBbl per day of crude oil and condensate. At December 31, 1995, natural gas deliverability net to the Company was approximately 170 MMcf per day and the Company held approximately 71,000 net undeveloped acres in Trinidad. In 1995, the Company was awarded the right to develop the U(a) block adjacent to the SECC Block and is presently negotiating the terms of a production sharing contract with the Government of Trinidad and Tobago. India. In December 1994, the Company signed agreements covering profit sharing, joint operations and product sales and representing a 30% working interest in and was designated operator of the Tapti, Panna and Mukta Blocks located offshore Bombay, India. The Company is designated operator of all three areas. The blocks were previously operated by the Indian national oil company, Oil & Natural Gas Corporation Limited, which retained a 40% working interest. The 363,000 acre Tapti Block contains two major proved gas accumulations delineated by 22 expendable exploration wells that have been plugged. The Company has initiated a development plan for the Tapti Block accumulations. The 106,000 acre Panna Block and the 192,000 acre Mukta Block are partially developed with 30 wells producing from five producing platforms located in the Panna and Mukta fields. The fields were producing approximately 3.3 MBbl per day of crude oil net to the Company as of December 31, 1995; all associated gas was being flared. The Company intends to continue development of the accumulations and to expand processing capacity to allow crude oil production at full deliverability as well as to permit natural gas sales. Venezuela. The Company was awarded exploration, exploitation and development rights for a block offshore the eastern state of Soucre, Venezuela in early 1996. The Company holds an initial 90 percent working interest in the joint venture. Plans include the completion of a 3-D seismic survey over the most prospective portions of the block in 1996 and initiation of drilling in 1997, with production targeted for mid-1998. Total reserves are estimated at 100 to 300 million barrels gross. Other International. The Company continues to evaluate other selected conventional natural gas and crude oil opportunities outside North America. The Company is pursuing other exploitation opportunities in countries where indigenous natural gas and crude oil reserves have been identified, particularly where synergies in natural gas transportation, processing and power cogeneration can be optimized with other Enron Corp. affiliated companies. In early 1995, the Company, an Enron Corp. affiliate and the Qatar General Petroleum Corporation signed a nonbinding letter of intent concerning the possible development of a liquefied 4 7 natural gas project for natural gas to be produced from a block within the North Dome Field. The Company may jointly hold up to a 40% equity interest in the joint venture and the Company would drill and develop to-be-agreed-upon reserves. In addition, the Company signed nonbinding letters of intent in early 1995 with Uzbekneftigaz, the national oil and gas company of Uzbekistan as well as with Gazprom, the Russian natural gas company, to pursue the feasibility of joint venture development and marketing of previously discovered hydrocarbon reserves in Uzbekistan.The Company is also participating in discussions concerning the potential for conventional oil and gas development opportunities in China, Mozambique, Jordan and Algeria. The Company also holds nonoperating working interests in two conventional oil and gas exploration prospects in the U.K. North Sea. The Company continues evaluation and assessment of its international opportunity portfolio in the coalbed methane recovery arena, including projects in South Wales in the U.K., the Lorraine Basin in France, Galilee Basin in Australia and the San Jiao area and Hedong Basin in China. MARKETING Wellhead Marketing. The Company's North America wellhead natural gas production is currently being sold on the spot market and under long-term natural gas contracts at market responsive prices. In many instances, the long-term contract prices closely approximate the prices received for natural gas being sold on the spot market. Wellhead natural gas volumes from Trinidad are sold at prices that are based on a fixed price schedule with annual escalations. Under terms of the production sharing contract, natural gas volumes in India are to be sold to the Gas Authority of India, Ltd. under a take-or-pay contract at a price linked to a basket of world market fuel oil quotations with floor and ceiling limits. Approximately 30% of the Company's wellhead natural gas production is currently being sold to pipeline and marketing subsidiaries of Enron Corp. The Company believes that the terms of its transactions and agreements with Enron Corp. and/or its affiliates are and intends that future such transactions and agreements will be at least as favorable to the Company as could be obtained from third parties. Substantially all of the Company's wellhead crude oil and condensate is sold under various terms and arrangements at market responsive prices. Other Marketing. Enron Oil & Gas Marketing, Inc. ("EOGM"), a wholly-owned subsidiary of the Company, is a marketing company engaging in various marketing activities. Both the Company and EOGM contract to provide, under short and long-term agreements, natural gas to various purchasers and then aggregate the necessary supplies for the sales with purchases from various sources including third-party producers, marketing companies, pipelines or from the Company's own production. In addition, EOGM has purchased and constructed several small gathering systems in order to facilitate its entry into the gathering business on a limited basis. Both the Company and EOGM utilize other short and long-term hedging and trading mechanisms including sales and purchases utilizing NYMEX-related commodity market transactions. These marketing activities have provided an effective balance in managing a portion of the Company's exposure to commodity price risks for both natural gas and crude oil and condensate wellhead prices. (See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Capital Resources and Liquidity - Hedging Transactions.") In September 1992, the Company sold a volumetric production payment for $326.8 million to a limited partnership. Under the terms of the production payment agreements, the Company conveyed a real property interest in approximately 124 billion cubic feet equivalent ("Bcfe") (136 trillion British thermal units ("TBtu")) of certain natural gas and other hydrocarbons to the purchaser. Effective October 1, 1993, the agreements were amended providing for the extension of the original term of the volumetric production payment through March 31, 1999 and including a revised schedule of daily quantities of hydrocarbons to be delivered which is approximately one-half of the original schedule. The revised schedule under the amended agreement totals approximately 89.1 Bcfe (97.8 TBtu) versus approximately 87.9 Bcfe (96.4 TBtu) remaining to be delivered under the original agreement. Daily quantities of hydrocarbons no longer required to be delivered under the revised schedule during the period from October 1, 1993 through June 30, 1996 are 5 8 available for sale by the Company. The Company retains responsibility for its working interest share of the cost of operations. In March 1995, in a series of transactions with Enron Corp. and an affiliate of Enron Corp., the Company exchanged all of its fuel supply and purchase contracts and related price swap agreements associated with a Texas City cogeneration plant (the "Cogen Contracts") for certain natural gas price swap agreements (the "Swap Agreements") of equivalent value. As a result of the transactions, the Company has been relieved of all performance obligations associated with the Cogen Contracts. The Company will realize net operating revenues and receive corresponding cash payments of approximately $91 million during the period extending through December 31, 1999, under the terms of the Swap Agreements. The estimated fair value of the Swap Agreements was approximately $81 million at the date the Swap Agreements were received. The net effect of this series of transactions has resulted/will result in increases in net operating revenues and cash receipts for the Company during 1995 and 1996 of approximately $13 million and $7 million, respectively, with offsetting decreases in 1998 and 1999 versus that anticipated under the Cogen Contracts. 6 9 WELLHEAD VOLUMES AND PRICES, AND LEASE AND WELL EXPENSES The following table sets forth certain information regarding the Company's wellhead volumes of and average prices for natural gas per thousand cubic feet ("Mcf"), crude oil and condensate, and natural gas liquids per barrel ("Bbl"), and average lease and well expenses per thousand cubic feet equivalent ("Mcfe" - natural gas equivalents are determined using the ratio of 6.0 Mcf of natural gas to 1.0 barrel of crude oil and condensate or natural gas liquids) delivered during each of the three years in the period ended December 31, 1995:
YEAR ENDED DECEMBER 31, ---------------------------- 1995 1994 1993 ------ ------ ------ VOLUMES (PER DAY) Natural Gas (MMcf) United States(1)............................................ 560 614 649 Canada...................................................... 76 72 58 Trinidad.................................................... 107 63 2 ------ ------ ------ Total.................................................. 743 749 709 ====== ====== ====== Crude Oil and Condensate (MBbl) United States............................................... 9.1 8.0 6.6 Canada...................................................... 2.4 2.0 2.2 Trinidad.................................................... 5.1 2.5 .1 India....................................................... 2.5 .1 - ------ ------ ------ Total.................................................. 19.1 12.6 8.9 ====== ====== ====== Natural Gas Liquids (MBbl) United States............................................... 1.0 .3 .2 Canada...................................................... .4 .4 .4 ------ ------ ------ Total.................................................. 1.4 .7 .6 ====== ====== ====== AVERAGE PRICES Natural Gas ($/Mcf) United States(2)............................................ $ 1.39 $ 1.71 $ 1.97 Canada...................................................... .97 1.42 1.34 Trinidad.................................................... .97 .93 .89 Composite.............................................. 1.29 1.62 1.92 Crude Oil and Condensate ($/Bbl) United States............................................... $17.32 $16.06 $16.96 Canada...................................................... 16.22 14.05 14.63 Trinidad.................................................... 16.07 15.50 14.36 India....................................................... 16.81 15.70 - Composite.............................................. 16.78 15.62 16.37 Natural Gas Liquids ($/Bbl) United States............................................... $11.88 $12.45 $13.85 Canada...................................................... 9.74 8.45 9.46 Composite.............................................. 11.31 9.90 11.12 LEASE AND WELL EXPENSES ($/MCFE) United States............................................... $ .19 $ .19 $ .18 Canada...................................................... .35 .34 .48 Trinidad.................................................... .15 .17 1.46 India(3).................................................... 1.25 .13 - Composite.............................................. .22 .20 .21
- --------------- (1) Includes 48 MMcf per day in 1995 and 1994, and 81 MMcf per day in 1993 delivered under the terms of a volumetric production payment agreement effective October 1, 1992, as amended. (2) Includes an average equivalent wellhead value of $.80 per Mcf in 1995, $1.27 per Mcf in 1994 and $1.57 per Mcf in 1993 for the volumes described in note (1), net of transportation costs. (3) Based on expense estimates for nine days of production for 1994. Expenses for 1995 includes certain nonrecurring startup costs. 7 10 OTHER NATURAL GAS MARKETING VOLUMES AND PRICES The following table sets forth certain information regarding the Company's volumes of natural gas delivered under other marketing and volumetric production payment arrangements, and resulting average per unit gross revenue and per unit amortization of deferred revenues along with associated costs during each of the three years in the period ended December 31, 1995. (See "Marketing" for a discussion of other natural gas marketing arrangements and agreements).
YEAR ENDED DECEMBER 31, ---------------------------- 1995 1994 1993 ------ ------ ------ Volume (MMcf per day)(1)......................................... 264 324 293 Average Gross Revenue ($/Mcf)(2)................................. $ 1.88 $ 2.38 $ 2.57 Associated Costs ($/Mcf)(3)(4)................................... 1.51 2.06 2.32 ------ ------ ------ Margin ($/Mcf)................................................... $ .37 $ .32 $ .25 ====== ====== ======
- --------------- (1) Includes 48 MMcf per day in 1995 and 1994 and 81 MMcf per day in 1993 delivered under the terms of volumetric production payment and exchange agreements effective October 1, 1992, as amended. (2) Includes per unit deferred revenue amortization for the volumes detailed in note (1) at an equivalent of $2.46 per Mcf ($2.36 per million British thermal units ("MMBtu")) in 1995 and 1994 and $2.50 per Mcf ($2.40 per MMBtu) in 1993. (3) Includes an average value of $1.57 per Mcf in 1995, $1.92 per Mcf in 1994 and $2.20 per Mcf in 1993, for the volumes detailed in note (1) including average wellhead value and any transportation costs and exchange differentials. (4) Including transportation and exchange differentials. COMPETITION The Company actively competes for reserve acquisitions and exploration/exploitation leases, licenses and concessions, frequently against companies with substantially larger financial and other resources. To the extent the Company's exploration budget is lower than that of certain of its competitors, the Company may be disadvantaged in effectively competing for certain reserves, leases, licenses and concessions. Competitive factors include price, contract terms, and quality of service, including pipeline connection times and distribution efficiencies. In addition, the Company faces competition from other producers and suppliers, including competition from other world wide energy supplies, such as natural gas from Canada. REGULATION Domestic Regulation of Natural Gas and Crude Oil Production. Natural gas and crude oil production operations are subject to various types of regulation, including regulation in the United States by state and federal agencies. Domestic legislation affecting the oil and gas industry is under constant review for amendment or expansion. Also, numerous departments and agencies, both federal and state, are authorized by statute to issue and have issued rules and regulations which, among other things, require permits for the drilling of wells, regulate the spacing of wells, prevent the waste of natural gas and liquid hydrocarbon resources through proration and restrictions on flaring, require drilling bonds and regulate environmental and safety matters. The regulatory burden on the oil and gas industry increases its cost of doing business and, consequently, affects its profitability. A substantial portion of the Company's oil and gas leases in the Big Piney area and in the Gulf of Mexico, as well as some in other areas, are granted by the federal government and administered by the Bureau of Land Management (the "BLM") and the Minerals Management Service (the "MMS") federal agencies. Operations conducted by the Company on federal oil and gas leases must comply with numerous statutory and 8 11 regulatory restrictions concerning the above and other matters. Certain operations must be conducted pursuant to appropriate permits issued by the BLM and the MMS. Sales of crude oil, condensate and natural gas liquids by the Company are made at unregulated market prices. The transportation and sale for resale of natural gas in interstate commerce are regulated pursuant to the Natural Gas Act of 1938 (the "NGA") and the Natural Gas Policy Act of 1978 (the "NGPA"). These statutes are administered by the Federal Energy Regulatory Commission (the "FERC"). Effective January 1, 1993, the Natural Gas Wellhead Decontrol Act of 1989 deregulated natural gas prices for all "first sales" of natural gas, which includes all sales by the Company of its own production. Consequently, sales of the Company's natural gas currently may be made at market prices, subject to applicable contract provisions. Since 1985, the FERC has endeavored to make natural gas transportation more accessible to natural gas buyers and sellers on an open and nondiscriminatory basis. These efforts have significantly altered the marketing and pricing of natural gas. Commencing in April 1992, the FERC issued Order Nos. 636, 636A and 636B ("Order No. 636"), which mandate a fundamental restructuring of interstate natural gas pipeline sales and transportation services, including the "unbundling" by interstate natural gas pipelines of the sales, transportation, storage, and other components of their previously existing city-gate sales service, and to separately state the rates for each unbundled service. Under Order No. 636, unbundled pipeline sales can be made only in the production areas. The purpose of Order No. 636 is to further enhance competition in the natural gas industry by assuring the comparability of pipeline sales service and services offered by a pipelines' competitors. The FERC issued final orders accepting most pipelines' Order No. 636 compliance filings, and has commenced a series of one-year reviews of individual pipeline implementations of Order No. 636. Appeals are pending and these orders may be amended or reversed in whole or in part. Order No. 636 does not directly regulate the Company's activities, but has had and will have an indirect effect because of its broad scope. With Order No. 636 and pending ongoing FERC reviews of individual pipeline restructurings, subject to court review, it is difficult to predict with precision its effects. In many instances, however, Order No. 636 has substantially reduced or brought to an end interstate pipelines' traditional roles as wholesalers of natural gas in favor of providing only storage and transportation services. Order No. 636 has also substantially increased competition in natural gas markets, even though there remains significant uncertainty with respect to the marketing and transportation of natural gas. In spite of this uncertainty, Order No. 636 may enhance the Company's ability to market and transport its natural gas production, although it may also subject the Company to more restrictive pipeline imbalance tolerances and greater penalties for violation of such tolerances. In July 1994, the FERC eliminated a regulation that had rendered virtually all sales of natural gas by pipeline affiliates, such as the Company, to be deregulated first sales. As a result, only sales by the Company of its own production now qualify for this status. All other sales of natural gas by the Company, such as those of natural gas purchased from third parties, are now jurisdictional sales subject to a blanket sales certificate issued by the FERC under the NGA. The Company does not anticipate this change will have any significant current adverse effects in light of the flexible terms and conditions of the existing blanket certificate. Such sales are subject to the future possibility of greater federal oversight, however, including the possibility the FERC might prospectively impose more restrictive conditions on such sales. The FERC has extended indefinitely its regulations (Order No. 497 regulations) governing relationships between interstate pipelines and their marketing affiliates, subject to revisions to delete an out-of-date standard and revise certain reporting and record keeping requirements. Among other matters, these new rules require pipelines to post on their electronic bulletin boards, within 24 hours of gas flow, information concerning discounted transportation provided to marketing affiliates to enable competing marketers to request comparable discounts. Order No. 497 does not directly regulate the Company's activities, although a substantial portion of the Company's natural gas production is sold to or transported by interstate pipeline affiliates which are subject to the Order. The Company's activities may therefore be indirectly affected by these regulations. 9 12 The Company owns, directly or indirectly, certain natural gas pipelines that it believes meet the traditional tests the FERC has used to establish a pipeline's status as a gatherer not subject to FERC jurisdiction under the NGA. State regulation of gathering facilities generally includes various safety, environmental, and in some circumstances, nondiscriminatory take requirements, but does not generally entail rate regulation. Natural gas gathering may receive greater regulatory scrutiny at both the state and federal levels as the pipeline restructuring under Order No. 636 is implemented. For example, the State of Oklahoma in 1995 enacted legislation that essentially requires gatherers to provide open access, non-discriminatory service. In addition, the FERC has reiterated that, except in situations in which the gatherer acts in concert with an interstate pipeline affiliate to frustrate the FERC's transportation policies, it does not have jurisdiction over natural gas gathering facilities and services and that such facilities and services are properly regulated by state authorities. This FERC action may further encourage regulatory scrutiny of natural gas gathering by state agencies. In addition, the FERC has approved several transfers by interstate pipelines, including certain of the Company's pipeline affiliates, of gathering facilities to unregulated independent or affiliated gathering companies. This could increase competition among gatherers in the affected areas. Certain of the FERC's orders delineating its new gathering policy are subject to pending court appeals. The Company's gathering operations could be adversely affected should they be subject in the future to the application of state or federal regulation of rates and services. The FERC has recently announced its intention to reexamine certain of its transportation-related policies, including the manner in which interstate pipelines release transportation capacity under Order No. 636, and has announced new policies concerning the use of alternative, non-cost based methods for setting rates for interstate natural gas transmission. While any resulting FERC action would affect the Company only indirectly, these inquiries are intended to further enhance competition in natural gas markets. The FERC has also recently initiated a proceeding in which it intends to evaluate its current regulatory treatment of pipeline facilities constructed in offshore federal waters. The ultimate outcome of such proceeding cannot be predicted at this time, but it is possible that it could result in more active oversight by the FERC of such offshore facilities. The Company's natural gas gathering operations may be or become subject to safety and operational regulations relating to the design, installation, testing, construction, operation, replacement, and management of facilities. Pipeline safety issues have recently become the subject of increasing focus in various political and administrative arenas at both the state and federal levels. For example, federal legislation addressing pipeline safety issues was considered during 1994 and 1995, which, if enacted, would have included a federal "one-call" notification system and certain new facilities specifications applicable to certain new construction. Similar "one call" legislation has been reintroduced in the U.S. Congress. The Company cannot predict what effect, if any, the adoption of this or other additional pipeline safety legislation might have on its operations, but does not believe that any adverse effect would be material. The Company cannot predict the effect that any of the aforementioned orders or the challenges to such orders will ultimately have on the Company's operations. Additional proposals and proceedings that might affect the natural gas industry are pending before Congress, the FERC and the courts. The Company cannot predict when or whether any such proposals or proceedings may become effective. It should also be noted that the natural gas industry historically has been very heavily regulated; therefore, there is no assurance that the less regulated approach currently being pursued by the FERC will continue indefinitely. Thus, the Company cannot predict the ultimate outcome or durability of the unbundled regulatory regime mandated by Order No. 636. Environmental Regulation. Various federal, state and local laws and regulations covering the discharge of materials into the environment, or otherwise relating to the protection of the environment, may affect the Company's operations and costs as a result of their effect on natural gas and crude oil exploration, development and production operations. It is not anticipated that the Company will be required in the near future to expend amounts that are material in relation to its total exploration and development expenditure program by reason of environmental laws and regulations, but inasmuch as such laws and regulations are frequently changed, the Company is unable to predict the ultimate cost of compliance. 10 13 Canadian Regulation. In Canada, the petroleum industry operates under federal, provincial and municipal legislation and regulations governing land tenure, royalties, production rates, pricing, environmental protection, exports and other matters. The price of natural gas and crude oil in Canada has been deregulated and is now determined by market conditions and negotiations between buyers and sellers. Various matters relating to the transportation and export of natural gas continue to be subject to regulation by both provincial and federal agencies; however, the North American Free Trade Agreement has reduced the risk of altering cross-border commercial transactions. Canadian governmental regulations may have a material effect on the economic parameters for engaging in oil and gas activities in Canada and may have a material effect on the advisability of investments in Canadian oil and gas drilling activities. The Company is monitoring political, regulatory and economic developments in Canada. Other International Regulation. The Company's exploration and production operations outside North America are subject to various types of regulations imposed by the respective governments of the countries in which the Company's operations are conducted, and may affect the Company's operations and costs within that country. The Company currently has producing operations offshore Trinidad and India and exploration activities in other selected international areas. RELATIONSHIP BETWEEN THE COMPANY AND ENRON CORP. Ownership of Common Stock. Through its ability to elect all of the directors of the Company, Enron Corp. has the ability to control all matters relating to the management of the Company, including any determination with respect to acquisition or disposition of Company assets, future issuance of common stock or other securities of the Company and any dividends payable on the common stock. Enron Corp. also has the ability to control the Company's exploration, development, acquisition and operating expenditure plans. There is no agreement between Enron Corp. and the Company that would prevent Enron Corp. from acquiring additional shares of common stock of the Company. The closing on December 13, 1995 of the sale by Enron Corp. of approximately 31 million outstanding shares of the common stock of the Company reduced Enron Corp.'s ownership interest in the Company from 80% to 61% with the result that (i) the Company ceased, effective December 14, 1995, to be included in the consolidated federal income tax return filed by Enron Corp. and (ii) the tax allocation agreement previously in effect between the Company and Enron Corp. was terminated. In addition, effective December 14, 1995, the Company and its subsidiaries and Enron Corp. entered into a new tax allocation agreement pursuant to which, among other things, Enron Corp. has agreed (in exchange for the payment of $13.0 million by the Company) to be liable for, and indemnify the Company against, all U.S. federal and state income taxes and certain foreign taxes imposed on the Company for periods prior to the date Enron Corp. reduced its ownership in the Company to less than 80%. The Company does not believe that the cessation of consolidated tax reporting with Enron Corp., the termination of the tax allocation agreement concurrent with deconsolidation and the signing of the new tax allocation agreement with Enron Corp. will have a material adverse effect on its financial condition or results of operations. Contractual Arrangements. The Company entered into a Services Agreement (the "Services Agreement") with Enron Corp. effective January 1, 1994, pursuant to which Enron Corp. provides various services, such as maintenance of certain employee benefit plans, provision of telecommunications and computer services, lease of office space and the provision of purchasing and operating services and certain other corporate staff and support services. Such services historically have been supplied to the Company by Enron Corp., and the Services Agreement provides for the further delivery of such services substantially identical in nature and quality to those services previously provided. The Company has agreed to a fixed rate for the rental of office space and to reimburse Enron Corp. for all other direct costs incurred in rendering services to the Company under the contract and to pay Enron Corp. for allocated indirect costs incurred in rendering such services up to a maximum of approximately $7 million in 1995 and $6.7 million for 1994. The limit on cost for the allocated indirect services provided by Enron Corp. to the Company will increase in subsequent years for inflation and certain changes in the Company's allocation bases, but such increase will not exceed 7.5% per 11 14 year. The Services Agreement is for an initial term of five years through December 1998 and will continue thereafter until terminated by either party. In March 1995, in a series of transactions with Enron Corp. and an affiliate of Enron Corp., the Company exchanged all of its fuel supply and purchase contracts and related price swap agreements associated with a Texas City cogeneration plant (the "Cogen Contracts") for certain natural gas price swap agreements (the "Swap Agreements") of equivalent value. As a result of the transactions, the Company has been relieved of all performance obligations associated with the Cogen Contracts. The Company will realize net operating revenues and receive corresponding cash payments of approximately $91 million during the period extending through December 31, 1999 under the terms of the Swap Agreements. The estimated fair value of the Swap Agreements was approximately $81 million at the date the Swap Agreements were received. The net effect of this series of transactions has resulted/will result in increases in net operating revenues and cash receipts for the Company during 1995 and 1996 of approximately $13 million and $7 million, respectively, with offsetting decreases in 1998 and 1999 versus that anticipated under the Cogen Contracts. Prior to December 14, 1995, the Company was included in the consolidated federal income tax return filed by Enron Corp. as the common parent for itself and its subsidiaries, excluding any foreign subsidiaries, and the resulting taxes, including taxes for any state or other taxing jurisdiction that required or permitted a consolidated, combined, or unitary tax return to be filed and in which the Company and/or any of its subsidiaries was included, were apportioned as between the Company and/or any of its subsidiaries and Enron Corp. based on the terms of the tax allocation agreement in effect prior to December 14, 1995. Effective December 14, 1995, the Company and its subsidiaries and Enron Corp. entered into a new tax allocation agreement (See "Ownership of Common Stock"). Conflicts of Interest. The nature of the respective businesses of the Company and Enron Corp. and its affiliates is such as to potentially give rise to conflicts of interest between the two companies. Conflicts could arise, for example, with respect to transactions involving purchases, sales and transportation of natural gas and other business dealings between the Company and Enron Corp. and its affiliates, potential acquisitions of businesses or oil and gas properties, the issuance of additional shares of voting securities, the election of directors or the payment of dividends by the Company. Circumstances may also arise that would cause Enron Corp. to engage in the exploration for and/or development and production of natural gas and crude oil in competition with the Company. For example, opportunities might arise which would require financial resources greater than those available to the Company, which are located in areas or countries in which the Company does not intend to operate or which involve properties that the Company would be unwilling to acquire. Also, Enron Corp. might acquire a competing oil and gas business as part of a larger acquisition. In addition, as part of Enron Corp.'s strategy of securing supplies of natural gas or capital, Enron Corp. may from time to time acquire producing properties or interests in entities owning producing properties, and thereafter engage in exploration, development and production activities with respect to such properties or indirectly engage in such activities through such companies. Enron Corp. subsidiaries provide or arrange financing, including debt or equity financing, for exploration and production companies that compete with the Company. In connection with such activities, Enron Corp. affiliates may make investments in the debt or equity of such companies. There are currently no such transactions under consideration that would result in voting control by Enron Corp. or any of its affiliates, other than the transaction described below. In its financing activities, Enron Corp. or an entity in which it has an interest may make loans secured by oil and gas properties or securities of oil and gas companies, may acquire production payments or may receive interests in oil and gas properties as equity components of lending transactions. As a result of its lending activities, Enron Corp. may also acquire oil and gas properties or companies upon foreclosure of secured loans or as part of a borrower's rearrangement of its obligations. Such acquisition, exploration, development and production activities may directly or indirectly compete with the Company's business. There can be no assurances that Enron Corp. will not engage directly or indirectly through entities other than the Company, in the natural gas and crude oil exploration, development and production business in competition with the Company. 12 15 Joint Energy Development Investments Limited Partnership ("JEDI"), a limited partnership in which Enron Capital & Trade Resources Corp. ("ECT"), a wholly-owned subsidiary of Enron Corp., owns a 50% general partner interest, has entered into an agreement to acquire a controlling interest in Coda Energy, Inc. ("Coda"). Coda is engaged in the exploration for, and the development, production and marketing of, natural gas and crude oil primarily in North Texas and Oklahoma. Crude oil accounts for approximately 86% of Coda's proved reserves. At December 31, 1994, Coda reported estimated proved natural gas reserves of 39,808 MMcf and estimated proved crude oil, condensate and natural gas liquids reserves of 39,207 MBbls. Enron Corp. anticipates that the transaction will be consummated in early 1996, subject to Coda stockholder approval and other conditions. Conflicts may arise between Coda and JEDI, and if the acquisition of Coda occurs Enron Corp. will be required to resolve such conflicts in a manner that is consistent with its fiduciary and contractual duties to other investors in Coda and JEDI and its fiduciary duties to the Company. ECT has entered into an agreement with JEDI and other investors in Coda designed to minimize certain conflicts of interest that may arise and providing, among other things, that the Company has no obligation to offer any business opportunities to Coda. The Company and Enron Corp. and its affiliates have in the past entered into material intercompany transactions and agreements incident to their respective businesses, and the Company and Enron Corp. and its affiliates may be expected to enter into material transactions and agreements from time to time in the future. Such transactions and agreements have related to, among other things, the purchase and sale of natural gas and crude oil, the financing of exploration and development efforts by the Company, and the provision of certain corporate services. (See "Marketing" and the Consolidated Financial Statements and notes thereto). The Company believes that its existing transactions and agreements with Enron Corp. and its affiliates have been at least as favorable to the Company as could be obtained from third parties, and the Company intends that the terms of any future transactions and agreements between the Company and Enron Corp. and its affiliates will be at least as favorable to the Company as could be obtained from third parties. OTHER MATTERS Energy Prices. Since the Company is primarily a natural gas company, it is more significantly impacted by changes in natural gas prices than in the prices for crude oil, condensate and natural gas liquids. During recent periods, domestic natural gas has been priced significantly below parity with crude oil, condensate and natural gas liquids based on the energy equivalency of, and differences in transportation and processing costs associated with, the respective products. This imbalance in parity has been primarily driven by, among other things, a supply of domestic natural gas volumes in excess of demand requirements. The Company is unable to predict when this supply imbalance may be resolved due to the significant impacts of factors such as general economic conditions, technology developments, weather and other international energy supplies over which the Company has no control. Average North America wellhead natural gas prices have fluctuated, at times rather dramatically, during the last three years. While these fluctuations resulted in an increase in average wellhead natural gas prices realized by the Company of 22% from 1992 to 1993, the average North America natural gas price received by the Company decreased 13% from 1993 to 1994 and 20% from 1994 to 1995. Wellhead natural gas volumes from Trinidad are sold at prices that are based on a fixed schedule with periodic escalations. While natural gas deliveries in India are not expected to commence until 1997 under the terms of the Production Sharing Contract, the price of such deliveries, when initiated, is to be indexed to a basket of world market fuel oil quotations structured to include floor and ceiling limits. Due to the many uncertainties associated with the world political environment, the availabilities of other world wide energy supplies and the relative competitive relationships of the various energy sources in the view of the consumers, the Company is unable to predict what changes may occur in natural gas prices in the future. Substantially all of the Company's wellhead crude oil and condensate is sold under various terms and arrangements at market responsive prices. Crude oil and condensate prices also have fluctuated during the last three years. Due to the many uncertainties associated with the world political environment, the availabilities of other world wide energy supplies and the relative competitive relationships of the various energy sources in the 13 16 view of the consumers, the Company is unable to predict what changes may occur in crude oil and condensate prices in the future. To mitigate the risk of market price fluctuations, the Company engages in certain price risk management activities to hedge commodity prices associated with a portion of the Company's sales and purchases of natural gas and crude oil. (See "Management's Discussion and Analysis of Financial Condition and Results of Operations"). Tight Gas Sand Tax Credits (Section 29) and Severance Tax Exemption. Federal United States tax law provides a tax credit for production of certain fuels produced from nonconventional sources (including natural gas produced from tight formations), subject to a number of limitations. Fuels qualifying for the credit must be produced from a well drilled or a facility placed in service after November 5, 1990 and before January 1, 1993, and must be sold before January 1, 2003. The credit, which is currently approximately $.52 per MMBtu of natural gas, is computed by reference to the price of crude oil, and is phased out as the price of crude oil exceeds $23.50 in 1980 dollars (adjusted for inflation) with complete phaseout if such price exceeds $29.50 in 1980 dollars (similarly adjusted). Under this formula, the commencement of phaseout would be triggered if the average price for crude oil rose above approximately $45 per barrel in current dollars. Significant benefits from the tax credit are accruing to the Company since a portion (and in some cases a substantial portion) of the Company's natural gas production from new wells drilled after November 5, 1990, and before January 1, 1993, on the Company's leases in several of the Company's significant producing areas qualify for this tax credit. Natural gas production from wells spudded or completed after May 24, 1989 and before September 1, 1996 in tight formations in a certain state qualifies for a ten-year exemption, ending August 31, 2001, from severance taxes, subject to certain limitations. In 1995, the drilling qualification period was extended in a modified and somewhat reduced form from September 1996 through August 2002. Consequently, new qualifying production will be added prospectively to that presently qualified. Other. All of the Company's oil and gas activities are subject to the risks normally incident to the exploration for and development and production of natural gas and crude oil, including blowouts, cratering and fires, each of which could result in damage to life and property. Offshore operations are subject to usual marine perils, including hurricanes and other adverse weather conditions, and governmental regulations as well as interruption or termination by governmental authorities based on environmental and other considerations. In accordance with customary industry practices, insurance is maintained by the Company against some, but not all, of the risks. Losses and liabilities arising from such events could reduce revenues and increase costs to the Company to the extent not covered by insurance. The Company's operations outside of North America are subject to certain risks, including expropriation of assets, risks of increases in taxes and government royalties, renegotiation of contracts with foreign governments, political instability, payment delays, limits on allowable levels of production and current exchange and repatriation losses, as well as changes in laws, regulations and policies governing operations of foreign companies generally. 14 17 CURRENT EXECUTIVE OFFICERS OF THE REGISTRANT The current executive officers of the Company and their names and ages are as follows:
NAME AGE POSITION ---- --- -------- Forrest E. Hoglund................... 62 Chairman of the Board, President and Chief Executive Officer; Director Joe Michael McKinney................. 56 President - International Operations Dennis M. Ulak....................... 42 President - International Operations Mark G. Papa......................... 49 President - North American Operations Lewis P. Chandler, Jr................ 56 Senior Vice President, Law Walter C. Wilson..................... 53 Senior Vice President and Chief Financial Officer Ben B. Boyd.......................... 54 Vice President and Controller
Forrest E. Hoglund joined the Company as Chairman of the Board, Chief Executive Officer and Director in September 1987. Since May 1990, he has also served as President of the Company. Mr. Hoglund was a director of USX Corporation from February 1986 until September 1987. He joined Texas Oil & Gas Corp. ("TXO") in 1977 as president, was named Chief Operating Officer in 1979, Chief Executive Officer in 1982, and served TXO in those capacities until September 1987. Mr. Hoglund is also a director of Texas Commerce Bancshares, Inc. Joe Michael McKinney has been President - International Operations since February 1994, a dual position shared with Mr. Ulak effective January 1996, with responsibilities for exploration, drilling, production and engineering activities for the Company's ventures outside North America. Mr. McKinney joined the Company and was named Senior Vice President of Operations for Enron Oil & Gas International, Inc., a wholly-owned subsidiary of the Company, in December 1991. He was elected President and Chief Operating Officer of Enron Oil & Gas International, Inc. in April 1993, a capacity in which he continues to serve jointly with Mr. Ulak effective January 1996. Prior to joining the Company, Mr. McKinney held operations management positions with Union Texas Petroleum Company, The Superior Oil Company and Exxon Company, USA. Dennis M. Ulak has been President - International Operations, a dual position shared with Mr. McKinney, since January 1996 with responsibilities for exploration, drilling, production and engineering activities for the Company's ventures outside North America. Mr. Ulak also serves jointly with Mr. McKinney as President and Chief Operating Officer of Enron Oil & Gas International, Inc. Mr. Ulak joined the Company in March 1987 as Senior Counsel and was named Assistant General Counsel for the Company's international operations in February 1989, Assistant General Counsel for the Company in August 1990 and Vice President and General Counsel for the Company in March 1992. Prior to joining the Company, Mr. Ulak held various legal positions with Enron Corp. and Northern Natural Gas Company. Mark G. Papa has been President - North American Operations since February 1994. From May 1986 through January 1994, Mr. Papa served as Senior Vice President - Operations. Mr. Papa joined Belco Petroleum Corporation, a predecessor of the Company, in 1981 as Division Production Coordinator and served as Senior Vice President - Drilling and Production, BelNorth Petroleum Corporation from May 1984 until May 1986. Lewis P. Chandler, Jr. has been Senior Vice President, Law since March 1992. Mr. Chandler joined the Company in December 1973 and has since served in a number of positions in the Company's legal department. He was appointed Vice President and General Counsel for BelNorth Petroleum Corp. in June 1983 and was named Vice President and General Counsel for the Company in January 1987. From May 1991 until March 1992, he was Senior Vice President and General Counsel for the Company. Walter C. Wilson has been Senior Vice President and Chief Financial Officer since May 1991. Mr. Wilson joined the Company in November 1987 as Vice President and Controller and was named Senior 15 18 Vice President - Finance in October 1988. Prior to joining the Company Mr. Wilson held financial management positions with Exxon Company, USA for 16 years and The Superior Oil Company for 4 years. Ben B. Boyd has been Vice President and Controller since March 1991. Mr. Boyd joined the Company in March 1989 as Director of Accounting and was named Controller in May 1990. Prior to joining the Company, Mr. Boyd held financial management positions with DeNovo Oil & Gas, Inc., Scurlock Oil Company and Coopers & Lybrand. ITEM 2. PROPERTIES OIL AND GAS EXPLORATION AND PRODUCTION PROPERTIES AND RESERVES Reserve Information. For estimates of the Company's net proved and proved developed reserves of natural gas and liquids, including crude oil, condensate and natural gas liquids, see "Supplemental Information to Consolidated Financial Statements." There are numerous uncertainties inherent in estimating quantities of proved reserves and in projecting future rates of production and timing of development expenditures, including many factors beyond the control of the producer. The reserve data set forth in Supplemental Information to Consolidated Financial Statements represent only estimates. Reserve engineering is a subjective process of estimating underground accumulations of natural gas and liquids, including crude oil, condensate and natural gas liquids, that cannot be measured in an exact manner. The accuracy of any reserve estimate is a function of the amount and quality of available data and of engineering and geological interpretation and judgment. As a result, estimates of different engineers normally vary. In addition, results of drilling, testing and production subsequent to the date of an estimate may justify revision of such estimate. Accordingly, reserve estimates are often different from the quantities ultimately recovered. The meaningfulness of such estimates is highly dependent upon the accuracy of the assumptions upon which they were based. In general, the volume of production from oil and gas properties owned by the Company declines as reserves are depleted. Except to the extent the Company acquires additional properties containing proved reserves or conducts successful exploration and development activities, or both, the proved reserves of the Company will decline as reserves are produced. Volumes generated from future activities of the Company are therefore highly dependent upon the level of success in acquiring or finding additional reserves and the costs incurred in doing so. The Company's estimates of reserves filed with other federal agencies agree with the information set forth in Supplemental Information to Consolidated Financial Statements. 16 19 Acreage. The following table summarizes the Company's developed and undeveloped acreage at December 31, 1995. Excluded is acreage in which the Company's interest is limited to owned royalty, overriding royalty and other similar interests.
DEVELOPED UNDEVELOPED TOTAL -------------------- --------------------- --------------------- GROSS NET GROSS NET GROSS NET --------- -------- --------- --------- --------- --------- United States California................ 10,215 6,368 638,199 637,454 648,414 643,822 Offshore Gulf of Mexico... 315,745 132,505 455,133 352,577 770,878 485,082 Texas..................... 454,256 221,207 272,990 214,233 727,246 435,440 Wyoming................... 161,867 117,815 316,330 246,758 478,197 364,573 Oklahoma.................. 214,363 72,279 106,074 58,162 320,437 130,441 New Mexico................ 75,487 35,056 88,013 47,924 163,500 82,980 Utah...................... 57,820 46,512 35,863 30,365 93,683 76,877 Kansas.................... 14,176 9,498 25,055 22,766 39,231 32,264 Colorado.................. 9,153 1,447 35,006 16,755 44,159 18,202 Michigan.................. 11 10 14,213 13,650 14,224 13,660 Mississippi............... 2,490 1,853 12,171 8,445 14,661 10,298 Montana................... 1,301 1,169 2,082 1,075 3,383 2,244 Other..................... 15,225 2,831 10,986 5,204 26,211 8,035 --------- --------- ---------- ---------- ---------- ---------- Total............. 1,332,109 648,550 2,012,115 1,655,368 3,344,224 2,303,918 Canada Alberta................... 364,328 168,503 192,429 146,739 556,757 315,242 Saskatchewan.............. 179,343 155,588 222,975 199,604 402,318 355,192 Manitoba.................. 11,531 9,702 480 480 12,011 10,182 British Columbia.......... 656 164 - - 656 164 --------- --------- ---------- ---------- ---------- ---------- Total Canada...... 555,858 333,957 415,884 346,823 971,742 680,780 Other International Australia................. - - 9,600,000 4,800,000 9,600,000 4,800,000 China..................... - - 1,208,805 604,403 1,208,805 604,403 Russia.................... - - 1,425,000 712,500 1,425,000 712,500 France.................... - - 1,063,925 1,063,925 1,063,925 1,063,925 India..................... 60,000 18,000 602,207 180,662 662,207 198,662 Trinidad.................. 4,200 3,990 74,851 71,108 79,051 75,098 United Kingdom............ - - 173,600 86,800 173,600 86,800 --------- --------- ---------- ---------- ---------- ---------- Total Other International... 64,200 21,990 14,148,388 7,519,398 14,212,588 7,541,388 --------- --------- ---------- ---------- ---------- ---------- Total........ 1,952,167 1,004,497 16,576,387 9,521,589 18,528,554 10,526,086 ========= ========= ========== ========== ========== ==========
Producing Well Summary. The following table reflects the Company's ownership in gas and oil wells located in Texas, the Gulf of Mexico, Oklahoma, New Mexico, Utah, Wyoming, and various other states, Canada, Trinidad and India at December 31, 1995. Gross oil and gas wells include 205 with multiple completions.
PRODUCTIVE WELLS --------------- GROSS NET ----- ----- Gas.................................................. 4,627 3,170 Oil.................................................. 774 435 ----- ----- Total...................................... 5,401 3,605 ===== =====
17 20 Drilling and Acquisition Activities. During the years ended December 31, 1995, 1994 and 1993 the Company spent approximately $513.8, $493.9 and $430.1 million, respectively, for exploratory and development drilling and acquisition of leases and producing properties. The Company drilled, participated in the drilling of or acquired wells as set out in the table below for the periods indicated:
YEAR ENDED DECEMBER 31, ----------------------------------------------------- 1995 1994 1993 --------------- --------------- --------------- GROSS NET GROSS NET GROSS NET ----- ------ ----- ------ ----- ------ Development Wells Completed Domestic Gas....................................... 220 146.38 308 244.23 352 279.00 Oil....................................... 60 49.93 34 29.57 45 19.01 Dry....................................... 47 37.33 41 32.15 59 46.83 --- ------ --- ------ --- ------ Total................................ 327 233.64 383 305.95 456 344.84 International Gas....................................... 117 107.53 250 190.30 227 190.10 Oil....................................... 12 8.08 11 5.10 4 3.50 Dry....................................... 15 12.83 13 11.50 11 7.60 --- ------ --- ------ --- ------ Total................................ 144 128.44 274 206.90 242 201.20 --- ------ --- ------ --- ------ Total Development............................ 471 362.08 657 512.85 698 546.04 --- ------ --- ------ --- ------ Exploratory Wells Completed Domestic Gas....................................... 4 3.14 13 9.80 14 10.03 Oil....................................... 7 3.28 3 2.57 3 2.50 Dry....................................... 15 10.29 23 18.17 32 22.08 --- ------ --- ------ --- ------ Total................................ 26 16.71 39 30.54 49 34.61 International Gas....................................... 7 5.89 9 7.90 14 11.40 Oil....................................... 1 .33 1 .50 2 .90 Dry....................................... 6 2.99 14 12.50 10 7.35 --- ------ --- ------ --- ------ Total................................ 14 9.21 24 20.90 26 19.65 --- ------ --- ------ --- ------ Total Exploratory............................ 40 25.92 63 51.44 75 54.26 --- ------ --- ------ --- ------ Total................................ 511 388.00 720 564.29 773 600.30 Wells in Progress at end of period............. 52 32.71 45 28.79 82 61.09 --- ------ --- ------ --- ------ Total................................ 563 420.71 765 593.08 855 661.39 === ====== === ====== === ====== Wells Acquired Gas....................................... 277 101.70* 41 40.90* 44 26.44* Oil....................................... 5 .46 60 38.99* - 12.80* --- ------ --- ------ --- ------ Total................................ 282 102.16 101 79.89 44 39.24 === ====== === ====== === ======
- --------------- * Includes the acquisition of additional interests in certain wells in which the Company previously held an interest. All of the Company's drilling activities are conducted on a contract basis with independent drilling contractors. The Company owns no drilling equipment. 18 21 ITEM 3. LEGAL PROCEEDINGS The Company and its subsidiaries and related companies are named defendants in numerous lawsuits and named parties in numerous governmental proceedings arising in the ordinary course of business. While the outcome of lawsuits or other proceedings against the Company cannot be predicted with certainty, management does not expect these matters to have a material adverse effect on the financial condition or results of operations of the Company. On November 19, 1992, TransAmerican Natural Gas Corporation ("TransAmerican") filed a petition against the Company alleging breach of contract, tortious interference with contract, misappropriation of trade secrets and violation of state antitrust laws. The petition, as amended, sought actual damages of at least $100 million plus exemplary damages of $300 million. The Company filed counterclaims against TransAmerican and a third-party claim against its sole shareholder, John R. Stanley, alleging fraud, negligent misrepresentation and breach of state antitrust laws. On October 16, 1995, the Company, TransAmerican and Stanley entered into an agreement which resolved all claims. The settlement terms did not have a materially adverse effect on the Company's financial condition or results of operations. The suit was dismissed with prejudice as to all parties by order entered in November 1995. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the fourth quarter of 1995. 19 22 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS The following table sets forth, for the periods indicated, the high and low sale prices per share for the common stock of the Company, as reported on the New York Stock Exchange Composite Tape, and the amount of cash dividends paid per share. The 1993 and First and Second Quarter 1994 sales prices and cash dividends per share have been restated to reflect a two-for-one stock split on May 31, 1994.
PRICE RANGE ----------------- CASH HIGH LOW DIVIDENDS ------ ------ --------- 1993 First Quarter......................................... $20.31 $13.38 $.030 Second Quarter........................................ 22.50 17.88 .030 Third Quarter......................................... 26.81 19.88 .030 Fourth Quarter........................................ 27.00 17.06 .030 1994 First Quarter......................................... $23.75 $19.31 $.030 Second Quarter........................................ 24.63 22.38 .030 Third Quarter......................................... 23.00 18.50 .030 Fourth Quarter........................................ 22.75 17.38 .030 1995 First Quarter......................................... $24.88 $17.13 $.030 Second Quarter........................................ 24.75 20.25 .030 Third Quarter......................................... 25.38 20.00 .030 Fourth Quarter........................................ 24.88 18.75 .030
As of March 1, 1996, there were approximately 275 record holders of the Company's common stock, including individual participants in security position listings. There are an estimated 9,000 beneficial owners of the Company's common stock, including shares held in street name. Following the initial public offering and sale of its common stock in October 1989, the Company paid quarterly dividends of $0.025 per share beginning with an initial dividend paid in January 1990 with respect to the fourth quarter of 1989. Beginning in January 1993 with respect to the fourth quarter of 1992, the Company has paid quarterly dividends of $0.03 per share. The Company currently intends to continue to pay quarterly cash dividends on its outstanding shares of common stock. However, the determination of the amount of future cash dividends, if any, to be declared and paid will depend upon, among other things, the financial condition, funds from operations, level of exploration and development expenditure opportunities and future business prospects of the Company. 20 23 ITEM 6. SELECTED FINANCIAL DATA
YEAR ENDED DECEMBER 31, ----------------------------------------------------------------- 1995 1994 1993 1992 1991 --------- --------- --------- --------- --------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENT OF INCOME DATA: Net operating revenues....... $ 648,702 $ 625,823 $ 581,020 $ 459,026 $ 402,588 Operating expenses Lease and well............. 69,463 60,384 59,344 49,406 49,922 Exploration................ 42,044 41,811 36,921 33,278 31,470 Dry hole................... 12,911 17,197 18,355 10,764 14,698 Impairment of unproved oil and gas properties...... 23,715 24,936 20,467 15,136 12,791 Depreciation, depletion and amortization............ 216,047 242,182 249,704 179,839 160,885 General and administrative.......... 56,626 51,418 45,274 36,648 36,216 Taxes other than income.... 32,587 28,254 35,396 28,346 18,222 --------- --------- --------- --------- --------- Total.............. 453,393 466,182 465,461 353,417 324,204 --------- --------- --------- --------- --------- Operating income............. 195,309 159,641 115,559 105,609 78,384 Other income, net............ 669 2,783 6,635 (3,476) (3,215) Interest expense (net of interest capitalized)...... 11,924 8,489 9,921 22,289 29,500 --------- --------- --------- --------- --------- Income before income taxes... 184,054 153,935 112,273 79,844 45,669 Income tax provision (benefit)(1)............... 41,936(2) 5,937(3) (25,752)(4) (17,736) (2,247) --------- --------- --------- --------- --------- Net income................... $ 142,118 $ 147,998 $ 138,025 $ 97,580 $ 47,916 ========= ========= ========= ========= ========= Earnings per share of common stock(5)................... $ .89 $ .93 $ .86 $ .63 $ .32 ========= ========= ========= ========= ========= Average number of common shares(5).................. 159,917 159,845 159,966 154,533 151,800 ========= ========= ========= ========= =========
AT DECEMBER 31, ------------------------------------------------------------------ 1995 1994 1993 1992 1991 ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS) BALANCE SHEET DATA: Oil and gas properties - net........... $1,881,545 $1,684,811 $1,546,045 $1,468,011 $1,339,666 Total assets................. 2,147,258 1,861,867 1,811,162 1,731,012 1,455,608 Long-term debt Affiliate.................. 141,520 25,000 - -(6) 132,836 Other...................... 147,559 165,337 153,000 150,000(6) 289,556 Deferred revenue............. 205,453 184,183 227,528 301,395(6) - Shareholders' equity......... 1,163,659 1,043,419 933,073 826,986(6) 643,185
- --------------- (1) Includes benefits of approximately $22 million, $36 million, $65 million, $43 million and $17 million in 1995, 1994, 1993, 1992 and 1991, respectively, relating to tight gas sand federal income tax credits and $7 million in 1991 associated with the utilization of a net operating loss carryforward. (2) Includes a benefit of approximately $14 million associated with the successful resolution on audit of federal income taxes for prior years. (3) Includes a benefit of approximately $8 million related to reduced estimated state income taxes and certain franchise taxes, a portion of which is treated as income tax under Statement of Financial Accounting Standards ("SFAS") No. 109 - "Accounting for Income Taxes", and a $5 million benefit 21 24 from the reduction of the Company's deferred federal income tax liability resulting from a reevaluation of deferred tax requirements. (4) Includes a benefit of $12 million from the reduction of the Company's deferred federal income tax liability resulting from a reevaluation of deferred tax requirements partially offset by an approximate $7 million predominantly noncash charge primarily to adjust the Company's accumulated deferred federal income tax liability for the increase in the corporate federal income tax rate from 34% to 35%. (5) In May 1994, the Board of Directors declared a two-for-one split of the common stock of the Company to be effected as a nontaxable dividend of one share for each share outstanding. Shares were issued on June 15, 1994 to shareholders of record as of May 31, 1994. All per share amounts presented herein are reflected on a post-split basis. (6) In August 1992, the Company completed the sale of an additional 8.2 million shares of common stock resulting in aggregate net proceeds to the Company of approximately $112 million used primarily to repay long-term debt. In September 1992, the Company completed the sale of a volumetric production payment, resulting in net proceeds of approximately $327 million used to repay long-term debt and for other general corporate purposes. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following review of operations for each of the three years in the period ended December 31, 1995 should be read in conjunction with the consolidated financial statements of the Company and notes thereto beginning with page F-1. RESULTS OF OPERATIONS Net Operating Revenues. Wellhead volume and price statistics for the specified years were as follows:
YEAR ENDED DECEMBER 31, ---------------------------- 1995 1994 1993 ------ ------ ------ Natural Gas Volumes (MMcf per day) North America(1)....................................... 636 686 707 Trinidad............................................... 107 63 2 ------ ------ ------ Total.......................................... 743 749 709 ====== ====== ====== Average Natural Gas Prices ($/Mcf) North America(2)....................................... $ 1.34 $ 1.68 $ 1.92 Trinidad............................................... .97 .93 .89 Composite...................................... 1.29 1.62 1.92 Crude/Condensate Volumes (MBbl per day) North America.......................................... 11.5 10.0 8.8 Trinidad............................................... 5.1 2.5 .1 India.................................................. 2.5 .1 - ------ ------ ------ Total.......................................... 19.1 12.6 8.9 ====== ====== ====== Average Crude/Condensate Prices ($/Bbl) North America.......................................... $17.09 $15.65 $16.39 Trinidad............................................... 16.07 15.50 14.36 India.................................................. 16.81 15.70 - Composite...................................... 16.78 15.62 16.37
- --------------- (1) Includes 48 MMcf per day in 1995 and 1994, and 81 MMcf per day in 1993 delivered under the terms of volumetric production payment and exchange agreements effective October 1, 1992, as amended. (2) Includes an average equivalent wellhead value of $.80 per Mcf in 1995, $1.27 per Mcf in 1994 and $1.57 per Mcf in 1993 for the volumes detailed in note (1), net of transportation costs. 22 25 1995 compared to 1994. During 1995, net operating revenues increased $23 million to $649 million as compared to 1994. Average wellhead natural gas prices for 1995 were down approximately 20% from 1994 reducing net operating revenues by approximately $89 million. In addition, a decrease of 1% in wellhead natural gas volumes from 1994 reduced net operating revenues by approximately $4 million. The Company voluntarily curtailed its United States wellhead natural gas delivered volumes by an average of approximately 105 MMcf per day during 1995 compared to approximately 70 MMcf per day during 1994 due to significantly lower United States wellhead natural gas prices. In addition, the impact of reduced drilling for U.S. natural gas deliverability and the sales of oil and gas reserves and related assets (net of purchases of similar assets) resulted in a reduction of approximately 20 MMcf per day in U.S. delivered volumes for 1995 as compared to 1994. The Company refocused its 1995 drilling activity away from natural gas deliverability and toward natural gas reserve enhancement and crude oil exploitation in the United States in response to the significant decline in United States wellhead natural gas prices, in the latter part of 1994 and early 1995, resulting in the drilling of 189 fewer net natural gas wells and 24 more net oil wells during 1995 as compared to 1994. Wellhead crude oil and condensate average prices increased 7% adding approximately $8 million to net operating revenues compared to 1994. Crude oil and condensate wellhead volumes increased 52% adding approximately $37 million to net operating revenues compared to a year ago primarily reflecting new production on stream offshore India and higher volumes offshore Trinidad and in North America. Gains on sales of reserves and related assets during 1995 increased $9 million to $63 million when compared to 1994 which increase was attributable to the Company's continuing efforts in optimizing the value of its assets. Other marketing activities associated with sales and purchases of natural gas, natural gas price swap transactions, other commodity price hedging of natural gas and crude oil and condensate prices utilizing NYMEX-related commodity market transactions and volumetric production payment-related margins added approximately $105 million to net operating revenues during 1995, an increase of approximately $55 million from 1994. This increase primarily resulted from a gain of $65 million on natural gas commodity price hedging activities utilizing NYMEX-related commodity market transactions in 1995 compared to an $11 million gain during 1994. The average associated costs of natural gas marketing, price swap and volumetric production payment transactions, including, where appropriate, average wellhead value, transportation costs and exchange differentials, decreased $.55 per Mcf. The average price received for these transactions decreased $.50 per Mcf. Related other natural gas marketing volumes decreased 19%. The reduction in other natural gas marketing volumes and prices relates primarily to the exchange of the fuel contracts noted below, lower wellhead market prices and decreased other marketing activities. The reduction in other natural gas marketing volumes, partially offset by the $.05 per Mcf margin increase, resulted in a decrease in net operating revenues of approximately $2 million compared to 1994. The Company realized an $11 million gain in 1995 related to certain natural gas commodity price swap transactions with an Enron Corp. affiliated company that were designated for trading purposes in late 1994. This gain was partially offset by a loss of approximately $3 million related to call option transactions and a loss of $6 million associated with certain NYMEX-related natural gas commodity market transactions that were marked-to-market due to loss of correlation between the NYMEX and the wellhead natural gas prices that such transactions were designated to hedge. (See "Capital Resources and Liquidity - Hedging Transactions.") In March 1995, the Company exchanged existing fuel supply and purchase contracts and related price swap agreements associated with a Texas City cogeneration plant for certain natural gas price swap agreements of equivalent value issued by an Enron Corp. affiliated company. As a result of these transactions, the Company realized a $13 million increase in net operating revenues in 1995 over the amount realized from the exchanged fuel supply and purchase contracts in 1994. (See "Relationship Between the Company and Enron Corp. - Contractual Agreements".) 23 26 1994 compared to 1993. During 1994, net operating revenues increased to $626 million, up $45 million as compared to 1993. Average wellhead natural gas volumes increased approximately 6% compared to 1993 primarily reflecting the effects of development activities in Trinidad and Canada partially offset by voluntary curtailments of production in the United States in 1994. The volume reductions in the United States as a result of voluntary curtailments were more than offset by the new natural gas deliveries from the Kiskadee field offshore Trinidad and increased deliveries in Canada. The increase in wellhead natural gas volumes added $28 million to net operating revenues. Average wellhead natural gas prices were down significantly from 1993 reducing net operating revenues by approximately $83 million. This 16% reduction in average wellhead natural gas prices reflects the overall decline in the United States natural gas markets during the last half of 1994 and increased volumes from Trinidad sold under a long-term contract at a price considerably below North American spot market prices. A 42% increase in wellhead crude oil and condensate volumes over 1993 added $22 million to net operating revenues primarily reflecting development activities in Trinidad and increased production in the United States. A 5% decrease in wellhead crude oil and condensate average prices decreased net operating revenues by approximately $3 million. Gains on sales of selected oil and gas reserves and related assets were $54 million in 1994 as compared to $13 million in 1993. While the quantity of equivalent reserves sold in 1994 was slightly less than 1993, higher average proceeds received per equivalent unit in 1994 as compared to 1993 primarily contributed to the increased gain recognition. In continuing its strategy of fully utilizing its assets in optimizing profitability, cash flow and return on investments, the Company expects to continue the sale of similar properties from time to time. Other marketing activities associated with sales and purchases of natural gas, natural gas and crude oil price swap transactions, other commodity price hedging of natural gas and crude oil prices utilizing NYMEX-related commodity market transactions, and margins relating to the volumetric production payment added $50 million to net operating revenues during 1994. This increase of $42 million from the same period in 1993 primarily results from a gain of $11 million on natural gas commodity price hedging activities utilizing NYMEX-related commodity market transactions in 1994 versus an $18 million loss during 1993 and increased margins associated with other natural gas marketing activities. The average associated costs of natural gas marketing, price swap and volumetric production payment transactions, including, where appropriate, average wellhead value, transportation costs and exchange differentials, decreased $.26 per Mcf. The average price received for these transactions decreased $.19 per Mcf. Related other natural gas marketing volumes increased 10%. The impact of these other marketing activities, a substantial portion of which serve as hedges of commodity price risks for a portion of wellhead deliveries, are more than offset by increases or reductions in revenues associated with market responsive prices for wellhead deliveries. (See Note 2 to Consolidated Financial Statements.) Operating Expenses 1995 as compared to 1994. During 1995, operating expenses of $453 million were $13 million lower than the $466 million incurred in 1994. Lease and well expenses increased approximately $9 million to $69 million primarily due to expanded international operations including the initiation of operations in India in late December 1994 and certain nonrecurring costs incurred related to those operations during 1995. Depreciation, depletion and amortization ("DD&A") expense decreased $26 million to $216 million reflecting a decrease in the average DD&A rate from $.80 per Mcfe in 1994 to $.68 per Mcfe in 1995. The DD&A rate decrease is primarily attributable to an overall decrease of $.09 per Mcfe in certain North America DD&A rates and an increase in the proportion of production from international operations with lower average DD&A rates than incurred in North America operations. General and administrative expenses increased approximately $5 million to $57 million primarily due to expanded international activities. Taxes other than income were $4 million higher in 1995 compared to 1994 primarily due to higher production related taxes associated with new production in India in 1995. 24 27 The Company reduced its total per unit operating costs for lease and well expense, DD&A, general and administrative expense, interest expense, and taxes other than income by $.07 per Mcfe, averaging $1.22 per Mcfe during 1995 compared to $1.29 per Mcfe in 1994. This decrease is primarily attributable to the reduction in the average DD&A rate as noted above partially offset by slight increases in per unit lease and well, general and administrative expenses, and taxes other than income which increase reflects primarily lower volumes associated with the curtailment of natural gas volumes in the U. S. due to the reduction in wellhead natural gas prices. 1994 as compared to 1993. During 1994, total operating expenses of $466 million were approximately $1 million higher than the $465 million incurred in 1993. Lease and well expenses of $60 million were approximately $1 million higher than the prior year primarily due to increased expenses related to new operations offshore Trinidad partially offset by cost reductions in North America. Exploration expenses of $42 million increased $5 million from the previous year primarily due to an increased level of exploration activities. Impairment of unproved oil and gas properties increased $4 million from 1993 primarily due to impairments associated with certain offshore Gulf of Mexico leases. DD&A expense decreased from $250 million in 1993 to $242 million in 1994 reflecting a $.09 per Mcfe decrease in the average DD&A rate including a $.03 per Mcfe reduction in the North American operations DD&A rate. General and administrative expenses increased $6 million to $51 million primarily due to overall higher costs associated with expanded international and domestic operations. Taxes other than income decreased approximately $7 million from 1993 primarily due to lower taxable United States wellhead volumes and prices and reductions included in 1994 related to revisions of certain prior year production taxes. Included in 1994 and 1993 are benefits associated with reductions in state franchise taxes of $4 million and $3 million, respectively. The Company continues to benefit from certain state severance tax exemptions allowed on high cost natural gas volumes. Total per unit operating costs for lease and well expense, DD&A, general and administrative expense, interest expense, and taxes other than income decreased $.14 per Mcfe, averaging $1.29 per Mcfe during 1994 compared to $1.43 per Mcfe for 1993. The decrease was primarily due to per unit reductions in DD&A and taxes other than income as discussed above. Other Income. Other income for 1993 includes $4 million in interest income associated with the investment of funds temporarily surplus to the Company (See Note 4 to Consolidated Financial Statements) and $4 million associated with settlements related to the termination of certain long-term natural gas contracts. Interest Expense Net interest expense in 1995 was up $3 million as compared to 1994 reflecting primarily a higher level of debt outstanding during 1995. (See Note 13 to Consolidated Financial Statements). Net interest expense in 1994 decreased approximately $1 million to $8 million as compared to 1993 primarily due to favorable interest rates on new financing acquired by a subsidiary of the Company in Trinidad and the retirement of higher interest rate debt. The estimated fair value of outstanding interest rate swap agreements at December 31, 1994 was a negative $0.5 million based on termination values obtained from third parties. Income Taxes Income tax provision increased $36 million for 1995 as compared to 1994 primarily resulting from higher income before income taxes, higher foreign income taxed at rates in excess of the U.S. rate and lower benefits associated with tight gas sand federal income tax credits utilized in 1995 as compared to 1994 partially offset by a $14 million benefit associated with the successful resolution on audit of federal income taxes for certain prior years. Income tax provision in 1994 includes a benefit of approximately $36 million associated with tight gas sand federal income tax credit utilization, a benefit of approximately $8 million related to reduced estimated state income taxes and a portion of certain franchise taxes which is treated as income tax under SFAS 25 28 No. 109, and a $5 million benefit from the reduction of the Company's deferred federal income tax liability resulting from a reevaluation of deferred tax requirements. CAPITAL RESOURCES AND LIQUIDITY Cash Flow. The primary sources of cash for the Company during the three-year period ended December 31, 1995 included funds generated from operations, proceeds from the sale of selected oil and gas reserves and related assets and the issuance of new debt. Primary cash outflows included funds used in operations, exploration and development expenditures, dividends, and the repayment of debt. Discretionary cash flow, a frequently used measure of performance for exploration and production companies, is generally derived by adjusting net income to eliminate the effects of depreciation, depletion and amortization, impairment of unproved oil and gas properties, deferred taxes, gains on sales of oil and gas reserves and related assets, certain other miscellaneous non-cash amounts, except for amortization of deferred revenue, and exploration and dry hole expenses. However, based on the continuing practice of the Company of selling selected oil and gas reserves and related assets in furtherance of its strategy of fully utilizing its assets in optimizing profitability, cash flow and return on investments, it believes that net proceeds from these transactions should also be considered as available discretionary cash flow and, accordingly, is presenting those values for all periods shown. The Company generated discretionary cash flow of approximately $525 million in 1995, $514 million in 1994 and $521 million in 1993. The 1995 and 1993 amounts include $11 million and $50 million, respectively, associated with federal income tax refunds resulting from the settlement on audit of federal income taxes paid in certain prior years. Net operating cash flows for each of the years in the three-year period ended December 31, 1995 have been revised to reflect the elimination of the amortization of deferred revenues related to the sale of a volumetric production payment during 1992 as net operating cash flows rather than as investing cash flows as previously reported. Net operating cash flows of $335 million for 1995 decreased approximately $47 million as compared to 1994 primarily reflecting higher accounts receivable arising from international activities, and the settlement in December 1995 of January 1996 NYMEX-related natural gas commodity positions. Net operating cash flows were approximately $383 million in 1994 and $406 million in 1993. Decreased 1994 net operating cash flows were primarily due to the receipt of a refund on settlement of an audit of federal income taxes paid in certain prior years. In accordance with the requirements of SFAS No. 95 - "Statement of Cash Flows", net proceeds from the sale of selected oil and gas reserves and related assets are not included in the determination of net operating cash flows. Sale of Selected Oil and Gas Reserves and Related Assets. During 1995, the Company received proceeds of $102 million from the sale of selected oil and gas reserves and related assets compared to $91 million received in 1994. Taxable gains from the 1995 sales generated federal income taxes of $24 million, leaving net proceeds of $78 million compared to net proceeds after federal income taxes in 1994 of $71 million. The 1994 proceeds of $91 million compared to $42 million received in 1993. While the quantity of equivalent reserves sold in 1994 was slightly less than 1993, higher average proceeds received per equivalent unit of reserves sold in 1994 as compared to 1993 resulted in significantly higher 1994 proceeds. Sale of Volumetric Production Payment. In September 1992, the Company sold a volumetric production payment for $326.8 million to a limited partnership. (See "Business - Marketing - Other Marketing" and Note 5 to Consolidated Financial Statements). Under the terms of the production payment agreements, the Company conveyed a real property interest in approximately 124 Bcfe (136 TBtu) of certain natural gas and other hydrocarbons to the purchaser. Effective October 1, 1993, the agreements were amended providing for the extension of the original term of the volumetric production payment through March 31, 1999 and including a revised schedule of daily quantities of hydrocarbons to be delivered which is approximately one-half of the original schedule. The revised schedule will total approximately 89.1 Bcfe (97.8 TBtu) versus approximately 87.9 Bcfe (96.4 TBtu) remaining to be delivered under the original agreement. Daily quantities of hydrocarbons no longer required to be delivered under the revised schedule during the period from October 1, 1993 through June 30, 1996 are available for sale by the Company. The Company retains responsibility for its working interest share of the cost of operations. In accordance with generally accepted 26 29 accounting principles, the Company accounted for the proceeds received in the transaction as deferred revenue which is being amortized into revenue and income as natural gas and other hydrocarbons are produced and delivered to the purchaser during the term, as revised, of the volumetric production payment thereby matching those revenues with the depreciation of asset values which remained on the balance sheet following the sale and the operating expenses incurred for which the Company retained responsibility. The Company expects the above transaction, as amended, to have minimal impact on future earnings. However, cash made available by the sale of the volumetric production payment has provided considerable financial flexibility for the pursuit of investment alternatives. Exploration and Development Expenditures. The table below sets out components of actual exploration and development expenditures for the years ended December 31, 1995, 1994 and 1993, along with those budgeted for the year 1996.
ACTUAL -------------------- BUDGETED EXPENDITURE CATEGORY 1995 1994 1993 1996 -------------------- ---- ---- ---- --------- (IN MILLIONS) Capital Drilling and Facilities........................... $303 $342 $331 Leasehold Acquisitions............................ 22 52 29 Producing Property Acquisitions................... 127 34 9 Capitalized Interest and Other.................... 12 14 14 ---- ---- ---- Total..................................... 464 442 383 Exploration Expenses................................ 55 59 55 ---- ---- ---- Total............................................... $519 $501 $438 $500-$550 ==== ==== ==== =========
Exploration and development expenditures increased $18 million in 1995 as compared to 1994. Differences in components reflect a significant increase in producing property acquisitions to complement existing United States producing areas. One such property acquisition was for non-cash consideration of $19 million of redeemable preferred stock of a subsidiary of the Company. (See Note 6 to Consolidated Financial Statements). (See "Business - Exploration and Production" for additional information detailing the specific geographic locations of the Company's drilling programs and "Outlook" below for a discussion related to 1996 exploration and development expenditure plans). Exploration and development expenditures increased $63 million, or 14%, in 1994 compared to 1993. The increase primarily reflects the acquisitions of selected properties to complement existing North American producing areas and the addition of new international activities in India. Hedging Transactions. With the objective of enhancing the certainty of future revenues, the Company enters into NYMEX-related commodity price swaps from time to time. Using NYMEX-related commodity price swaps, the Company receives a fixed price for the respective commodity hedged and pays a floating market price, as defined for each transaction, to the counterparty at settlement. In 1995, prices for approximately 35% of the natural gas delivered volumes were hedged using NYMEX-related commodity price swaps. The NYMEX-related natural gas commodity price swaps are priced based on a Henry Hub, Louisiana delivery point. The Henry Hub price has historically had a high degree of correlation with the wellhead price received by the Company which has made such transactions effective natural gas price hedges. During December 1995, there was a loss of correlation between the prices paid under the natural gas commodity price swaps and the wellhead natural gas prices ultimately received for a portion of the Company's hedged natural gas production. This loss of correlation resulted in the recognition of a $6 million pre-tax loss in 1995. With the preliminary indication of a possible change in the overall natural gas market environment at year-end 1995 signaling potentially improving industry conditions, the Company closed substantially all its open NYMEX-related positions regarding natural gas commodity price swaps to participate in this potential upside. While the removal of the hedges has resulted in a deferred net loss of approximately $4 million to be 27 30 recognized during 1996, the Company expects the net reductions to be more than offset by revenue associated with increases in wellhead natural gas prices throughout 1996. Included in the $4 million net loss is a $21 million pre-tax loss related to the first quarter of 1996. Financing. The Company's long-term debt-to-total-capital ratio was 20% and 15% as of December 31, 1995 and 1994, respectively. The Company has entered into an agreement with Enron Corp. pursuant to which the Company may borrow funds from Enron Corp. at a representative market rate of interest on a revolving basis. During 1995, the average of the daily balances of funds borrowed by the Company under the agreement was $15 million and the balance at December 31, 1995 was $142 million. During 1994, there were no funds borrowed by the Company under this agreement. Under a promissory note effective January 1, 1993 at a fixed interest rate of 7%, the Company may advance funds temporarily surplus to the Company to Enron Corp. for investment purposes. Daily outstanding balances of funds advanced to Enron Corp. under the note averaged $154,000 during 1995 and $69 million during 1994 with no balance outstanding at December 31, 1995 and 1994. There was no balance outstanding at December 31, 1995 and $7 million outstanding at December 31, 1994, under a commercial paper program initiated in 1990. Proceeds from the commercial paper program were used to fund current transactions. During 1995, total long-term debt increased $99 million to $289 million as a result of borrowings related to certain international drilling activities and certain producing property acquisitions. (See Note 4 to the Consolidated Financial Statements). The estimated fair value of the Company's long-term debt at December 31, 1995 and 1994 was $294 million and $186 million, respectively, based upon quoted market prices and, where such prices were not available, upon interest rates currently available to the Company at year end. (See Note 13 to the Consolidated Financial Statements). Outlook. Uncertainty continues to exist as to the direction of future North America natural gas price trends, and there is a rather wide divergence in the opinions held by some in the industry. This divergence in opinion is caused by various factors including improvements in the technology used in drilling and completing oil and gas wells that are tending to mitigate the impacts of fewer oil and gas wells being drilled, the deregulation of the natural gas market under Federal Energy Regulatory Commission Order 636 and subsequent related orders, improvements being realized in the availability and utilization of natural gas storage capacity and colder weather experienced in the early portion of the 1995/1996 winter season than in recent years. However, the continually increasing recognition of natural gas as a more environmentally friendly source of energy along with the availability of significant domestically sourced supplies should result in further increases in demand and a supporting/strengthening of the overall natural gas market over time. Being primarily a natural gas producer, the Company is more significantly impacted by changes in natural gas prices than by changes in crude oil and condensate prices. (See "Business - Other Matters - Energy Prices"). Based on the portion of the Company's anticipated natural gas volumes for which prices have not, in effect, been hedged using NYMEX-related commodity market transactions, long-term marketing contracts and the sale of a volumetric production payment, the Company's net income and cash flow sensitivity to changing natural gas prices is approximately $16 million for each $.10 per Mcf change in average wellhead natural gas prices. The Company plans to continue to focus a substantial portion of its development and exploration expenditures in its major producing areas in North America. However, based on the continuing uncertainty associated with North America natural gas prices and the continuing weakness in that market, and as a result of the recent success realized in Trinidad, the opportunities available to the Company in conjunction with the late 1994 signing of agreements in India and the recent winning of a concession in Venezuela, the Company anticipates expending an increasing portion of its available funds in the further development of these opportunities outside North America. In addition, the Company expects to conduct limited exploratory activity in other areas outside of North America in its expenditure plans and will continue to evaluate the potential for involvement in other exploitation type opportunities. (See "Business - Exploration and Production" for additional information detailing the specific geographic locations of the related drilling programs). Early-in-year activity will be managed within an annual expected expenditure level of approximately $500-$550 million for 1996. This early-in-year planning will address the continuing uncertainty with regard to the future of the North America natural gas price environment and will be structured to maintain the flexibility necessary under the Company's continuing strategy of funding exploration, exploitation, development and acquisition activities primarily from available internally generated cash flow. The continuation of expenditures 28 31 in other areas outside of North America in the near term is expected to be primarily for the evaluation of conventional oil and gas exploration and exploitation opportunities in the U.K. North Sea and China, respectively, and coalbed methane recovery prospects in Australia and China. Other prospects in various locations will also attract the expenditure of some funds. Other factors representing positive impacts that are more certain continue to hold good potential for the Company in future periods. While the drilling qualification period for the tight gas sand federal income tax credit expired as of December 31, 1992, the Company continued in 1995, and should continue in the future, to realize significant benefits associated with production from wells drilled during the qualifying period as it will be eligible for the federal income tax credit through the year 2002. However, all other factors remaining equal, the annual benefit, which was approximately $22 million in 1995 and is estimated to be approximately $14 million for 1996, is expected to continue to decline in future periods as production from the qualified wells declines. The drilling qualification period for a certain state severance tax exemption available on qualifying high cost natural gas revenues continues through August 1996 in its current form and in a modified and somewhat reduced form from that point through August 2002. Consequently, new qualifying production will be added prospectively to that presently qualified. (See "Business - Other Matters - Tight Gas Sand Tax Credit (Section 29) and Severance Tax Exemption"). Other natural gas marketing activities are also expected to continue to contribute meaningfully to financial results. The Company completed a fairly significant restructure of its other natural gas marketing portfolio during 1992 with the sale of a volumetric production payment of approximately 124 Bcfe (136 TBtu) for $326.8 million that was subsequently revised in 1993 (See "Business - Marketing - Other Marketing" and Note 5 to Consolidated Financial Statements) and elimination of most delivery obligations under four long-term fixed price marketing contracts. The proceeds from the sale of the volumetric production payment added substantially to the financial flexibility of the Company supporting future development while the combined effect of all elements of the restructuring on net income has not been, and is not expected in the future to be, significant. These factors are expected to contribute significantly to earnings, cash flow, and the ability of the Company to pursue the continuation of an active exploration, exploitation, development and selective acquisition program. The level of exploration and development expenditures may vary in 1996 and will vary in future periods depending on energy market conditions and other related economic factors. Based upon existing economic and market conditions, the Company believes net operating cash flow and available financing alternatives in 1996 will be sufficient to fund its net investing cash requirements for the year. However, the Company has significant flexibility with respect to its financing alternatives and adjustment of its exploration, exploitation, development and acquisition expenditure plans if circumstances warrant. While the Company has certain continuing commitments associated with expenditure plans related to operations in India and anticipates having such in Venezuela, they are not anticipated to be material when considered in relation to the total financial capacity of the Company. Other. The cost of environmental compliance has not been material to the Company. In March 1995, the Financial Accounting Standards Board issued SFAS No. 121 - "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (the "Standard"). The Standard requires, among other things, that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company will adopt the Standard in the first quarter of 1996. The effect of adoption of the Standard is anticipated to result in a non-cash impairment charge of less than $5 million pre-tax. In October 1995, the Financial Accounting Standards Board issued SFAS No. 123 - "Accounting for Stock-Based Compensation". SFAS No. 123 encourages companies to account for stock-based compensation awards based on the fair value of the awards at the date they are granted. The resulting compensation cost would be shown as an expense in the statement of income. Companies can choose not to apply the new accounting method and continue to apply current accounting requirements; however, disclosure will be required as to what net income and earnings per share would have been had the new accounting method been followed. SFAS No. 123 is effective for calendar year 1996. 29 32 INFORMATION REGARDING FORWARD LOOKING STATEMENTS This Annual Report on Form 10-K includes forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although the Company believes that its expectations are based on reasonable assumptions, it can give no assurance that its goals will be achieved. Important factors that could cause actual results to differ materially from those in the forward looking statements herein include, but are not limited to, the extent of the Company's success in acquiring oil and gas properties and in discovering, developing and producing reserves, the timing and extent of changes in commodity prices for natural gas, crude oil and condensate and natural gas liquids, political developments in foreign countries and conditions in the capital markets and equity markets during the periods covered by the forward looking statements. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required hereunder is included in this report as set forth in the "Index to Financial Statements" on page F-1. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item regarding directors is set forth in the Proxy Statement under the caption entitled "Election of Directors", and is incorporated herein by reference. See list of "Current Executive Officers of the Registrant" in Part I located elsewhere herein. There are no family relationships among the officers listed, and there are no arrangements or understandings pursuant to which any of them were elected as officers. Officers are appointed or elected annually by the Board of Directors at its first meeting following the Annual Meeting of Shareholders, each to hold office until the corresponding meeting of the Board in the next year or until a successor shall have been elected, appointed or shall have qualified. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is set forth in the Proxy Statement under the caption "Compensation of Directors and Executive Officers", and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is set forth in the Proxy Statement under the captions "Election of Directors" and "Compensation of Directors and Executive Officers", and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item is set forth in the Proxy Statement under the caption "Certain Transactions", and is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K (A)(1) AND (2) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE See "Index to Financial Statements" set forth on page F-1. (A)(3) EXHIBITS See pages E-1 through E-7 for a listing of the exhibits. (B) REPORTS ON FORM 8-K No reports on Form 8-K were filed by the Company during the last quarter of 1995. 30 33 INDEX TO FINANCIAL STATEMENTS ENRON OIL & GAS COMPANY
PAGE ----- Consolidated Financial Statements: Management's Responsibility for Financial Reporting............................... F-2 Reports of Independent Public Accountants......................................... F-3 Consolidated Statements of Income for Each of the Three Years in the Period Ended December 31, 1995.............................................................. F-4 Consolidated Balance Sheets - December 31, 1995 and 1994.......................... F-5 Consolidated Statements of Shareholders' Equity for Each of the Three Years in the Period Ended December 31, 1995................................................. F-6 Consolidated Statements of Cash Flows for Each of the Three Years in the Period Ended December 31, 1995........................................................ F-7 Notes to Consolidated Financial Statements........................................ F-8 Supplemental Information to Consolidated Financial Statements....................... F-23 Financial Statement Schedule: Schedule II - Valuation and Qualifying Accounts and Reserves...................... S-1 Other financial statement schedules have been omitted because they are inapplicable or the information required therein is included elsewhere in the consolidated financial statements or notes thereto.
F-1 34 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING The following consolidated financial statements of Enron Oil & Gas Company and its subsidiaries were prepared by management which is responsible for their integrity, objectivity and fair presentation. The statements have been prepared in conformity with generally accepted accounting principles and, accordingly, include some amounts that are based on the best estimates and judgments of management. Arthur Andersen LLP, independent public accountants, was engaged to audit the consolidated financial statements of Enron Oil & Gas Company and its subsidiaries and issue a report thereon. In the conduct of the audit, Arthur Andersen LLP was given unrestricted access to all financial records and related data including minutes of all meetings of shareholders, the Board of Directors and committees of the Board. Management believes that all representations made to Arthur Andersen LLP during the audit were valid and appropriate. Their audits of the years presented included developing an overall understanding of the Company's accounting systems, procedures and internal controls, and conducting tests and other auditing procedures sufficient to support their opinion on the financial statements. Arthur Andersen LLP was also engaged to examine and report on management's assertion about the effectiveness of the system of internal controls of Enron Oil & Gas Company and its subsidiaries. The reports of Arthur Andersen LLP appear on the following page. The system of internal controls of Enron Oil & Gas Company and its subsidiaries is designed to provide reasonable assurance as to the reliability of financial statements and the protection of assets from unauthorized acquisition, use or disposition. This system includes, but is not limited to, written policies and guidelines including a published code for the conduct of business affairs, conflicts of interest and compliance with laws regarding antitrust, antiboycott and foreign corrupt practices policies, the careful selection and training of qualified personnel, and a documented organizational structure outlining the separation of responsibilities among management representatives and staff groups. The adequacy of financial controls of Enron Oil & Gas Company and its subsidiaries and the accounting principles employed in financial reporting by the Company are under the general oversight of the Audit Committee of the Board of Directors. No member of this committee is an officer or employee of the Company. The independent public accountants have direct access to the Audit Committee and meet with the committee from time to time to discuss accounting, auditing and financial reporting matters. It should be recognized that there are inherent limitations to the effectiveness of any system of internal control, including the possibility of human error and circumvention or override. Accordingly, even an effective system can provide only reasonable assurance with respect to the preparation of reliable financial statements and safeguarding of assets. Furthermore, the effectiveness of an internal control system can change with circumstances. It is management's opinion that, considering the criteria for effective internal control over financial reporting and safeguarding of assets which consists of interrelated components including the control environment, risk assessment process, control activities, information and communication systems, and monitoring, the Company maintained an effective system of internal control as to the reliability of financial statements and the protection of assets against unauthorized acquisition, use or disposition for the year ended December 31, 1995. BEN B. BOYD WALTER C. WILSON FORREST E. HOGLUND Vice President and Senior Vice President and Chairman of the Board, Controller Chief Financial Officer President and Chief Executive Officer
Houston, Texas February 16, 1996 F-2 35 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Enron Oil & Gas Company: We have examined management's assertion that the system of internal control of Enron Oil & Gas Company and its subsidiaries for the year ended December 31, 1995 was adequate to provide reasonable assurance as to the reliability of financial statements and the protection of assets against unauthorized acquisition, use or disposition, included in the accompanying report on Management's Responsibility for Financial Reporting. Our examination was made in accordance with standards established by the American Institute of Certified Public Accountants and, accordingly, included obtaining an understanding of the system of internal control, testing and evaluating the design and operating effectiveness of the system of internal control and such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion. Because of inherent limitations in any system of internal control, errors or irregularities may occur and not be detected. Also, projections of any evaluation of the system of internal control to future periods are subject to the risk that the system of internal control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, management's assertion that the system of internal control of Enron Oil & Gas Company and its subsidiaries for the year ended December 31, 1995 was adequate to provide reasonable assurance as to the reliability of financial statements and the protection of assets against unauthorized acquisition, use or disposition is fairly stated in all material respects, based upon current standards of control criteria. ARTHUR ANDERSEN LLP Houston, Texas February 16, 1996 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Enron Oil & Gas Company: We have audited the accompanying consolidated balance sheets of Enron Oil & Gas Company (a Delaware corporation) and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1995. These financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Enron Oil & Gas Company and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The financial statement schedule listed in the index to financial statements is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Houston, Texas February 16, 1996 F-3 36 ENRON OIL & GAS COMPANY CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, -------------------------------- 1995 1994 1993 -------- -------- -------- NET OPERATING REVENUES Natural Gas Associated Companies.................................... $229,997 $267,997 $279,921 Trade................................................... 222,118 221,896 225,241 Crude Oil, Condensate and Natural Gas Liquids Associated Companies.................................... 58,233 46,782 38,953 Trade................................................... 66,145 29,556 16,881 Gains on Sales of Reserves and Related Assets.............. 62,821 54,014 13,318 Other...................................................... 9,388 5,578 6,706 -------- -------- -------- Total.............................................. 648,702 625,823 581,020 OPERATING EXPENSES Lease and Well............................................. 69,463 60,384 59,344 Exploration................................................ 42,044 41,811 36,921 Dry Hole................................................... 12,911 17,197 18,355 Impairment of Unproved Oil and Gas Properties.............. 23,715 24,936 20,467 Depreciation, Depletion and Amortization................... 216,047 242,182 249,704 General and Administrative................................. 56,626 51,418 45,274 Taxes Other Than Income.................................... 32,587 28,254 35,396 -------- -------- -------- Total.............................................. 453,393 466,182 465,461 -------- -------- -------- OPERATING INCOME............................................. 195,309 159,641 115,559 OTHER INCOME, NET............................................ 669 2,783 6,635 -------- -------- -------- INCOME BEFORE INTEREST EXPENSE AND TAXES..................... 195,978 162,424 122,194 INTEREST EXPENSE Incurred Affiliate............................................... 1,360 629 - Other................................................... 17,054 13,984 15,378 Capitalized................................................ (6,490) (6,124) (5,457) -------- -------- -------- Net Interest Expense.................................... 11,924 8,489 9,921 -------- -------- -------- INCOME BEFORE INCOME TAXES................................... 184,054 153,935 112,273 INCOME TAX PROVISION (BENEFIT)............................... 41,936 5,937 (25,752) -------- -------- -------- NET INCOME................................................... $142,118 $147,998 $138,025 ======== ======== ======== EARNINGS PER SHARE OF COMMON STOCK........................... $ .89 $ .93 $ .86 ======== ======== ======== AVERAGE NUMBER OF COMMON SHARES.............................. 159,917 159,845 159,966 ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. F-4 37 ENRON OIL & GAS COMPANY CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
AT DECEMBER 31, -------------------------- 1995 1994 ----------- ----------- ASSETS CURRENT ASSETS Cash and Cash Equivalents........................................ $ 23,039 $ 5,810 Accounts Receivable Associated Companies.......................................... 60,777 57,352 Trade......................................................... 107,737 68,781 Inventories...................................................... 11,697 15,731 Other............................................................ 14,582 8,744 ----------- ----------- Total.................................................... 217,832 156,418 OIL AND GAS PROPERTIES (Successful Efforts Method)................. 3,380,924 3,015,435 Less: Accumulated Depreciation, Depletion and Amortization....... (1,499,379) (1,330,624) ----------- ----------- Net Oil and Gas Properties............................... 1,881,545 1,684,811 OTHER ASSETS....................................................... 47,881 20,638 ----------- ----------- TOTAL ASSETS....................................................... $ 2,147,258 $ 1,861,867 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable Associated Companies.......................................... $ 12,902 $ 13,353 Trade......................................................... 120,756 117,791 Accrued Taxes Payable............................................ 19,595 17,631 Dividends Payable................................................ 4,795 4,800 Other............................................................ 11,249 11,026 ----------- ----------- Total.................................................... 169,297 164,601 LONG-TERM DEBT Affiliate........................................................ 141,520 25,000 Other............................................................ 147,559 165,337 OTHER LIABILITIES.................................................. 11,629 10,035 DEFERRED INCOME TAXES.............................................. 308,141 269,292 DEFERRED REVENUE................................................... 205,453 184,183 COMMITMENTS AND CONTINGENCIES (Note 9) SHAREHOLDERS' EQUITY Common Stock, $.01 Par, 160,000,000 Shares Authorized and Issued........................................................ 201,600 201,600 Additional Paid In Capital....................................... 399,379 403,488 Cumulative Foreign Currency Translation Adjustment............... (10,747) (15,298) Retained Earnings................................................ 576,740 453,810 Common Stock Held in Treasury, 150,045 shares at December 31, 1995 and 9,173 shares at December 31, 1994.................... (3,313) (181) ----------- ----------- Total Shareholders' Equity............................... 1,163,659 1,043,419 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY......................... $ 2,147,258 $ 1,861,867 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. F-5 38 ENRON OIL & GAS COMPANY CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CUMULATIVE FOREIGN COMMON ADDITIONAL CURRENCY STOCK TOTAL COMMON PAID IN TRANSLATION RETAINED HELD IN SHAREHOLDERS' STOCK CAPITAL ADJUSTMENT EARNINGS TREASURY EQUITY -------- ---------- ----------- -------- -------- ------------- Balance at December 31, 1992... $200,800 $ 421,747 $ (1,726) $206,165 $ - $ 826,986 Net Income................... - - - 138,025 - 138,025 Dividends Paid/Declared, $.12 Per Share................. - - - (19,195) - (19,195) Translation Adjustment....... - - (5,129) - - (5,129) Treasury Stock Purchased..... - - - - (16,698) (16,698) Treasury Stock Issued Under Stock Option Plans........ - (4,216) - - 13,300 9,084 -------- -------- -------- -------- -------- ---------- Balance at December 31, 1993... 200,800 417,531 (6,855) 324,995 (3,398) 933,073 Net Income................... - - - 147,998 - 147,998 Two-for-One Stock Split...... 800 (800) - - - - Dividends Paid/Declared, $.12 Per Share................. - - - (19,183) - (19,183) Translation Adjustment....... - - (8,443) - - (8,443) Treasury Stock Purchased/ Tendered.................. - - - - (35,960) (35,960) Treasury Stock Issued Under Stock Option Plans........ - (13,243) - - 39,177 25,934 -------- -------- -------- -------- -------- ---------- Balance at December 31, 1994... 201,600 403,488 (15,298) 453,810 (181) 1,043,419 Net Income................... - - - 142,118 - 142,118 Dividends Paid/Declared, $.12 Per Share................. - - - (19,188) - (19,188) Translation Adjustment....... - - 4,551 - - 4,551 Treasury Stock Purchased..... - - - - (17,855) (17,855) Treasury Stock Issued Under Stock Option Plans........ - (4,109) - - 14,438 10,329 Other........................ - - - - 285 285 -------- -------- -------- -------- -------- ---------- Balance at December 31, 1995... $201,600 $ 399,379 $ (10,747) $576,740 $ (3,313) $1,163,659 ======== ======== ======== ======== ======== ==========
The accompanying notes are an integral part of these consolidated financial statements. F-6 39 ENRON OIL & GAS COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, -------------------------------- 1995 1994 1993 -------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Reconciliation of Net Income to Net Operating Cash Inflows: Net Income................................................. $142,118 $147,998 $138,025 Items Not Requiring (Providing) Cash Depreciation, Depletion and Amortization................... 216,047 242,182 249,704 Impairment of Unproved Oil and Gas Properties.............. 23,715 24,936 20,467 Deferred Income Taxes...................................... 45,173 1,788 25,612 Other, Net................................................. 2,910 (2,735) 1,768 Exploration Expenses....................................... 42,044 41,811 36,921 Dry Hole Expenses.......................................... 12,911 17,197 18,355 Gains On Sales of Reserves and Related Assets.............. (62,821) (54,014) (13,318) Other, Net................................................. 720 4,490 1,242 Changes in Components of Working Capital and Other Liabilities Accounts Receivable..................................... (17,525) (883) (24,586) Inventories............................................. 4,034 (2,163) (4,548) Accounts Payable........................................ 2,514 (25,648) 26,208 Accrued Taxes Payable................................... 1,964 277 7,443 Other Liabilities....................................... 1,544 1,086 772 Other, Net.............................................. (18,791) (1,463) (44,443) Amortization of Deferred Revenue........................... (43,344) (43,345) (73,867) Changes in Components of Working Capital Associated with Investing and Financing Activities...................... (17,858) 31,038 40,042 -------- -------- -------- NET OPERATING CASH INFLOWS................................... 335,355 382,552 405,797 INVESTING CASH FLOWS Additions to Oil and Gas Properties........................ (445,047) (442,078) (383,064) Exploration Expenses....................................... (42,044) (41,811) (36,921) Dry Hole Expenses.......................................... (12,911) (17,197) (18,355) Proceeds from Sales of Reserves and Related Assets (Note 10)..................................................... 102,006 90,515 41,815 Changes in Components of Working Capital Associated with Investing Activities.................................... 18,391 (32,120) (37,256) Other, Net................................................. (11,689) (8,758) (4,905) -------- -------- -------- NET INVESTING CASH OUTFLOWS.................................. (391,294) (451,449) (438,686) FINANCING CASH FLOWS Long-Term Debt Affiliate............................................... 116,520 25,000 - Other................................................... (16,100) (25,300) 33,000 Dividends Paid............................................. (19,193) (19,178) (19,200) Treasury Stock Purchased................................... (17,855) (14,139) (16,698) Proceeds from Sales of Treasury Stock...................... 10,329 4,113 9,084 Other, Net................................................. (533) 1,082 (2,786) -------- -------- -------- NET FINANCING CASH INFLOWS (OUTFLOWS)........................ 73,168 (28,422) 3,400 -------- -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............. 17,229 (97,319) (29,489) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.................................................... 5,810 103,129 132,618 -------- -------- -------- CASH AND CASH EQUIVALENTS AT END OF YEAR..................... $ 23,039 $ 5,810 $103,129 ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. F-7 40 ENRON OIL & GAS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation. The consolidated financial statements of Enron Oil & Gas Company (the "Company"), 61% of the outstanding common stock of which is owned by Enron Corp., include the accounts of all domestic and foreign subsidiaries. All material intercompany accounts and transactions have been eliminated. Certain reclassifications have been made to the consolidated financial statements for prior years to conform with the current presentation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Cash Equivalents. The Company records as cash equivalents all highly liquid short-term investments with maturities of three months or less. (See Note 4 "Long-Term Debt - Financing Arrangements with Enron Corp.") Oil and Gas Operations. The Company accounts for its natural gas and crude oil exploration and production activities under the successful efforts method of accounting. Oil and gas lease acquisition costs are capitalized when incurred. Unproved properties with significant acquisition costs are assessed quarterly on a property-by-property basis, and any impairment in value is recognized. Amortization of any remaining costs of such leases begins at a point prior to the end of the lease term depending upon the length of such term. Unproved properties with acquisition costs that are not individually significant are aggregated, and the portion of such costs estimated to be nonproductive, based on historical experience, is amortized over the average holding period. If the unproved properties are determined to be productive, the appropriate related costs are transferred to proved oil and gas properties. Lease rentals are expensed as incurred. Oil and gas exploration costs, other than the costs of drilling exploratory wells, are charged to expense as incurred. The costs of drilling exploratory wells are capitalized pending determination of whether they have discovered proved commercial reserves. If proved commercial reserves are not discovered, such drilling costs are expensed. The costs of all development wells and related equipment used in the production of natural gas and crude oil are capitalized. Depreciation, depletion and amortization of the cost of proved oil and gas properties is calculated using the unit-of-production method. Estimated future dismantlement, restoration and abandonment costs (classified as long-term liabilities), net of salvage values, are taken into account. Certain other assets are depreciated on a straight-line basis. Inventories, consisting primarily of tubular goods and well equipment held for use in the exploration for, and development and production of natural gas and crude oil reserves, are carried at cost with adjustments made from time to time to recognize changes in condition value. Natural gas revenues are recorded on the entitlement method based on the Company's percentage ownership of current production. Each working interest owner in a well generally has the right to a specific percentage of production, although actual production sold may differ from an owner's ownership percentage. Under entitlement accounting, a receivable is recorded when underproduction occurs and a payable when overproduction occurs. Gains and losses associated with the sale in place of natural gas and crude oil reserves and related assets are classified as net operating revenues in the consolidated statements of income based on the Company's strategy of continuing such sales in maximizing the economic value of its assets. F-8 41 Accounting for Interest and Price Risk Management. The Company engages in price and interest rate risk management activities for primarily non-trading purposes. Such activities consist of transactions to hedge commodity prices associated with the sales of natural gas and crude oil in order to mitigate the risk of market price fluctuations and interest rate swap agreements to effectively convert portions of floating rate debt to a fixed rate basis, thereby reducing the impact of interest rate changes on future income. Changes in the market value of commodity price and interest rate swap transactions entered into as hedges are deferred so that the gain or loss is recognized in the period in which the revenues or expenses associated with the hedged transactions are applicable. In certain situations, the Company has designated portions of and may in the future designate certain commodity price swap transactions or portions thereof as for trading purposes. These transactions are accounted for using the mark-to-market method of accounting. Under this method, unrealized gains or losses resulting from the impact of price movements are recognized as net gains or losses in net operating revenues in the consolidated statements of income. Capitalized Interest Costs. Certain interest costs have been capitalized as a part of the historical cost of unproved oil and gas properties. Interest costs capitalized during each of the three years in the period ended December 31, 1995 are set out in the consolidated statements of income. Income Taxes. The closing on December 13, 1995 of the sale by Enron Corp. of approximately 31 million outstanding shares of the common stock of the Company reduced Enron Corp.'s ownership interest in the Company from 80% to 61% with the result that (i) the Company ceased, effective December 14, 1995, to be included in the consolidated federal income tax return filed by Enron Corp. and (ii) a tax allocation agreement previously in effect between the Company and Enron Corp. was terminated. In addition, effective December 14, 1995, the Company and its subsidiaries and Enron Corp. entered into a new tax agreement pursuant to which, among other things, Enron Corp. has agreed (in exchange for the payment of $13.0 million by the Company) to be liable for, and indemnify the Company against all U.S. federal and state income taxes and certain foreign taxes imposed on the Company for periods prior to the date Enron Corp. reduced its ownership in the Company to less than 80%. The Company does not believe that the cessation of consolidated tax reporting with Enron Corp., the termination of the tax allocation agreement concurrent with deconsolidation and the signing of the new tax agreement with Enron Corp. will have a material adverse effect on its financial condition or results of operations. Prior to December 14, 1995, the Company was included in the consolidated federal income tax return filed by Enron Corp. as the common parent for itself and its subsidiaries and the resulting taxes, including taxes for any state or other taxing jurisdiction that required or permitted a consolidated, combined, or unitary tax return to be filed and in which the Company and/or any of its subsidiaries was included, were apportioned as between the Company and/or any of its subsidiaries and Enron Corp. based on the terms of the tax allocation agreement in effect prior to December 14, 1995. The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109 - "Accounting for Income Taxes". SFAS No. 109 requires the asset and liability approach for accounting for income taxes. Under this approach, deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases (See Note 8 "Income Taxes"). Foreign Currency Translation. For subsidiaries whose functional currency is deemed to be other than the U.S. dollar, asset and liability accounts are translated at year-end exchange rates and revenue and expenses are translated at average exchange rates prevailing during the year. Translation adjustments are included as a separate component of shareholders' equity. Earnings Per Share. Earnings per share is computed on the basis of the average number of common shares outstanding during the periods. F-9 42 2. NATURAL GAS AND CRUDE OIL, CONDENSATE AND NATURAL GAS LIQUIDS NET OPERATING REVENUES Natural Gas Net Operating Revenues are comprised of the following:
1995 1994 1993 -------- -------- -------- Wellhead Natural Gas Revenues Associated Companies(1)(2)....................... $173,864 $279,339 $340,508 Trade............................................ 174,732 162,553 156,301 -------- -------- -------- Total.................................... $348,596 $441,892 $496,809 ======== ======== ======== Other Natural Gas Marketing Activities Gross Revenues from: Associated Companies.......................... $ 78,985 $159,726 $139,576 Trade(3)...................................... 102,904 121,965 135,606 -------- -------- -------- Total.................................... 181,889 281,691 275,182 Associated Costs from: Associated Companies(1)(4)(5)................. 90,121 181,756 182,456 Trade......................................... 56,221 62,513 66,273 -------- -------- -------- Total.................................... 146,342 244,269 248,729 -------- -------- -------- Net...................................... 35,547 37,422 26,453 Commodity Price Transaction Gain (Loss) Trading....................................... 2,688(6) - - Non-Trading(7)................................ 65,284 10,579 (18,100) -------- -------- -------- Total.................................... 67,972 10,579 (18,100) -------- -------- -------- Total.................................... $103,519 $ 48,001 $ 8,353 ======== ======== ========
Crude Oil, Condensate and Natural Gas Liquids Net Operating Revenues are comprised of the following:
1995 1994 1993 -------- -------- -------- Wellhead Crude Oil, Condensate and Natural Gas Liquids Revenues Associated Companies............................. $ 56,681 $ 44,979 $ 38,953 Trade............................................ 66,145 29,556 16,881 -------- -------- -------- Total.................................... $122,826 $ 74,535 $ 55,834 ======== ======== ======== Other Crude Oil and Condensate Marketing Activities Commodity Price Hedging Gain(7).................. $ 1,552 $ 1,803 $ - ======== ======== ========
- --------------- (1) Wellhead Natural Gas Revenues in 1995, 1994 and 1993 include $80,369, $126,783 and $129,504, respectively, associated with deliveries by Enron Oil & Gas Company to Enron Oil & Gas Marketing, Inc., a wholly-owned subsidiary, reflected as a cost in Other Natural Gas Marketing Activities - Associated Costs. (2) Includes $14,022, $22,434 and $46,358 in 1995, 1994 and 1993, respectively, associated with the equivalent wellhead value of volumes delivered under the terms of a volumetric production payment agreement effective October 1, 1992, as amended, net of transportation. (3) Includes $43,344, $43,345 and $73,867 in 1995, 1994 and 1993, respectively, associated with the amortization of deferred revenues under the terms of volumetric production payment and exchange agreements effective October 1, 1992, as amended. (4) Includes the effect of a price swap agreement with a third party which in effect fixed the price of certain purchases through February 1995. F-10 43 (5) Includes $27,549, $33,779 and $65,042 in 1995, 1994 and 1993, respectively, for volumes delivered under volumetric production payment and exchange agreements effective October 1, 1992, as amended, including equivalent wellhead value, any applicable transportation costs and exchange differentials. (6) Includes an $11,255 gain associated with certain NYMEX-related commodity market transactions designated for trading purposes partially offset by a $2,567 loss related to call option transactions and a $6,000 loss associated with certain NYMEX-related natural gas commodity market transactions that were marked-to-market due to loss of correlation between the NYMEX and the wellhead natural gas prices that the positions were designated to hedge. (See Note 13 "Price and Interest Rate Risk Management"). (7) Represents gain or loss associated with commodity price swap transactions primarily with Enron Corp. affiliated companies based on NYMEX-related commodity prices in effect on dates of execution, less customary transaction fees. These transactions serve as price hedges for a portion of wellhead sales. In March 1995, in a series of transactions with Enron Corp. and an affiliate of Enron Corp., the Company exchanged all of its fuel supply and purchase contracts and related price swap agreements associated with a Texas City cogeneration plant (the "Cogen Contracts") for certain natural gas price swap agreements of equivalent value issued by the affiliate that are designated as hedges (the "Swap Agreements"). Such Swap Agreements were closed on March 31, 1995. As a result of the transactions, the Company has been relieved of all performance obligations associated with the Cogen Contracts. Such operating revenues and associated costs through February 28, 1995 were classified as Other Natural Gas Marketing Activities-Gross Revenues and Associated Costs from Associated Companies. The Company will realize net operating revenues classified as Other Natural Gas Marketing Activities-Commodity Price Transaction Gain (Loss), Non-Trading, and receive corresponding cash payments of approximately $91 million during the period extending through December 31, 1999, under the terms of the closed Swap Agreements. The estimated fair value of the Swap Agreements was approximately $81 million at the date the Swap Agreements were received in exchange for the Cogen Contracts. The net effect of this series of transactions has resulted/will result in increases in net operating revenues and cash receipts for the Company during 1995 and 1996 of approximately $13 million and $7 million, respectively, with offsetting decreases in 1998 and 1999 versus those anticipated under the Cogen Contracts. The total cash payments receivable under the terms of the Swap Agreements, approximately $60 million at December 31, 1995, are presented in the accompanying balance sheet as Accounts Receivable - Associated Companies for the $25 million current portion and as Other Assets for the $35 million noncurrent portion. The corresponding total future revenue of approximately $63 million is classified as Deferred Revenue. (See Note 13 "Price and Interest Rate Risk Management"). 3. OTHER ASSETS Other Assets at December 31, 1994 includes an investment in 349,387 shares of Enron Corp. common stock purchased for $10 million, at an average of $28.62 per share from Enron Corp. (the fair market value of such shares on the dates of acquisition). In August 1995, the purchase of an additional 283,946 shares of Enron Corp. common stock for $9.3 million, at an average of $32.71 per share was completed, resulting in a total of 633,333 shares at a total cost of $19.3 million. The Enron Corp. common stock was subsequently exchanged in November 1995 for redeemable preferred stock issued in March 1995 by a subsidiary of the Company. (See Note 6 "Shareholders' Equity"). 4. LONG-TERM DEBT Revolving Credit Agreement. The Company is a party to a Revolving Credit Agreement dated as of March 11, 1994, among the Company and the banks named therein (the "Credit Agreement"). The Credit Agreement provides for aggregate borrowings of up to $100 million, with provisions for increases, at the option of the Company, up to $300 million. Advances under the Credit Agreement bear interest, at the option of the Company, based on a base rate, an adjusted CD rate or a Eurodollar rate. Each advance under the Credit Agreement matures on a date selected by the Company at the time of the advance, but in no event after F-11 44 January 15, 1998. There were no advances outstanding under the Credit Agreement at December 31, 1995 or 1994. Financing Arrangements With Enron Corp. The Company engages in various transactions with Enron Corp. that are characteristic of a consolidated group under common control. Activities of the Company not internally funded from operations have been and may be funded from time to time by advances from Enron Corp. The Company entered into an agreement with Enron Corp., effective October 12, 1989 (as amended effective September 29, 1992) and payable on demand no later than September 29, 1995, under which the Company could borrow funds from Enron Corp. at a representative market rate of interest on a revolving basis. During 1995 and 1994, there were no funds borrowed by the Company under this agreement. Effective as of September 29, 1995, this agreement was replaced with another agreement with Enron Corp. providing for borrowings by the Company of up to $200 million under substantially the same terms as the previous agreement. Advances under this agreement which amounted to $141.5 million at December 31, 1995 are payable on demand on or before December 31, 1998. Such balance was classified as long-term based on the Company's intent and ability to replace such amount with other long-term debt. In January 1996, $105 million was retired using the proceeds from new long-term financings. (See "Long-Term Debt, Other"). In July 1994, the Company prepaid $25 million of loans payable due in April 1995 with proceeds from a promissory note payable to Enron Corp. which note was in the same amount and with essentially the same terms as the loan prepaid. The promissory note was classified as long-term based on the Company's intent and ability to refinance such note upon maturity with other long-term debt. The interest rate swap agreement which effectively fixed the interest rate of the original loan payable at 8.98% through maturity remained in effect for the promissory note payable to Enron Corp. The note was paid in April 1995. The Company also entered into an agreement with Enron Corp., effective October 12, 1989 (as amended effective September 29, 1992), which provides the Company the option of depositing any excess funds that may be available from time to time with Enron Corp. with interest at a representative market rate during the periods the funds were held by Enron Corp. Effective January 1, 1993, the Company executed a promissory note at a fixed interest rate of 7% with Enron Corp. providing for the investment of funds temporarily surplus to the Company from time to time with Enron Corp. Daily outstanding balances of funds advanced to Enron Corp. under this note averaged $154,000 and $68.8 million during 1995 and 1994, respectively. There were no advances outstanding at December 31, 1995 or 1994 under this agreement. Interest income recorded in 1995 and 1994 under the terms of this note totaled $11 thousand and $4.7 million, respectively. Effective as of September 29, 1995, the Company entered into a new credit agreement which replaces the October 12, 1989 credit agreement, as amended, and supplements the promissory note entered into on January 1, 1993. Such new agreement provides the Company the option of depositing any excess funds that may be available from time to time in excess of those advanced under the January 1, 1993 promissory note with Enron Corp. up to a combined total of $200 million under substantially the same terms as included in the October 12, 1989 agreement, as amended, and with a maturity date of December 31, 1998. Long-Term Debt, Other. Long-Term Debt, Other at December 31 consisted of the following:
1995 1994 -------- -------- Senior Notes...................................... $ 70,000 $ 70,000 Promissory Notes.................................. 71,600 56,000 Commercial Paper.................................. - 6,700 Loan Payable...................................... - 25,000 Capitalized Lease Obligation...................... 5,959 7,637 -------- -------- Total........................................... $147,559 $165,337 ======== ========
The Senior Notes bear interest at 9.1% with principal repayments of $30 million due on February 15, 1996 and $20 million due in 1997 and 1998. The $30 million repayment due on February 15, 1996 is classified as long-term based on the Company's intent and ability to replace such amount upon maturity with other long-term debt. F-12 45 The Promissory Notes represent advances to a subsidiary of the Company. Two advances aggregating $31 million were received in March 1994 under a credit agreement dated as of March 8, 1994 between the subsidiary and a financial institution. One of the advances is in the amount of $16 million, bears interest at a fixed rate of 4.52% and is due in 1998. The other advance is in the amount of $15 million, bears interest at a floating rate that resets quarterly, is equal to 84% of the London Interbank Bid Rate and is due in 1998. Both advances are collateralized with a letter of credit issued by a bank on behalf of the subsidiary and guaranteed by the Company. The advances were used to partially repay a promissory note payable to a bank by the subsidiary. In May 1994 and January 1995, the subsidiary received other advances of $25 million and $15 million, respectively, evidenced by promissory notes, under a credit agreement dated May 27, 1994 between the subsidiary and a financial institution. The credit agreement provides for aggregate borrowings of up to $44 million and is due in 1999. The advances bear interest based on various interest rate options, as defined in the credit agreement, which ranged from 5.27% to 5.57% during 1995. The advances are guaranteed by the Company and were used to partially repay temporary advances from the Company to the subsidiary for qualified development costs. The Commercial Paper outstanding at December 31, 1994 was issued under a commercial paper program the proceeds of which are used to fund current transactions and are classified as long-term based on the Company's intent and ability to replace such obligation with other long-term debt. The Loan Payable was retired in April 1995 using the proceeds from other long-term financings. Interest was at a variable rate based on the London Interbank Offered Rate which had, in effect, been converted to a fixed interest rate of 8.92% through maturity using an interest rate swap agreement in equivalent dollar amounts. The note was classified as long-term based on the Company's intent and ability to replace such loan upon maturity with other long-term debt. Certain of the borrowings described above contain covenants requiring the maintenance of certain financial ratios and limitations on liens, debt issuance and dispositions of assets. In 1991, the Company filed with the Securities and Exchange Commission a registration statement providing for the issuance and sale from time to time of up to $250 million of debt securities to the public. As of December 31, 1995, no debt securities had been issued under this registration statement. Subsequent to year-end, a subsidiary of the Company entered into a Credit Agreement dated as of January 16, 1996 among the subsidiary and the banks named therein and received advances under the agreement, evidenced by promissory notes, aggregating $105 million. Each note matures in January 2001 and bears interest at a floating rate based on the London Interbank Offered Rate for periods selected by the subsidiary. The notes are guaranteed by the Company, the proceeds of which were ultimately used to partially repay advances to the Company by Enron Corp. Fair Value Of Long-Term Debt. At December 31, 1995 and 1994, the Company had $289 million and $190 million, respectively, of long-term debt. The estimated fair value of such debt at December 31, 1995 and 1994 was approximately $294 million and $186 million, respectively. The fair value of long-term debt is the value the Company would have to pay to retire the debt, including any premium or discount to the debtholder for the differential between the stated interest rate and the year-end market rate. The fair value of long-term debt is based upon quoted market prices and, where such quotes were not available, upon interest rates available to the Company at year-end. 5. VOLUMETRIC PRODUCTION PAYMENT In September 1992, the Company sold a volumetric production payment for $326.8 million to a limited partnership. Under the terms of the production payment agreements, the Company conveyed a real property interest of approximately 124 billion cubic feet equivalent ("Bcfe") (136 trillion British thermal units ("TBtu")) of certain natural gas and other hydrocarbons to the purchaser. Effective October 1, 1993, the agreements were amended providing for the extension of the original term of the volumetric production payment through March 31, 1999 and including a revised schedule of daily quantities of hydrocarbons to be delivered which is approximately one-half of the original schedule. The revised schedule will total approximately 89.1 Bcfe (97.8 TBtu) versus approximately 87.9 Bcfe (96.4 TBtu) remaining to be delivered under F-13 46 the original agreement. Daily quantities of hydrocarbons no longer required to be delivered under the revised schedule during the period from October 1, 1993 through June 30, 1996 are available for sale by the Company. The Company retains responsibility for its working interest share of the cost of operations. A portion of the proceeds of the sale was used to repay a portion of the Company's long-term debt, with surplus funds advanced to Enron Corp. under a note agreement which facilitates the deposit of funds temporarily surplus to the Company. The Company accounted for the proceeds received in the transaction as deferred revenue which is being amortized into revenue and income as natural gas and other hydrocarbons are produced and delivered during the term, as revised, of the volumetric production payment agreement. Annual remaining amortization of deferred revenue, based on revised scheduled deliveries under the volumetric production payment agreement, as amended, at December 31, 1995 was as follows: 1996....................................................... $ 43,463 1997....................................................... 43,344 1998....................................................... 43,344 1999....................................................... 10,688 -------- Total............................................ $140,839 ========
6. SHAREHOLDERS' EQUITY The Board of Directors of the Company approved in December 1992, as amended in September 1994, the purchasing and holding in treasury at any time of up to 500,000 shares of common stock of the Company for, but not limited to, meeting obligations associated with stock option grants to qualified employees pursuant to the Company's stock option plans. (See Note 9 "Commitments and Contingencies - Stock Option Plans"). At December 31, 1995 and 1994, 150,045 shares and 9,173 shares, respectively, were held in treasury under this authorization. On May 3, 1994, the shareholders of the Company approved and the Board of Directors subsequently declared a two-for-one split of the common stock of the Company to be effected as a nontaxable dividend of one share for each share outstanding. Shares were issued on June 15, 1994 to shareholders of record as of May 31,1994. At such time, an amendment to the Restated Certificate of Incorporation of the Company to increase the total number of authorized shares of the common stock of the Company from 80 million to 160 million shares and to change the par value of common stock from no par to $.01 par per share was filed with the Secretary of State of Delaware. All share and per share amounts in the financial statements and supplemental financial information have been restated to consider the effect of the two-for-one stock split. In March 1995, a subsidiary of the Company issued to an unrelated third party 19,000 shares of the subsidiary's non-voting redeemable preferred stock, with a liquidation/redemption value of $1,000 per share and dividends payable semi-annually at an annual rate of $70.00 per share, in exchange for certain oil and gas properties. (See Note 3 "Other Assets"). In February 1996, the Board of Directors authorized submission of a resolution to shareholders for approval at their annual meeting in May 1996 that would amend the Restated Certificate of Incorporation of the Company to increase the total number of authorized shares of the common stock of the Company from 160 million to 320 million shares. Such charter amendment, if adopted, will become effective when the appropriate Certificate of Amendment to the Company's Restated Certificate of Incorporation is filed with the Secretary of State of Delaware. 7. TRANSACTIONS WITH ENRON CORP. AND RELATED PARTIES Natural Gas and Crude Oil, Condensate and Natural Gas Liquids Net Operating Revenues. Wellhead Natural Gas and Crude Oil, Condensate and Natural Gas Liquids Revenues and Other Natural Gas and Other Crude Oil and Condensate Marketing Activities include revenues from and associated costs paid to various subsidiaries and affiliates of Enron Corp. pursuant to contracts which, in the opinion of management, are no less favorable than could be obtained from third parties. Other Natural Gas and Other Crude Oil and Condensate Marketing Activities also include certain commodity price swap and NYMEX-related commod- F-14 47 ity transactions with Enron Corp. affiliated companies which, in the opinion of management, are no less favorable than could be obtained from third parties. (See Note 2 "Natural Gas and Crude Oil, Condensate and Natural Gas Liquids Net Operating Revenues"). General and Administrative Expenses. The Company is charged by Enron Corp. for all direct costs associated with its operations. Such direct charges, excluding benefit plan charges (See Note 9 "Commitments and Contingencies - Employee Benefit Plans"), totaled $17.2 million, $13.7 million and $11.5 million for the years ended December 31, 1995, 1994 and 1993, respectively. Management believes that these charges are reasonable. Additionally, certain administrative costs not directly charged to any Enron Corp. operations or business segments are allocated to the entities of the consolidated group. Allocation percentages are generally determined utilizing weighted average factors derived from property gross book value, net operating revenues and payroll costs. Effective January 1, 1994, the Company entered into an agreement with Enron Corp. with an initial term of five years through December 1998, which agreement replaced a similar previous agreement, providing for services substantially identical in nature and quality to those services previously provided and for allocated indirect costs incurred in rendering such services up to a maximum of approximately $7 million in 1995 and $6.7 million for 1994. The limit on cost for the allocated indirect services provided by Enron Corp. to the Company will increase in subsequent years for inflation and certain changes in the Company's allocation bases, but such increase will not exceed 7.5% per year. Management believes the indirect allocated charges for the numerous types of support services provided by the corporate staff are reasonable. Approximately $6.8 million, $6.6 million and $7.9 million were charged to the Company for indirect general and administrative expenses for the years ended December 31, 1995, 1994 and 1993, respectively. Financing. See Note 4 "Long-Term Debt - Financing Arrangements with Enron Corp." for a discussion of financing arrangements with Enron Corp. 8. INCOME TAXES The principal components of the Company's net deferred income tax liability at December 31, 1995 and 1994 were as follows:
1995 1994 -------- -------- Deferred Income Tax Assets Non-Producing Leasehold Costs................................. $ 8,469 $ 7,685 Seismic Costs Capitalized for Tax............................. 5,316 4,683 Other......................................................... 1,460 4,194 -------- -------- Total Deferred Income Tax Assets...................... 15,245 16,562 Deferred Income Tax Liabilities Oil and Gas Exploration and Development Costs Deducted for Tax Over Book Depreciation, Depletion and Amortization......... 274,219 252,599 Capitalized Interest.......................................... 6,265 5,763 Volumetric Production Payment Book Revenue Over Income for Tax.................................................... 40,591 26,777 Other......................................................... 2,311 715 -------- -------- Total Deferred Income Tax Liabilities................. 323,386 285,854 -------- -------- Net Deferred Income Tax Liability..................... $308,141 $269,292 ======== ========
The components of income (loss) before income taxes were as follows:
1995 1994 1993 -------- -------- -------- United States....................................... $157,174 $125,510 $117,460 Foreign............................................. 26,880 28,425 (5,187) -------- -------- -------- Total..................................... $184,054 $153,935 $112,273 ======== ======== ========
F-15 48 Total income tax provision (benefit) was as follows:
1995 1994 1993 -------- -------- -------- Current: Federal.......................................... $ (6,983) $ 113 $(52,555) State............................................ 130 2,745 5 Foreign.......................................... 3,616 1,291 1,186 -------- -------- -------- Total.................................... (3,237) 4,149 (51,364) Deferred: Federal.......................................... 24,733 3,818 20,845 State............................................ 855 (14,414) 4,357 Foreign.......................................... 19,585 12,384 410 -------- -------- -------- Total.................................... 45,173 1,788 25,612 -------- -------- -------- Income Tax Provision (Benefit)..................... $ 41,936 $ 5,937 $(25,752) ======== ======== ========
The differences between taxes computed at the U.S. federal statutory tax rate and the Company's effective rate were as follows:
1995 1994 1993 -------- -------- -------- Statutory Federal Income Tax Rate.................. 35.00% 35.00% 35.00% State Income Tax, Net of Federal Benefit........... 0.35 (4.93) 2.53 Income Tax Related to Foreign Operations........... 7.21 3.44 3.08 Tight Gas Sand Federal Income Tax Credits.......... (12.19) (23.71) (58.05) Revision of Prior Years' Tax Estimates............. (6.52) (3.25) (10.73) Amended Return Recoveries.......................... (1.09) (2.62) - Federal Tax Rate Increase.......................... - - 5.23 Other.............................................. 0.02 (0.07) - ------ ------ ------ Effective Income Tax Rate................ 22.78% 3.86% (22.94)% ====== ====== ======
Current income tax receivable from (payable to) Enron Corp. at December 31, 1995, 1994 and 1993 amounted to $458, $(506) and $(6,892), respectively. The current taxes payable to the Internal Revenue Service for the short-period of December 14, 1995 through December 31, 1995 are not material. The Company's $2.7 million alternative minimum tax credit carryforward was eliminated when taxes were reallocated between Enron Corp. and the Company after completion of the 1988-1991 Internal Revenue Service audit. The Company's foreign subsidiaries' undistributed earnings of approximately $84 million at December 31, 1995 are considered to be indefinitely invested outside the U.S. and, accordingly, no U.S. federal or state income taxes have been provided thereon. Upon distribution of those earnings in the form of dividends, the Company may be subject to both foreign withholding taxes and U.S. income taxes, net of allowable foreign tax credits. Determination of any potential amount of unrecognized deferred income tax liabilities is not practicable. 9. COMMITMENTS AND CONTINGENCIES Employee Benefit Plans. Employees of the Company are covered by various retirement, stock purchase and other benefit plans of Enron Corp. During each of the years ended December 31, 1995, 1994 and 1993, the Company was charged $6.6 million, $5.1 million and $4.5 million, respectively, for all such benefits, including pension expense totaling $0.8 million, $0.3 million and $0.5 million, respectively, by Enron Corp. As of September 30, 1995, the most recent valuation date, the plan net assets of the Enron Corp. defined benefit plan in which the employees of the Company participate was less than the actuarial present value of projected plan benefit obligations by approximately $19.3 million. The assumed discount rate, rate of return on F-16 49 plan assets and rate of increases in wages used in determining the actuarial present value of projected plan benefits were 7.5%, 10.5% and 4.0%, respectively. The Company also has in effect pension and savings plans related to its Canadian, Trinidadian and Indian subsidiaries. Activity related to these plans is not material relative to the Company's operations. The Company provides certain medical, life insurance and dental benefits to eligible employees who retire under the Enron Corp. Retirement Plan and their eligible surviving spouses. Benefits are provided under the provisions of a contributory defined dollar benefit plan. The Company accrues the cost of these post-retirement benefits over the service lives of the employees expected to be eligible to receive such benefits. The transition obligation existing at January 1, 1993 is being amortized over an average period of 19 years. The accumulated post-retirement benefit obligation ("APBO") existing at December 31, 1995 totaled $131.1 million, of which $114.3 million is applicable to current retirees and current employees eligible to retire. The measurement of the APBO assumes a 7.5% discount rate and a health care cost trend rate of 11.7% in 1995 decreasing to 5% by the year 2006 and beyond. A 1% increase in the health care cost trend rate would have the effect of increasing the APBO and the net periodic expense by approximately $8.8 million and $0.6 million, respectively. The Company does not currently intend to prefund its obligations under its post-retirement welfare benefit plans. Stock Option Plans. The Company has various stock option plans ("the Plans") under which employees of the Company and its subsidiaries and non-employee members of the Board of Directors have been or may be granted rights to purchase shares of common stock of the Company generally at a price not less than the market price of the stock at the date of grant. Options granted under the Plans vest over a period of time based on the nature of the grants and as defined in the individual grant agreements. The following table sets forth the transactions for the Plans for the years ended December 31:
NUMBER OF STOCK OPTIONS ------------------------------------- 1995 1994 1993 -------- --------- -------- Outstanding at January 1....................... 7,214,555 4,124,800 3,908,050 Granted...................................... 1,650,030(1) 5,128,095(1) 920,600 Exercised.................................... (621,927) (1,967,920) (671,850) Forfeited.................................... (223,893) (70,420) (32,000) --------- --------- --------- Outstanding at December 31 (Grant Prices of $9.25 - $24.38 per Share).................... 8,018,765 7,214,555 4,124,800 ========= ========= ========= Available for Grant at December 31............. 3,792,038 3,218,175 1,075,850 ========= ========= =========
- --------------- (1) Includes 170,985 and 1,920,275 options granted on December 29, 1995 and December 30, 1994, respectively, under all employee stock option grants. At December 31, 1995, 4,716,320 options outstanding were vested. Of the remaining unvested options, 1,054,292, 895,977, 751,227, 566,752 and 34,197 vest in the years 1996, 1997, 1998, 1999 and 2000, respectively. During 1995, 1994 and 1993, the Company purchased or was tendered 762,799, 1,817,093 and 831,850 of its common shares, respectively, and delivered such shares upon the exercise of stock options, except for shares held in treasury at December 31, 1995, 1994 and 1993 as set out below. The difference between the cost of the treasury shares and the exercise price of the options, net of federal income tax benefit of $2.2 million, $7.2 million and $2.8 million for the years 1995, 1994 and 1993, respectively, is reflected as an adjustment to Additional Paid In Capital. In October 1993, as amended in September 1994, the Company commenced a stock repurchase program authorized by the Board of Directors to facilitate the availability of treasury shares of common stock for, but not limited to, the settlement of employee stock option exercises pursuant to the Plans. At December 31, 1995 and 1994, 150,045 and 9,173 shares, respectively, were held in treasury under this authorization. (See Note 6 "Shareholders' Equity"). F-17 50 In October 1995, the Financial Accounting Standards Board issued SFAS No. 123 - "Accounting for Stock-Based Compensation". SFAS No. 123 encourages companies to account for stock-based compensation awards based on the fair value of the awards at the date they are granted. The resulting compensation cost would be shown as an expense in the statement of income. Companies can choose not to apply the new accounting method and continue to apply current accounting requirements; however, disclosure will be required as to what net income and earnings per share would have been had the new accounting method been followed. SFAS No. 123 is effective for calendar year 1996. Letters Of Credit. At December 31, 1995 and 1994, the Company had letters of credit outstanding totaling approximately $32 million issued in connection with a loan between one of the Company's subsidiaries and a trust. Contingencies. There are various suits and claims against the Company having arisen in the ordinary course of business. However, management does not believe these suits and claims will individually or in the aggregate have a material adverse effect on the Company's financial condition or results of operations. On November 19, 1992, TransAmerican Natural Gas Corporation ("TransAmerican") filed a petition against the Company alleging breach of contract, tortious interference with contract, misappropriation of trade secrets and violation of state antitrust laws. The petition, as amended, sought actual damages of at least $100 million plus exemplary damages of $300 million. The Company filed counterclaims against TransAmerican and a third-party claim against its sole shareholder, John R. Stanley, alleging fraud, negligent misrepresentation and breach of state antitrust laws. On October 16, 1995, the Company, TransAmerican and Stanley entered into an agreement which resolved all claims. The settlement terms did not have a materially adverse effect on the Company's financial condition or results of operations. The suit was dismissed with prejudice as to all parties by order entered in November 1995. The Company has been named as a potentially responsible party in certain Comprehensive Environmental Response Compensation and Liability Act proceedings. However, management does not believe that any potential assessments resulting from such proceedings will individually or in the aggregate have a materially adverse effect on the financial condition or results of operations of the Company. 10. CASH FLOW INFORMATION Gains on sales of certain oil and gas reserves and related assets in the amount of $62.8 million, $54.0 million and $13.3 million for the years ended December 31, 1995, 1994 and 1993, respectively, are required by current accounting guidelines to be removed from net income in connection with determining net operating cash inflows while the related proceeds are required to be classified as investing cash flows. The Company believes that proceeds from the sales of reserves and related assets should be considered in analyzing the elements of operating cash flows. The current federal income tax impact of these sales transactions was calculated by the Company to be $24.4 million, $19.8 million and $8.2 million for the years ended December 31, 1995, 1994 and 1993, respectively, which entered into the overall calculation of current federal income tax. The Company believes that this federal income tax impact should also be considered in analyzing the elements of the cash flow statement. The consolidated statements of cash flows for 1994 and 1993 have been revised to reflect the elimination of the non-cash amortization of deferred revenue from net operating cash flows rather than investing cash flows as previously reported. Non-cash investing and financing activities for 1995 include the issuance by a subsidiary of the Company of redeemable preferred stock with a liquidation/redemption value of $19 million in exchange for certain oil and gas properties (See Note 6 "Shareholders' Equity"). An approximate $7 million step-up in property basis was made relating to deferred tax liabilities associated with the difference between the tax and book bases of acquired properties as required by SFAS No. 109 for a nontaxable business combination. F-18 51 Cash paid for interest and paid (received) for income taxes was as follows for the years ended December 31:
1995 1994 1993 ------- ------- -------- Interest (net of amount capitalized).................... $11,307 $10,436 $ 10,517 Income taxes............................................ 10,140 1,352 (65,543)
Included in 1995 income taxes paid is $13 million paid to Enron Corp. for the indemnification of any future liability associated with all federal and state income taxes and certain foreign taxes imposed on the Company for periods prior to the date Enron Corp. reduced its ownership in the Company from 80% to 61%. 11. BUSINESS SEGMENT INFORMATION The Company's operations are all natural gas and crude oil exploration and production related. Accordingly, such operations are classified as one business segment. Financial information by geographic area is presented below for the years ended December 31, or at December 31:
1995 1994 1993 ---------- ---------- ---------- Gross Operating Revenues United States.............................. $ 582,993 $ 656,546 $ 653,929 Foreign.................................... 131,682 86,763 46,316 ---------- ---------- ---------- Total(1).............................. $ 714,675 $ 743,309 $ 700,245 ========== ========== ========== Operating Income (Loss) United States.............................. $ 162,652 $ 138,001 $ 126,410 Foreign.................................... 32,657 21,640 (10,851) ---------- ---------- ---------- Total................................. $ 195,309 $ 159,641 $ 115,559 ========== ========== ========== Identifiable Assets United States.............................. $1,693,293 $1,505,926 $1,564,330 Foreign.................................... 453,965 355,941 246,832 ---------- ---------- ---------- Total................................. $2,147,258 $1,861,867 $1,811,162 ========== ========== ==========
- --------------- (1) Not deducted are natural gas associated costs of $65,973, $117,486 and $119,225 in 1995, 1994 and 1993, respectively. 12. OTHER INCOME, NET Other income, net consisted of the following for the years ended December 31:
1995 1994 1993 ---------- ---------- ---------- Interest Income................................. $ 556 $ 4,990 $ 5,789 Reserve Accruals................................ 379 (3,143) (2,520) Contract Settlements............................ - - 4,248 Other, Net...................................... (266) 936 (882) ---------- ---------- ---------- Total................................. $ 669 $ 2,783 $ 6,635 ========== ========== ==========
13. PRICE AND INTEREST RATE RISK MANAGEMENT Periodically, the Company enters into certain trading and non-trading activities including NYMEX-related commodity market transactions and other contracts. The non-trading portions of these activities have been designated to hedge the impact of market price fluctuations on anticipated commodity delivery volumes or other contractual commitments. F-19 52 Trading Activities. The Company realized an $11.3 million gain in 1995 related to certain natural gas commodity price swap transactions with an Enron Corp. affiliated company that were designated for trading purposes in December 1994 and closed in the first quarter of 1995. In 1995, the Company sold a call option with a notional volume of 50 billion British thermal units ("BBtu") per day at a strike price of $2.10 per million British thermal units ("MMBtu") for each month in the period January 1996 through December 1996. At December 31, 1995 the approximate market value of the outstanding call option was $1.8 million. The Company recognized a $2.6 million loss in 1995 related to this call option. In the first quarter of 1996, the Company purchased a call option with a notional volume of 50 BBtu per day at a strike price of $2.10 per MMBtu for the period February 1996 through December 1996 for $3.0 million to offset the call option discussed above. The purchase resulted in a $1.2 million loss to be recognized in the first quarter of 1996. There were no trading gains or losses in 1993 or 1994. The following table summarizes the estimated fair value of financial instruments held for trading purposes:
1995 -------------------------- CARRYING AVERAGE AMOUNT FAIR VALUE(1) -------- ------------- (IN MILLIONS) Options Written............................................. $ (1.8) $ (.3) NYMEX-related Commodity Market Positions.................... - .4
- --------------- (1) Estimated fair values have been determined by using available market data and valuation methodologies. Judgment is necessarily required in interpreting market data and the use of different market assumptions or estimation methodologies may affect the estimated fair value amounts. Interest Rate Swap Agreements. At December 31, 1995, there were no interest rate swap agreements outstanding. At December 31, 1994, the Company had outstanding interest rate swap agreements with notional principal amounts of $50 million which terminated in April 1995. The interest rate swap agreements were entered into to hedge certain floating rate obligations and effectively fix the interest rate on the notional amount of debt at 8.98% and 8.92%. The estimated fair value of the outstanding swap agreements at December 31, 1994 was a negative $0.5 million. The fair value of interest rate swap agreements is based upon termination values obtained from third parties. Foreign Currency Contracts. The Company enters into foreign currency contracts from time to time to hedge specific currency exposure from commercial transactions. At December 31, 1995 and 1994, there were no foreign currency contracts outstanding. Subsequent to year-end, a subsidiary of the Company and the Company entered into offsetting foreign currency and interest rate swap agreements with an aggregate notional principal amount of $210 million. Such swap agreements are scheduled to terminate in 2001. Hedging Transactions. With the objective of enhancing the certainty of future revenues, the Company enters into NYMEX-related commodity price swaps from time to time. Using NYMEX-related commodity price swaps, the Company receives a fixed price for the respective commodity hedged and pays a floating market price, as defined for each transaction, to the counterparty at settlement. The NYMEX-related natural gas commodity price swaps are priced based on a Henry Hub, Louisiana delivery point. The Henry Hub price has historically had a high degree of correlation with the wellhead price received by the Company which has made such transactions effective natural gas price hedges. During December 1995, there was a loss of correlation between the prices paid under the natural gas commodity price swaps and the wellhead natural gas prices ultimately received for a portion of the Company's hedged natural gas production. This loss of correlation resulted in the recognition of a $6 million loss in 1995. F-20 53 At December 31, 1995, the Company had outstanding positions covering notional volumes of approximately 169 TBtu of natural gas for 1996 and 11 TBtu of natural gas for each of the years 1997 through 2005 and approximately 3.6 million barrels ("MMBbl"), 2.8 MMBbl, 2.8 MMBbl, 2.2 MMBbl, and .9 MMBbl of crude oil and condensate for the years 1996 through 2000, respectively. The fair value of the positions was a positive $16.0 million at December 31, 1995. The Company closed substantially all of its NYMEX-related natural gas commodity price swaps by entering into offsetting positions during the first quarter of 1996 resulting in a deferred net pre-tax loss of approximately $4 million that will be recognized during 1996, including a $21 million loss related to the first quarter of 1996. In 1995, the Company also issued options exercisable at one time by the counterparty on or before December 17, 1996, covering notional volumes of approximately 73 TBtu of natural gas for each of the years 1997 and 1998. The fair value of the option was a positive $8.3 million at December 31, 1995. Such options were embedded in NYMEX-related natural gas commodity price swaps designated as hedges. The following table summarizes the estimated fair value of financial instruments and related transactions for non-trading activities at December 31, 1995 and 1994:
1995 1994 ------------------------- ------------------------- CARRYING ESTIMATED CARRYING ESTIMATED AMOUNT FAIR VALUE(1) AMOUNT FAIR VALUE(1) -------- ------------- -------- ------------- (IN MILLIONS) (IN MILLIONS) Long-Term Debt(2)........................ $289.1 $ 294.0 $190.3 $ 185.7 Energy Commodity Price Swaps(3)(4)....... - - - (103.7) Related Fixed Price Sales Contract(3)(4)......................... - - - 170.8 Swap Agreements(4)....................... 62.8 58.8 - - NYMEX-Related Commodity Market Positions.............................. (5.1) 10.9 - 30.7
- --------------- (1) Estimated fair values have been determined by using available market data and valuation methodologies. Judgment is necessarily required in interpreting market data and the use of different market assumptions or estimation methodologies may affect the estimated fair value amounts. (2) See Note 4 "Long-Term Debt." (3) The fair value of the Energy Commodity Price Swaps should be considered with the fair value of the Related Fixed Price Sales Contract in determining the overall market risk of these related business transactions. (4) See Note 2 "Natural Gas and Crude Oil, Condensate and Natural Gas Liquids Net Operating Revenues". Credit Risk. While notional contract amounts are used to express the magnitude of price and interest rate swap agreements, the amounts potentially subject to credit risk, in the event of nonperformance by the other parties, are substantially smaller. The Company does not anticipate nonperformance by the other parties. 14. CONCENTRATION OF CREDIT RISK Substantially all of the Company's accounts receivable at December 31, 1995 and 1994 result from crude oil and natural gas sales and/or joint interest billings to affiliate and third party companies in the oil and gas industry. This concentration of customers and joint interest owners may impact the Company's overall credit risk, either positively or negatively, in that these entities may be similarly affected by changes in economic or other conditions. In determining whether or not to require collateral from a customer or joint interest owner, the Company analyzes the entity's net worth, cash flows, earnings, and credit ratings. Receivables are generally not collateralized. Historical credit losses incurred on receivables by the Company have been immaterial. F-21 54 15. OTHER In March 1995, the Financial Accounting Standards Board issued SFAS No. 121 - "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (the "Standard"). The Standard requires, among other things, that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company will adopt the Standard in the first quarter of 1996. The effect of adoption of the Standard is anticipated to result in a non-cash impairment charge of less than $5 million pre-tax. F-22 55 ENRON OIL & GAS COMPANY SUPPLEMENTAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS EXCEPT PER SHARE AMOUNTS UNLESS OTHERWISE INDICATED) (UNAUDITED EXCEPT FOR RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES) OIL AND GAS PRODUCING ACTIVITIES The following disclosures are made in accordance with SFAS No. 69 - "Disclosures about Oil and Gas Producing Activities": Oil and Gas Reserves. Users of this information should be aware that the process of estimating quantities of "proved" and "proved developed" crude oil and natural gas reserves is very complex, requiring significant subjective decisions in the evaluation of all available geological, engineering and economic data for each reservoir. The data for a given reservoir may also change substantially over time as a result of numerous factors including, but not limited to, additional development activity, evolving production history, and continual reassessment of the viability of production under varying economic conditions. Consequently, material revisions to existing reserve estimates occur from time to time. Although every reasonable effort is made to ensure that reserve estimates reported represent the most accurate assessments possible, the significance of the subjective decisions required and variances in available data for various reservoirs make these estimates generally less precise than other estimates presented in connection with financial statement disclosures. Proved reserves represent estimated quantities of crude oil, condensate, natural gas and natural gas liquids that geological and engineering data demonstrate, with reasonable certainty, to be recoverable in future years from known reservoirs under economic and operating conditions existing at the time the estimates were made. Proved developed reserves are proved reserves expected to be recovered, through wells and equipment in place and under operating methods being utilized at the time the estimates were made. Canadian provincial royalties are determined based on a graduated percentage scale which varies with prices and production volumes. Canadian reserves, as presented on a net basis, assume prices and royalty rates in existence at the time the estimates were made, and the Company's estimate of future production volumes. Future fluctuations in prices, production rates, or changes in political or regulatory environments could cause the Company's share of future production from Canadian reserves to be materially different from that presented. Estimates of proved and proved developed reserves at December 31, 1995, 1994 and 1993 were based on studies performed by the engineering staff of the Company for reserves in the United States, Canada, Trinidad and India. Opinions by DeGolyer and MacNaughton, independent petroleum consultants, for the years ended December 31, 1995, 1994 and 1993 covering producing areas containing 73%, 59% and 65%, respectively, of proved reserves of the Company on a net-equivalent-cubic-feet-of-gas basis, indicate that the estimates of proved reserves prepared by the Company's engineering staff for the properties reviewed by DeGolyer and MacNaughton, when compared in total on a net-equivalent-cubic-feet-of-gas basis, do not differ materially from the estimates prepared by DeGolyer and MacNaughton. Such estimates by DeGolyer and MacNaughton in the aggregate varied by not more than 5% from those prepared by the engineering staff of the Company. All reports by DeGolyer and MacNaughton were developed utilizing geological and engineering data provided by the Company. The presentation of estimated proved reserves has been restated to exclude, for each of the years presented, those quantities attributable to future deliveries required under a volumetric production payment. In order to calculate such amounts, the Company has assumed that deliveries under the volumetric production payment are made as scheduled at expected British thermal unit factors, and that delivery commitments are satisfied through delivery, as scheduled, of the related volumes. The Company has also presented, as additional information, proved reserves including quantities attributable to future deliveries required under the volumetric production payment. The Company believes that this information is informative to readers of its financial statements as the related oil and gas properties costs and deferred revenue are included in the Company's balance sheets for each of the years presented. This additional information is not required to be presented in accordance with SFAS No. 69; however, the Company believes this additional information is useful in assessing its reserve and financial position on a comprehensive basis. No major discovery or other favorable or adverse event subsequent to December 31, 1995 is believed to have caused a material change in the estimates of proved or proved developed reserves as of that date. F-23 56 The following table sets forth the Company's net proved and proved developed reserves at December 31 for each of the four years in the period ended December 31, 1995, and the changes in the net proved reserves for each of the three years in the period then ended as estimated by the engineering staff of the Company. NET PROVED AND PROVED DEVELOPED RESERVE SUMMARY
UNITED STATES CANADA TRINIDAD INDIA TOTAL ------------- ------ -------- ------ ------- Natural Gas (Bcf)(1) Net proved reserves at December 31, 1992.................................. 1,326.1 232.5 - - 1,558.6 Revisions of previous estimates....... (31.3) 11.0 - - (20.3) Purchases in place.................... 9.2 2.6 - - 11.8 Extensions, discoveries and other additions........................... 234.9 47.7 101.3 - 383.9 Sales in place........................ (13.7) (1.5) - - (15.2) Production............................ (212.0) (21.3) (.8) - (234.1) ------- ------ ------ ------ ------- Net proved reserves at December 31, 1993.................................. 1,313.2 271.0 100.5 - 1,684.7 Additional disclosures: Volumes attributable to volumetric production payment.................. 87.5 - - - 87.5 ------- ------ ------ ------ ------- Net proved reserves at December 31, 1993, including volumes attributable to volumetric production payment......... 1,400.7 271.0 100.5 - 1,772.2 ======= ====== ====== ====== ======= Net proved reserves at December 31, 1993.................................. 1,313.2 271.0 100.5 - 1,684.7 Revisions of previous estimates....... (17.1) (6.5) 15.0 - (8.6) Purchases in place.................... 18.8 9.2 - 29.3 57.3 Extensions, discoveries and other additions........................... 233.8 50.2 113.9 - 397.9 Sales in place........................ (29.3) (1.0) - - (30.3) Production............................ (212.0) (26.3) (23.2) - (261.5) ------- ------ ------ ------ ------- Net proved reserves at December 31, 1994.................................. 1,307.4 296.6 206.2 29.3 1,839.5 Additional disclosures: Volumes attributable to volumetric production payment.................. 70.9 - - - 70.9 ------- ------ ------ ------ ------- Net proved reserves at December 31, 1994, including volumes attributable to volumetric production payment......... 1,378.3 296.6 206.2 29.3 1,910.4 ======= ====== ====== ====== ======= Net proved reserves at December 31, 1994.................................. 1,307.4 296.6 206.2 29.3 1,839.5 Revisions of previous estimates....... 10.1 (8.1) 17.5 (29.3) (9.8) Purchases in place.................... 174.8 - - - 174.8 Extensions, discoveries and other additions........................... 1,391.6(2) 54.8 60.8 75.0 1,582.2 Sales in place........................ (38.1) (1.7) - - (39.8) Production............................ (191.7) (27.7) (39.0) - (258.4) ------- ------ ------ ------ ------- Net proved reserves at December 31, 1995.................................. 2,654.1(2) 313.9 245.5 75.0 3,288.5 Additional disclosures: Volumes attributable to volumetric production payment.................. 54.2 - - - 54.2 ------- ------ ------ ------ ------- Net proved reserves at December 31, 1995, including volumes attributable to volumetric production payment......... 2,708.3(2) 313.9 245.5 75.0 3,342.7 ======= ====== ====== ====== =======
(Table continued on following page) F-24 57
UNITED STATES CANADA TRINIDAD INDIA TOTAL ------------- ------ -------- ------ ------- Liquids (MBbl)(3)(4) Net proved reserves at December 31, 1992.................................. 13,865 5,358 - - 19,223 Revisions of previous estimates....... 1,490 (536) - - 954 Purchases in place.................... 15 489 - - 504 Extensions, discoveries and other additions........................... 3,552 1,115 2,251 - 6,918 Sales in place........................ (3,230) (23) - - (3,253) Production............................ (2,520) (932) (33) - (3,485) ------------- ------ -------- ------ ------- Net proved reserves at December 31, 1993.................................. 13,172 5,471 2,218 - 20,861 Revisions of previous estimates....... 2,179 (177) 455 - 2,457 Purchases in place.................... 358 - - 7,617 7,975 Extensions, discoveries and other additions........................... 5,332 2,848 2,687 - 10,867 Sales in place........................ (257) - - - (257) Production............................ (2,997) (905) (931) (32) (4,865) ------------- ------ -------- ------ ------- Net proved reserves at December 31, 1994.................................. 17,787 7,237 4,429 7,585 37,038 Revisions of previous estimates....... (413) (351) 396 4,874 4,506 Purchases in place.................... 4,264 - - - 4,264 Extensions, discoveries and other additions........................... 8,703 729 3,896 - 13,328 Sales in place........................ (1,241) (9) - - (1,250) Production............................ (3,701) (1,021) (1,851) (917) (7,490) ------------- ------ -------- ------ ------- Net proved reserves at December 31, 1995.................................. 25,399 6,585 6,870 11,542 50,396 ========== ====== ====== ====== ====== Net proved developed reserves at Natural Gas (Bcf) December 31, 1992................... 1,054.1 194.4 - - 1,248.5 December 31, 1993................... 1,079.8 250.6 71.4 - 1,401.8 December 31, 1994................... 1,128.2 288.3 206.2 - 1,622.7 December 31, 1995................... 1,218.1 310.1 233.9 - 1,762.1 Liquids (MBbl)(4) December 31, 1992................... 12,762 5,329 - - 18,091 December 31, 1993................... 11,165 5,409 1,591 - 18,165 December 31, 1994................... 16,770 7,073 4,429 7,585 35,857 December 31, 1995................... 19,977 6,505 5,607 11,542 43,631 Net proved developed reserves, including amounts attributable to volumetric production payment at Natural Gas (Bcf) December 31, 1992................... 1,168.4 194.4 - - 1,362.8 December 31, 1993................... 1,167.3 250.6 71.4 - 1,489.3 December 31, 1994................... 1,199.1 288.3 206.2 - 1,693.6 December 31, 1995................... 1,272.3 310.1 233.9 - 1,816.3
- --------------- (1) Billion cubic feet. (2) Includes 1,180.0 Bcf of proved undeveloped methane reserves contained, along with high concentrations of carbon dioxide and other gases in deep Wyoming Paleozoic formations in the Big Piney area of Wyoming. The Company is actively pursuing the consummation of a market or markets from several different potential sources to facilitate realizing the value of these reserves. (3) Thousand barrels. (4) Includes crude oil, condensate and natural gas liquids. F-25 58 Capitalized Costs Relating to Oil and Gas Producing Activities. The following table sets forth the capitalized costs relating to the Company's natural gas and crude oil producing activities at December 31, 1995 and 1994:
1995 1994 ----------- ----------- Proved Properties......................................... $ 3,253,593 $ 2,889,242 Unproved Properties....................................... 127,331 126,193 ----------- ----------- Total........................................... 3,380,924 3,015,435 Accumulated depreciation, depletion and amortization...... (1,499,379) (1,330,624) ----------- ----------- Net capitalized costs..................................... $ 1,881,545 $ 1,684,811 =========== ===========
Costs Incurred in Oil and Gas Property Acquisition, Exploration and Development Activities. The acquisition, exploration and development costs disclosed in the following tables are in accordance with definitions in SFAS No. 19 - "Financial Accounting and Reporting by Oil and Gas Producing Companies". Acquisition costs include costs incurred to purchase, lease, or otherwise acquire property. Exploration costs include exploration expenses, additions to exploration wells in progress, and depreciation of support equipment used in exploration activities. Development costs include additions to production facilities and equipment, additions to development wells in progress and related facilities, and depreciation of support equipment and related facilities used in development activities. F-26 59 The following tables set forth costs incurred related to the Company's oil and gas activities for the years ended December 31:
FOREIGN -------------------------------------- UNITED STATES CANADA TRINIDAD INDIA OTHER TOTAL ------------- ------- -------- ------- ------- -------- 1995 Acquisition Costs of Properties Unproved.................... $ 16,196 $ 4,645 $ - $ - $ 1,482 $ 22,323 Proved...................... 122,369 116 - 5,000 - 127,485 --------- ------- -------- ------- ------- -------- Total............... 138,565 4,761 - 5,000 1,482 149,808 Exploration Costs............. 47,463 7,197 374 (98) 17,948 72,884 Development Costs............. 217,674 28,611 32,692 16,756 577 296,310 --------- ------- -------- ------- ------- -------- Total............... $ 403,702 $40,569 $ 33,066 $21,658 $20,007 $519,002 ========= ======= ======== ======= ======= ======== 1994 Acquisition Costs of Properties Unproved.................... $ 45,776 $ 6,618 $ - $ - $ (17) $ 52,377 Proved...................... 17,367 4,523 - 12,300 - 34,190 --------- ------- -------- ------- ------- -------- Total............... 63,143 11,141 - 12,300 (17) 86,567 Exploration Costs............. 70,669 8,210 850 2,302 11,242 93,273 Development Costs............. 223,241 35,896 60,778 767 564 321,246 --------- ------- -------- ------- ------- -------- Total............... $ 357,053 $55,247 $ 61,628 $15,369 $11,789 $501,086 ========= ======= ======== ======= ======= ======== 1993 Acquisition Costs of Properties Unproved.................... $ 23,686 $ 4,556 $ - $ - $ 887 $ 29,129 Proved...................... 6,625 2,598 - - - 9,223 --------- ------- -------- ------- ------- -------- Total............... 30,311 7,154 - - 887 38,352 Exploration Costs............. 53,918 9,096 1,367 - 18,595 82,976 Development Costs............. 247,705 28,045 41,262 - - 317,012 --------- ------- -------- ------- ------- -------- Total............... $ 331,934 $44,295 $ 42,629 $ - $19,482 $438,340 ========= ======= ======== ======= ======= ========
F-27 60 Results of Operations for Oil and Gas Producing Activities(1). The following tables set forth results of operations for oil and gas producing activities for the years ended December 31:
FOREIGN --------------------------------------------- UNITED STATES CANADA TRINIDAD INDIA OTHER TOTAL ------------- ------- -------- ------- -------- -------- 1995 Operating Revenues Associated Companies..................... $ 223,652 $ 6,893 $ - $ - $ - $230,545 Trade.................................... 122,567 36,815 71,686 15,411 - 246,479 Gains on Sales of Reserves and Related Assets......................... 62,737 84 - - - 62,821 --------- ------- ------- ------- -------- -------- Total.............................. 408,956 43,792 71,686 15,411 - 539,845 Exploration Expenses, including Dry Hole... 35,298 3,839 374 (98) 15,542 54,955 Production Costs........................... 63,734 13,825 8,176 10,553 - 96,288 Impairment of Unproved Oil and Gas Properties............................... 21,981 1,734 - - - 23,715 Depreciation, Depletion and Amortization............................. 180,788 19,533 14,633 335 368 215,657 --------- ------- ------- ------- -------- -------- Income (Loss) before Income Taxes.......... 107,155 4,861 48,503 4,621 (15,910) 149,230 Income Tax Provision (Benefit)............. 1,226 1,133 26,677 2,311 (1,335) 30,012 --------- ------- ------- ------- -------- -------- Results of Operations...................... $ 105,929 $ 3,728 $21,826 $ 2,310 $(14,575) $119,218 ========= ======= ======= ======= ======== ======== 1994 Operating Revenues Associated Companies..................... $ 315,866 $ 8,452 $ - $ - $ - $324,318 Trade.................................... 115,375 42,017 35,908 509 - 193,809 Gains on Sales of Reserves and Related Assets......................... 54,026 (12) - - - 54,014 --------- ------- ------- ------- -------- -------- Total.............................. 485,267 50,457 35,908 509 - 572,141 Exploration Expenses, including Dry Hole... 42,242 4,503 836 2,302 9,125 59,008 Production Costs........................... 68,998 12,776 5,083 26 - 86,883 Impairment of Unproved Oil and Gas Properties............................... 23,862 1,074 - - - 24,936 Depreciation, Depletion and Amortization............................. 218,433 16,572 6,572 - 281 241,858 --------- ------- ------- ------- -------- -------- Income (Loss) before Income Taxes.......... 131,732 15,532 23,417 (1,819) (9,406) 159,456 Income Tax Provision (Benefit)............. (8,617) 6,175 12,804 (910) (2,873) 6,579 --------- ------- ------- ------- -------- -------- Results of Operations...................... $ 140,349 $ 9,357 $10,613 $ (909) $ (6,533) $152,877 ========= ======= ======= ======= ======== ======== 1993 Operating Revenues Associated Companies..................... $ 369,824 $ 9,637 $ - $ - $ - $379,461 Trade.................................... 140,552 33,228 1,209 - - 174,989 Gains on Sales of Reserves and Related Assets......................... 13,724 (406) - - - 13,318 --------- ------- ------- ------- -------- -------- Total.............................. 524,100 42,459 1,209 - - 567,768 Exploration Expenses, including Dry Hole... 35,029 6,657 1,367 - 12,223 55,276 Production Costs........................... 75,767 14,063 1,496 - - 91,326 Impairment of Unproved Oil and Gas Properties............................... 19,499 968 - - - 20,467 Depreciation, Depletion and Amortization............................. 234,292 14,630 387 - 154 249,463 --------- ------- ------- ------- -------- -------- Income (Loss) before Income Taxes.......... 159,513 6,141 (2,041) - (12,377) 151,236 Income Tax Provision (Benefit)............. (15,525) 2,265 (1,020) - (1,742) (16,022) --------- ------- ------- ------- -------- -------- Results of Operations...................... $ 175,038 $ 3,876 $(1,021) $ - $(10,635) $167,258 ========= ======= ======= ======= ======== ========
- --------------- (1) Excludes net revenues associated with other marketing activities, interest charges, general corporate expenses and certain gathering and handling fees for each of the three years in the period ended December 31, 1995. The gathering and handling fees and other marketing net revenues are directly associated with oil and gas operations with regard to segment reporting as defined in SFAS No. 14 - "Financial Reporting for Segments of a Business Enterprise", but are not part of Disclosures about Oil and Gas Producing Activities as defined in SFAS No. 69. F-28 61 Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves. The following information has been developed utilizing procedures prescribed by SFAS No. 69 and based on crude oil and natural gas reserve and production volumes estimated by the engineering staff of the Company. It may be useful for certain comparison purposes, but should not be solely relied upon in evaluating the Company or its performance. Further, information contained in the following table should not be considered as representative of realistic assessments of future cash flows, nor should the Standardized Measure of Discounted Future Net Cash Flows be viewed as representative of the current value of the Company. The future cash flows presented below are based on sales prices, cost rates, and statutory income tax rates in existence as of the date of the projections. It is expected that material revisions to some estimates of crude oil and natural gas reserves may occur in the future, development and production of the reserves may occur in periods other than those assumed, and actual prices realized and costs incurred may vary significantly from those used. Management does not rely upon the following information in making investment and operating decisions. Such decisions are based upon a wide range of factors, including estimates of probable as well as proved reserves, and varying price and cost assumptions considered more representative of a range of possible economic conditions that may be anticipated. The presentation of the standardized measure of discounted future net cash flows and changes therein has been restated to exclude, for each of the years presented, amounts attributable to future deliveries required under a volumetric production payment at the equivalent wellhead value. In order to calculate such amounts, the Company has assumed that deliveries under the volumetric production payment are made as scheduled and that production costs corresponding to the volumes delivered are incurred by the Company at average rates for the properties subject to the production payment. This restatement was made following discussions with the Staff of the Securities and Exchange Commission. The Company has also presented, as additional information, the standardized measure of discounted future net cash flows and changes therein including amounts attributable to future deliveries required under the volumetric production payment. The Company believes that this information is informative to readers of its financial statements because the related oil and gas properties costs and deferred revenue are shown in the Company's balance sheets for each of the years presented. This additional information is not required to be presented in accordance with SFAS No. 69; however, the Company believes this additional information is useful in assessing its reserve and financial position on a comprehensive basis. F-29 62 The following table sets forth the standardized measure of discounted future net cash flows from projected production of the Company's crude oil and natural gas reserves at December 31, for the years ended December 31:
UNITED STATES CANADA TRINIDAD INDIA TOTAL ----------- --------- --------- --------- ----------- 1995 Future cash inflows(1)............................... $ 3,996,029 $ 502,803 $ 395,328 $ 396,130 $ 5,290,290 Future production costs.............................. (747,064) (203,906) (152,287) (202,410) (1,305,667) Future development costs............................. (297,859) (7,153) (3,610) (13,500) (322,122) ----------- --------- --------- --------- ----------- Future net cash flows before income taxes............ 2,951,106 291,744 239,431 180,220 3,662,501 Future income taxes.................................. (695,843) (46,310) (105,188) (81,349) (928,690) ----------- --------- --------- --------- ----------- Future net cash flows................................ 2,255,263 245,434 134,243 98,871 2,733,811 Discount to present value at 10% annual rate......... (1,015,123) (68,861) (19,217) (45,470) (1,148,671) ----------- --------- --------- --------- ----------- Standardized measure of discounted future net cash flows relating to proved oil and gas reserves...... 1,240,140 176,573 115,026 53,401 1,585,140 Additional disclosures: Amounts attributable to volumetric production payment.......................................... 35,957 - - - 35,957 ----------- --------- --------- --------- ----------- Total discounted future net revenues, including amounts attributable to volumetric production payment.......................................... $ 1,276,097 $ 176,573 $ 115,026 $ 53,401 $ 1,621,097 =========== ========= ========= ========= =========== 1994 Future cash inflows(1)............................... $ 2,315,215 $ 487,050 $ 317,758 $ 168,370 $ 3,288,393 Future production costs.............................. (606,932) (196,275) (87,479) (105,840) (996,526) Future development costs............................. (135,768) (9,596) (1,781) (4,500) (151,645) ----------- --------- --------- --------- ----------- Future net cash flows before income taxes............ 1,572,515 281,179 228,498 58,030 2,140,222 Future income taxes.................................. (208,163) (57,220) (102,171) (22,482) (390,036) ----------- --------- --------- --------- ----------- Future net cash flows................................ 1,364,352 223,959 126,327 35,548 1,750,186 Discount to present value at 10% annual rate......... (401,547) (67,018) (22,897) (14,730) (506,192) ----------- --------- --------- --------- ----------- Standardized measure of discounted future net cash flows relating to proved oil and gas reserves...... 962,805 156,941 103,430 20,818 1,243,994 Additional disclosures: Amounts attributable to volumetric production payment.......................................... 60,269 - - - 60,269 ----------- --------- --------- --------- ----------- Total discounted future net revenues, including amounts attributable to volumetric production payment.......................................... $ 1,023,074 $ 156,941 $ 103,430 $ 20,818 $ 1,304,263 =========== ========= ========= ========= =========== 1993 Future cash inflows(1)............................... $ 3,154,790 $ 592,845 $ 147,542 $ - $ 3,895,177 Future production costs.............................. (639,760) (230,230) (45,385) - (915,375) Future development costs............................. (165,473) (21,001) (7,582) - (194,056) ----------- --------- --------- --------- ----------- Future net cash flows before income taxes............ 2,349,557 341,614 94,575 - 2,785,746 Future income taxes.................................. (487,017) (91,718) (35,477) - (614,212) ----------- --------- --------- --------- ----------- Future net cash flows................................ 1,862,540 249,896 59,098 - 2,171,534 Discount to present value at 10% annual rate......... (600,172) (90,125) (9,519) - (699,816) ----------- --------- --------- --------- ----------- Standardized measure of discounted future net cash flows relating to proved oil and gas reserves...... 1,262,368 159,771 49,579 - 1,471,718 Additional disclosures: Amounts attributable to volumetric production payment.......................................... 105,323 - - - 105,323 ----------- --------- --------- --------- ----------- Total discounted future net revenues, including amounts attributable to volumetric production payment.......................................... $ 1,367,691 $ 159,771 $ 49,579 $ - $ 1,577,041 =========== ========= ========= ========= ===========
- --------------- (1) Based on year end market prices determined at the point of delivery from the producing unit. F-30 63 Changes in Standardized Measure of Discounted Future Net Cash Flows. The following table sets forth the changes in the standardized measure of discounted future net cash flows at December 31, for each of the three years in the period ended December 31, 1995.
UNITED STATES CANADA TRINIDAD INDIA TOTAL ----------- -------- -------- -------- ---------- Standardized measure of discounted future net cash flows relating to proved oil and gas reserves at December 31, 1992.................................................... $ 1,183,692 $125,419 $ - $ - $1,309,111 Additional disclosures: Amounts attributable to volumetric production payment... 127,724 - - - 127,724 ----------- -------- -------- -------- ---------- Total discounted future net revenues relating to proved oil and gas reserves, including amounts attributable to volumetric production payment, at December 31, 1992.................................................. $ 1,311,416 $125,419 $ - $ - $1,436,835 =========== ======== ======== ======== ========== Standardized measure of discounted future net cash flows relating to proved oil and gas reserves at December 31, 1992.................................................... $ 1,183,692 $125,419 $ - $ - $1,309,111 Sales and transfers of oil and gas produced, net of production costs...................................... (388,251) (28,802) 287 - (416,766) Net changes in prices and production costs.............. 158,102 28,400 - - 186,502 Extensions, discoveries, additions and improved recovery net of related costs.................................. 275,722 27,785 74,191 - 377,698 Development costs incurred.............................. 58,500 13,900 - - 72,400 Revisions of estimated development costs................ 32,196 (1,345) - - 30,851 Revisions of previous quantity estimates................ (26,118) 5,668 - - (20,450) Accretion of discount................................... 128,461 15,348 - - 143,809 Net change in income taxes.............................. (76,755) (9,795) (24,899) - (111,449) Purchases of reserves in place.......................... 9,462 2,707 - - 12,169 Sales of reserves in place.............................. (36,919) (1,140) - - (38,059) Changes in timing and other............................. (55,724) (18,374) - - (74,098) ----------- -------- -------- -------- ---------- Standardized measure of discounted future net cash flows relating to proved oil and gas reserves at December 31, 1993.................................................... 1,262,368 159,771 49,579 - 1,471,718 Additional disclosures: Amounts attributable to volumetric production payment... 105,323 - - - 105,323 ----------- -------- -------- -------- ---------- Total discounted future net revenues relating to proved oil and gas reserves, including amounts attributable to volumetric production payment, at December 31, 1993.................................................. $ 1,367,691 $159,771 $ 49,579 $ - $1,577,041 =========== ======== ======== ======== ========== Standardized measure of discounted future net cash flows relating to proved oil and gas reserves at December 31, 1993.................................................... $ 1,262,368 $159,771 $ 49,579 $ - $1,471,718 Sales and transfers of oil and gas produced, net of production costs...................................... (339,809) (37,693) (30,825) (483) (408,810) Net changes in prices and production costs.............. (506,273) (65,287) 11,002 - (560,558) Extensions, discoveries, additions and improved recovery net of related costs.................................. 225,366 51,006 96,515 - 372,887 Development costs incurred.............................. 69,900 6,700 7,582 - 84,182 Revisions of estimated development costs................ 6,792 5,931 - - 12,723 Revisions of previous quantity estimates................ (2,909) (3,407) 14,077 - 7,761 Accretion of discount................................... 145,119 19,762 7,448 - 172,329 Net change in income taxes.............................. 167,983 19,966 (45,789) (7,752) 134,408 Purchases of reserves in place.......................... 16,651 3,404 - 29,053 49,108 Sales of reserves in place.............................. (27,980) (461) - - (28,441) Changes in timing and other............................. (54,403) (2,751) (6,159) - (63,313) ----------- -------- -------- -------- ---------- Standardized measure of discounted future net cash flows relating to proved oil and gas reserves at December 31, 1994.................................................... 962,805 156,941 103,430 20,818 1,243,994 Additional disclosures: Amounts attributable to volumetric production payments.............................................. 60,269 - - - 60,269 ----------- -------- -------- -------- ---------- Total discounted future net revenues relating to proved oil and gas reserves, including amounts attributable to volumetric production payment, at December 31, 1994.................................................. $ 1,023,074 $156,941 $103,430 $ 20,818 $1,304,263 =========== ======== ======== ======== ==========
(Table continued on following page) F-31 64
UNITED STATES CANADA TRINIDAD INDIA TOTAL ---------- -------- -------- ----- ---------- Standardized measure of discounted future net cash flows relating to proved oil and gas reserves at December 31, 1994.................................................... $ 962,805 $156,941 $103,430 $ 20,818 $1,243,994 Sales and transfers of oil and gas produced, net of production costs...................................... (268,463) (29,883) (63,510) (4,858) (366,714) Net changes in prices and production costs.............. 12,079 (5,698) (37,035) 7,857 (22,797) Extensions, discoveries, additions and improved recovery net of related costs.................................. 376,474(1) 38,028 53,674 46,180 514,356 Development costs incurred.............................. 29,100 2,600 1,800 - 33,500 Revisions of estimated development costs................ 920 139 28,771 4,500 34,330 Revisions of previous quantity estimates................ 5,694 (5,217) 10,142 (29) 10,590 Accretion of discount................................... 97,248 17,483 17,412 2,857 135,000 Net change in income taxes.............................. (132,614) 10,592 (8,048) (28,127) (158,197) Purchases of reserves in place.......................... 193,711 - - - 193,711 Sales of reserves in place.............................. (54,441) (569) - - (55,010) Changes in timing and other............................. 17,627 (7,843) 8,390 4,203 22,377 ----------- -------- -------- -------- ---------- Standardized measure of discounted future net cash flows relating to proved oil and gas reserves at December 31, 1995.................................................... 1,240,140 176,573 115,026 53,401 1,585,140 Additional disclosures: Amounts attributable to volumetric production payment... 35,957 - - - 35,957 ----------- -------- -------- -------- ---------- Total discounted future net revenues relating to proved oil and gas reserves, including amounts attributable to volumetric production payment, at December 31, 1995.................................................. $ 1,276,097 $176,573 $115,026 $ 53,401 $1,621,097 =========== ======== ======== ======== ==========
- --------------- (1) Includes approximately $77 million related to the reserves in the Big Piney deep Paleozoic formations. F-32 65 UNAUDITED QUARTERLY FINANCIAL INFORMATION
QUARTER ENDED ----------------------------------------------- MARCH 31 JUNE 30 SEPT. 30 DEC. 31 -------- -------- -------- -------- 1995 Net Operating Revenues................... $155,362 $183,974 $153,006 $156,360 ======== ======== ======== ======== Operating Income......................... $ 42,829 $ 73,374 $ 37,925 $ 41,181 ======== ======== ======== ======== Income before Income Taxes............... $ 39,500 $ 71,331 $ 33,344 $ 39,879 Income Tax Provision..................... 9,875 23,193 376 8,492 -------- -------- -------- -------- Net Income............................... $ 29,625 $ 48,138 $ 32,968 $ 31,387 ======== ======== ======== ======== Earnings per Share of Common Stock....... $ .19 $ .30 $ .21 $ .20 ======== ======== ======== ======== Average Number of Common Shares.......... 159,972 159,965 159,916 159,817 ======== ======== ======== ======== 1994 Net Operating Revenues................... $158,208 $155,449 $160,683 $151,483 ======== ======== ======== ======== Operating Income......................... $ 38,938 $ 39,081 $ 52,020 $ 29,602 ======== ======== ======== ======== Income before Income Taxes............... $ 39,088 $ 36,581 $ 50,497 $ 27,769 Income Tax Provision (Benefit)........... 8,830 2,369 9,529 (14,791) -------- -------- -------- -------- Net Income............................... $ 30,258 $ 34,212 $ 40,968 $ 42,560 ======== ======== ======== ======== Earnings per Share of Common Stock....... $ .19 $ .21 $ .26 $ .27 ======== ======== ======== ======== Average Number of Common Shares.......... 159,840 159,859 159,777 159,902 ======== ======== ======== ======== 1993 Net Operating Revenues................... $136,834 $140,486 $152,647 $151,053 ======== ======== ======== ======== Operating Income......................... $ 29,633 $ 31,517 $ 38,451 $ 15,958 ======== ======== ======== ======== Income before Income Taxes............... $ 28,955 $ 29,598 $ 37,168 $ 16,552 Income Tax Provision (Benefit)........... (1,253) (3,923) 1,412 (21,988) -------- -------- -------- -------- Net Income............................... $ 30,208 $ 33,521 $ 35,756 $ 38,540 ======== ======== ======== ======== Earnings per Share of Common Stock....... $ .19 $ .21 $ .22 $ .24 ======== ======== ======== ======== Average Number of Common Shares.......... 160,000 160,000 160,000 159,865 ======== ======== ======== ========
F-33 66 SCHEDULE II ENRON OIL & GAS COMPANY SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (IN THOUSANDS)
========================================================================================================== COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ---------------------------------------------------------------------------------------------------------- ADDITIONS DEDUCTIONS FOR BALANCE AT CHARGED TO PURPOSE FOR BALANCE AT BEGINNING OF COSTS AND WHICH RESERVES END OF DESCRIPTION YEAR EXPENSES WERE CREATED YEAR - ---------------------------------------------------------------------------------------------------------- 1995 Reserves deducted from assets to which they apply - Revaluation of Accounts Receivable....... $1,022 $1,549 $ - $2,571 ====== ====== ====== ====== Litigation Reserve(a)...................... $2,000 $ (379)(b) $1,621 $ - ====== ====== ====== ====== 1994 Reserves deducted from assets to which they apply - Revaluation of Accounts Receivable....... $1,020 $ 2 $ - $1,022 ====== ====== ====== ====== Litigation Reserve(a)...................... $2,000 $3,143 $3,143 $2,000 ====== ====== ====== ====== 1993 Reserves deducted from assets to which they apply - Revaluation of Accounts Receivable....... $ - $1,020 $ - $1,020 ====== ====== ====== ====== Litigation Reserve(a)...................... $2,030 $2,520 $2,550 $2,000 ====== ====== ====== ======
- --------------- (a) Included in Other Liabilities in the consolidated balance sheets. (b) Includes reversal of prior year provision in excess of requirement. S-1 67 EXHIBITS Exhibits not incorporated herein by reference to a prior filing are designated by an asterisk (*) and are filed herewith; all exhibits not so designated are incorporated herein by reference to the Company's Form S-1 Registration Statement, Registration No. 33-30678, filed on August 24, 1989 ("Form S-1"), or as otherwise indicated. 3.1(a) - Restated Certificate of Incorporation of Enron Oil & Gas Company (Exhibit 3.1 to Form S-1). 3.1(b) - Certificate of Amendment of Restated Certificate of Incorporation of Enron Oil & Gas Company (Exhibit 4.1(b) to Form S-8 Registration Statement, Registration No. 33-52201, filed on February 8, 1994). 3.1(c) - Certificate of Amendment of Restated Certificate of Incorporation of Enron Oil & Gas Company (Exhibit 4.1(c) to Form S-8 Registration Statement, Registration No. 33-58103, filed on March 15, 1995). 3.2* - By-laws of Enron Oil & Gas Company dated August 23, 1989, as amended December 12, 1990, February 8, 1994 and January 19, 1996. 3.3 - Specimen of Certificate evidencing the Common Stock (Exhibit 3.3 to Form S-1). 4.1 - Promissory Note due May 1, 1996, dated May 1, 1991 (Exhibit 4.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1991). 4.3 - Amended and Restated Enron Oil & Gas Company 1994 Stock Plan (Exhibit 4.3 to Form S-8 Registration Statement, Registration No. 33-58103, filed on March 15, 1995). 4.3(a)* - Amendment to Amended and Restated Enron Oil & Gas Company 1994 Stock Plan, dated effective as of December 12, 1995. 10.1 - Services Agreement, dated as of January 1, 1994, between Enron Oil & Gas Company and Enron Corp. (Exhibit 10.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.2 - Stock Restriction and Registration Agreement dated as of August 23, 1989 (Exhibit 10.2 to Form S-1). 10.3* - 1995 Tax Allocation Agreement, entered into effective as of December 14, 1995, between Enron Corp., Enron Oil & Gas Company, and the subsidiaries of Enron Oil & Gas Company listed therein as additional parties. 10.4 - Enron Corp. Deferral Plan dated December 10, 1985 (Exhibit 10.12 to Form S-1). 10.5 - Enron Corp. 1988 Stock Plan (Exhibit 10.13 to Form S-1). 10.7 - Enron Corp. 1984 Stock Option Plan (Exhibit 10.15 to Form S-1). 10.8 - Enron Corp. 1986 Stock Option Plan (Exhibit 10.16 to Form S-1). 10.9(a) - Employment Agreement between Enron Oil & Gas Company and Forrest Hoglund, dated as of September 1, 1987, as amended (Exhibit 10.19 to Form S-1), and Second and Third Amendments to Employment Agreement dated June 30, 1989 and February 14, 1992, respectively (Exhibit 10.10 to Form S-1 Registration Statement, Registration No. 33-50462, filed on August 5, 1992). 10.9(b) - 4th Amendment to Employment Agreement dated December 14, 1994, among Enron Corp., Enron Oil & Gas Company and Forrest Hoglund (Exhibit 10.9(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.10 - Fuel Supply Contract, dated as of June 30, 1986, by and between Enron Oil & Gas Company, HNG Oil Company, BelNorth Petroleum Corporation and Enron Cogeneration One Company, as amended (Exhibit 10.23 to Form S-1).
E-1 68 10.11 - Gas Sales Contract dated September 2, 1987 between Enron Oil & Gas Company and Cogenron Inc., as amended (Exhibit 10.24 to Form S-1). 10.12 - Letter Agreement dated August 20, 1987 between Enron Oil & Gas Company and Panhandle Gas Company (Exhibit 10.25 to Form S-1). 10.13 - Pension Program for Enron Corp. Deferral Plan Participants, effective January 1, 1985, as amended (Exhibit 10.29 to Form S-1). 10.14 - Enron Oil & Gas Company 1993 Non-employee Director Stock Option Plan (Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992). 10.15(a) - Credit Agreement, dated as of March 11, 1994, among Enron Oil & Gas Company, the Banks named therein and Texas Commerce Bank, National Association, as Administrative Agent and Promissory Note due January 15, 1998, dated March 11, 1994 to the order of Texas Commerce Bank National Association, Promissory Note due January 15, 1998, dated March 11, 1994 to the order of The Bank of New York, Promissory Note due January 15, 1998, dated March 11, 1994 to the order of The Bank of Nova Scotia, Promissory Note due January 15, 1998, dated March 11, 1994 to the order of Credit Lyonnais Cayman Islands Branch, Promissory Note due January 15, 1998, dated March 11, 1994 to the order of Credit Suisse, Promissory Note due January 15, 1998, dated March 11, 1994 to the order of The First National Bank of Chicago, and Promissory Note due January 15, 1998, dated March 11, 1994 to the order of Bank of America National Trust and Savings Association (Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.15(b) - Assignment and Acceptance dated April 14, 1994, between Texas Commerce Bank National Association and Royal Bank of Canada and Promissory Note due January 15, 1998, dated April 14, 1994, to the order of Texas Commerce Bank National Association and Promissory Note due January 15, 1998, dated April 14, 1994, to the order of Royal Bank of Canada (Exhibit 10.15(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.16 - Interest Rate and Currency Exchange Agreement, dated as of June 1, 1991, between Enron Risk Management Services Corp. and Enron Oil & Gas Marketing, Inc. (Exhibit 10.17 to the Company's Annual Report on Form 10-K for the year ended December 31, 1991), Confirmation dated June 14, 1992 (Exhibit 10.17 to Form S-1 Registration Statement, Registration No. 33-50462, filed on August 5, 1992) and Confirmations dated March 25, 1991, April 25, 1991, and September 23, 1992 (assigned to Enron Risk Management Services Corp. by Enron Finance Corp. pursuant to an Assignment and Assumption Agreement, dated as of November 1, 1993, by and between Enron Finance Corp., Enron Risk Management Services Corp. and Enron Oil & Gas Marketing, Inc.). (Exhibit 10.16 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.17 - Assignment and Assumption Agreement, dated as of November 1, 1993, by and between Enron Oil & Gas Marketing, Inc., Enron Oil & Gas Company and Enron Risk Management Services Corp. (Exhibit 10.17 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.18 - ISDA Master Agreement, dated as of November 1, 1993, between Enron Oil & Gas Company and Enron Risk Management Services Corp., and Confirmation Nos. 1268.0, 1286.0, 1291.0, 1292.0, 1304.0, 1305.0, 1321.0, 1335.0, 1338.0, 1370.0, 1471.0, 1485.0, 1486.0, 1494.0, 1495.0, 1509.0, 1514.0, 1533.01, 1569.0, 1986.0, 2217.0, 2227.0, 2278.0, 2299.0, 2372.0, 2647.0 (Exhibit 10.18 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993).
E-2 69 10.19 - Letter Agreement between Colorado Interstate Gas Company and Enron Oil & Gas Marketing, Inc. dated November 1, 1990 (Exhibit 10.18 to the Company's Annual Report on Form 10-K for the year ended December 31, 1990). 10.22 - Gas Sales Agreement between Enron Gas Marketing, Inc. and Enron Oil & Gas Marketing, Inc. dated August 22, 1989 (Exhibit 10.38 to Form S-1). 10.23 - Gas Purchase Agreement between Enron Oil & Gas Company and Enron Oil & Gas Marketing, Inc. dated August 22, 1989 (Exhibit 10.41 to Form S-1). 10.24 - Gas Purchase Agreement between Enron Oil & Gas Company and Enron Oil & Gas Marketing, Inc. dated August 22, 1989 (Exhibit 10.42 to Form S-1). 10.25 - Enron Corp. 1991 Stock Plan (Exhibit 10.08 to Enron Corp. Annual Report on Form 10-K for the year ended December 31, 1991). 10.26 - Enron Corp. 1988 Deferral Plan (Exhibit 10.49 to Form S-1). 10.27 - Form of Enron Corp. Long-Term Incentive Plan Effective as of January 1, 1987 (Exhibit 10.50 to Form S-1). 10.28 - Enron Executive Supplemental Survivor Benefits Plan Effective January 1, 1987 (Exhibit 10.51 to Form S-1). 10.29 - 1988 FlexPerq Program Summary (Exhibit 10.52 to Form S-1). 10.30* - Credit Agreement between Enron Corp. and Enron Oil & Gas Company dated September 29, 1995. 10.31* - Credit Agreement between Enron Oil & Gas Company and Enron Corp. dated September 29, 1995. 10.33 - Swap Agreement between Banque Paribas and Enron Oil & Gas Company, dated as of December 5, 1990 (Exhibit 10.37 to the Company's Annual Report on Form 10-K for the year ended December 31, 1990), and Confirmations dated March 25, 1991 and April 25, 1991 (Exhibit 10.37 to Form S-1 Registration Statement, Registration No. 33-50462, filed on August 5, 1992). 10.34 - Enron Oil & Gas Company 1992 Stock Plan (As Amended and Restated effective December 14, 1994) (incorporated by reference to Exhibit A to the Company's Proxy Statement, dated March 27, 1995, with respect to the Company's 1995 Annual Meeting of Shareholders). 10.35 - Enron Corp. 1992 Deferral Plan (Exhibit 10.41 to the Company's Annual Report on Form 10-K for the year ended December 31, 1991). 10.36(a) - Conveyance of Production Payment, dated September 25, 1992, between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.34 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992). 10.36(b) - First Amendment to Conveyance of Production Payment, dated effective April 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.36(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.36(c) - Second Amendment to Conveyance of Production Payment, dated effective July 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.36(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.36(d) - Third Amendment to Conveyance of Production Payment, dated effective October 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.36(d) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993).
E-3 70 10.37(a) - Hydrocarbon Exchange Agreement dated September 25, 1992, between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.35 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992). 10.37(b) - Amendment to Hydrocarbon Exchange Agreement dated effective as of January 1, 1993, between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.37(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.37(c) - First Amendment to Hydrocarbon Exchange Agreement dated effective as of April 1, 1993, between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.37(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.37(d) - Second Amendment to Hydrocarbon Exchange Agreement dated effective as of July 1, 1993, between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.37(d) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.37(e) - Amendment to Hydrocarbon Exchange Agreement dated effective as of August 1, 1993, between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.37(e) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.37(f) - Fourth Amendment to Hydrocarbon Exchange Agreement, dated effective October 1, 1993, between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.37 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.38 - Purchase and Sale Agreement, dated September 25, 1992, between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.36 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992). 10.39(a) - Production and Delivery Agreement, dated September 25, 1992, between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.37 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992). 10.39(b) - First Amendment to Production and Delivery Agreement, dated effective April 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.39(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.39(c) - Second Amendment to Production and Delivery Agreement, dated effective July 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.39(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.39(d) - Third Amendment to Production and Delivery Agreement, dated effective October 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.39(d) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.40 - Credit Agreement, dated as of March 8, 1994 between Enron Gas & Oil Trinidad Limited and Caribbean Regional Development Investment Trust, and Request for Advance No. 1, dated March 4, 1993, and Request for Advance No. 2, dated March 4, 1993 (Exhibit 10.40 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993).
E-4 71 10.41 - Promissory Note due May 1, 1998, dated as of March 8, 1994, to the order of Caribbean Regional Development Investment Trust (Exhibit 10.41 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.42 - Promissory Note due May 1, 1998, dated as of March 8, 1994 to the order of Caribbean Regional Development Investment Trust (Exhibit 10.42 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.43 - Letter of Credit and Reimbursement Agreement, dated March 8, 1994, between Enron Gas & Oil Trinidad Limited and Credit Suisse (Exhibit 10.43 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.44 - Parent Guaranty, dated March 8, 1994 between Enron Oil & Gas Company and Credit Suisse (Exhibit 10.44 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.45(a) - Letter Loan Agreement dated as of May 27, 1994, between Enron Gas & Oil Trinidad Limited and The Bank of Nova Scotia (Exhibit 10.45(a) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.45(b) - Promissory Note due May 27, 1999, dated as of May 31, 1994, to the order of The Bank of Nova Scotia (Exhibit 10.45(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.45(c) - Promissory Note due May 27, 1999, dated as of January 10, 1995, to the order of The Bank of Nova Scotia (Exhibit 10.45(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.46 - Guaranty dated as of May 27, 1994, between Enron Oil & Gas Company and The Bank of Nova Scotia (Exhibit 10.46 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.47 - Attorney Opinion Letter of Enron Oil & Gas International, Inc. dated December 18, 1994 (Panna and Mukta Fields) (Exhibit 10.47 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.48 - Certificate of Enron Oil & Gas India Ltd. dated December 22, 1994 (Panna and Mukta Fields) (Exhibit 10.48 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.49 - Financial and Performance Guarantee of Enron Oil & Gas International, Inc. dated December 22, 1994 (Panna and Mukta Fields) (Exhibit 10.49 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.50 - Joint Operating Agreement effective as of December 22, 1994, among Oil & Natural Gas Corporation Limited, Enron Oil & Gas India Ltd. and Reliance Industries Limited for contract area identified as Panna and Mukta Fields (Appendices B-1 and B-2 have been intentionally omitted. The Company hereby agrees to furnish a copy of either appendix to the Commission upon request) (Exhibit 10.50 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.51 - Production Sharing Contract dated as of December 22, 1994, among The Government of India, Oil & Natural Gas Corporation Limited, Reliance Industries Limited and Enron Oil & Gas India Ltd., for contract area identified as Panna and Mukta Fields [Appendices B-1 and B-2 and Appendix G (Figures G-1, VIIA-1 to 10, VIIB-1 to 20 and VIII-3) have all been intentionally omitted. The Company hereby agrees to furnish a copy of any such appendix and/or figure to the Commission upon request] (Exhibit 10.51 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994).
E-5 72 10.52 - Attorney Opinion Letter of Enron Oil & Gas International, Inc. dated December 18, 1994 (Tapti Fields) (Exhibit 10.52 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.53 - Certificate of Enron Oil & Gas India Ltd. dated December 22, 1994 (Tapti Fields) (Exhibit 10.53 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.54 - Financial and Performance Guarantee of Enron Oil & Gas International, Inc. dated December 22, 1994 (Tapti Fields) (Exhibit 10.54 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.55 - Joint Operating Agreement effective as of December 22, 1994, among Oil & Natural Gas Corporation Limited, Enron Oil & Gas India Ltd. and Reliance Industries Limited, for contract area identified as Mid-Tapti and South-Tapti Gas Fields [Appendix B (Figure B-1) has been intentionally omitted. The Company hereby agrees to furnish a copy of such appendix to the Commission upon request] (Exhibit 10.55 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.56 - Production Sharing Contract dated as of December 22, 1994, among The Government of India, Oil & Natural Gas Corporation Limited, Reliance Industries Limited and Enron Oil & Gas India Ltd., for contract area identified as Mid and South Tapti Field [Appendix B, Appendix G (Figures G-1, VII-1 to 11, VIII-2 to 4 and Appendix 3) have all been intentionally omitted. The Company hereby agrees to furnish a copy of any such appendix, to the Commission upon request] (Exhibit 10.56 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.57(a)* - Letter Agreement relating to Natural Gas Swap Transactions, dated March 31, 1995, among Enron Oil & Gas Company, Enron Corp. and Enron Capital & Trade Resources Corp. 10.57(b)* - Amendment to Natural Gas Swap Transactions Letter Agreement, dated March 31, 1995, among Enron Oil & Gas Company, Enron Corp. and Enron Capital & Trade Resources Corp. 10.58* - Confirmation Letter (revised due to adjustments to the attached Payment Schedule), dated March 31, 1995, between Enron Oil & Gas Company and Enron Capital & Trade Resources Corp. (ECT Transaction Reference No. 15198.00). 10.59* - Confirmation Letter (revised due to Price Change for 1998 and adjustment to the attached Payment Schedule), dated March 31, 1995, between Enron Oil & Gas Company and Enron Capital & Trade Resources Corp. (ECT Transaction Reference No. 15198.01). 10.60* - Letter Agreement relating to swap transaction payments, dated February 1995, between Enron Oil & Gas Company and Enron Capital & Trade Resources Corp. 10.64* - Credit Agreement, dated as of January 16, 1996, among EOG Company of Canada, as the Borrower, and the Banks named therein and Texas Commerce Bank National Association, as Administrative Agent, and Promissory Note due January 17, 2001, dated January 16, 1996, to the order of Texas Commerce Bank National Association, Promissory Note due January 17, 2001, dated January 16, 1996, to the order of Commerzbank Aktiengesellschaft, Promissory Note due January 17, 2001, dated January 16, 1996, to the order of Royal Bank of Canada, Promissory Note due January 17, 2001, dated January 16, 1996, to the order of The Bank of New York, and Promissory Note due January 17, 2001, dated January 16, 1996, to the order of The Bank of Nova Scotia.
E-6 73 10.65* - Guaranty, dated as of January 16, 1996, by Enron Oil & Gas Company, as Guarantor, in favor of the Banks named therein and Texas Commerce Bank National Association, as Administrative Agent. 10.66* - ISDA Master Agreement, dated as of January 16, 1996, between Royal Bank of Canada and EOG Company of Canada. 10.67* - ISDA Master Agreement, dated as of January 16, 1996, between Royal Bank of Canada and Enron Oil & Gas Company. 10.68* - Guaranty, dated effective as of January 16, 1996, by Enron Oil & Gas Company in favor of Royal Bank of Canada. 21* - List of subsidiaries. 23.1* - Consent of DeGolyer and MacNaughton. 23.2* - Opinion of DeGolyer and MacNaughton dated January 22, 1996. 23.3* - Consent of Arthur Andersen LLP. 24* - Powers of Attorney. 27* - Financial Data Schedule.
E-7 74 SIGNATURES Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 5th day of March, 1996. ENRON OIL & GAS COMPANY (Registrant) By /s/ WALTER C. WILSON --------------------------------- (Walter C. Wilson) Senior Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of registrant and in the capacities with Enron Oil & Gas Company indicated and on the 5th day of March, 1996. SIGNATURE TITLE --------- ----- /s/ FORREST E. HOGLUND Chairman of the Board, President and Chief - ------------------------------- Executive Officer and Director (Principal (Forrest E. Hoglund) Executive Officer) /s/ WALTER C. WILSON Senior Vice President and Chief Financial - ------------------------------- Officer (Principal Financial Officer) (Walter C. Wilson) /s/ BEN B. BOYD Vice President and Controller (Principal - ------------------------------- Accounting Officer) (Ben B. Boyd) FRED C. ACKMAN* Director - ------------------------------- (Fred C. Ackman) RICHARD D. KINDER* Director - ------------------------------- (Richard D. Kinder) KENNETH L. LAY* Director - ------------------------------- (Kenneth L. Lay) EDWARD RANDALL, III* Director - ------------------------------- (Edward Randall, III) *By /s/ ANGUS H. DAVIS ---------------------------- (Angus H. Davis) (Attorney-in-fact for persons indicated) 75 INDEX TO EXHIBITS 3.1(a) - Restated Certificate of Incorporation of Enron Oil & Gas Company (Exhibit 3.1 to Form S-1). 3.1(b) - Certificate of Amendment of Restated Certificate of Incorporation of Enron Oil & Gas Company (Exhibit 4.1(b) to Form S-8 Registration Statement, Registration No. 3352201, filed on February 8, 1994). 3.1(c) - Certificate of Amendment of Restated Certificate of Incorporation of Enron Oil & Gas Company (Exhibit 4.1(c) to Form S-8 Registration Statement, Registration No. 3358103, filed on March 15, 1995). 3.2* - By-laws of Enron Oil & Gas Company dated August 23, 1989, as amended December 12, 1990, February 8, 1994 and January 19, 1996. 3.3 - Specimen of Certificate evidencing the Common Stock (Exhibit 3.3 to Form S-1). 4.1 - Promissory Note due May 1, 1996, dated May 1, 1991 (Exhibit 4.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1991). 4.3 - Amended and Restated Enron Oil & Gas Company 1994 Stock Plan (Exhibit 4.3 to Form S-8 Registration Statement, Registration No. 3358103, filed on March 15, 1995). 4.3(a)* - Amendment to Amended and Restated Enron Oil & Gas Company 1994 Stock Plan, dated effective as of December 12, 1995. 10.1 - Services Agreement, dated as of January 1, 1994, between Enron Oil & Gas Company and Enron Corp. (Exhibit 10.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.2 - Stock Restriction and Registration Agreement dated as of August 23, 1989 (Exhibit 10.2 to Form S-1). 10.3* - 1995 Tax Allocation Agreement, entered into effective as of December 14, 1995, between Enron Corp., Enron Oil & Gas Company, and the subsidiaries of Enron Oil & Gas Company listed therein as additional parties. 10.4 - Enron Corp. Deferral Plan dated December 10, 1985 (Exhibit 10.12 to Form S-1). 10.5 - Enron Corp. 1988 Stock Plan (Exhibit 10.13 to Form S-1). 10.7 - Enron Corp. 1984 Stock Option Plan (Exhibit 10.15 to Form S-1). 10.8 - Enron Corp. 1986 Stock Option Plan (Exhibit 10.16 to Form S-1). 10.9(a) - Employment Agreement between Enron Oil & Gas Company and Forrest Hoglund, dated as of September 1, 1987, as amended (Exhibit 10.19 to Form S-1), and Second and Third Amendments to Employment Agreement dated June 30, 1989 and February 14, 1992, respectively (Exhibit 10.10 to Form S-1 Registration Statement, Registration No. 3350462, filed on August 5, 1992). 10.9(b) - 4th Amendment to Employment Agreement dated December 14, 1994, among Enron Corp., Enron Oil & Gas Company and Forrest Hoglund (Exhibit 10.9(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.10 - Fuel Supply Contract, dated as of June 30, 1986, by and between Enron Oil & Gas Company, HNG Oil Company, BelNorth Petroleum Corporation and Enron Cogeneration One Company, as amended (Exhibit 10.23 to Form S-1).
76 10.11 - Gas Sales Contract dated September 2, 1987 between Enron Oil & Gas Company and Cogenron Inc., as amended (Exhibit 10.24 to Form S-1). 10.12 - Letter Agreement dated August 20, 1987 between Enron Oil & Gas Company and Panhandle Gas Company (Exhibit 10.25 to Form S-1). 10.13 - Pension Program for Enron Corp. Deferral Plan Participants, effective January 1, 1985, as amended (Exhibit 10.29 to Form S-1). 10.14 - Enron Oil & Gas Company 1993 Non-employee Director Stock Option Plan (Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992). 10.15(a) - Credit Agreement, dated as of March 11, 1994, among Enron Oil & Gas Company, the Banks named therein and Texas Commerce Bank, National Association, as Administrative Agent and Promissory Note due January 15, 1998, dated March 11, 1994 to the order of Texas Commerce Bank National Association, Promissory Note due January 15, 1998, dated March 11, 1994 to the order of The Bank of New York, Promissory Note due January 15, 1998, dated March 11, 1994 to the order of The Bank of Nova Scotia, Promissory Note due January 15, 1998, dated March 11, 1994 to the order of Credit Lyonnais Cayman Islands Branch, Promissory Note due January 15, 1998, dated March 11, 1994 to the order of Credit Suisse, Promissory Note due January 15, 1998, dated March 11, 1994 to the order of The First National Bank of Chicago, and Promissory Note due January 15, 1998, dated March 11, 1994 to the order of Bank of America National Trust and Savings Association (Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.15(b) - Assignment and Acceptance dated April 14, 1994, between Texas Commerce Bank National Association and Royal Bank of Canada and Promissory Note due January 15, 1998, dated April 14, 1994, to the order of Texas Commerce Bank National Association and Promissory Note due January 15, 1998, dated April 14, 1994, to the order of Royal Bank of Canada (Exhibit 10.15(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.16 - Interest Rate and Currency Exchange Agreement, dated as of June 1, 1991, between Enron Risk Management Services Corp. and Enron Oil & Gas Marketing, Inc. (Exhibit 10.17 to the Company's Annual Report on Form 10-K for the year ended December 31, 1991), Confirmation dated June 14, 1992 (Exhibit 10.17 to Form S-1 Registration Statement, Registration No. 3350462, filed on August 5, 1992) and Confirmations dated March 25, 1991, April 25, 1991, and September 23, 1992 (assigned to Enron Risk Management Services Corp. by Enron Finance Corp. pursuant to an Assignment and Assumption Agreement, dated as of November 1, 1993, by and between Enron Finance Corp., Enron Risk Management Services Corp. and Enron Oil & Gas Marketing, Inc.). (Exhibit 10.16 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.17 - Assignment and Assumption Agreement, dated as of November 1, 1993, by and between Enron Oil & Gas Marketing, Inc., Enron Oil & Gas Company and Enron Risk Management Services Corp. (Exhibit 10.17 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.18 - ISDA Master Agreement, dated as of November 1, 1993, between Enron Oil & Gas Company and Enron Risk Management Services Corp., and Confirmation Nos. 1268.0, 1286.0, 1291.0, 1292.0, 1304.0, 1305.0, 1321.0, 1335.0, 1338.0, 1370.0, 1471.0, 1485.0, 1486.0, 1494.0, 1495.0, 1509.0, 1514.0, 1533.01, 1569.0, 1986.0, 2217.0, 2227.0, 2278.0, 2299.0, 2372.0, 2647.0 (Exhibit 10.18 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993).
77 10.19 - Letter Agreement between Colorado Interstate Gas Company and Enron Oil & Gas Marketing, Inc. dated November 1, 1990 (Exhibit 10.18 to the Company's Annual Report on Form 10-K for the year ended December 31, 1990). 10.22 - Gas Sales Agreement between Enron Gas Marketing, Inc. and Enron Oil & Gas Marketing, Inc. dated August 22, 1989 (Exhibit 10.38 to Form S-1). 10.23 - Gas Purchase Agreement between Enron Oil & Gas Company and Enron Oil & Gas Marketing, Inc. dated August 22, 1989 (Exhibit 10.41 to Form S-1). 10.24 - Gas Purchase Agreement between Enron Oil & Gas Company and Enron Oil & Gas Marketing, Inc. dated August 22, 1989 (Exhibit 10.42 to Form S-1). 10.25 - Enron Corp. 1991 Stock Plan (Exhibit 10.08 to Enron Corp. Annual Report on Form 10-K for the year ended December 31, 1991). 10.26 - Enron Corp. 1988 Deferral Plan (Exhibit 10.49 to Form S-1). 10.27 - Form of Enron Corp. Long-Term Incentive Plan Effective as of January 1, 1987 (Exhibit 10.50 to Form S-1). 10.28 - Enron Executive Supplemental Survivor Benefits Plan Effective January 1, 1987 (Exhibit 10.51 to Form S-1). 10.29 - 1988 FlexPerq Program Summary (Exhibit 10.52 to Form S-1). 10.30* - Credit Agreement between Enron Corp. and Enron Oil & Gas Company dated September 29, 1995. 10.31* - Credit Agreement between Enron Oil & Gas Company and Enron Corp. dated September 29, 1995. 10.33 - Swap Agreement between Banque Paribas and Enron Oil & Gas Company, dated as of December 5, 1990 (Exhibit 10.37 to the Company's Annual Report on Form 10-K for the year ended December 31, 1990), and Confirmations dated March 25, 1991 and April 25, 1991 (Exhibit 10.37 to Form S-1 Registration Statement, Registration No. 3350462, filed on August 5, 1992). 10.34 - Enron Oil & Gas Company 1992 Stock Plan (As Amended and Restated effective December 14, 1994) (incorporated by reference to Exhibit A to the Company's Proxy Statement, dated March 27, 1995, with respect to the Company's 1995 Annual Meeting of Shareholders). 10.35 - Enron Corp. 1992 Deferral Plan (Exhibit 10.41 to the Company's Annual Report on Form 10-K for the year ended December 31, 1991). 10.36(a) - Conveyance of Production Payment, dated September 25, 1992, between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.34 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992). 10.36(b) - First Amendment to Conveyance of Production Payment, dated effective April 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.36(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.36(c) - Second Amendment to Conveyance of Production Payment, dated effective July 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.36(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.36(d) - Third Amendment to Conveyance of Production Payment, dated effective October 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.36(d) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993).
78 10.37(a) - Hydrocarbon Exchange Agreement dated September 25, 1992, between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.35 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992). 10.37(b) - Amendment to Hydrocarbon Exchange Agreement dated effective as of January 1, 1993, between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.37(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.37(c) - First Amendment to Hydrocarbon Exchange Agreement dated effective as of April 1, 1993, between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.37(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.37(d) - Second Amendment to Hydrocarbon Exchange Agreement dated effective as of July 1, 1993, between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.37(d) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.37(e) - Amendment to Hydrocarbon Exchange Agreement dated effective as of August 1, 1993, between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.37(e) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.37(f) - Fourth Amendment to Hydrocarbon Exchange Agreement, dated effective October 1, 1993, between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.37 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.38 - Purchase and Sale Agreement, dated September 25, 1992, between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.36 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992). 10.39(a) - Production and Delivery Agreement, dated September 25, 1992, between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.37 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992). 10.39(b) - First Amendment to Production and Delivery Agreement, dated effective April 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.39(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.39(c) - Second Amendment to Production and Delivery Agreement, dated effective July 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.39(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.39(d) - Third Amendment to Production and Delivery Agreement, dated effective October 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership (Exhibit 10.39(d) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.40 - Credit Agreement, dated as of March 8, 1994 between Enron Gas & Oil Trinidad Limited and Caribbean Regional Development Investment Trust, and Request for Advance No. 1, dated March 4, 1993, and Request for Advance No. 2, dated March 4, 1993 (Exhibit 10.40 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993).
79 10.41 - Promissory Note due May 1, 1998, dated as of March 8, 1994, to the order of Caribbean Regional Development Investment Trust (Exhibit 10.41 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.42 - Promissory Note due May 1, 1998, dated as of March 8, 1994 to the order of Caribbean Regional Development Investment Trust (Exhibit 10.42 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.43 - Letter of Credit and Reimbursement Agreement, dated March 8, 1994, between Enron Gas & Oil Trinidad Limited and Credit Suisse (Exhibit 10.43 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.44 - Parent Guaranty, dated March 8, 1994 between Enron Oil & Gas Company and Credit Suisse (Exhibit 10.44 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993). 10.45(a) - Letter Loan Agreement dated as of May 27, 1994, between Enron Gas & Oil Trinidad Limited and The Bank of Nova Scotia (Exhibit 10.45(a) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.45(b) - Promissory Note due May 27, 1999, dated as of May 31, 1994, to the order of The Bank of Nova Scotia (Exhibit 10.45(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.45(c) - Promissory Note due May 27, 1999, dated as of January 10, 1995, to the order of The Bank of Nova Scotia (Exhibit 10.45(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.46 - Guaranty dated as of May 27, 1994, between Enron Oil & Gas Company and The Bank of Nova Scotia (Exhibit 10.46 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.47 - Attorney Opinion Letter of Enron Oil & Gas International, Inc. dated December 18, 1994 (Panna and Mukta Fields) (Exhibit 10.47 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.48 - Certificate of Enron Oil & Gas India Ltd. dated December 22, 1994 (Panna and Mukta Fields) (Exhibit 10.48 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.49 - Financial and Performance Guarantee of Enron Oil & Gas International, Inc. dated December 22, 1994 (Panna and Mukta Fields) (Exhibit 10.49 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.50 - Joint Operating Agreement effective as of December 22, 1994, among Oil & Natural Gas Corporation Limited, Enron Oil & Gas India Ltd. and Reliance Industries Limited for contract area identified as Panna and Mukta Fields (Appendices B-1 and B-2 have been intentionally omitted. The Company hereby agrees to furnish a copy of either appendix to the Commission upon request) (Exhibit 10.50 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.51 - Production Sharing Contract dated as of December 22, 1994, among The Government of India, Oil & Natural Gas Corporation Limited, Reliance Industries Limited and Enron Oil & Gas India Ltd., for contract area identified as Panna and Mukta Fields [Appendices B-1 and B-2 and Appendix G (Figures G-1, VIIA-1 to 10, VIIB-1 to 20 and VIII-3) have all been intentionally omitted. The Company hereby agrees to furnish a copy of any such appendix and/or figure to the Commission upon request] (Exhibit 10.51 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994).
80 10.52 - Attorney Opinion Letter of Enron Oil & Gas International, Inc. dated December 18, 1994 (Tapti Fields) (Exhibit 10.52 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.53 - Certificate of Enron Oil & Gas India Ltd. dated December 22, 1994 (Tapti Fields) (Exhibit 10.53 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.54 - Financial and Performance Guarantee of Enron Oil & Gas International, Inc. dated December 22, 1994 (Tapti Fields) (Exhibit 10.54 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.55 - Joint Operating Agreement effective as of December 22, 1994, among Oil & Natural Gas Corporation Limited, Enron Oil & Gas India Ltd. and Reliance Industries Limited, for contract area identified as Mid-Tapti and South-Tapti Gas Fields [Appendix B (Figure B-1) has been intentionally omitted. The Company hereby agrees to furnish a copy of such appendix to the Commission upon request] (Exhibit 10.55 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.56 - Production Sharing Contract dated as of December 22, 1994, among The Government of India, Oil & Natural Gas Corporation Limited, Reliance Industries Limited and Enron Oil & Gas India Ltd., for contract area identified as Mid and South Tapti Field [Appendix B, Appendix G (Figures G-1, VII-1 to 11, VIII-2 to 4 and Appendix 3) have all been intentionally omitted. The Company hereby agrees to furnish a copy of any such appendix, to the Commission upon request] (Exhibit 10.56 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994). 10.57(a)* - Letter Agreement relating to Natural Gas Swap Transactions, dated March 31, 1995, among Enron Oil & Gas Company, Enron Corp. and Enron Capital & Trade Resources Corp. 10.57(b)* - Amendment to Natural Gas Swap Transactions Letter Agreement, dated March 31, 1995, among Enron Oil & Gas Company, Enron Corp. and Enron Capital & Trade Resources Corp. 10.58* - Confirmation Letter (revised due to adjustments to the attached Payment Schedule), dated March 31, 1995, between Enron Oil & Gas Company and Enron Capital & Trade Resources Corp. (ECT Transaction Reference No. 15198.00). 10.59* - Confirmation Letter (revised due to Price Change for 1998 and adjustment to the attached Payment Schedule), dated March 31, 1995, between Enron Oil & Gas Company and Enron Capital & Trade Resources Corp. (ECT Transaction Reference No. 15198.01). 10.60* - Letter Agreement relating to swap transaction payments, dated February 1995, between Enron Oil & Gas Company and Enron Capital & Trade Resources Corp. 10.64* - Credit Agreement, dated as of January 16, 1996, among EOG Company of Canada, as the Borrower, and the Banks named therein and Texas Commerce Bank National Association, as Administrative Agent, and Promissory Note due January 17, 2001, dated January 16, 1996, to the order of Texas Commerce Bank National Association, Promissory Note due January 17, 2001, dated January 16, 1996, to the order of Commerzbank Aktiengesellschaft, Promissory Note due January 17, 2001, dated January 16, 1996, to the order of Royal Bank of Canada, Promissory Note due January 17, 2001, dated January 16, 1996, to the order of The Bank of New York, and Promissory Note due January 17, 2001, dated January 16, 1996, to the order of The Bank of Nova Scotia.
81 10.65* - Guaranty, dated as of January 16, 1996, by Enron Oil & Gas Company, as Guarantor, in favor of the Banks named therein and Texas Commerce Bank National Association, as Administrative Agent. 10.66* - ISDA Master Agreement, dated as of January 16, 1996, between Royal Bank of Canada and EOG Company of Canada. 10.67* - ISDA Master Agreement, dated as of January 16, 1996, between Royal Bank of Canada and Enron Oil & Gas Company. 10.68* - Guaranty, dated effective as of January 16, 1996, by Enron Oil & Gas Company in favor of Royal Bank of Canada. 21* - List of subsidiaries. 23.1* - Consent of DeGolyer and MacNaughton. 23.2* - Opinion of DeGolyer and MacNaughton dated January 22, 1996. 23.3* - Consent of Arthur Andersen LLP. 24* - Powers of Attorney. 27* - Financial Data Schedule.
EX-3.2 2 BYLAWS OF ENRON OIL & GAS DATED 8/23/89 1 EXHIBIT 3.2 BYLAWS OF ENRON OIL & GAS COMPANY A Delaware Corporation Date of Adoption: August 23, 1989 As Amended: December 12, 1990, February 8, 1994, and January 19, 1996 2 BYLAWS Table of Contents
Page ---- Article I. Offices ------- Section 1. Registered Office 1 Section 2. Other Offices 1 Article II. Stockholders ------------ Section 1. Place of Meetings 1 Section 2. Quorum; Adjournment of Meetings 1 Section 3. Annual Meetings 2 Section 4. Special Meetings 2 Section 5. Record Date 2 Section 6. Notice of Meeting 3 Section 7. Stockholder List 3 Section 8. Proxies 3 Section 9. Voting; Elections; Inspectors 4 Section 10. Conduct of Meetings 5 Section 11. Treasury Stock 5 Section 12. Business to Be Brought Before the Annual Meeting 5 Article III. Board of Directors ------------------ Section 1. Power; Number; Term of Office 6 Section 2. Quorum; Voting 7 Section 3. Place of Meetings; Order of Business 7 Section 4. First Meeting 7 Section 5. Regular Meetings 7 Section 6. Special Meetings 7 Section 7. Nomination of Directors 8 Section 8. Removal 9 Section 9. Vacancies; Increases in the Number of Directors 9 Section 10. Compensation 9 Section 11. Action Without a Meeting; Telephone Conference Meeting 9 Section 12. Approval or Ratification of Acts or Contracts by Stockholders 10
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Page ---- Article IV. Committees ---------- Section 1. Executive Committee 10 Section 2. Audit Committee 11 Section 3. Other Committees 11 Section 4. Procedure; Meetings; Quorum 11 Section 5. Substitution and Removal of Members; Vacancies 11 Article V. Officers -------- Section 1. Number, Titles and Term of Office 12 Section 2. Powers and Duties of the Chairman of the Board 12 Section 3. Powers and Duties of the President, President-North American Operations, and President-International Operations 12 Section 4. Powers and Duties of Vice Chairman of the Board 13 Section 5. Vice Presidents 13 Section 6. General Counsel 13 Section 7. Secretary 14 Section 8. Deputy Corporate Secretary and Assistant Secretaries 14 Section 9. Treasurer 14 Section 10. Assistant Treasurers 14 Section 11. Action with Respect to Securities of Other Corporations 15 Section 12. Delegation 15 Article VI. Capital Stock ------------- Section 1. Certificates of Stock 15 Section 2. Transfer of Shares 16 Section 3. Ownership of Shares 16 Section 4. Regulations Regarding Certificates 16 Section 5. Lost or Destroyed Certificates 16
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Page ---- Article VII. Miscellaneous Provisions ------------------------ Section 1. Fiscal year 16 Section 2. Corporate Seal 17 Section 3. Notice and Waiver of Notice 17 Section 4. Facsimile Signatures 17 Section 5. Reliance upon Books, Reports and Records 17 Section 6. Application of Bylaws 18 Article VIII. Amendments 18 ----------
-4- 5 BYLAWS OF ENRON OIL & GAS COMPANY Article I Offices Section 1. Registered Office. The registered office of the Corporation required by the General Corporation Law of the State of Delaware to be maintained in the State of Delaware shall be the registered office named in the original Certificate of Incorporation of the Corporation, or such other office as may be designated from time to time by the Board of Directors in the manner provided by law. Section 2. The Corporation may also have offices at such other places both within and without the state of incorporation of the Corporation as the Board of Directors may from time to time determine or the business of the Corporation may require. Article II Stockholders Section 1. Place of Meetings. All meetings of the stockholders shall be held at the principal office of the Corporation, or at such other place within or without the state of incorporation of the Corporation as shall be specified or fixed in the notices or waivers of notice thereof. Section 2. Quorum; Adjournment of Meetings. Unless otherwise required by law or provided in the Certificate of Incorporation or these Bylaws, (i) the holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at any meeting of stockholders for the transaction of business, (ii) in all matters other than election of directors, the affirmative vote of the holders of a majority of such stock so present or represented at any meeting of stockholders at which a quorum is present shall constitute the act of the stockholders, and (iii) where a separate vote by a class or classes is required, a majority of the outstanding shares of such class or classes, present in person or represented by proxy shall constitute a quorum entitled to take action with respect to that vote on that matter and the affirmative vote of the majority of the shares of such class or classes present in person or 6 represented by proxy at the meeting shall be the act of such class. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum, subject to the provisions of clauses (ii) and (iii) above. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Notwithstanding the other provisions of the Certificate of Incorporation or these Bylaws, the chairman of the meeting or the holders of a majority of the issued and outstanding stock, present in person or represented by proxy and entitled to vote thereat, at any meeting of stockholders, whether or not a quorum is present, shall have the power to adjourn such meeting from time to time, without any notice other than announcement at the meeting of the time and place of the holding of the adjourned meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at such meeting. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally called. Section 3. Annual Meetings. An annual meeting of the stockholders, for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place (within or without the state of incorporation of the Corporation), on such date, and at such time as the Board of Directors shall fix and set forth in the notice of the meeting, which date shall be within thirteen (13) months subsequent to the last annual meeting of stockholders. Section 4. Special Meetings. Unless otherwise provided in the Certificate of Incorporation, special meetings of the stockholders for any purpose or purposes may be called at any time by the Chairman of the Board, by the President, by the Vice Chairman of the Board, by a majority of the Board of Directors, or by a majority of the executive committee (if any), at such time and at such place as may be stated in the notice of the meeting. A special meeting of stockholders shall be called by the Chairman of the Board, the President or the Secretary upon written request therefor, stating the purpose(s) of the meeting, delivered to such officer and signed by the holder(s) of at least ten percent (10%) of the issued and outstanding stock entitled to vote at such meeting. Business transacted at a special meeting shall be confined to the purpose(s) stated in the notice of such meeting. Section 5. Record Date. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or any adjournment thereof, or -2- 7 entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors of the Corporation may fix a date as the record date for any such determination of stockholders, which record date shall not precede the date on which the resolutions fixing the record date are adopted and which record date shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting of stockholders, nor more than sixty (60) days prior to any other action. If the Board of Directors does not fix a record date for any meeting of the stockholders, the record date for determining stockholders entitled to notice of or to vote at such meeting shall be at the close of business on the day next preceding the day on which notice is given, or, if in accordance with Article VII, Section 3 of these Bylaws notice is waived, at the close of business on the day next preceding the day on which the meeting is held. The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 6. Notice of Meetings. Written notice of the place, date and hour of all meetings, and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be given by or at the direction of the Chairman of the Board, the President, the Vice Chairman of the Board, the Secretary or the other person(s) calling the meeting to each stockholder entitled to vote thereat not less than ten (10) nor more than sixty (60) days before the date of the meeting. Such notice may be delivered either personally or by mail. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the Corporation. Section 7. Stockholder List. A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in the name of such stockholder, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The stockholder list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. -3- 8 Section 8. Proxies. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for him by proxy. Proxies for use at any meeting of stockholders shall be filed with the Secretary, or such other officer as the Board of Directors may from time to time determine by resolution, before or at the time of the meeting. All proxies shall be received and taken charge of and all ballots shall be received and canvassed by the secretary of the meeting, who shall decide all questions touching upon the qualification of voters, the validity of the proxies, and the acceptance or rejection of votes, unless an inspector or inspectors shall have been appointed by the chairman of the meeting, in which event such inspector or inspectors shall decide all such questions. No proxy shall be valid after three (3) years from its date, unless the proxy provides for a longer period. Each proxy shall be revocable unless expressly provided therein to be irrevocable and coupled with an interest sufficient in law to support an irrevocable power. Should a proxy designate two or more persons to act as proxies, unless such instrument shall provide the contrary, a majority of such persons present at any meeting at which their powers thereunder are to be exercised shall have and may exercise all the powers of voting or giving consents thereby conferred, or if only one be present, then such powers may be exercised by that one; or, if an even number attend and a majority do not agree on any particular issue, each proxy so attending shall be entitled to exercise such powers in respect of such portion of the shares as is equal to the reciprocal of the fraction equal to the number of proxies representing such shares divided by the total number of shares represented by such proxies. Section 9. Voting; Elections; Inspectors. Unless otherwise required by law or provided in the Certificate of Incorporation, each stockholder shall on each matter submitted to a vote at a meeting of stockholders have one vote for each share of stock entitled to vote which is registered in his name on the record date for the meeting. For the purposes hereof, each election to fill a directorship shall constitute a separate matter. Shares registered in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxy as the bylaws (or comparable instrument) of such corporation may prescribe, or in the absence of such provision, as the Board of Directors (or comparable body) of such corporation may determine. Shares registered in the name of a deceased person may be voted by the executor or administrator of such person's estate, either in person or by proxy. All voting, except as required by the Certificate of Incorporation or where otherwise required by law, may be by a voice vote; provided, however, upon request of the chairman of the meeting or upon demand therefor by stockholders holding a majority of the issued and outstanding stock present in person or by proxy at any meeting a stock -4- 9 vote shall be taken. Every stock vote shall be taken by written ballots, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the procedure established for the meeting. All elections of directors shall be by written ballots, unless otherwise provided in the Certificate of Incorporation. At any meeting at which a vote is taken by written ballots, the chairman of the meeting may appoint one or more inspectors, each of whom shall subscribe an oath or affirmation to execute faithfully the duties of inspector at such meeting with strict impartiality and according to the best of such inspector's ability. Such inspector shall receive the written ballots, count the votes and make and sign a certificate of the result thereof. The chairman of the meeting may appoint any person to serve as inspector, except no candidate for the office of director shall be appointed as an inspector. Unless otherwise provided in the Certificate of Incorporation, cumulative voting for the election of directors shall be prohibited. Section 10. Conduct of Meetings. The meetings of the stockholders shall be presided over by the Chairman of the Board, or if the Chairman of the Board is not present, by the President, or if the President is not present, by the Vice Chairman of the Board, or if neither the Chairman of the Board, the President nor the Vice Chairman of the Board is present, by a chairman elected at the meeting. The Secretary of the Corporation, if present, shall act as secretary of such meetings, or if the Secretary is not present, the Deputy Corporate Secretary or an Assistant Secretary shall so act; if neither the Secretary or the Deputy Corporate Secretary or an Assistant Secretary is present, then a secretary shall be appointed by the chairman of the meeting. The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seem to the chairman in order. Section 11. Treasury Stock. The Corporation shall not vote, directly or indirectly, shares of its own stock owned by it and such shares shall not be counted for quorum purposes. Nothing in this Section 11 shall be construed as limiting the right of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. Section 12. Business to Be Brought Before the Annual Meeting. To be properly brought before the annual meeting of stockholders, business must be either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in this Section 12 of Article II, who shall be entitled to vote at such meeting and who -5- 10 complies with the notice procedures set forth in this Section 12 of Article II. In addition to any other applicable requirements, for business to be brought before an annual meeting by a stockholder of the Corporation, 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 the anniversary date of the immediately preceding annual meeting of stockholders of the Corporation. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (i) 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, (ii) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business, (iii) the acquisition date, the class and the number of shares of voting stock of the Corporation which are owned beneficially by the stockholder, (iv) any material interest of the stockholder in such business, and (v) a representation that the stockholder intends to appear in person or by proxy at the meeting to bring the proposed business before the meeting. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section 12. The chairman of the annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 12 of Article II, and if the chairman should so determine, the chairman shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Notwithstanding the foregoing provisions of this Section 12 of Article II, a stockholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section 12. Article III Board of Directors Section 1. Power; Number; Term of Office. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, and subject to the restrictions imposed by law or the Certificate of Incorporation, the Board of Directors may exercise all the powers of the Corporation. -6- 11 The number of directors which shall constitute the whole Board of Directors shall be determined from time to time by the Board of Directors (provided that no decrease in the number of directors which would have the effect of shortening the term of an incumbent director may be made by the Board of Directors). If the Board of Directors makes no such determination, the number of directors shall be three. Each director shall hold office for the term for which such director is elected, and until such Director's successor shall have been elected and qualified or until such Director's earlier death, resignation or removal. Unless otherwise provided in the Certificate of Incorporation, directors need not be stockholders nor residents of the state of incorporation of the Corporation. Section 2. Quorum; Voting. Unless otherwise provided in the Certificate of Incorporation, a majority of the total number of directors shall constitute a quorum for the transaction of business of the Board of Directors and the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. Section 3. Place of Meetings; Order of Business. The directors may hold their meetings and may have an office and keep the books of the Corporation, except as otherwise provided by law, in such place or places, within or without the state of incorporation of the Corporation, as the Board of Directors may from time to time determine. At all meetings of the Board of Directors business shall be transacted in such order as shall from time to time be determined by the Chairman of the Board, or in the Chairman of the Board's absence by the President (should the President be a director), or in the President's absence by the Vice Chairman of the Board, or by the Board of Directors. Section 4. First Meeting. Each newly elected Board of Directors may hold its first meeting for the purpose of organization and the transaction of business, if a quorum is present, immediately after and at the same place as the annual meeting of the stockholders. Notice of such meeting shall not be required. At the first meeting of the Board of Directors in each year at which a quorum shall be present, held next after the annual meeting of stockholders, the Board of Directors shall elect the officers of the Corporation. Section 5. Regular Meetings. Regular meetings of the Board of Directors shall be held at such times and places as shall be designated from time to time by the Chairman of the Board or, in the absence of the Chairman of the Board, by the President (should the President be a director), or in the President's absence, by the Vice Chairman of the Board. Notice of such regular meetings shall not be required. -7- 12 Section 6. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board, the President (should the President be a director) or the Vice Chairman of the Board or, on the written request of any two directors, by the Secretary, in each case on at least twenty-four (24) hours personal, written, telegraphic, cable or wireless notice to each director. Such notice, or any waiver thereof pursuant to Article VII, Section 3 hereof, need not state the purpose or purposes of such meeting, except as may otherwise be required by law or provided for in the Certificate of Incorporation or these Bylaws. Meetings may be held at any time without notice if all the directors are present or if those not present waive notice of the meeting in writing. Section 7. Nomination of Directors. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders (a) by or at the direction of the Board of Directors or (b) by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in this Section 7 of Article III, who shall be entitled to vote for the election of directors at the meeting and who complies with the notice procedures set forth in this Section 7 of Article III. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation (i) with respect to an election to be held at the annual meeting of the stockholders of the Corporation, 90 days prior to the anniversary date of the immediately preceding annual meeting of stockholders of the Corporation, and (ii) with respect to an election to be held at a special meeting of stockholders of the Corporation for the election of directors, not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or public disclosure of the date of the meeting was made, whichever first occurs. Such stockholder's notice to the Secretary shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director, all information relating to the person that is required to be disclosed in solicitations for proxies for election of directors, or is otherwise required, pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including the written consent of such person to be named in the proxy statement as a nominee and to serve as a director if elected); and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the Corporation's books, of such stockholder, and (ii) the class and number of shares of capital stock of the Corporation which are beneficially owned by the stockholder. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the Corporation that information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. -8- 13 In the event that a person is validly designated as nominee to the Board and shall thereafter become unable or unwilling to stand for election to the Board of Directors, the Board of Directors or the stockholder who proposed such nominee, as the case may be, may designate a substitute nominee. No person shall be eligible to serve as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 7 of Article III. The chairman of the meeting of stockholders shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by the Bylaws, and if the chairman should so determine, the chairman shall so declare to the meeting and the defective nomination shall be disregarded. Notwithstanding the foregoing provisions of this Section 7 of Article III, a stockholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section 7 of Article III. Section 8. Removal. Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. Section 9. Vacancies; Increases in the Number of Directors. Unless otherwise provided in the Certificate of Incorporation, vacancies existing on the Board of Directors for any reason and newly created directorships resulting from any increase in the authorized number of directors may be filled by the affirmative vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director; and any director so chosen shall hold office until the next annual election and until such Director's successor shall have been elected and qualified, or until such Director's earlier death, resignation or removal. Section 10. Compensation. Directors and members of standing committees may receive such compensation as the Board of Directors from time to time shall determine to be appropriate, and shall be reimbursed for all reasonable expenses incurred in attending and returning from meetings of the Board of Directors. Section 11. Action Without a Meeting; Telephone Conference Meeting. Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted to be taken at any meeting of the Board of Directors, or any committee designated by the Board of Directors, may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee. Such consent shall have the same force and effect as a unanimous vote at a meeting, and -9- 14 may be stated as such in any document or instrument filed with the Secretary of State of the state of incorporation of the Corporation. Unless otherwise restricted by the Certificate of Incorporation, subject to the requirement for notice of meetings, members of the Board of Directors, or members of any committee designated by the Board of Directors, may participate in a meeting of such Board of Directors or committee, as the case may be, by means of a conference telephone connection or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in such a meeting shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. Section 12. Approval or Ratification of Acts or Contracts by Stockholders. The Board of Directors in its discretion may submit any act or contract for approval or ratification at any annual meeting of the stockholders, or at any special meeting of the stockholders called for the purpose of considering any such act or contract, and any act or contract that shall be approved or be ratified by the vote of the stockholders holding a majority of the issued and outstanding shares of stock of the Corporation entitled to vote and present in person or by proxy at such meeting (provided that a quorum is present) shall be as valid and as binding upon the Corporation and upon all the stockholders as if it has been approved or ratified by every stockholder of the Corporation. Article IV Committees Section 1. Executive Committee. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate an Executive Committee consisting of one or more of the directors of the Corporation, one of whom shall be designated chairman of the Executive Committee. During the intervals between the meetings of the Board of Directors, the Executive Committee shall possess and may exercise all the powers of the Board of Directors, including the power to authorize the seal of the Corporation to be affixed to all papers which may require it; provided, however, that the Executive Committee shall not have the power or authority of the Board of Directors in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution of the Corporation, amending, altering or repealing these Bylaws or adopting new bylaws for the Corporation or otherwise acting where action by the Board of Directors is specified by the Delaware General Corporation Law. The Executive -10- 15 Committee shall also have, and may exercise, all the powers of the Board of Directors, except as aforesaid, whenever a quorum of the Board of Directors shall fail to be present at any meeting of the Board. Section 2. Audit Committee. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate an Audit Committee consisting of one or more of the directors of the Corporation, one of whom shall be designated chairman of the Audit Committee. The Audit Committee shall have and may exercise such powers and authority as provided in the resolution creating it and as determined from time to time by the Board of Directors. Section 3. Other Committees. The Board of Directors may, by resolution passed from time to time by a majority of the whole Board of Directors, designate such other committees as it shall see fit consisting of one or more of the directors of the Corporation, one of whom shall be designated chairman of each such committee. Any such committee shall have and may exercise such powers and authority as provided in the resolution creating it and as determined from time to time by the Board of Directors. Section 4. Procedure; Meetings; Quorum. Any committee designated pursuant to this Article IV shall keep regular minutes of its actions and proceedings in a book provided for that purpose and report the same to the Board of Directors at its meeting next succeeding such action, shall fix its own rules or procedures, and shall meet at such times and at such place or places as may be provided by such rules, or by such committee or the Board of Directors. Should a committee fail to fix its own rules, the provisions of these Bylaws, pertaining to the calling of meetings and conduct of business by the Board of Directors, shall apply as nearly as may be. At every meeting of any such committee, the presence of a majority of all the members thereof shall constitute a quorum, except as provided in Section 5 of this Article IV, and the affirmative vote of a majority of the members present shall be necessary for the adoption by it of any resolution. Section 5. Substitution and Removal of Members; Vacancies. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member. The Board of Directors shall have the power at any time to remove any member(s) of a committee and to appoint other directors in lieu of the person(s) so removed and shall also have the power to fill vacancies in a committee. -11- 16 Article V Officers Section 1. Number, Titles and Term of Office. The officers of the Corporation shall be a Chairman of the Board, a President, a President-North American Operations, one or more Presidents-International Operations, one or more Vice Presidents (any one or more of whom may be designated Executive Vice President or Senior Vice President), a General Counsel, a Treasurer, a Secretary and such other officers as the Board of Directors may from time to time elect or appoint (including, but not limited to, a Vice Chairman of the Board, a Deputy Corporate Secretary, one or more Assistant Secretaries and one or more Assistant Treasurers). Each officer shall hold office until such officer's successor shall be duly elected and shall qualify or until such officer's death or until such officer shall resign or shall have been removed. Any number of offices may be held by the same person, unless the Certificate of Incorporation provides otherwise. Except for the Chairman of the Board and the Vice Chairman of the Board, no officer need be a director. Section 2. Powers and Duties of the Chairman of the Board. The Chairman of the Board shall be the chief executive officer of the Corporation. Subject to the control of the Board of Directors and the Executive Committee (if any), the Chairman of the Board shall have general executive charge, management and control of the properties, business and operations of the Corporation with all such powers as may be reasonably incident to such responsibilities; may agree upon and execute all leases, contracts, evidences of indebtedness and other obligations in the name of the Corporation and may sign all certificates for shares of capital stock of the Corporation; and shall have such other powers and duties as designated in accordance with these Bylaws and as from time to time may be assigned to the Chairman of the Board by the Board of Directors. The Chairman of the Board shall preside at all meetings of the stockholders and of the Board of Directors. Section 3. Powers and Duties of the President, President-North American Operations, and President-International Operations. (a) Unless the Board of Directors otherwise determines, the President shall have the authority to agree upon and execute all leases, contracts, evidences of indebtedness and other obligations in the name of the Corporation; and, unless the Board of Directors otherwise determines, the President shall, in the absence of the Chairman of the Board or if there be no Chairman of the Board, preside at all meetings of the stockholders and (should the President be a director) of the Board of Directors; and the President shall have such other powers and duties as designated in accordance with these -12- 17 Bylaws and as from time to time may be assigned to the President by the Board of Directors or the Chairman of the Board. (b) Unless the Board of Directors otherwise determines, the President-North American Operations shall have the authority to agree upon and execute all leases, contracts, evidences of indebtedness and other obligations in the name of the Corporation pertaining to the Corporation's North American operations; and the President- North American Operations shall have such other powers and duties as designated in accordance with these Bylaws and as from time to time may be assigned to the President-North American Operations by the Board of Directors or the Chairman of the Board. (c) Unless the Board of Directors otherwise determines, each President-International Operations shall have the authority to agree upon and execute all leases, contracts, evidences of indebtedness and other obligations in the name of the Corporation pertaining to the Corporation's international operations; and each President- International Operations shall have such other powers and duties as designated in accordance with these Bylaws and as from time to time may be assigned to each President-International Operations by the Board of Directors or the Chairman of the Board. Section 4. Powers and Duties of the Vice Chairman of the Board. The Board of Directors may assign areas of responsibility to the Vice Chairman of the Board, and, in such event, and subject to the overall direction of the Chairman of the Board and the Board of Directors, the Vice Chairman of the Board shall be responsible for supervising the management of the affairs of the Corporation and its subsidiaries within the area or areas assigned and shall monitor and review on behalf of the Board of Directors all functions within the corresponding area or areas of the Corporation and each such subsidiary of the Corporation. In the absence of the President, or in the event of the President's inability or refusal to act, the Vice Chairman of the Board shall perform the duties of the President, and when so acting shall have all the powers of and be subject to all the restrictions upon the President. Further, the Vice Chairman of the Board shall have such other powers and duties as designated in accordance with these Bylaws and as from time to time may be assigned to the Vice Chairman of the Board by the Board of Directors or the Chairman of the Board. Section 5. Vice Presidents. Each Vice President shall at all times possess power to sign all certificates, contracts and other instruments of the Corporation, except as otherwise limited in writing by the Chairman of the Board, the President or the Vice Chairman of the Board or of the Corporation. Each Vice President shall have such other powers and duties as from time to time may be assigned to such Vice President by the Board of Directors, the Chairman of the Board, the President or the Vice Chairman of the Board. -13- 18 Section 6. General Counsel. The General Counsel shall act as chief legal advisor to the Corporation. The General Counsel may have one or more staff attorneys and assistants, and may retain other attorneys to conduct the legal affairs and litigation of the Corporation under the General Counsel's supervision. Section 7. Secretary. The Secretary shall keep the minutes of all meetings of the Board of Directors, committees of the Board of Directors and the stockholders, in books provided for that purpose; shall attend to the giving and serving of all notices; may in the name of the Corporation affix the seal of the Corporation to all contracts of the Corporation and attest the affixation of the seal of the Corporation thereto; may sign with the other appointed officers all certificates for shares of capital stock of the Corporation; shall have charge of the certificate books, transfer books and stock ledgers, and such other books and papers as the Board of Directors may direct, all of which shall at all reasonable times be open to inspection of any director upon application at the office of the Corporation during business hours; shall have such other powers and duties as designated in these Bylaws and as from time to time may be assigned to the Secretary by the Board of Directors, the Chairman of the Board, the President or the Vice Chairman of the Board; and shall in general perform all acts incident to the office of Secretary, subject to the control of the Board of Directors, the Chairman of the Board, the President or the Vice Chairman of the Board. Section 8. Deputy Corporate Secretary and Assistant Secretaries. The Deputy Corporate Secretary and each Assistant Secretary shall have the usual powers and duties pertaining to such offices, together with such other powers and duties as designated in these Bylaws and as from time to time may be assigned to the Deputy Corporate Secretary or an Assistant Secretary by the Board of Directors, the Chairman of the Board, the President, the Vice Chairman of the Board, or the Secretary. The Deputy Corporate Secretary shall exercise the powers of the Secretary during that officer's absence or inability or refusal to act. Section 9. Treasurer. The Treasurer shall have responsibility for the custody and control of all the funds and securities of the Corporation, and shall have such other powers and duties as designated in these Bylaws and as from time to time may be assigned to the Treasurer by the Board of Directors, the Chairman of the Board, the President or the Vice Chairman of the Board. The Treasurer shall perform all acts incident to the position of Treasurer, subject to the control of the Board of Directors, the Chairman of the Board, the President and the Vice Chairman of the Board; and the Treasurer shall, if required by the Board of Directors, give such bond for the faithful discharge of the Treasurer's duties in such form as the Board of Directors may require. Section 10. Assistant Treasurers. Each Assistant Treasurer shall have the usual powers and duties pertaining to such office, together with such other powers and duties as -14- 19 designated in these Bylaws and as from time to time may be assigned to each Assistant Treasurer by the Board of Directors, the Chairman of the Board, the President, the Vice Chairman of the Board, or the Treasurer. The Assistant Treasurers shall exercise the powers of the Treasurer during that officer's absence or inability or refusal to act. Section 11. Action with Respect to Securities of Other Corporations. Unless otherwise directed by the Board of Directors, the Chairman of the Board, the President or the Vice Chairman of the Board, together with the Secretary, the Deputy Corporate Secretary or any Assistant Secretary shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of security holders of or with respect to any action of security holders of any other corporation in which this Corporation may hold securities and otherwise to exercise any and all rights and powers which this Corporation may possess by reason of its ownership of securities in such other corporation. Section 12. Delegation. For any reason that the Board of Directors may deem sufficient, the Board of Directors may, except where otherwise provided by statute, delegate the powers or duties of any officer to any other person, and may authorize any officer to delegate specified duties of such officer to any other person. Any such delegation or authorization by the Board shall be effected from time to time by resolution of the Board of Directors. Article VI Capital Stock Section 1. Certificates of Stock. The certificates for shares of the capital stock of the Corporation shall be in such form, not inconsistent with that required by law and the Certificate of Incorporation, as shall be approved by the Board of Directors. Every holder of stock represented by certificates shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman of the Board, President, Vice Chairman of the Board or a Vice President and the Secretary, Deputy Corporate Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer of the Corporation representing the number of shares (and, if the stock of the Corporation shall be divided into classes or series, certifying the class and series of such shares) owned by such stockholder which are registered in certified form; provided, however, that any of or all the signatures on the certificate may be facsimile. The stock record books and the blank stock certificate books shall be kept by the Secretary, or at the office of such transfer agent or transfer agents as the Board of Directors may from time to time determine. In case any officer, transfer agent or registrar who shall have signed or whose facsimile signature or signatures shall have been placed upon any such certificate or certificates shall have ceased to be such officer, transfer agent or registrar before such certificate is -15- 20 issued by the Corporation, such certificate may nevertheless be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. The stock certificates shall be consecutively numbered and shall be entered in the books of the Corporation as they are issued and shall exhibit the holder's name and number of shares. Section 2. Transfer of Shares. The shares of stock of the Corporation shall be transferable only on the books of the Corporation by the holders thereof in person or by their duly authorized attorneys or legal representatives upon surrender and cancellation of certificates for a like number of shares. Upon surrender to the Corporation or a transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Section 3. Ownership of Shares. The Corporation shall be entitled to treat the holder of record of any share or shares of capital stock of the Corporation as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the state of incorporation of the Corporation. Section 4. Regulations Regarding Certificates. The Board of Directors shall have the power and authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer and registration or the replacement of certificates for shares of capital stock of the Corporation. Section 5. Lost or Destroyed Certificates. The Board of Directors may determine the conditions upon which the Corporation may issue a new certificate of stock in place of a certificate theretofore issued by it which is alleged to have been lost, stolen or destroyed and may require the owner of such certificate or such owner's legal representative to give bond, with surety sufficient to indemnify the Corporation and each transfer agent and registrar against any and all losses or claims which may arise by reason of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate in the place of the one so lost, stolen or destroyed. Article VII Miscellaneous Provisions Section 1. Fiscal Year. The fiscal year of the Corporation shall begin on the first day of January of each year. -16- 21 Section 2. Corporate Seal. The corporate seal shall be circular in form and shall have inscribed thereon the name of the Corporation and the state of its incorporation, which seal shall be in the charge of the Secretary and shall be affixed to certificates of stock, debentures, bonds, and other documents, in accordance with the direction of the Board of Directors or a committee thereof, and as may be required by law; however, the Secretary may, if the Secretary deems it expedient, have a facsimile of the corporate seal inscribed on any such certificates of stock, debentures, bonds, contracts or other documents. Duplicates of the seal may be kept for use by the Deputy Corporate Secretary or any Assistant Secretary. Section 3. Notice and Waiver of Notice. Whenever any notice is required to be given by law, the Certificate of Incorporation or under the provisions of these Bylaws, said notice shall be deemed to be sufficient if given (i) by telegraphic, cable or wireless transmission (including by telecopy or facsimile transmission) or (ii) by deposit of the same in a post office box or by delivery to an overnight courier service company in a sealed prepaid wrapper addressed to the person entitled thereto at such person's post office address, as it appears on the records of the Corporation, and such notice shall be deemed to have been given on the day of such transmission or mailing or delivery to courier, as the case may be. Whenever notice is required to be given by law, the Certificate of Incorporation or under any of the provisions of these Bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person, including without limitation a director, at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice unless so required by the Certificate of Incorporation or these Bylaws. Section 4. Facsimile Signatures. In addition to the provisions for the use of facsimile signatures elsewhere specifically authorized in these Bylaws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors. Section 5. Reliance upon Books, Reports and Records. A member of the Board of Directors, or a member of any committee designated by the Board of Directors, shall, in the performance of such person's duties, be fully protected in relying in good faith upon the records of the Corporation and upon such information, opinion, reports or statements -17- 22 presented to the Corporation by any of the Corporation's officers or employees, or committees of the Board of Directors, or by any other person as to matters the member reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation. Section 6. Application of Bylaws. In the event that any provisions of these Bylaws is or may be in conflict with any law of the United States, of the state of incorporation of the Corporation or of any other governmental body or power having jurisdiction over this Corporation, or over the subject matter to which such provision of these Bylaws applies, or may apply, such provision of these Bylaws shall be inoperative to the extent only that the operation thereof unavoidably conflicts with such law, and shall in all other respects be in full force and effect. Article VIII Amendments The Board of Directors shall have the power to adopt, amend and repeal from time to time Bylaws of the Corporation, subject to the right of the stockholders entitled to vote with respect thereto to amend or repeal such Bylaws as adopted or amended by the Board of Directors. -18- EX-4.3A 3 AMENDMENT TO 1994 STOCK PLAN 1 Exhibit 4.3(a) AMENDMENT TO AMENDED AND RESTATED ENRON OIL & GAS COMPANY 1994 STOCK PLAN WHEREAS, ENRON OIL & GAS COMPANY (the "Company") has heretofore adopted and maintains the Amended and Restated Enron Oil & Gas Company 1994 Stock Plan (the "Plan"); and WHEREAS, the Company desires to amend the Plan (a) to provide for the increase in the number of shares available for grant, and (b) to revise the definition of "retirement"; NOW, THEREFORE the plan is amended as follows: A. Section 3.1 (i) is hereby rescinded and amended in its entirety to read as follows: "(i) Calculation of Number of Shares Available. The number of shares available for granting Awards under the Plan shall be six million (6,000,000) Shares, subject to adjustment as provided in Section 3.2" B. Section 10 (q) is hereby rescinded and amended in its entirety to read as follows: "(q) "Retirement" shall mean with respect to an Employee of the Company or one of its subsidiaries, after attainment of age 55 with at least 5 years of service, the Employee's termination of employment and eligibility to receive benefits under the Enron Corp. Retirement Plan." AS AMENDED HEREBY, the Plan is specifically ratified and reaffirmed. Date effective as of December 12, 1995. ATTEST: ENRON OIL & GAS COMPANY /s/ ANGUS H. DAVIS /s/ J. CHRIS BRYAN ________________________ ________________________ Angus H. Davis J. Chris Bryan Vice President, Communications Vice President, Administration & and Corporate Secretary Human Resources EX-10.3 4 1995 TAX ALLOCATION AGMT. 1 Exhibit 10.3 1995 TAX ALLOCATION AGREEMENT THIS 1995 TAX ALLOCATION AGREEMENT ("Agreement") is entered into effective as of the Deconsolidation Date between Enron Corp., a Delaware corporation with its principal place of business being Houston, Texas ("Enron"), Enron Oil & Gas Company, also a Delaware corporation with its principal place of business being Houston, Texas ("EOG"), and those subsidiaries of EOG listed below as additional parties. (Enron, EOG, and those EOG subsidiaries listed below are hereinafter collectively referred to as the "Parties" and singularly as a "Party", while EOG and such subsidiaries are collectively referred to as "EOG"). RECITALS WHEREAS, Enron and EOG previously entered into that certain First Amended and Restated Tax Allocation Agreement (hereinafter the "Base Agreement") executed in August 1991 generally providing for the apportionment and allocation of federal income and other tax liabilities between the Parties; and WHEREAS, the Parties subsequently modified the terms of the Base Agreement, as reflected in Modification "A" to the First Amended and Restated Tax Allocation Agreement executed in 1992 (the Base Agreement and Modification "A" are hereinafter collectively referred to as the "Earlier Agreements") so as to further specify their agreement as to the apportionment and allocation of federal income and other tax liabilities; and WHEREAS, Enron is considering selling a certain number of shares of common stock that it owns in EOG, thus reducing its ownership interest in EOG below 80 percent and thereby precluding Enron from continuing to include EOG in the consolidated federal income tax returns prepared by Enron as common parent for the taxable periods following the Deconsolidation Date; WHEREAS, EOG has represented in various public statements that the Deconsolidation, when coupled with the effectiveness of the Earlier Agreements and this Agreement, will not have a material adverse effect on its financial condition or results of operations; and WHEREAS, the Earlier Agreements do not fully address the obligations of the Parties vis-a-vis one another upon a Deconsolidation; and WHEREAS, the Parties have agreed to change many of the provisions of the Earlier Agreements and thus would like to memorialize such agreement regarding their respective rights, obligations, and intentions as to any tax payments to be made by EOG to Enron or by Enron to EOG for the Post-Deconsolidation Date Period and, in particular, the Parties' rights, obligations, and intentions with respect to (i) paragraph 7 of Modification "A" and (ii) any refund of Taxes to be received by the Consolidated Group attributable to the four years from 1988 through and including 1991, and have such terms generally supersede those of the Earlier Agreements. 2 NOW, THEREFORE, the Parties to this Agreement agree as follows: ARTICLE I DEFINITIONS 1.1 Definitions: As used in this Agreement, the following terms have the following meanings: "Code" means the Internal Revenue Code of 1986, as amended, or corresponding provisions of any subsequent federal tax laws. "Consolidated Group" means the "affiliated group" of corporations of which Enron is the "common parent corporation", as such terms are defined in Code Section 1504(a)(1). "Consolidated Minimum Tax Credit(s)" means the consolidated minimum tax credit(s) computed in accordance with Code Sections 53, 1502, and 1503, and shown on a Consolidated Return with respect to those tax periods up to and including the Deconsolidation Date. "Consolidated Return" means the consolidated federal income tax return of the Consolidated Group for each taxable year as filed or to be filed by Enron on behalf of the Consolidated Group. "Consolidated Tax Liability" means, generally, the consolidated federal income tax liability computed in accordance with Treasury Regulation Section 1.1502-2 and shown on a Consolidated Return, taking into account all credits to which the Consolidated Group is entitled under the Code, but not taking into account any "consolidated alternative minimum tax liability" (as provided under Code Sections 55, 1502, and 1503) or any Consolidated Minimum Tax Credit. "Deconsolidation" means that event which causes Enron to no longer have the requisite ownership interest in EOG so as to allow the Parties to file as a Consolidated Group. "Deconsolidation Date" means that date when Enron and EOG no longer constitute a Consolidated Group. "Earlier Agreements" has that meaning ascribed to it in the Recitals. "Party" and "Parties" have that meaning ascribed to them in the Recitals. "Pre-Deconsolidation Date Period" means, chronologically, those tax years prior to the 1995 tax year plus that period in time beginning January 1, 1995 and ending on and including the Deconsolidation Date. "Post-Deconsolidation Date Period" means, chronologically, that period following the Deconsolidation Date. -2- 3 "Taxes" or "Tax" means federal income taxes as provided in Code Section 11, alternative minimum tax as provided in Code Section 55, and any state taxes measured by net income (including state taxes measured by net income reflected in any Unitary Tax Returns filed by Enron) and any interest or penalties thereon. The term Taxes or Tax, however, specifically excludes any tax imposed by any foreign government. "Unitary Tax Return" means a state income tax return which reflects the combined and/or consolidated reporting (either on a domestic or worldwide basis) of Enron and its affiliates for a state which either (i) imposes its income tax on its apportioned and/or allocable share of the net income and its United States affiliates that are engaged in a "unitary business", part of which is conducted in the state or (ii) imposes its income tax on its apportioned and/or allocable share of the net income of a taxpayer and its affiliates--both domestic and foreign--that are engaged in a unitary business. Other terms defined herein have the meanings given them. ARTICLE II TAX INDEMNIFICATION 2.1 Enron's Tax Indemnification for the Pre-Deconsolidation Date Period: Enron shall be liable for, indemnify, and hold EOG harmless for all Taxes (i) imposed on or incurred by EOG for the Pre-Deconsolidation Date Period and (ii) equitably apportioned to EOG by Enron for all tax periods beginning before and ending after the Deconsolidation Date. Enron, in turn, shall be entitled to receive all refunds of such Taxes, if any, from either the applicable tax authorities or EOG (in the event such refund(s) have been made directly to EOG), except with respect to the $10.5 million amount set forth in Section 2.4(a) below. 2.2 EOG's 1995 Tax Liability and Payment (a) EOG's sole liability for Taxes for the portion of the Pre-Deconsolidation Date Period attributable to the 1995 tax year shall be based on EOG's preparation of its portion of Enron's 1995 Consolidated Return and Enron's review thereof. Any discrepancies between EOG's return position and Enron's subsequent review shall be resolved by consultation by each Party's respective tax officers and Enron's ultimate determination shall be controlling as long as such determination does not have a material adverse effect on EOG's financial condition or results of operations. (b) The Parties agree that in determining EOG's allocable share of the (i) Unitary and (ii) Consolidated Tax Liabilities for the 1995 tax year that they shall follow the allocation and methodology set forth in the Earlier Agreements. (c) EOG shall pay Enron its allocable share of the estimated Unitary and Consolidated Tax Liabilities for the 1995 tax year, net of any 1995 Code Section 29 credits, within 45 days from the Deconsolidation Date. A "true-up" payment shall be made by EOG to Enron or Enron to EOG, if any, within 15 days after Enron's subsequent determination of EOG's liability based on -3- 4 taxable income and tax credits reported as part of Enron's 1995 Unitary and Consolidated Returns and EOG's separate state Tax returns. (d) Enron shall be liable for, indemnify, and hold EOG harmless for all Taxes attributable to the event of Deconsolidation. 2.3 Government of India Taxes: Enron shall be liable for, indemnify, and hold EOG harmless for additional taxes, interest, and penalties assessed by India (including all third-party professional fees and out-of-pocket costs incurred with respect to the conduct of any audit or the defense against any assessment) due to (i) a disallowance of deduction for pre-production sharing costs in fiscal years ended March 31, 1994 and March 31, 1995 and (ii) the failure to file an Association of Persons Return ("AOP") for the year ended March 31, 1995. Enron shall also be liable for, indemnify, and hold EOG harmless for any payment required to be made to Reliance Industries Limited or its affiliates ("RIL") or Oil & Natural Gas Corporation Limited ("ONGC") and all third-party professional fees and out-of-pocket costs incurred by EOG with respect to the defense against any action or claim made by RIL or ONGC due to the failure to file AOP for the period ended March 31, 1995. 2.4 Other Payments to be Made Between the Parties (a) Enron is obligated to pay to EOG $10.5 million attributable to a federal income tax refund to be received by Enron for the four tax years from 1988 through and including 1991. (b) In consideration of Enron's tax indemnification as set forth in Sections 2.1 and 2.3 to this Agreement, EOG shall be obligated to pay to Enron $13 million no later than on the Deconsolidation Date. (c) In the event Enron has not paid EOG the $10.5 million refund amount by the Deconsolidation Date, EOG shall have the right to offset its $13 million indemnification payment obligation to Enron by such $10.5 million sum thus resulting in a net payment by EOG to Enron of $2.5 million no later than on the Deconsolidation Date. ARTICLE III MINIMUM TAX CREDIT AND RELATED MATTERS ASSOCIATED WITH DECONSOLIDATION 3.1 Consolidated Minimum Tax Credit (a) As currently calculated by Enron, no Consolidated Minimum Tax Credits have been allocated to EOG by Enron based on Consolidated Returns filed through tax year ended December 31, 1994 under the methodology followed for the Pre-Deconsolidation Date Period and Enron has not made any determination of EOG's allocable share of Consolidated Minimum Tax -4- 5 Credits for the 1995 tax year. In the event Consolidated Minimum Tax Credits are allocated to EOG, EOG shall be obligated to reimburse Enron for the amount of such credits allocated to EOG. EOG shall make a good faith effort to utilize such credits. Payments to be made by EOG to Enron shall be made upon the occurrence of the earlier of the following two events: (i) The date of EOG's filing of its federal income tax return for the tax year in the Post-Deconsolidation Date Period when EOG utilizes any reallocated Consolidated Minimum Tax Credits; or (ii) The date EOG's liability is reduced by such credits if not on an original return and EOG receives a refund or reduces a payment otherwise required to be made. (b) For purposes of Section 3.1(a) any minimum tax credits generated by EOG in the Post-Deconsolidation Date Period shall be disregarded in making this determination. (c) For purposes of Section 3.1(a), any payments to be made between EOG and Enron may be made for more than one tax year of the Post-Deconsolidation Date Period until the reallocated Consolidated Minimum Tax Credit is used (or could have been used) in its entirety. 3.2 Consolidated Minimum Tax Credit Allocation Adjustments: In the event the amount of the Consolidated Minimum Tax Credits allocated to EOG are adjusted resulting in a reduction of Consolidated Minimum Tax Credits previously utilized by EOG and a payment has been made by EOG to Enron pursuant to the terms of Section 3.1, Enron shall be obligated to pay EOG for any assessment of Taxes made against it by the Internal Revenue Service attributable to such adjustment from the date of payment pursuant to Section 3.1. Payment shall be made by Enron to EOG on the day EOG pays the Internal Revenue Service for such assessment. ARTICLE IV AUDITS AND OTHER TAX PROCEEDINGS 4.1 General Cooperation and Exchange of Information (a) EOG shall provide, or cause to be provided, to Enron copies of all correspondence received from any taxing authority by EOG in connection with the liability of the Parties for Taxes for the Pre-Deconsolidation Date Period. EOG shall also provide Enron with access to or copies of any materials requested by Enron which would assist Enron in resolving any tax matters for the Consolidated Group for the Pre-Deconsolidation Date Period. Further, the Parties will provide each other with such cooperation and information as they may reasonably request of each other in preparing or filing any return, amended return, or claim for refund, in determining liability or right of refund, or in conducting any audit or other proceeding, in respect of Taxes imposed on the Parties or their respective affiliates. -5- 6 (b) Enron on one hand and EOG on the other hand and their affiliates will preserve and retain all returns, schedules, workpapers, and all material records or other documents relating to any such returns, claims, audits, or other proceedings until the expiration of the statutory period of limitations (including extensions) of the taxable periods to which such documents relate and until the final determination of any payments which may be required with respect to such periods under this Agreement and shall make such documents available at the then-current corporate headquarters of such Party to the other Party or any affiliate thereof, and their respective officers, employees, and agents, upon reasonable notice and at reasonable times, it being understood that such representative shall be entitled to make copies of any such books and records relating to Enron or EOG as they shall deem necessary. (c) Enron on one hand and EOG on the other hand further agree to permit representatives of the other Party or any affiliate thereof to meet with employees of such Party on a mutually convenient basis in order to enable such representatives to obtain additional information and explanations of any documents provided pursuant to this Section 4.1. Enron on one hand and EOG on the other hand shall make available to the representatives of the other Party or any affiliate thereof sufficient workspace and facilities to perform the activities described in this Section. Any information obtained pursuant to this Section 4.1 shall be kept confidential, except as may be otherwise necessary in connection with the filing of returns or claims for refund or in conducting any audit or other proceeding. Each Party shall provide the cooperation and information required by this Section 4.1 at its own expense. 4.2 Audits: In the event of an audit by the Internal Revenue Service, or by any state or local tax authority, of a return filed by Enron for the Pre-Deconsolidation Date Period, Enron shall give EOG timely and reasonable notice of audit proceedings and EOG will provide all necessary information and other assistance reasonably requested by Enron with respect to issues concerning the activities of EOG. All communications with the Internal Revenue Service concerning such audit will be made by Enron unless otherwise agreed between the Parties hereto. 4.3 Material Adverse Impact to EOG: Notwithstanding the provisions of Section 4.2, the Parties agree that in no event shall Enron file any amended tax return, claim for refund, or make any tax election affecting the Pre-Deconsolidation Date Period that would have any material adverse impact on EOG's financial condition or results of operations without first obtaining the written permission of EOG. ARTICLE V UNITARY TAX RETURNS FOR POST-DECONSOLIDATION DATE PERIOD FILINGS Enron agrees to continue to file any Unitary Tax Returns and allocate Unitary tax liability for the Post-Deconsolidation Date Period in which the operations of EOG are reflected in a manner consistent with the methodology followed for the Pre-Deconsolidation Date Period. -6- 7 ARTICLE VI OTHER PROVISIONS 6.1 Effect of the Agreement: The obligations of the Parties set forth under this Agreement shall be unconditional and absolute, and shall remain in effect without limitation as to time. Further, all prior tax sharing and allocation agreements between Enron and EOG (including the Earlier Agreements) shall terminate effective as of the Deconsolidation Date, except that those provisions of the Earlier Agreement regarding the allocation of Consolidated Tax Liability shall remain in effect for the 1995 tax year until the provisions of Section 2.2 of this Agreement are fully implemented by the Parties. 6.2 Conflict or Ambiguity: Because the terms of this Agreement generally supersede the terms of the Earlier Agreements, the Parties agree that if there is any conflict or ambiguity between the Earlier Agreements and this Agreement the terms of this Agreement shall control. 6.3 Assignability: The rights and obligations of the Parties under this Agreement may not be assigned by a Party without the prior written consent of the other Party to this Agreement. 6.4 Governing Law: This Agreement shall be governed by the laws of the state of Texas. IN WITNESS WHEREOF, the Parties hereto have caused their names to be subscribed and executed by the respective authorized officers on the dates indicated, effective as of the date first written above. ENRON CORP. By: /s/ ROBERT J. HERMANN ___________________________________ Robert J. Hermann Vice President, Tax Date: December 11, 1995 __________________________________ -7- 8 ENRON OIL & GAS COMPANY By: /s/ SUSAN M. MURRAY ____________________________________ Susan M. Murray Vice President, Tax Date: December 11, 1995 __________________________________ ENRON OIL & GAS INTERNATIONAL, INC. By: /s/ SUSAN M. MURRAY ____________________________________ Susan M. Murray Vice President, Tax Date: December 11, 1995 __________________________________ EOGI-TRINIDAD, INC. By: /s/ SUSAN M. MURRAY ___________________________________ Susan M. Murray Vice President, Tax Date: December 11, 1995 _________________________________ EOGI-AUSTRALIA, INC. By: /s/ SUSAN M. MURRAY ____________________________________ Susan M. Murray Vice President, Tax Date: December 11, 1995 __________________________________ -8- 9 EOGI-FRANCE, INC. By: /s/ SUSAN M. MURRAY ____________________________________ Susan M. Murray Vice President, Tax Date: December 11, 1995 __________________________________ EOGI-RUSSIA, INC. By: /s/ SUSAN M. MURRAY ____________________________________ Susan M. Murray Vice President, Tax Date: December 11, 1995 __________________________________ EOGI-QATAR, INC. By: /s/ SUSAN M. MURRAY ____________________________________ Susan M. Murray Vice President, Tax Date: December 11, 1995 __________________________________ EOGI-UZBEKISTAN, INC. By: /s/ SUSAN M. MURRAY ____________________________________ Susan M. Murray Vice President, Tax Date: December 11, 1995 __________________________________ -9- 10 EOGI-KUWAIT, INC. By: /s/ SUSAN M. MURRAY ____________________________________ Susan M. Murray Vice President, Tax Date: December 11, 1995 __________________________________ ENRON OIL & GAS-CARTHAGE, INC. By: /s/ SUSAN M. MURRAY ____________________________________ Susan M. Murray Vice President, Tax Date: December 11, 1995 __________________________________ ERSO, INC. By: /s/ SUSAN M. MURRAY ____________________________________ Susan M. Murray Vice President, Tax Date: December 11, 1995 __________________________________ ENRON OIL & GAS PROPERTY MANAGEMENT, INC. By: /s/ SUSAN M. MURRAY ____________________________________ Susan M. Murray Vice President, Tax Date: December 11, 1995 ___________________________________ -10- 11 ENRON OIL & GAS MARKETING, INC. By: /s/ SUSAN M. MURRAY ____________________________________ Susan M. Murray Vice President, Tax Date: December 11, 1995 __________________________________ I N HOLDINGS, INC. By: /s/ SUSAN M. MURRAY _____________________________________ Susan M. Murray Vice President, Tax Date: December 11, 1995 ___________________________________ NILO OPERATING COMPANY By: /s/ SUSAN M. MURRAY _____________________________________ Susan M. Murray Vice President, Tax Date: December 11, 1995 __________________________________ EOGI-TRINIDAD U(a) BLOCK, INC. By: /s/ SUSAN M. MURRAY ____________________________________ Susan M. Murray Vice President, Tax Date: December 11, 1995 __________________________________ -11- 12 EOGI-ALGERIA, INC. By: /s/ SUSAN M. MURRAY ____________________________________ Susan M. Murray Vice President, Tax Date: December 11, 1995 __________________________________ -12- 13 EOGI-KAZAKHSTAN, INC. By: /s/ DENNIS M. ULAK ____________________________________ Dennis M. Ulak Assistant Secretary Date: 12-11-95 __________________________________ EOGI-INDIA, INC. By: /s/ DENNIS M. ULAK ____________________________________ Dennis M. Ulak Assistant Secretary Date: 12-11-95 __________________________________ EOGI-CHINA, INC. By: /s/ DENNIS M. ULAK ____________________________________ Dennis M. Ulak Assistant Secretary Date: 12-11-95 __________________________________ ENRON OIL & GAS INDIA LTD. By: /s/ DENNIS M. ULAK ____________________________________ Dennis M. Ulak Assistant Secretary Date: 12-11-95 __________________________________ -13- 14 EOGI-UNITED KINGDOM, INC. By: /s/ ANGUS H. DAVIS ____________________________________ Angus H. Davis Assistant Secretary Date: December 11, 1995 __________________________________ -14- 15 IN WITNESS WHEREOF, the Parties hereto have caused their names to be subscribed and executed by the respective authorized officers on the dates indicated, effective as of the date first written above. ENRON OIL & GAS INVESTMENTS, INC. By: /s/ DOUGLAS WEAVER ____________________________________ Douglas Weaver President -15- EX-10.30 5 CREDIT AGMT BETWEEN ENRON CORP & EOG 1 EXHIBIT 10.30 CREDIT AGREEMENT CREDIT AGREEMENT dated as of September 29, 1995, between Enron Corp., a Delaware corporation ("Lender"), and Enron Oil & Gas Company, a Delaware corporation ("Borrower"). The parties hereto hereby agree as follows: 1. Loans. Subject to the terms and conditions of this Agreement, Lender may make loans (the "Loans") from its available funds to Borrower from time to time during the period from the date of this Agreement up to but not including the Termination Date, as defined in Section 10, in an aggregate principal amount up to but not exceeding the sum of Two Hundred Million Dollars ($200,000,000) at any one time outstanding. Within the limits of this Agreement, Borrower may borrow, prepay pursuant to Section 4, and reborrow under this Section 1. While the Lender has, and shall have, no obligation to make Loans to the Borrower pursuant to this Agreement, the parties hereto agree that any Loans by the Lender will be made in reliance on the agreements of the Lender and the Borrower contained herein and on the terms and conditions and in the manner provided herein. Lender may make Loans to Borrower and Borrower may borrow under this Agreement when one or both of the following shall occur and be continuing: a. Borrower does not have the capacity, under any committed revolving credit facility or facilities carried as back-stop sources (the total of such committed revolving credit facility or facilities, as such facility or facilities may be modified, amended, supplemented, or replaced from time to time, shall hereinafter be collectively referred to as "Committed Revolving Credit Capacity") to obtain debt financing from any of its commercial paper programs, uncommitted bank lines or comparable sources (the debt financing that Borrower may obtain from such programs, credit lines and comparable sources, as such programs, credit lines and comparable sources may be modified, amended, supplemented, or replaced from time, is collectively referred to herein as "Commercial Revolving Debt Capacity"). b. Lender has temporary surplus cash available. 2. Interest. Interest on the outstanding and unpaid principal amount of Loans made pursuant to this Agreement shall be calculated as follows: a. On and after September 29, 1995 but before January 1, 1996. Borrower shall pay interest to Lender on the outstanding and unpaid principal amount of the Loans made on and after September 29, 1995 but before January 1, 1996 pursuant to this Agreement at a rate per annum equal to: (1) the one month LIBOR rate as indicated by the British Bankers Association Interest Settlement Rate (displayed on the LIBO page of Telerate 3750) as of 11:00 a.m., London time, or if not available, (2) the arithmetic mean of the rates at which deposits in dollars are offered at the principal London office of Bankers Trust Company and Citibank N.A. rounded 2 to the nearest 1/16 of 1% (or, if there is no such nearest 1/16 of 1%, the next higher 1/16 of 1%) at approximately 11:00 a.m., London time, and in an amount that is representative for a single transaction in the London interbank market at such time. b. On and after January 1, 1996. On and after January 1, 1996, if the sum of the outstanding and unpaid principal amount of the (i) Borrower's Commercial Revolving Debt Capacity and (ii) Loans outstanding under this Agreement: (1) is equal to or less than Borrower's Committed Revolving Credit Capacity, then Borrower shall pay interest to Lender on the outstanding and unpaid principal amount of Loans made pursuant to this Agreement at a rate per annum equal to the sum of the following, divided by two: (i) the daily market borrowing cost of Borrower, as determined daily by Lender's Treasury Department and (ii) the daily average rate, as determined daily by Lender's Treasury Department, at which Lender is able in accordance with Lender's Investment Policy to invest temporary surplus cash. (2) exceeds Borrower's Committed Revolving Credit Capacity, then Borrower shall pay interest to Lender on the outstanding and unpaid principal amount of Loans made pursuant to this Agreement at a rate per annum equal to: (a) the sum of the following, divided by two: (i) the daily market borrowing cost of Borrower, as determined daily by Lender's Treasury Department and (ii) the daily average rate, as determined daily by Lender's Treasury Department, at which Lender is able in accordance with Lender's Investment Policy to invest temporary surplus cash available to Lender to the extent such cash is available to Lender for use in such Loan(s), and/or to the extent such cash is not available to Lender, (b) the daily market borrowing cost of Borrower plus the cost incurred by the Lender to maintain committed revolving credit facilities, as determined daily by Lender's Treasury Department. Interest shall be calculated on the basis of a year of 360 days for the actual number of days elapsed. Interest shall be paid at the offices of Lender at 1400 Smith Street, Houston, Texas 77002 in funds immediately available to Lender on the fifth Business Day of each month. As used herein, Business Day means any day other than a Saturday, a Sunday or a state or federal bank holiday in Houston, Texas or New York, New York. 3. Note. All Loans made by Lender under this Agreement shall be evidenced by, and repaid with interest in accordance with, a single promissory note of Borrower in substantially the form annexed hereto as Exhibit A (the "Note"), with appropriate insertions therein. The Note shall be used to evidence each borrowing, repayment and reborrowing hereunder. The Note shall (i) be dated the date of the first Loan evidenced thereby and (ii) be stated to mature as to principal on the Termination Date. Lender is hereby authorized by Borrower to endorse on the schedule attached to the Note the 2 3 amount of each Loan and of each payment of principal received by Lender on account of the Loans, which endorsement shall, in the absence of manifest error, be conclusive as to the outstanding balance of the Loans made by Lender, provided, however, that the failure to make such notation with respect to any Loan or payment shall not limit or otherwise affect the obligations of Borrower under this Agreement or the Note. 4. Prepayments. Borrower may prepay the Note in whole or in part. 5. Acceleration. Lender reserves the right to require prepayment of the Note upon demand, whereupon this Agreement shall be immediately terminated and the principal amount of the Note, together with accrued interest thereon, shall become immediately due and payable. 6. Use of Proceeds. The proceeds of the Loans hereunder shall be used by Borrower to supplement working capital and for other general corporate purposes. 7. Notices, Etc. All notices and other communications provided for under this Agreement shall be in writing (including telegraphic communication) and mailed, telecopied, telegraphed, or delivered, if to Lender, at its address at 1400 Smith Street, Houston, Texas 77002, Attention: Vice President, Finance and Treasurer, telecopy number (713) 853-3920 and if to Borrower, at its address at 1400 Smith Street, Houston, Texas 77002, Attention: Senior Vice President and Chief Financial Officer, telecopy number (713) 646-2548; or, as to each party, at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section 7. 8. No Waiver; Remedies. No failure on the part of Lender to exercise, and no delay in exercising, any right, power, or remedy under this Agreement or the Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right under this Agreement or the Note preclude any other or further exercise thereof or the exercise of any other right. The remedies provided in this Agreement or the Note are cumulative and not exclusive of any remedies provided by law. 9. Governing Law. This instrument shall be construed under the laws of the State of Texas, and the obligation of Borrower to make payments of interest as provided for herein is expressly limited so that the aggregate amount of all the interest paid by Borrower on the Note shall never exceed the highest rate allowed by the laws of the State of Texas as construed by the highest court or courts having jurisdiction thereof (the "Legal Interest Rate"); and if, at the time any such payment of interest is due, the payment of such sum would make the total interest exceed the Legal Interest Rate, the amount so payable by Borrower shall be reduced to an amount which does not exceed Legal Interest Rate; and, similarly, if the maturity of the Note is accelerated for any reason before the due date stated, earned interest may never include more than the Legal Interest Rate, it being the intention of the parties to conform strictly to the laws of the State of Texas now in force, and in the event it should be held that the interest payable under the Note or otherwise is in excess of the Legal Interest Rate, the interest chargeable hereunder (whether included in the face amount or otherwise) shall be reduced to the Legal Interest Rate, and any amount in excess of the Legal Interest Rate shall be cancelled automatically and shall be either refunded (if theretofore paid) or credited to the principal amount due on the Note. 3 4 10. Termination Date. The "Termination Date" means December 31, 1998. Notwithstanding the above, this Credit Agreement may be terminated upon at least thirty (30) days prior written notice given by one party to the other; provided, however, that the provisions of this Agreement shall survive as to any Loans maturing after the effective termination date. Upon cancellation of the last such Loan, this Agreement shall be of no further force and effect. 11. Captions. The captions of the various sections of this Agreement have been inserted only for the purposes of convenience, and shall not be deemed in any manner to modify, explain, enlarge or restrict any provisions of this Agreement. 12. Entire Agreement. THIS AGREEMENT AND THE NOTE TOGETHER CONSTITUTE A WRITTEN LOAN AGREEMENT AND 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. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. ENRON OIL & GAS COMPANY By:__________________________________ Walter C. Wilson Senior Vice President and Chief Financial Officer ENRON CORP. By:__________________________________ Kurt S. Huneke Vice President, Finance and Treasurer 4 5 EXHIBIT A PROMISSORY NOTE Houston, Texas $200,000,000 September 29, 1995 FOR VALUE RECEIVED, the undersigned, Enron Oil & Gas Company, a Delaware corporation ("Borrower"), DOES HEREBY PROMISE to pay to the order of Enron Corp. ("Lender") at its office at 1400 Smith Street, Houston, Texas 77002, in lawful money of the United States and in funds immediately available to Lender, the principal amount of Two Hundred Million and No/100 Dollars ($200,000,000) or the aggregate unpaid principal amount of all loans (the "Loans") made to Borrower by Lender pursuant to Section 1 of the Credit Agreement hereinafter referred to, whichever is less, on demand or on December 31, 1998. Borrower further promises to pay interest in like money, at said office, from the date hereof on the unpaid principal amount hereof until such principal amount shall become due and payable, at the rates per annum and on the dates provided in Section 2 of the Credit Agreement. Each Loan made by the Lender to the Borrower pursuant to the Credit Agreement, and all payments made on account of principal thereof, shall be recorded by the Lender and endorsed on the Schedule attached hereto which is part of this Promissory Note or in such other records as the Lender may designate. This Promissory Note is the Note described in and issued pursuant to the Credit Agreement dated as of September 29, 1995, between Borrower and Lender (the "Credit Agreement"), and is entitled to the benefits thereof. The Credit Agreement, among other things, (i) provides for the making of Loans by the Lender to the Borrower from time to time in an aggregate amount not to exceed the U.S. dollar amount first above mentioned, the indebtedness of the Borrower resulting from each such Loan being evidenced by this Promissory Note, and (ii) contains provisions for prepayments on account of the principal of this Promissory Note upon the terms and conditions specified in the Credit Agreement. Terms used herein which are defined in the Credit Agreement shall have their defined meanings when used herein. This Note shall be governed by and construed in accordance with the laws of the State of Texas. If this Note shall be collected by any legal proceedings or shall be placed in the hands of an attorney for collection after maturity, the undersigned promises to pay to the owner and holder hereof all reasonable attorney's fees and costs of collection. THIS AGREEMENT AND THE CREDIT AGREEMENT TOGETHER CONSTITUTE A WRITTEN LOAN AGREEMENT AND REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL 6 AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. ENRON OIL & GAS COMPANY By:__________________________________ Walter C. Wilson Senior Vice President and Chief Financial Officer 2 7 SCHEDULE TO PROMISSORY NOTE This Grid is attached to and made part of the Promissory Note dated September 29, 1995, executed by Enron Oil & Gas Company to Enron Corp., and records advances, payments and other information required therein. UNPAID NAME OF AMOUNT OF PRINCIPAL PERSON AMOUNT OF PRINCIPAL BALANCE OF MAKING DATE LOAN REPAID NOTE NOTATION - ------------------------------------------------------------------------------- EX-10.31 6 CREDIT AGMT BETWEEN EOG & ENRON CORP 1 EXHIBIT 10.31 CREDIT AGREEMENT CREDIT AGREEMENT dated as of September 29, 1995, between Enron Oil & Gas Company, a Delaware corporation ("Lender"), and Enron Corp., a Delaware corporation ("Borrower"). The parties hereto hereby agree as follows: 1. Loans. Subject to the terms and conditions of this Agreement, Lender may make loans (the "Loans") from its available funds to Borrower from time to time during the period from the date of this Agreement up to but not including the Termination Date, as defined in Section 10, in an aggregate principal amount up to but not exceeding the sum of Two Hundred Million Dollars ($200,000,000) at any one time outstanding. Within the limits of this Agreement, Borrower may borrow, prepay pursuant to Section 4, and reborrow under this Section 1. While the Lender has, and shall have, no obligation to make Loans to the Borrower pursuant to this Agreement, the parties hereto agree that any Loans by the Lender will be made in reliance on the agreements of the Lender and the Borrower contained herein and on the terms and conditions and in the manner provided herein. Lender may make Loans to Borrower and Borrower may borrow under this Agreement to the extent Lender has temporary surplus cash available and Borrower and Lender may mutually benefit from the Loans. 2. Interest. Interest on the outstanding and unpaid principal amount of Loans made pursuant to this Agreement shall be calculated as follows: a. On and after September 29, 1995 but before January 1, 1996. Borrower shall pay interest to Lender on the outstanding and unpaid principal amount of the Loans made on and after September 29, 1995 but before January 1, 1996 pursuant to this Agreement at a rate per annum equal to: (1) the one month LIBOR rate as indicated by the British Bankers Association Interest Settlement Rate (displayed on the LIBO page of Telerate 3750) as of 11:00 a.m., London time, or if not available, (2) the arithmetic mean of the rates at which deposits in dollars are offered at the principal London office of Bankers Trust Company and Citibank N.A. rounded to the nearest 1/16 of 1% (or, if there is no such nearest 1/16 of 1%, the next higher 1/16 of 1%) at approximately 11:00 a.m., London time, and in an amount that is representative for a single transaction in the London interbank market at such time. b. On and after January 1, 1996. Borrower shall pay interest to Lender on the outstanding and unpaid principal amount of the Loans made on and after January 1, 1996 pursuant to this Agreement at a rate per annum equal to the sum of the following, divided by two: (i) the daily market borrowing all-in cost of Borrower, as determined daily by Borrower's Treasury Department and (ii) the daily average rate, as determined daily by Borrower's Treasury Department, at which Lender is able in accordance with Lender's Investment Policy to invest temporary surplus cash available to Lender. 2 c. Volumetric Production Payment Loans. Notwithstanding the provisions of Section 2.a. or b., for any period during the term of this Agreement during which the outstanding and unpaid principal amount of loans made by Lender to Borrower is equal to or less than the VPP Deferred Revenue Balance, such principal amount shall bear interest as provided in the Promissory Note made on January 1, 1993 by Borrower to Lender. Only principal balances in excess of any VPP Deferred Revenue Balance shall bear interest as provided in Section 2.a or b. For purposes of this Agreement, "VPP Deferred Revenue Balance" shall mean the amounts associated with the unamortized deferred revenues under the terms of volumetric production payment and exchange agreements effective October 1, 1992, as amended, that are reported in the financial statements of Lender from time to time and are comparable to amounts included in audited and publicly reported financial statements. Interest shall be calculated on the basis of a year of 360 days for the actual number of days elapsed. Interest shall be paid at the offices of Lender at 1400 Smith Street, Houston, Texas 77002 in funds immediately available to Lender on the fifth Business Day of each month. As used herein, Business Day means any day other than a Saturday, a Sunday or a state or federal bank holiday in Houston, Texas or New York, New York. 3. Note. All Loans made by Lender under this Agreement shall be evidenced by, and repaid with interest in accordance with, a single promissory note of Borrower in substantially the form annexed hereto as Exhibit A (the "Note"), with appropriate insertions therein. The Note shall be used to evidence each borrowing, repayment and reborrowing hereunder. The Note shall (i) be dated the date of the first Loan evidenced thereby and (ii) be stated to mature as to principal on the Termination Date. Lender is hereby authorized by Borrower to endorse on the schedule attached to the Note the amount of each Loan and of each payment of principal received by Lender on account of the Loans, which endorsement shall, in the absence of manifest error, be conclusive as to the outstanding balance of the Loans made by Lender, provided, however, that the failure to make such notation with respect to any Loan or payment shall not limit or otherwise affect the obligations of Borrower under this Agreement or the Note. 4. Prepayments. Borrower may prepay the Note in whole or in part. 5. Acceleration. Lender reserves the right to require prepayment of the Note upon demand, whereupon this Agreement shall be immediately terminated and the principal amount of the Note, together with accrued interest thereon, shall become immediately due and payable. 6. Use of Proceeds. The proceeds of the Loans hereunder shall be used by Borrower to supplement working capital and for other general corporate purposes. 7. Notices, Etc. All notices and other communications provided for under this Agreement shall be in writing (including telegraphic communication) and mailed, telecopied, telegraphed, or delivered, if to Lender, at its address at 1400 Smith Street, Houston, Texas 77002, Attention: Senior Vice President and Chief Financial Officer, telecopy number (713) 646-2548, and if to Borrower, at its address at 1400 Smith Street, Houston, Texas 77002, Attention: Vice President, Finance and 2 3 Treasurer, telecopy number (713) 853-3920; or, as to each party, at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section 7. 8. No Waiver; Remedies. No failure on the part of Lender to exercise, and no delay in exercising, any right, power, or remedy under this Agreement or the Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right under this Agreement or the Note preclude any other or further exercise thereof or the exercise of any other right. The remedies provided in this Agreement or the Note are cumulative and not exclusive of any remedies provided by law. 9. Governing Law. This instrument shall be construed under the laws of the State of Texas, and the obligation of Borrower to make payments of interest as provided for herein is expressly limited so that the aggregate amount of all the interest paid by Borrower on the Note shall never exceed the highest rate allowed by the laws of the State of Texas as construed by the highest court or courts having jurisdiction thereof (the "Legal Interest Rate"); and if, at the time any such payment of interest is due, the payment of such sum would make the total interest exceed the Legal Interest Rate, the amount so payable by Borrower shall be reduced to an amount which does not exceed Legal Interest Rate; and, similarly, if the maturity of the Note is accelerated for any reason before the due date stated, earned interest may never include more than the Legal Interest Rate, it being the intention of the parties to conform strictly to the laws of the State of Texas now in force, and in the event it should be held that the interest payable under the Note or otherwise is in excess of the Legal Interest Rate, the interest chargeable hereunder (whether included in the face amount or otherwise) shall be reduced to the Legal Interest Rate, and any amount in excess of the Legal Interest Rate shall be cancelled automatically and shall be either refunded (if theretofore paid) or credited to the principal amount due on the Note. 10. Termination Date. The "Termination Date" means December 31, 1998. Notwithstanding the above, this Credit Agreement may be terminated upon at least thirty (30) days prior written notice given by one party to the other; provided, however, that the provisions of this Agreement shall survive as to any Loans maturing after the effective termination date. Upon cancellation of the last such Loan, this Agreement shall be of no further force and effect. 11. Captions. The captions of the various sections of this Agreement have been inserted only for the purposes of convenience, and shall not be deemed in any manner to modify, explain, enlarge or restrict any provisions of this Agreement. 12. Entire Agreement. THIS AGREEMENT AND THE NOTE TOGETHER CONSTITUTE A WRITTEN LOAN AGREEMENT AND 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. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. 3 4 ENRON OIL & GAS COMPANY By:__________________________________ Walter C. Wilson Senior Vice President and Chief Financial Officer ENRON CORP. By:__________________________________ kurt S. Huneke Vice President, Finance and Treasurer 4 5 EXHIBIT A PROMISSORY NOTE Houston, Texas $200,000,000 September 29, 1995 FOR VALUE RECEIVED, the undersigned, Enron Corp., a Delaware corporation ("Borrower"), DOES HEREBY PROMISE to pay to the order of Enron Oil & Gas Company ("Lender") at its office at 1400 Smith Street, Houston, Texas 77002, in lawful money of the United States and in funds immediately available to Lender, the principal amount of Two Hundred Million and No/100 Dollars ($200,000,000) or the aggregate unpaid principal amount of all loans (the "Loans") made to Borrower by Lender pursuant to Section 1 of the Credit Agreement hereinafter referred to, whichever is less, on demand or on December 31, 1998. Borrower further promises to pay interest in like money, at said office, from the date hereof on the unpaid principal amount hereof until such principal amount shall become due and payable, at the rates per annum and on the dates provided in Section 2 of the Credit Agreement. Each Loan made by the Lender to the Borrower pursuant to the Credit Agreement, and all payments made on account of principal thereof, shall be recorded by the Lender and endorsed on the Schedule attached hereto which is part of this Promissory Note or in such other records as the Lender may designate. This Promissory Note is the Note described in and issued pursuant to the Credit Agreement dated as of September 29, 1995, between Borrower and Lender (the "Credit Agreement"), and is entitled to the benefits thereof. The Credit Agreement, among other things, (i) provides for the making of Loans by the Lender to the Borrower from time to time in an aggregate amount not to exceed the U.S. dollar amount first above mentioned, the indebtedness of the Borrower resulting from each such Loan being evidenced by this Promissory Note, and (ii) contains provisions for prepayments on account of the principal of this Promissory Note upon the terms and conditions specified in the Credit Agreement. Terms used herein which are defined in the Credit Agreement shall have their defined meanings when used herein. This Note shall be governed by and construed in accordance with the laws of the State of Texas. If this Note shall be collected by any legal proceedings or shall be placed in the hands of an attorney for collection after maturity, the undersigned promises to pay to the owner and holder hereof all reasonable attorney's fees and costs of collection. THIS AGREEMENT AND THE CREDIT AGREEMENT TOGETHER CONSTITUTE A WRITTEN LOAN AGREEMENT AND REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL 6 AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. ENRON CORP. By:__________________________________ Kurt S. Huneke Vice President, Finance and Treasurer 2 7 SCHEDULE TO PROMISSORY NOTE This Grid is attached to and made part of the Promissory Note dated September 29, 1995, executed by Enron Oil & Gas Company to Enron Corp., and records advances, payments and other information required therein. UNPAID NAME OF AMOUNT OF PRINCIPAL PERSON AMOUNT OF PRINCIPAL BALANCE OF MAKING DATE LOAN REPAID NOTE NOTATION - ----------------------------------------------------------------------------- EX-10.57A 7 LETTER AGMT TO NATURAL GAS SWAP TRANSACTIONS 1 Exhibit 10.57(a) March 31, 1995 Enron Oil & Gas Company 1400 Smith Street Houston, TX 77002 RE: Natural Gas Swap Transactions Ladies and Gentlemen: This letter serves to confirm our mutual understanding with respect to the certain agreements by Enron Oil & Gas Company, a Delaware corporation ("EOG"), to make assignments to Enron Corp., a Delaware corporation ("Enron"), and to Enron Capital & Trade Resources Corp., a Delaware corporation ("ECT"); and the obligations of Enron and ECT to enter into certain swap transactions in consideration for such assignments. Unless otherwise defined herein, all capitalized terms shall have the meaning assigned such terms in the Receivable Sale and Service Agreement (the "Sale Agreement") of even date herewith among ECT, State Street Bank and Trust Company, as Trustee of the Contract Funding One Trust, the purchasers named therein, and Citibank, N.A., as agent for the Purchasers. In connection with the transactions contemplated by the Sale Agreement, EOG is, of even date herewith, (a) assigning to Enron, who is immediately thereafter assigning to ECT, the Fuel Supply Contract (and certain related fuel purchase contracts), and (b) assigning to ECT the Paribas/Westpac Hedging Agreements. As consideration for such assignments, ECT and EOG are entering into the natural gas swap transactions (the "Swap Transactions") described in Exhibit A attached hereto. As further consideration for such assignments, Enron hereby guaranties to EOG that ECT will promptly pay and perform its obligations to EOG pursuant to this letter and the Swap Transactions. The parties recognize that (in connection with the transactions contemplated by the Sale Agreement) ECT is establishing an Available Liquidity Commitment (in the amount of $2,000,000) and is funding a Reserve Account (in the amount of $2,000,000). As further consideration for such assignments and the Swap Transactions, EOG and ECT have agreed to the following payment scheme (with respect to the Available Liquidity Commitment and the Reserve Account): (a) As soon as practicable after the end of calendar year 1995, ECT will determine the amount (if any) by which the funds in the Reserve Account and the Available Liquidity Commitment (existing as of the end of 1995) exceed $4,000,000 2 (such excess, not to exceed $500,000, the "Reserve Excess"). Promptly thereafter ECT will notify EOG in writing of the amount of the Reserve Excess. (b) Commencing January 1, 1996, through the Retirement Date, the Reserve Excess will accrue a notional amount of interest at the per annum rate (compounded monthly) equal to the discount rate used to calculate the present value of the Receivable Asset. As referenced herein, the "ECT Retained Amount" means the sum of (i) the Reserve Excess, plus (ii) such notional interest accrual through the Retirement Date, plus (iii) $4,000,000. (c) If on the Retirement Date, the sum of the amounts in the Reserve Account and the Available Liquidity Commitment is less than the ECT Retained Amount, then EOG will pay to ECT (in immediately available funds on the Retirement Date) the difference between such sum and the ECT Retained Amount. (d) If on the Retirement Date, the sum of the amounts in the Reserve Account and the Available Liquidity Commitment is greater than the ECT Retained Amount, then ECT will distribute to EOG (from the Reserve Account in immediately available funds on the Retirement Date) the difference between such sum and the ECT Retained Amount. (e) In all instances, ECT will be entitled to receive on the Retirement Date the first distribution of funds from the Reserve Account until ECT has received an amount which (when combined with the amount of the Available Liquidity Commitment as of the Retirement Date) equals the ECT Retained Amount. (f) Subject to compliance with any confidentiality covenants to which ECT may be bound, ECT will provide EOG with access to such books and records as is necessary for EOG to confirm the accuracy of the payment and distribution of funds in compliance with clauses (a) through (e) above. This letter is essential to the understanding of the parties relating to the subject matter hereof and is not superseded or cancelled by any communications, understandings, and agreements dated on or after the date hereof (including the assignments described above and notwithstanding the provisions of such assignments to the contrary). This letter may not be amended or modified except in writing and executed by the parties hereto. This letter may be executed in counterparts which, when taken together, shall constitute one document. This letter shall be governed by and construed in accordance with the internal laws of the State of Texas without regard to the conflicts of laws principles thereof. This letter shall be binding upon the parties hereto and their respective successors and assigns. - 2 - 3 If the foregoing accurately reflects our mutual understandings, indicate your acknowledgement by signing in the space provided below. ENRON CORP. By: /s/ Kurt S. Huneke ___________________________________________ Name: Kurt S. Huneke Title: Vice President, Finance and Treasurer ENRON CAPITAL & TRADE RESOURCES CORP. By: /s/ Andrew S. Fastow ___________________________________________ Name: Andrew S. Fastow Title: Vice President Accepted and Agreed this 31st day of March, 1995 Enron Oil & Gas Company By: /s/ Mark G. Papa ___________________________________________ Name: Mark G. Papa Title: President, North American Operations - 3 - 4
- ------------------------------------------------------------------------------------------- EXHIBIT A: SCHEDULE FOR 200,000 MMBTUD ECT/EOG SWAP TRANSACTIONS - ------------------------------------------------------------------------------------------- QUARTER QUARTER UNDISCOUNTED DISCOUNTED UNDISCOUNTED DISCOUNTED ------------ ---------- ------------ ---------- YEAR MONTH $ DISC% $ $ $ - ---- ----- - ----- - - - - ------------------------------------------------------------------------------------------- 1995 3 $1,600,000 1,000000 $1,600,000 $1,600,000 $1,600,000 - ------------------------------------------------------------------------------------------- 200,000 4 $3,166,666 0.993814 $3,147,078 - ------------------------------------------------------------------------------------------- MMBTUD 5 $3,166,667 0.987463 $3,126,966 - ------------------------------------------------------------------------------------------- 6 $3,166,667 0.981355 $3,107,623 $9,500,000 $9,381,667 - ------------------------------------------------------------------------------------------- 7 $3,166,666 0.975083 $3,087,761 - ------------------------------------------------------------------------------------------- 8 $3,166,667 0.968851 $3,068,028 - ------------------------------------------------------------------------------------------- 9 $3,166,667 0.962858 $3,049,050 $9,500,000 $9,204,839 - ------------------------------------------------------------------------------------------- 10 $3,166,666 0.956704 $3,029,562 - ------------------------------------------------------------------------------------------- 11 $3,166,667 0.950786 $3,010,823 - ------------------------------------------------------------------------------------------- 12 $3,166,667 0.944710 $2,991,581 $9,500,000 $9,031,966 - ------------------------------------------------------------------------------------------- $30,100,000 $29,218,473 - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- 1996 1 $2,500,000 0.938672 $2,346,680 - ------------------------------------------------------------------------------------------- 200,000 2 $2,500,000 0.933252 $2,333,129 - ------------------------------------------------------------------------------------------- MMBTUD 3 $2,500,000 0.927287 $2,318,217 $7,500,000 $6,998,026 - ------------------------------------------------------------------------------------------- 4 $2,500,000 0.921551 $2,303,878 - ------------------------------------------------------------------------------------------- 5 $2,500,000 0.915661 $2,289,153 - ------------------------------------------------------------------------------------------ 6 $2,500,000 0.909997 $2,274,994 $7,500,000 $6,868,025 - ------------------------------------------------------------------------------------------- 7 $2,500,000 0.904181 $2,260,454 - ------------------------------------------------------------------------------------------- 8 $2,500,000 0.898403 $2,246,007 - ------------------------------------------------------------------------------------------- 9 $2,500,000 0.892846 $2,232,114 $7,500,000 $6,738,574 - ------------------------------------------------------------------------------------------- 10 $2,500,000 0.887139 $2,217,848 - ------------------------------------------------------------------------------------------- 11 $2,500,000 0.881652 $2,204,129 - ------------------------------------------------------------------------------------------- 12 $2,500,000 0.876017 $2,190,042 $7,500,000 $6,612,020 - ------------------------------------------------------------------------------------------- $30,000,000 $27,216,664 - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- 1997 1 $1,625,000 0.870418 $1,414,430 - ------------------------------------------------------------------------------------------- 200,000 2 $1,625,000 0.865392 $1,406,262 - ------------------------------------------------------------------------------------------- MMBTUD 3 $1,625,000 0.859861 $1,397,274 $4,875,000 $4,217,960 - ------------------------------------------------------------------------------------------ 4 $1,625,000 0.854542 $1,388,631 - ------------------------------------------------------------------------------------------- 5 $1,625,000 0.849081 $1,379,756 - ------------------------------------------------------------------------------------------- 6 $1,625,000 0.843829 $1,371,222 $4,875,000 $4,139,604 - ------------------------------------------------------------------------------------------- 7 $1,625,000 0.838436 $1,362,458 - ------------------------------------------------------------------------------------------- 8 $1,625,000 0.833077 $1,353,750 - ------------------------------------------------------------------------------------------- 9 $1,625,000 0.827924 $1,345,377 $4,875,000 $4,061,585 - ------------------------------------------------------------------------------------------- 10 $1,625,000 0.822633 $1,336,778 - ------------------------------------------------------------------------------------------- 11 $1,625,000 0.817544 $1,328,509 - ------------------------------------------------------------------------------------------- 12 $1,625,000 0.812319 $1,320,018 $4,875,000 $3,985,306 - ------------------------------------------------------------------------------------------- $19,500,000 $16,404,466 - -------------------------------------------------------------------------------------------
5 - ------------------------------------------------------------------------------------------- EXHIBIT A: SCHEDULE FOR 200,000 MMBTUD ECT/EOG SWAP TRANSACTIONS - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- 1998 1 $683,333 0.807127 $551,537 - ------------------------------------------------------------------------------------------- 200,000 2 $683,333 0.802467 $548,352 - ------------------------------------------------------------------------------------------- MMBTUD 3 $683,333 0.797338 $544,848 $2,050,000 $1,644,737 - ------------------------------------------------------------------------------------------- 4 $683,333 0.792406 $541,477 - ------------------------------------------------------------------------------------------- 5 $683,333 0.787342 $538,017 - ------------------------------------------------------------------------------------------- 6 $683,333 0.782471 $534,689 $2,050,000 $1,614,183 - ------------------------------------------------------------------------------------------- 7 $683,333 0.777470 $531,272 - ------------------------------------------------------------------------------------------- 8 $683,333 0.772502 $527,876 - ------------------------------------------------------------------------------------------- 9 $683,333 0.767723 $524,611 $2,050,000 $1,583,758 - ------------------------------------------------------------------------------------------- 10 $683,333 0.762817 $521,258 - ------------------------------------------------------------------------------------------- 11 $683,333 0.758098 $518,034 - ------------------------------------------------------------------------------------------- 12 $683,333 0.753253 $514,723 $2,050,000 $1,544,014 - ------------------------------------------------------------------------------------------- $8,200,000 $6,396,693 - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- 1999 1 $350,000 0.748439 $261,954 - ------------------------------------------------------------------------------------------- 200,000 2 $350,000 0.744117 $260,441 - ------------------------------------------------------------------------------------------- MMBTUD 3 $350,000 0.739361 $258,776 $1,050,000 $781,171 - ------------------------------------------------------------------------------------------- 4 $350,000 0.734788 $257,176 - ------------------------------------------------------------------------------------------- 5 $350,000 0.730092 $255,532 - ------------------------------------------------------------------------------------------- 6 $350,000 0.725576 $253,951 $1,050,000 $766,659 - ------------------------------------------------------------------------------------------- 7 $350,000 0.721059 $252,371 - ------------------------------------------------------------------------------------------- 8 $350,000 0.716543 $250,790 - ------------------------------------------------------------------------------------------- 9 $350,000 0.712027 $249,210 $1,050,000 $752,371 - ------------------------------------------------------------------------------------------- 10 $350,000 0.707511 $247,629 - ------------------------------------------------------------------------------------------- 11 $350,000 0.702995 $246,048 - ------------------------------------------------------------------------------------------- 12 $350,000 0.698479 $244,468 $1,050,000 $738,145 - ------------------------------------------------------------------------------------------- $4,200,000 $3,038,346 - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- $92,000,000 $82,274,621 ----------- ----------- - ------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------- INCLUDES "ESTIMATED" MARKET CONTRACT IMPACT -$900,000 - ------------------------------------------------------------------------------------------- INCLUDES "ESTIMATED" TRANSACTION COST =$700,000 - ------------------------------------------------------------------------------------------- SCHEDULE SUBJECT TO CHANGE BASED ON: - ------------------------------------------------------------------------------------------- FINAL INTEREST RATE CALCULATIONS - ------------------------------------------------------------------------------------------- FINAL TRANSACTION COSTS AND - ------------------------------------------------------------------------------------------- FINAL MARKET CONTRACT CALCULATIONS - -------------------------------------------------------------------------------------------
EX-10.57B 8 AMENDMENT TO NATURAL GAS SWAP LETTER AGMT. 1 EXHIBIT 10.57(b) AMENDMENT TO NATURAL GAS SWAP TRANSACTIONS LETTER AGREEMENT Reference for all purposes is hereby made to that certain Natural Gas Swap Transactions Letter Agreement (the Letter Agreement), dated March 31, 1995 between and among ENRON CORP.,a Delaware corporation ("ENRON"), ENRON CAPITAL & TRADE RESOURCES CORP. WHEREAS, ENRON, ECT and EOG each desire to amend the Letter Agreement as hereinafter set forth effective as of March 31, 1995 (the "Effective Date"); NOW, THEREFORE, for and in consideration of the premises and of the sum of Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which is acknowledged by each of the parties hereto, ENRON, ECT and EOG do hereby amend the Letter Agreement as follows: 1 Capitalized terms used herein shall have the meanings given to them in the Letter Agreement, unless otherwise defined herein. 2 Exhibit A of the Letter Agreement is hereby amended by deleting same and substituting Amended Exhibit A attached hereto in lieu thereof. Amended Exhibit A attached hereto is made a part of the Letter Agreement and supercedes Exhibit A attached to the Letter Agreement. 3 Except as expressly amended hereby, the Letter Agreement shall remain in full force and effect as heretofore entered into. ENRON, ECT and EOG each ratifies and confirms the Letter Agreement as hereby amended. EXECUTED this 19th day of December, 1995, but effective for all purposes as of the Effective Date. ENRON CORP. ENRON OIL & GAS COMPANY By: /s/ E.P. Segner III By: /s/ Mark G. Papa ------------------------- ------------------------------------ Name: Edmond P. Segner III Name: Mark G. Papa ------------------------- ------------------------------------ Title: Executive Vice President Title: President, North American Operations ------------------------- ------------------------------------ ENRON CAPITAL & TRADE RESOURCES CORP. By: /s/ Richard A. Causey ------------------------- Name: Richard A. Causey ------------------------- Title: Vice President ------------------------- Page 1 2 AMENDED EXHIBIT A : SCHEDULE FOR 6,000,000 MMBTU PER MONTH ECT/EOG SWAP TRANSACTIONS
QUARTER QUARTER UNDISCOUNTED DISCOUNTED UNDISCOUNTED DISCOUNTED MARGIN PURCHASE SALE YEAR MONTH $ DISC % $ $ $ 1995 3 $1,600,200 $1,582,476 $1,600,200 $1,582,476 $0.266700 $1.8500 $2.116700 6,000,000 4 $3,166,800 $3,113,093 $0.527800 $1.8500 $2.377800 MMBTU/MTH 5 $3,166,800 $3,093,958 $0.527800 $1.8500 $2.377800 6 $3,166,800 $3,075,552 $9,500,400 $9,282,603 $0.527800 $1.8500 $2.377800 7 $3,166,800 $3,056,648 $0.527800 $1.8500 $2.377800 8 $3,166,800 $3,037,860 $0.527800 $1.8500 $2.377800 9 $3,166,800 $3,019,787 $9,500,400 $9,114,295 $0.527800 $1.8500 $2.377800 10 $3,166,800 $3,001,226 $0.527800 $1.8500 $2.377800 11 $3,166,800 $2,983,371 $0.527800 $1.8500 $2.377800 12 $3,166,800 $2,965,033 $9,500,400 $8,949,630 $0.527800 $1.8500 $2.377800 $30,101,400 $28,929,004 1996 1 $2,500,200 $2,326,516 $0.416700 $1.9200 $2.336700 6,000,000 2 $2,500,200 $2,313,135 $0.416700 $1.9200 $2.336700 MMBTU/MTH 3 $2,500,200 $2,298,917 $7,500,600 $6,938,568 $0.416700 $1.9200 $2.336700 4 $2,500,200 $2,285,241 $0.416700 $1.9200 $2.336700 5 $2,500,200 $2,271,194 $0.416700 $1.9200 $2.336700 6 $2,500,200 $2,257,683 $7,500,600 $6,814,118 $0.416700 $1.9200 $2.336700 7 $2,500,200 $2,243,806 $0.416700 $1.9200 $2.336700 8 $2,500,200 $2,230,014 $0.416700 $1.9200 $2.336700 9 $2,500,200 $2,216,747 $7,500,600 $6,690,567 $0.416700 $1.9200 $2.336700 10 $2,500,200 $2,203,122 $0.416700 $1.9200 $2.336700 11 $2,500,200 $2,190,015 $0.416700 $1.9200 $2.336700 12 $2,500,200 $2,176,554 $7,500,600 $6,569,691 $0.416700 $1.9200 $2.336700 $30,002,400 $27,012,944 1997 1 $1,624,800 $1,405,778 $0.270800 $2.0300 $2.300800 6,000,000 2 $1,624,800 $1,397,971 $0.270800 $2.0300 $2.300800 MMBTU/MTH 3 $1,624,800 $1,389,379 $4,874,400 $4,193,128 $0.270800 $2.0300 $2.300800 4 $1,624,800 $1,381,113 $0.270800 $2.0300 $2.300800 5 $1,624,800 $1,372,624 $0.270800 $2.0300 $2.300800 6 $1,624,800 $1,364,458 $4,874,400 $4,118,195 $0.270800 $2.0300 $2.300800 7 $1,624,800 $1,356,071 $0.270800 $2.0300 $2.300800 8 $1,624,800 $1,347,736 $0.270800 $2.0300 $2.300800 9 $1,624,800 $1,339,718 $4,874,400 $4,043,525 $0.270800 $2.0300 $2.300800 10 $1,624,800 $1,331,483 $0.270800 $2.0300 $2.300800 11 $1,624,800 $1,323,562 $0.270800 $2.0300 $2.300800 12 $1,624,800 $1,315,427 $4,874,400 $3,970,472 $0.270800 $2.0300 $2.300800 $19,497,600 $16,325,320
Page 2 3 AMENDED EXHIBIT A : SCHEDULE FOR 6,000,000 MMBTU PER MONTH ECT/EOG SWAP TRANSACTIONS
MARGIN PURCHASE SALE 1998 1 $760,200 $611,670 $0.126700 $2.1400 $2.266700 6,000,000 2 $760,200 $608,273 $0.126700 $2.1400 $2.266700 MMBTU/MTH 3 $760,200 $604,534 $2,280,600 $1,824,477 $0.126700 $2.1400 $2.266700 4 $760,200 $600,937 $0.126700 $2.1400 $2.266700 5 $760,200 $597,244 $0.126700 $2.1400 $2.266700 6 $760,200 $593,691 $2,280,600 $1,791,872 $0.126700 $2.1400 $2.266700 7 $760,200 $590,041 $0.126700 $2.1400 $2.266700 8 $760,200 $586,415 $0.126700 $2.1400 $2.266700 9 $760,200 $582,926 $2,280,600 $1,759,382 $0.126700 $2.1400 $2.266700 10 $760,200 $579,343 $0.126700 $2.1400 $2.266700 11 $760,200 $575,896 $0.126700 $2.1400 $2.266700 12 $760,200 $572,357 $2,280,600 $1,727,596 $0.126700 $2.1400 $2.266700 $9,122,400 $7,103,327 1999 1 $349,800 $261,747 $0.058300 $2.2400 $2.298300 6,000,000 2 $349,800 $260,293 $0.058300 $2.2400 $2.298300 MMBTU/MTH 3 $349,800 $258,693 $1,049,400 $780,733 $0.058300 $2.2400 $2.298300 4 $349,800 $257,154 $0.058300 $2.2400 $2.298300 5 $349,800 $255,573 $0.058300 $2.2400 $2.298300 6 $349,800 $254,053 $1,049,400 $766,780 $0.058300 $2.2400 $2.298300 7 $349,800 $253,750 $0.058300 $2.2400 $2.298300 8 $349,800 $252,190 $0.058300 $2.2400 $2.298300 9 $349,800 $250,690 $1,049,400 $756,630 $0.058300 $2.2400 $2.298300 10 $349,800 $249,149 $0.058300 $2.2400 $2.298300 11 $349,800 $247,667 $0.058300 $2.2400 $2.298300 12 $349,800 $246,145 $1,049,400 $742,961 $0.058300 $2.2400 $2.298300 $4,197,600 $3,047,104 $92,921,400 $82,417,699 ----------- -----------
INCLUDES FINAL MARKET CONTRACT IMPACT =$901,000 INCLUDES FINAL TRANSACTION COST = $511,000 INCLUDES FINAL INTEREST RATE COST OF MONEY = 7.53% ANNUAL Page 3 EX-10.58 9 CONFIRMATION LETTER 1 Exhibit 10.58 Enron Capital & Trade Resources Corp. 1400 Smith Street P. O. Box 4428 Houston, Texas 77210-4428 To: Enron Oil & Gas Company 1400 Smith Street Houston, TX 77002 Attn: Mark Eschenburg From: Enron Capital & Trade Resources Corp. 1400 Smith Street Houston, TX 77002 Date: March 31, 1995 CONFIRMATION LETTER (REVISED DUE TO ADJUSTMENTS TO THE ATTACHED PAYMENT SCHEDULE) ECT TRANSACTION REFERENCE NOS.: 15198.00 The purpose of this communication is to set forth the terms and conditions of the Swap Transaction entered into between us as of the Effective Date specified below (the "Swap Transaction"). This communication constitutes a "Confirmation" as referred to in the master swap agreement specified below. The definitions and provisions contained in the 1987 Interest Rate and Currency Exchange Definitions (as published by the International Swap Dealers Association, Inc.) are incorporated into this Confirmation. In the event of any inconsistency between those definitions and provisions and this Confirmation, this Confirmation will govern. Each party represents that it is entering into this transaction in connection with its line of business and that the terms hereof have been individually tailored and negotiated. This Confirmation supplements, forms part of, and is subject to, the following master swap agreement upon execution thereof: Date As Of: November 1, 1993 Between: Enron Oil & Gas Company (EOG) And: Enron Capital & Trade Resources Corp. (ECT) Upon execution, all provisions contained in the master swap agreement will govern this Confirmation except as expressly modified below. All provisions contained in the master swap agreement will govern this Confirmation except as expressly modified below. 2 The terms of the particular Swap Transaction to which this Confirmation relates are as follows: Commodity: Pipeline quality natural gas ("Natural Gas") Quantity Per Period: Quantity Period Per Period ------ ---------- Each calendar month beginning with 6,000,000 MMBtu per March 1, 1995 and ending on Month December 31, 1999
"MMBtu" means one million British Thermal Units. Effective Date: March 1, 1995 Termination Date: December 31, 1999 The terms of this Swap Transaction relating to the Fixed Price Payor are as follows: Fixed Price Payor: Enron Oil & Gas Company Payment Dates: 25th calendar day succeeding each Period End Date. Period End Date: The last calendar day for the appropriate delivery month. The first Period End Date being March 31, 1995. Fixed Amount: $1.85/MMBtu x 6,000,000 MMBtu per Month for each delivery month for the Period March 1, 1995 through December 31, 1995 $1.92/MMBtu x 6,000,000 MMBtu per Month for each delivery month for the Period January 1, 1996 through December 31, 1996 $2.03/MMBtu x 6,000,000 MMBtu per Month for each delivery month for the Period January 1, 1997 through December 31, 1997 $2.14/MMBtu x 6,000,000 MMBtu per Month for each delivery month for the Period January 1, 1998 through December 31, 1998 $2.24/MMBtu x 6,000,000 MMBtu per Month for each delivery month for the Period January 1, 1999 through December 31, 1999. 2 3 The terms of this Swap Transaction relating to the Floating Price Payor are as follows: Floating Price Payor: ECT Payment Dates: 25th calendar day succeeding each Period End Date. Period End Date: The last calendar day for the appropriate delivery month. The first Period End Date being March 31, 1995. Floating Amount: The average of the last three NYMEX Trading Days for the natural gas contract for the appropriate delivery month x 6,000,000 MMBtu per month for each delivery month. Period: Each calendar month beginning with March 1, 1995 and ending on December 31, 1999. Banking Day Convention: If any specified Payment Date is not a New York Banking Day such Payment Date will be the first following day which is a New York Banking Day. Payment Schedule: SEE ATTACHED PAYMENT SCHEDULE RECONCILING TRANSACTION 15198.00 WITH 15198.01. 3 4 Alternate Component Prices: If NYMEX Natural Gas Settlement Prices are not published for any Period, the Price for such Period shall be the amount determined by the mutual agreement of the parties in good faith to most closely reflect the average spot price in Dollars per MMBtu for that period for natural gas delivered to Henry Hub, LA. Subject to the netting of cross payments as provided in the master swap agreement referred to herein, each party has agreed to make payments to the other in accordance with this Confirmation. Please confirm that the foregoing correctly sets forth the terms of our agreement by sending a return acknowledgment to such effect to the attention of the Enron Capital & Trade Resources Corp. Attn.: Director of Documentation (Fax No. 713/ 646-4816) within three New York Banking Days following receipt of this Confirmation. The parties agree that this Swap Transaction are governed by and subject to the terms and conditions of the master swap agreement referenced above. Please check this Confirmation carefully upon receipt so that errors and discrepancies can promptly be identified and rectified. Enron Capital & Trade Resources Corp. is very pleased to have concluded this transaction with you. Regards, ENRON CAPITAL & TRADE RESOURCES CORP. /s/ Robert M. Hrytzik ______________________________________ Robert M. Hrytzik Agent and Attorney-in-Fact Enron Capital & Trade Resources Corp. (formerly Enron Risk Management Services Corp.) Confirmed as of the 31st day of March, 1995 ENRON OIL & GAS COMPANY /s/ Mark G. Papa ______________________________________ Mark G. Papa 05/09/95 President, North American Operations ______________________________________ (Title) (Date) 4 5 REVISED PAYMENT SCHEDULE FOR RECONCILIATION OF CONTRACTS 15198.00 AND 15198.01 Determination Period Payment Amount - -------------------- -------------- Mar-95 $1,600,200 Apr-95 $3,166,800 May-95 $3,166,800 Jun-95 $3,166,800 Jul-95 $3,166,800 Aug-95 $3,166,800 Sep-95 $3,166,800 Oct-95 $3,166,800 Nov-95 $3,166,800 Dec-95 $3,166,800 Jan-96 $2,500,200 Feb-96 $2,500,200 Mar-96 $2,500,200 Apr-96 $2,500,200 May-96 $2,500,200 Jun-96 $2,500,200 Jul-96 $2,500,200 Aug-96 $2,500,200 Sep-96 $2,500,200 Oct-96 $2,500,200 Nov-96 $2,500,200 Dec-96 $2,500,200 Jan-97 $1,624,800 Feb-97 $1,624,800 Mar-97 $1,624,800 Apr-97 $1,624,800 May-97 $1,624,800 Jun-97 $1,624,800 Jul-97 $1,624,800 Aug-97 $1,624,800 Sep-97 $1,624,800 Oct-97 $1,624,800 Nov-97 $1,624,800 Dec-97 $1,624,800 Jan-98 $760,200 Feb-98 $760,200 Mar-98 $760,200 Apr-98 $760,200 May-98 $760,200 Jun-98 $760,200 Jul-98 $760,200 Aug-98 $760,200 Sep-98 $760,200 Oct-98 $760,200 Nov-98 $760,200 Dec-98 $760,200 Jan-99 $349,800 Feb-99 $349,800 Mar-99 $349,800 Apr-99 $349,800 May-99 $349,800 Jun-99 $349,800 Jul-99 $349,800 Aug-99 $349,800 Sep-99 $349,800 Oct-99 $349,800 Nov-99 $349,800 Dec-99 $349,800
6 IDENTIFICATION OF HEDGING TRANSACTION FOR FEDERAL INCOME TAX PURPOSES Enron Oil & Gas Company hereby identifies the attached Swap Transaction as a hedging transaction for federal income tax purposes: Swap Transaction ref. # or effective date: 15198.00 _______________________________ between: Enron Oil & Gas Company _______________________________ and: Enron Capital Trade & Resources Corp. _______________________________ Commodity or other item being hedged: Pipeline Quality Natural Gas _______________________________ Date of identification: March 31, 1995 _______________________________ EX-10.59 10 CONFIRMATION LETTER(REVISED DUE TO PRICE CHANGE) 1 Exhibit 10.59 Enron Capital & Trade Resources Corp. 1400 Smith Street P. O. Box 4428 Houston, Texas 77210-4428 To: Enron Oil & Gas Company 1400 Smith Street Houston, TX 77002 Attn: Mark Eschenburg From: Enron Capital & Trade Resources Corp. 1400 Smith Street Houston, TX 77002 Date: March 31, 1995 CONFIRMATION LETTER (REVISED DUE TO PRICE CHANGE FOR 1998 AND ADJUSTMENT TO THE ATTACHED PAYMENT SCHEDULE ECT TRANSACTION REFERENCE NOS.: 15198.01 The purpose of this communication is to set forth the terms and conditions of the Swap Transaction entered into between us as of the Effective Date specified below (the "Swap Transaction"). This communication constitutes a "Confirmation" as referred to in the master swap agreement specified below. The definitions and provisions contained in the 1987 Interest Rate and Currency Exchange Definitions (as published by the International Swap Dealers Association, Inc.) are incorporated into this Confirmation. In the event of any inconsistency between those definitions and provisions and this Confirmation, this Confirmation will govern. Each party represents that it is entering into this transaction in connection with its line of business and that the terms hereof have been individually tailored and negotiated. This Confirmation supplements, forms part of, and is subject to, the following master swap agreement upon execution thereof: Date As Of: November 1, 1993 Between: Enron Oil & Gas Company (EOG) And: Enron Capital & Trade Resources Corp. (ECT) Upon execution, all provisions contained in the master swap agreement will govern this Confirmation except as expressly modified below. All provisions contained in the master swap agreement will govern this Confirmation except as expressly modified below. 2 The terms of the particular Swap Transaction to which this Confirmation relates are as follows: Commodity: Pipeline quality natural gas ("Natural Gas")
Quantity Per Period: Quantity Period Per Period ------ ---------- Each calendar month beginning with 6,000,000 MMBtu per March 1, 1995 and ending on Month December 31, 1999 "MMBtu" means one million British Thermal Units.
Effective Date: March 1, 1995 Termination Date: December 31, 1999 The terms of this Swap Transaction relating to the Fixed Price Payor are as follows: Fixed Price Payor: ECT Payment Dates: 25th calendar day succeeding each Period End Date. Period End Date: The last calendar day for the appropriate delivery month. The first Period End Date being March 31, 1995. Fixed Amount: $2.1167/MMBtu x 6,000,000 MMBtu per Month for each delivery month for the Period March 1, 1995 through March 31, 1995 $2.3778/MMBtu x 6,000,000 MMBtu per Month for each delivery month for the Period April 1, 1995 through December 31, 1995 $2.3367/MMBtu x 6,000,000 MMBtu per Month for each delivery month for the Period January 1, 1996 through December 31, 1996 $2.3008/MMBtu x 6,000,000 MMBtu per Month for each delivery month for the Period January 1, 1997 through December 31, 1997 $2.2667/MMBtu x 6,000,000 MMBtu per Month for each delivery month for the Period January 1, 1998 through December 31, 1998 $2.2983/MMBtu x 6,00,000 MMBtu per Month for each delivery month for the Period January 1, 1999 through December 31, 1999. The terms of this Swap Transaction relating to the Floating Price Payor are as follows: 2 3 Floating Price Payor: Enron Oil & Gas Company Payment Dates: 25th calendar day succeeding each Period End Date. Period End Date: The last calendar day for the appropriate delivery month. The first Period End Date being March 31, 1995. Floating Amount: The average of the last three NYMEX Trading Days for the natural gas contract for the appropriate delivery month x 6,000,000 MMBtu per month for each delivery month. Period: Each calendar month beginning with March 1, 1995 and ending on December 31, 1999. Banking Day Convention: If any specified Payment Date is not a New York Banking Day such Payment Date will be the first following day which is a New York Banking Day. Payment Schedule: SEE ATTACHED PAYMENT SCHEDULE RECONCILING TRANSACTION 15198.00 WITH 15198.01. 3 4 Alternate Component Prices: If NYMEX Natural Gas Settlement Prices are not published for any Period, the Price for such Period shall be the amount determined by the mutual agreement of the parties in good faith to most closely reflect the average spot price in Dollars per MMBtu for that period for natural gas delivered to Henry Hub, LA. Subject to the netting of cross payments as provided in the master swap agreement referred to herein, each party has agreed to make payments to the other in accordance with this Confirmation. Please confirm that the foregoing correctly sets forth the terms of our agreement by sending a return acknowledgment to such effect to the attention of the Enron Capital & Trade Resources Corp. Attn.: Director of Documentation (Fax No. 713/646-4816) within three New York Banking Days following receipt of this Confirmation. The parties agree that this Swap Transaction are governed by and subject to the terms and conditions of the master swap agreement referenced above. Please check this Confirmation carefully upon receipt so that errors and discrepancies can promptly be identified and rectified. Enron Capital & Trade Resources Corp. is very pleased to have concluded this transaction with you. Regards, ENRON CAPITAL & TRADE RESOURCES CORP. /s/ Robert M. Hrytzik _____________________________________ Robert M. Hrytzik Agent and Attorney-in-Fact Enron Capital & Trade Resources Corp. (formerly Enron Risk Management Services Corp.) Confirmed as of the 31st day of March, 1995 ENRON OIL & GAS COMPANY /s/ Mark G. Papa _______________________________________ Mark G. Papa 05/09/95 President, North American Operations _______________________________________ (Title) (Date) 4 5 REVISED PAYMENT SCHEDULE FOR RECONCILIATION OF CONTRACTS 15198.00 AND 15198.01
Determination Period Payment Amount - -------------------- -------------- Mar-95 $1,600,200 Apr-95 $3,166,800 May-95 $3,166,800 Jun-95 $3,166,800 Jul-95 $3,166,800 Aug-95 $3,166,800 Sep-95 $3,166,800 Oct-95 $3,166,800 Nov-95 $3,166,800 Dec-95 $3,166,800 Jan-96 $2,500,200 Feb-96 $2,500,200 Mar-96 $2,500,200 Apr-96 $2,500,200 May-96 $2,500,200 Jun-96 $2,500,200 Jul-96 $2,500,200 Aug-96 $2,500,200 Sep-96 $2,500,200 Oct-96 $2,500,200 Nov-96 $2,500,200 Dec-96 $2,500,200 Jan-97 $1,624,800 Feb-97 $1,624,800 Mar-97 $1,624,800 Apr-97 $1,624,800 May-97 $1,624,800 Jun-97 $1,624,800 Jul-97 $1,624,800 Aug-97 $1,624,800 Sep-97 $1,624,800 Oct-97 $1,624,800 Nov-97 $1,624,800 Dec-97 $1,624,800 Jan-98 $760,200 Feb-98 $760,200 Mar-98 $760,200 Apr-98 $760,200 May-98 $760,200 Jun-98 $760,200 Jul-98 $760,200 Aug-98 $760,200 Sep-98 $760,200 Oct-98 $760,200 Nov-98 $760,200 Dec-98 $760,200 Jan-99 $349,800 Feb-99 $349,800 Mar-99 $349,800 Apr-99 $349,800 May-99 $349,800 Jun-99 $349,800 Jul-99 $349,800 Aug-99 $349,800 Sep-99 $349,800 Oct-99 $349,800 Nov-99 $349,800 Dec-99 $349,800
6 IDENTIFICATION OF HEDGING TRANSACTION FOR FEDERAL INCOME TAX PURPOSES Enron Oil & Gas Company hereby identifies the attached Swap Transaction as a hedging transaction for federal income tax purposes: Swap Transaction ref. # or effective date: 15198.01 _____________________________ between: Enron Oil & Gas Company _____________________________ and: Enron Capital Trade _____________________________ Commodity or other item being hedged: Pipeline Quality Natural Gas & Resources Corp. _____________________________ Date of identification: March 31, 1995 _____________________________ EX-10.60 11 LETTER AGMT RELATING TO SWAP TRANSACTION 1 EXHIBIT 10.60 In consideration of the payment by Enron Capital & Trade Resources Corp. ("ECT") to Enron Oil & Gas Company ("EOG") of $11,254,706.48 and of the covenants and agreements contained in the confirmations of the transactions described on Exhibit A attached hereto (the "Transactions"), EOG and ECT hereby agree to enter into the Transactions on the terms and conditions contained in such confirmations and the Master Agreement referred to herein. ENRON OIL & GAS COMPANY ENRON CAPITAL & TRADE RESOURCES CORP. By: /s/ Mark G. Papa By: /s/ Kevin P. Hannon _________________________ __________________________ Name: Mark G. Papa Name: Kevin P. Hannon Title: President, North American Title: Vice President Operations 2 EXHIBIT "A"
EOG CONFIRMATION NUMBERS ------------------------ 4918.00 04918.01S 4919.00 04919.01S 4920.01 04920.01S 8465.00 08465.00S 9194.00 09194.00S 9422.00 09422.00S 9423.00 09423.00S 9424.00 09424.00S 10009.00 10009.00S 10009.01 10009.01S 10140.00 10140.00S 10328.00 10328.00S 10531.00 10531.00S 10621.00 10621.00S 10660.00 10660.00S 10681.00 10681.00S 11190.00 11190.00S 11220.00 11220.00S 11255.00 11255.00S
EX-10.64 12 CREDIT AGREEMENT 1 EXHIBIT 10.64 U.S. $105,000,000 CREDIT AGREEMENT Dated as of January 16, 1996 Among EOG COMPANY OF CANADA, as the Borrower and THE BANKS NAMED HEREIN and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Administrative Agent 2 TABLE OF CONTENTS
Section Page - ------- ---- ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.1. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1- 1.2. Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8- 1.3. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8- 1.4. Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8- ARTICLE II AMOUNT AND TERMS OF THE ADVANCES 2.1. The Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9- 2.2. Making the Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9- 2.3. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10- 2.4. Repayment; Extension of Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10- 2.5. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11- 2.6. Additional Interest on Eurodollar Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12- 2.7. Interest Rate Determination and Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12- 2.8. Voluntary Conversion of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14- 2.9. Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15- 2.10. Increased Costs; Capital Adequacy, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15- 2.11. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17- 2.12. Payments and Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17- 2.13. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19- 2.14. Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21- 2.15. Increase of Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22- 2.16 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22- 2.17. Non-Ratable Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22- 2.18. Replacement of Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23- ARTICLE III CONDITIONS TO EACH BORROWING 3.1. Initial Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24- 3.2. Additional Conditions Precedent to the Borrowings . . . . . . . . . . . . . . . . . . . . . . . . -25-
3 ARTICLE IV REPRESENTATIONS AND WARRANTIES 4.1. Representations and Warranties of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . -26- ARTICLE V COVENANTS OF THE BORROWER 5.1. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27- 5.2. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27- ARTICLE VI EVENTS OF DEFAULT 6.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28- ARTICLE VII THE ADMINISTRATIVE AGENT 7.1. Authorization and Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29- 7.2. Administrative Agent's Reliance, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30- 7.3. Administrative Agent and Its Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30- 7.4. Bank Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31- 7.5. Certain Rights of the Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31- 7.6. Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32- 7.7. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32- 7.8. Resignation by the Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33- ARTICLE VIII MISCELLANEOUS 8.1. Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33- 8.2. Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34- 8.3. No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35- 8.4. Costs, Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35- 8.5. Right of Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36- 8.6. Binding Effect; Assignments; Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . -36- 8.7. Governing Law; Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38- 8.8. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38- 8.9. Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39- 8.10. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
4 8.11. Survival; Term; Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39- 8.12. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40- 8.13. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40- 8.14 Location of Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40- 8.15. Currency Conversion and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
5 Annex I Commitments Schedule I - Applicable Margin Schedule II - Applicable Lending Offices Exhibit A Form of Note Exhibit B Notice of Borrowing Exhibit C-1 Opinion of Vinson & Elkins L.L.P., special U.S. counsel to Borrower and Guarantor Exhibit C-2 Opinion of Bennett Jones Verchere, Canadian tax counsel to Borrower and Guarantor Exhibit C-3 Opinion of Stewart McKelvey Stirling Scales, Nova Scotia counsel to Borrower and Guarantor Exhibit D Opinion of Vice President and General Counsel of Guarantor Exhibit E Notice of Conversion Exhibit F Form of Assignment and Acceptance
6 CREDIT AGREEMENT Dated as of January 16, 1996 EOG COMPANY OF CANADA, an unlimited liability company incorporated under the laws of the province of Nova Scotia (the "Borrower"), the financial institutions party hereto (the "Banks"), and TEXAS COMMERCE BANK NATIONAL ASSOCIATION (in its individual capacity, "TCB"), as administrative agent (in such capacity, the "Administrative Agent") for the Banks hereunder, agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.1. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and the plural forms of the terms defined): "Adjusted CD Rate" means, for any Interest Period for each Adjusted CD Rate Advance, an interest rate per annum equal to the sum of: (a) the rate per annum obtained by dividing (1) the rate of interest determined by the Administrative Agent to be the average (rounded upward to the nearest whole multiple of 1/100 of 1% per annum, if such average is not such a multiple) of the consensus bid rate determined by each of the Reference Banks for the bid rates per annum, at 9:00 A.M. (or as soon thereafter as practicable) on the first day of such Interest Period, of New York certificate of deposit dealers of recognized standing selected by such Reference Bank for the purchase at face value of certificates of deposit of such Reference Bank in an amount substantially equal to such Reference Bank's Adjusted CD Rate Advance and with a maturity equal to such Interest Period (provided that, if bid rate quotes from such dealers are not available to any Reference Bank, such Reference Bank shall notify the Administrative Agent of a reasonably equivalent rate determined by it on the basis of another source or sources selected by it), by (2) a percentage equal to 100% minus the Adjusted CD Rate Reserve Percentage for such Interest Period, plus (b) the Assessment Rate for such Interest Period. The Adjusted CD Rate for the Interest Period for each Adjusted CD Rate Advance shall be determined by the Administrative Agent on the basis of applicable rates furnished to and received by the Administrative Agent from the Reference Banks one Business Day before the first day of such Interest Period, subject however, to the provisions of Section 2.7. -1- 7 "Adjusted CD Rate Advance" means an Advance which bears interest as provided in Section 2.5(b). "Adjusted CD Rate Reserve Percentage" for any Interest Period for each Adjusted CD Rate Advance means the reserve percentage applicable one Business Day before the first day of such Interest Period under regulations issued from time to time by the Federal Reserve Board for determining the maximum reserve requirement (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with deposits exceeding one billion dollars with respect to liabilities consisting of or including (among other liabilities) U.S. dollar nonpersonal time deposits in the United States with a maturity equal to such Interest Period. "Administrative Agent" shall have the meaning specified in the first paragraph of this Agreement, together with any successor thereto pursuant to Section 7.8. "Advance" means an advance by a Bank to the Borrower pursuant to Article II (and where appropriate or the context requires, each portion of such an advance of a specific "Type" as defined below), each portion thereof transferred to a Bank (including a Person that becomes a Bank in connection with such transfer) pursuant to Section 2.10(e), 2.18 or 8.6(b) and each portion remaining after any such transfer, each Advance to consist of one or more of the following types (each of which shall be a "Type" of Advance): an Adjusted CD Rate Advance, a Base Rate Advance or a Eurodollar Advance. "Agreement" means this Credit Agreement, as amended, supplemented or modified from time to time in the future. "Applicable Lending Office" means, with respect to each Bank, such Bank's Domestic Lending Office in the case of a Base Rate Advance, such Bank's CD Lending Office in the case of an Adjusted CD Rate Advance and such Bank's Eurodollar Lending Office in the case of a Eurodollar Advance. "Applicable Margin" means, for any Interest Period for each Adjusted CD Rate Advance and for any Interest Period for each Eurodollar Advance, the percentage per annum applicable to such Interest Period for such Advance as shown in Schedule I and being based on (a) the Type of Advance to which such Interest Period relates (i.e., Adjusted CD Rate Advance or Eurodollar Advance), and (b) the Rating Level, which for the purposes of determining the Applicable Margin shall be the Rating Level in effect on the first day of such Interest Period. "Assessment Rate" for any Interest Period for each Adjusted CD Rate Advance means the annual assessment rate estimated by the Bank which is the Administrative Agent one Business Day before the first day of such Interest Period for determining the then current annual assessment payable by such Bank to the FDIC for insuring dollar deposits of such Bank at its principal office in the United States. -2- 8 "Bankruptcy Code" means Title 11 of the United States Code, as now or hereafter in effect, or any successor thereto. "Banks" has the meaning specified in the first paragraph of this Agreement, and shall include any financial institution which becomes a Bank pursuant to Section 2.15, Section 2.18 or Section 8.6(b). "Base Rate" at any time shall mean the higher of (a) the Prime Commercial Lending Rate as in effect from time to time and (b) the Federal Funds Rate plus 1/2 of 1%. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Rate for any reason, including the inability or failure of the Administrative Agent to obtain sufficient bids or publications in accordance with the terms hereof, the Base Rate shall be the Prime Commercial Lending Rate until the circumstances giving rise to such inability no longer exist. "Base Rate Advance" means an Advance which bears interest as provided in Section 2.5(a). "Borrower" means EOG Company of Canada, an unlimited liability company incorporated under the laws of the province of Nova Scotia, and any successor thereto pursuant to Section 5.2(b). "Borrowing" means a borrowing hereunder consisting of (a) the initial Advances on January 16, 1996, and (b) any subsequent Advances made (on the same date) after January 16, 1996 pursuant to an increase in the facility in accordance with Section 2.15. "Business Day" means (a) any day of the year except Saturday, Sunday and any day on which banks are required or authorized to close in Halifax, Nova Scotia, Houston, Texas or New York, New York, and (b) if the applicable Business Day relates to any Eurodollar Advances, any day which is a "Business Day" described in clause (a) and which is also a day for trading by and between banks in the applicable interbank Eurodollar market. "CD Lending Office" means, with respect to any Bank, the office of such Bank specified as its "CD Lending Office" opposite its name on Schedule II hereto or in the document pursuant to which it became a party hereto as contemplated by Section 2.15, 2.18 or 8.6(b) (or, if no such office is specified, its Domestic Lending Office) or such other office of such Bank as such Bank may from time to time specify to the Borrower and the Administrative Agent. "Chapter One" shall mean Chapter One of the Texas Credit Code, as in effect on the date the document using such term was executed. -3- 9 "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor Federal tax code, and any reference to any statutory provision of the Code shall be deemed to be a reference to any successor provision or provisions. "Commitment" means the commitment of each Bank to lend money in an amount not to exceed the amount set forth opposite such Bank's name on Annex I hereto. "Convert", "Conversion" and "Converted" each refers to a conversion of Advances of one Type into Advances of another Type pursuant to Section 2.7, Section 2.8 or Section 2.10(b). "Domestic Lending Office" means, with respect to any Bank, the office of such Bank specified as its "Domestic Lending Office" opposite its name on Schedule II or in the document pursuant to which it became a party hereto as contemplated by Section 2.15, 2.18 or 8.6(b) or such other office of such Bank as such Bank may from time to time specify to the Borrower and the Administrative Agent. "eurocurrency liabilities" has the meaning assigned to that term in Regulation D of the Federal Reserve Board, as in effect from time to time. "Eurodollar Advance" means an Advance which bears interest as provided in Section 2.5(c). "Eurodollar Lending Office" means, with respect to any Bank, the office of such Bank specified as its "Eurodollar Lending Office" opposite its name on Schedule II or in the document pursuant to which it became a party hereto as contemplated by Section 2.15, 2.18 or 8.6(b) (or, if no such office is specified, its Domestic Lending Office) or such other office of such Bank as such Bank may from time to time specify to the Borrower and the Administrative Agent. "Eurodollar Rate" means, for any Interest Period for each Eurodollar Advance, the lesser of (a) (i) an interest rate per annum shown on page 3750 of the Dow Jones & Company Telerate screen or any successor page as the composite offered rate for London interbank deposits with a period equal to the Interest Period for such Eurodollar Advance, as shown under the heading "USD", as of 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period, (ii) if the rate specified in clause (i) of this definition does not appear, an interest rate per annum based on the rates at which Dollar deposits with a period equal to such Interest Period are displayed on page "LIBO" of the Reuters Monitor Money Rates Service or such other page as may replace the LIBO page on that service for the purpose of displaying London interbank offered rates of major banks as of 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period, it being understood that if two or more rates appear on such page, the rate will be the arithmetic average of such displayed rates and if fewer than two such rates are displayed, this clause (ii) of this definition shall not be applicable, and (iii) if the rate specified in clause (i) does not appear and if clause (ii) of this definition is not applicable, an interest rate -4- 10 per annum equal to the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rate per annum at which dollar deposits in immediately available funds for delivery on the first day of such Interest Period are offered by TCB to leading banks in the interbank Eurodollar market selected by TCB at approximately 11:00 A.M. (local time in the relevant Eurodollar market) two Business Days before the first day of such Interest Period in an amount substantially equal to the amount of the largest Eurodollar Advance to be outstanding during such Interest Period and for a period equal to such Interest Period and (b) the Highest Lawful Rate. The Eurodollar Rate for each Interest Period for each Eurodollar Advance shall be determined by the Administrative Agent on the basis of applicable rates furnished to and received by the Administrative Agent from TCB two Business Days before the first day of such Interest Period, subject, however, to the provisions of Section 2.7. "Events of Default" has the meaning specified in Section 6.1. "Exchange Rate" means, in relation to the exchange of one currency to another on a particular day for the purpose of Section 8.15 hereof, the rate of exchange quoted by each Bank (with respect to amounts owed to such Bank) as its noon spot rate of exchange for the conversion of one currency to the other on such day. "FDIC" means the Federal Deposit Insurance Corporation, or any federal agency or authority of the United States from time to time succeeding to its function. "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Federal Reserve Board" means the Board of Governors of the Federal Reserve System, or any federal agency or authority of the United States from time to time succeeding to its function. "Guarantor" means Enron Oil & Gas Company, a Delaware corporation, or any successor permitted by Section 4.2(d) of the Guaranty. "Guarantor Default" shall have the meaning assigned such term in the Guaranty. "Guaranty" means that certain Guaranty dated of even date herewith issued by the Guarantor in favor of the Administrative Agent and the Banks, as the same may be supplemented, amended or modified from time to time. -5- 11 "Highest Lawful Rate" shall mean, on any day, with respect to any Bank, the maximum nonusurious rate of interest permitted for that day by the laws applicable to such Bank, stated as a rate per annum. On each day, if any, that Chapter One establishes the Highest Lawful Rate, the Highest Lawful Rate shall be the "indicated rate ceiling" (as defined in Chapter One) for that day. "Interest Period" means, with respect to each Adjusted CD Rate Advance or Eurodollar Advance, the period commencing on the date of such Advance or the date of the Conversion of any Advance into such an Advance and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below except that any Interest Period for Eurodollar Advances which commences on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month shall end on the last Business Day of the appropriate subsequent calendar month. The duration of each such Interest Period shall be (a) in the case of an Adjusted CD Rate Advance, 30, 60, 90 or 180 days and (b) in the case of a Eurodollar Advance, one, two, three or six months, in each case as the Borrower may, upon notice received by the Administrative Agent not later than 11:00 A.M. on the third Business Day (first Business Day in the case of an Adjusted CD Rate Advance) on the first day of such Interest Period, select; provided, however, that: (1) Interest Periods commencing on the same date for Adjusted CD Rate Advances or Eurodollar Advances, respectively, shall be of the same duration; (2) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided, in the case of any Interest Period for a Eurodollar Advance, that if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and (3) no Interest Period for any Advance under a Note which is maturing may end after the Maturity Date for such Note. "Loan Document" means this Agreement, each Note, the Notice of Borrowing and each other document or instrument executed and delivered in connection with this Agreement. "Majority Banks" means at any time Banks holding at least 66 2/3% of the then aggregate unpaid principal amount of the Notes held by Banks, or, if no such principal amount is then outstanding, Banks having at least 66 2/3% of the Commitments. "Maturity Date" means, (a) with respect to any Note dated January 16, 1996, the earlier of (i) January 17, 2001, or such later date to which the maturity of such Note has been -6- 12 extended pursuant to Section 2.4(b), or (ii) the date, if any, that the Notes become due and payable in accordance with Section 6.1; and (b) with respect to any Note issued pursuant to Section 2.15, the earlier of (i) five (5) years and one (1) day from the date of such Note, or such later date to which the maturity of such Note has been extended pursuant to Section 2.4(b), or (ii) the date, if any, that the Notes become due and payable in accordance with Section 6.1. "Moody's" means Moody's Investors Service, Inc. "Note" means a promissory note of the Borrower payable to the order of any Bank, in substantially the form of Exhibit A, evidencing the aggregate indebtedness of the Borrower to such Bank resulting from the Advance owed to such Bank. The Notes evidencing the Advances made on January 16, 1996, shall be dated January 16, 1996. The Notes evidencing Advances comprising a Borrowing made pursuant to an increase in the facility pursuant to Section 2.15, shall be dated the date of such Advances. "Notice of Borrowing" has the meaning specified in Section 2.2. "Other Taxes" has the meaning specified in Section 2.13(c). "Payment Office" means the office of the Administrative Agent located at 712 Main Street, Houston, Texas or such other office as the Administrative Agent may designate by written notice to the other parties hereto. "Person" means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, firm or other entity, or a government or any political subdivision or agency, department or instrumentality thereof. "Prescribed Forms" means such duly executed form(s) or statement(s), and in such number of copies, which may, from time to time, be prescribed by law and which, pursuant to applicable provisions of (a) an income tax treaty between the United States and the country of residence of the Bank providing the form(s) or statement(s), (b) the Code, or (c) any applicable rule or regulation under the Code, permit the Borrower to make payments hereunder for the account of such Bank free of deduction or withholding of income or similar taxes (except for any deduction or withholding of income or similar taxes as a result of any change in or in the interpretation of any such treaty, the Code or any such rule or regulation). "Prime Commercial Lending Rate" means that rate of interest from time to time announced by TCB at its principal office as its prime rate (or comparable rate, if TCB does not so designate a "prime rate"), the Prime Commercial Lending Rate to change when and as such prime rate or comparable rate, as the case may be, changes. The Prime Commercial Lending Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. TCB may make commercial loans or other loans at rates of interest at, above or -7- 13 below the Prime Commercial Lending Rate. For purposes hereof, the principal office of TCB, as of the date hereof, is its office located at 712 Main Street, Houston, Texas. "Rating Level" means the applicable category of rating level contained in Schedule I which is based on the rating of the Guarantor's senior unsecured long-term debt as classified by Moody's and/or Standard & Poor's and which shall be the highest applicable Rating Level I, Rating Level II, Rating Level III, Rating Level IV, Rating Level V or Rating Level VI, as the case may be, as set forth in Schedule I. "Reference Banks" means Texas Commerce Bank National Association, Commerzbank Aktiengesellschaft, Atlanta Agency, and Royal Bank of Canada. "Standard & Poor's" and "S&P" each means Standard & Poor's Ratings Group. "Taxes" has the meaning specified in Section 2.13(a). "Texas Credit Code" shall mean Title 79, Revised Civil Statutes of Texas, 1925, as amended. 1.2. Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding". Unless otherwise indicated, all references to a particular time are references to Houston, Texas time. 1.3. Miscellaneous. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Article, Section, Schedule and Exhibit references are to Articles and Sections of and Schedules and Exhibits to this Agreement, unless otherwise specified. The term "including" shall mean "including, without limitation,". 1.4. Ratings. A rating, whether public or private, by Standard & Poor's or Moody's shall be deemed to be in effect on the date of announcement or publication by Standard & Poor's or Moody's, as the case may be, of such rating or, in the absence of such announcement or publication, on the effective date of such rating and will remain in effect until the date when any change in such rating is deemed to be in effect. In the event any of the rating categories used by Moody's or Standard & Poor's is revised or designated differently (such as by changing letter designations to different letter designations or to numerical designations), the references herein to such rating shall be changed to the revised or redesignated rating for which the standards are closest to, but not lower than, the standards at the date hereof for the rating which has been revised or redesignated. Long-term debt supported by a letter of credit, guaranty, insurance or other similar credit enhancement mechanism shall not be considered as senior unsecured long-term debt. -8- 14 ARTICLE II AMOUNT AND TERMS OF THE ADVANCES 2.1. The Advances. Each Bank severally agrees, on the terms and conditions hereinafter set forth, to make one advance to the Borrower on January 16, 1996 in an amount not to exceed such Bank's Commitment. If a Borrowing is made to increase the outstanding indebtedness under this Agreement pursuant to Section 2.15, each Bank participating in such increase shall make an advance to the Borrower to fund its portion of such Borrowing. The Borrower, for interest rate purposes, may elect pursuant to the terms hereof to divide the Advance made by each Bank into one or more Types specified herein; provided that for all Eurodollar Advances, not more than four (4) different Interest Periods shall not be outstanding at the same time, and for all CD Rate Advances, not more than four (4) different Interest Periods shall not be outstanding at the same time; and provided further that all Advances made on January 16, 1996 of any Type shall be made by the Banks ratably according to their respective Commitments. The Advances are not revolving and the Borrower may not reborrow amounts repaid or prepaid. On the date of each Borrowing, any portion of the Commitments not utilized shall be terminated. 2.2. Making the Advances. (a) Each Borrowing shall be made on notice, given not later than 11:00 A.M. (x) if the Borrowing is to be comprised, in whole or in part, of Eurodollar Advances, at least three (3) Business Days prior to the date of the Borrowing, (y) if the Borrowing is to be comprised of Adjusted CD Rate Advances, at least one (1) Business Day prior to the date of the Borrowing, and (z) if the Borrowing is to be comprised of Base Rate Advances, on the day of the Borrowing, by the Borrower to the Administrative Agent, which shall give to each Bank prompt notice thereof by telecopy. Such notice of the Borrowing (the "Notice of Borrowing") shall be by telecopy, confirmed immediately in writing, in substantially the form of Exhibit B, specifying therein the requested (1) Type of Advances comprising the Borrowing, (2) aggregate amount of the Borrowing, and (3) if the Borrowing will be comprised of Adjusted CD Rate Advances or Eurodollar Advances, the initial Interest Period for each such Advance. If the Borrowing is comprised, in whole or in part, of Adjusted CD Rate Advances or Eurodollar Advances, the Administrative Agent shall promptly notify each Bank of the applicable interest rate under Section 2.5(b) or (c). Each Bank shall, before 11:00 A.M. (2:00 P.M. if the Borrowing is comprised of Base Rate Advances) on the date of the Borrowing, make available for the account of its Applicable Lending Office to the Administrative Agent at its Payment Office, in same day funds, such Bank's ratable portion of the Borrowing. After the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the Borrower in accordance with the Borrower's written instructions. (b) The Notice of Borrowing shall be irrevocable and binding on the Borrower. If the Notice of Borrowing specifies the Borrowing is to be comprised, in whole or in part, of -9- 15 Adjusted CD Rate Advances or Eurodollar Advances, the Borrower shall, subject to Section 8.8, indemnify each Bank against any loss, cost or expense incurred by such Bank as a result of any failure to fulfill on or before the date specified in such Notice of Borrowing for the Borrowing the applicable conditions set forth in Article III, or to make the Borrowing specified in such Notice of Borrowing on the date specified in such Notice of Borrowing including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Bank to fund the Advance to be made by such Bank as part of the Borrowing when such Advance, as a result of such failure, is not made on such date. (c) Unless the Administrative Agent shall have received notice from a Bank prior to the date of a Borrowing that such Bank will not make available to the Administrative Agent such Bank's ratable portion of the Borrowing, the Administrative Agent may assume that such Bank has made such portion available to the Administrative Agent on the date of the Borrowing in accordance with subsection (a) of this Section 2.2 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such ratable portion available to the Administrative Agent, such Bank and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (1) in the case of the Borrower, the weighted average of the respective interest rates which would have been applicable to Advances not so made and (2) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Bank's Advance as part of the Borrowing for purposes of this Agreement. (d) The failure of any Bank to make the Advance to be made by it as part of any Borrowing shall not relieve any other Bank of its obligation, if any, hereunder to make its Advance on the date of the Borrowing, but no Bank shall be responsible for the failure of any other Bank to make the Advance to be made by such other Bank on the date of the Borrowing. 2.3. Fees. Subject to Section 8.8, the Borrower shall pay to the Administrative Agent such fees as may be separately agreed to by it and the Administrative Agent. 2.4. Repayment; Extension of Maturity Date. (a) The Borrower shall repay the unpaid principal amount of each Advance owed to each Bank in accordance with the Note or Notes evidencing such Advance to the order of such Bank. The unpaid principal balance of each Note, together with all accrued and unpaid interest on such Note, shall be due and payable on the Maturity Date for such Note. (b) Within the 90-day period ending on January 16, 1997 (or in the case of any Note issued pursuant to Section 2.15, within the 90-day period ending on the first anniversary of -10- 16 the issuance of such Note), and, in either case, within the subsequent 90-day period ending on each yearly anniversary thereafter, the Borrower may request in writing that the Banks extend the Maturity Date for such Notes, as appropriate, for one (1) additional year; provided, however, that any such extension shall require the consent of all of the Banks, which consent may be withheld in each Bank's sole discretion; and provided, further, that if any Bank has not responded to such request in writing within 45 days after receipt of the written request of the Borrower by the Administrative Agent, such failure shall be deemed a denial of said request and such Bank shall be subject to removal as provided in Section 2.18. 2.5. Interest. Subject to Section 8.8, the Borrower shall pay interest on the unpaid principal amount of each Advance owed to each Bank from the date of such Advance until such principal amount shall be paid in full, at the following rates per annum: (a) Base Rate Advances. During such periods as such Advance is a Base Rate Advance, a rate per annum equal at all times to the Base Rate in effect from time to time, due quarterly on the last Business Day of each January, April, July and October (commencing on the last Business Day of April, 1996) during such periods and on the date such Base Rate Advance shall be Converted or paid in full; provided that any amount of principal (other than principal of Adjusted CD Rate Advances bearing interest pursuant to the proviso to Section 2.5(b) and principal of Eurodollar Advances bearing interest pursuant to the proviso to Section 2.5(c)) which is not paid when due (whether at stated maturity, by acceleration or otherwise) shall bear interest, from the date on which such amount is due until such amount is paid in full, due on demand, at a rate per annum equal at all times to 2% per annum above the Base Rate in effect from time to time. (b) Adjusted CD Rate Advances. During such periods as such Advance is an Adjusted CD Rate Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum of the Adjusted CD Rate for such Interest Period for such Advance plus the Applicable Margin per annum for such Interest Period, due on the last day of such Interest Period and, if such Interest Period has a duration of more than 90 days, on the day which occurs during such Interest Period 90 days from the first day of such Interest Period (each Adjusted CD Rate Advance to bear interest from and including the first day of the Interest Period for such Advance to (but not including) the last day of such Interest Period); provided that any amount of principal of any Adjusted CD Rate Advance which is not paid when due (whether at stated maturity, by acceleration or otherwise) shall bear interest, from the date on which such amount is due until such amount is paid in full, due on demand, at a rate per annum equal at all times to the greater of (x) 2% per annum above the Base Rate in effect from time to time and (y) 2% per annum above the rate per annum required to be paid on such Advance immediately prior to the date on which such amount became due. (c) Eurodollar Advances. During such periods as such Advance is a Eurodollar Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum of the Eurodollar Rate for such Interest Period for such Advance plus the Applicable Margin -11- 17 per annum for such Interest Period, due on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on the day which occurs during such Interest Period three months from the first day of such Interest Period (each Eurodollar Rate Advance to bear interest from and including the first day of the Interest Period for such Advance to (but not including) the last day of such Interest Period); provided that any amount of principal of any Eurodollar Advance which is not paid when due (whether at stated maturity, by acceleration or otherwise) shall bear interest, from the date on which such amount is due until such amount is paid in full, due on demand, at a rate per annum equal at all times to the greater of (x) 2% per annum above the Base Rate in effect from time to time and (y) 2% per annum above the rate per annum required to be paid on such Advance immediately prior to the date on which such amount became due. 2.6. Additional Interest on Eurodollar Advances. If any Bank is required under regulations of the Federal Reserve Board to maintain reserves with respect to liabilities or assets consisting of or including eurocurrency liabilities, and if as a result thereof there is an increase in the cost to such Bank of agreeing to make or making, funding or maintaining Eurodollar Advances, the Borrower shall, subject to Section 8.8, from time to time, upon demand by such Bank (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Bank additional amounts, as additional interest hereunder, sufficient to compensate such Bank for such increased cost. A certificate in reasonable detail as to the basis for and the amount of such increased cost, submitted to the Borrower and the Administrative Agent by such Bank, shall be conclusive and binding for all purposes, absent manifest error. 2.7. Interest Rate Determination and Protection. (a) Each Reference Bank agrees to furnish to the Administrative Agent timely information for the purpose of determining each Adjusted CD Rate. If any one or more of the Reference Banks shall not furnish such timely information to the Administrative Agent for the purpose of determining any such Adjustable CD Rate, the Administrative Agent shall determine such Adjustable CD Rate on the basis of timely information furnished by the remaining Reference Banks. (b) The Administrative Agent shall give prompt notice to the Borrower and the Banks of the applicable interest rate determined by the Administrative Agent for purposes of Section 2.5(a), (b) or (c), and the applicable rate, if any, furnished by each Reference Bank for the purpose of determining the applicable interest rate under Section 2.5(b). (c) If fewer than two Reference Banks furnish timely information to the Administrative Agent for determining the Adjusted CD Rate for any Adjusted CD Rate Advances, (1) the Administrative Agent shall forthwith notify the Borrower and the Banks that the interest rate cannot be determined for such Adjusted CD Rate Advances, -12- 18 (2) each such Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance (or if such Advance is then a Base Rate Advance, will continue as a Base Rate Advance), and (3) the obligation of the Banks to make, or to Convert Advances into, Adjusted CD Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower and the Banks that the circumstances causing such suspension no longer exist. (d) If, with respect to any Adjusted CD Rate Advances or Eurodollar Advances, the Majority Banks notify the Administrative Agent that the applicable interest rate for any Interest Period for such Advances will not adequately reflect the cost to such Majority Banks of making, funding or maintaining their respective Adjusted CD Rate Advances or Eurodollar Advances, as the case may be, for such Interest Period, the Administrative Agent shall forthwith so notify the Borrower and the Banks, whereupon (1) each such Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance (or, if such Advance is then a Base Rate Advance, will continue as a Base Rate Advance), and (2) the obligation of the Banks to make, or to Convert Advances into, Adjusted CD Rate Advances or Eurodollar Advances, as the case may be, shall be suspended until the Administrative Agent shall notify the Borrower and the Banks that the circumstances causing such suspension no longer exist. (e) If the Borrower shall fail to select the duration of any Interest Period for any Adjusted CD Rate Advances or Eurodollar Advances in accordance with the provisions contained in this Agreement, the Administrative Agent will forthwith so notify the Borrower and the Banks and such Advances will automatically, on the last day of the then existing Interest Period therefor, Convert into Base Rate Advances. (f) (1) On the date on which the aggregate unpaid principal amount of all Eurodollar Advances having the same Interest Period shall be reduced, by payment or prepayment or otherwise, to less than $5,000,000, such Eurodollar Advances shall automatically Convert into Base Rate Advances, and on and after such date, the right of the Borrower to Convert Advances into Eurodollar Advances shall terminate; provided, however, that (A) if other Eurodollar Advances are outstanding, the Borrower shall have the right to aggregate such Eurodollar Advances (and continue such Advances) if the aggregate unpaid principal amount of all such Eurodollar Advances being aggregated and continued shall equal or exceed $5,000,000, and (B) if Adjusted CD Rate Advances are outstanding, the Borrower shall have the right, in the case of Adjusted CD Rate Advances, on the last day of the Interest Period for such Advance, to aggregate all or such portion of such Adjusted CD Rate Advances with such Eurodollar Advance (and Convert or -13- 19 continue such Advances) if the aggregate unpaid principal amount of such resulting Eurodollar Advances having the same Interest Period shall equal or exceed $5,000,000. (2) On the date on which the aggregate unpaid principal amount of all Adjusted CD Rate Advances having the same Interest Period shall be reduced, by payment or prepayment or otherwise, to less than $5,000,000, such Adjusted CD Rate Advances shall automatically Convert into Base Rate Advances, and on and after such date, the right of the Borrower to Convert Advances into Adjusted CD Rate Advances shall terminate; provided, however, that (A) if other Adjusted CD Rate Advances are outstanding, the Borrower shall have the right to aggregate such Adjusted CD Rate Advances (and continue such Advances) if the aggregate unpaid principal amount of all such Adjusted CD Rate Advances being aggregated and continued shall equal or exceed $5,000,000, and (B) if Eurodollar Advances are outstanding, the Borrower shall have the right, in the case of Eurodollar Advances, on the last day of the Interest Period for such Advance, to aggregate all or such portion of such Eurodollar Advances with such Adjusted CD Rate Advance (and Convert or continue such Advances) if the aggregate unpaid principal amount of such resulting Adjusted CD Rate Advances having the same Interest Period shall equal or exceed $5,000,000. (g) Any Bank may, if it so elects, fulfill its Commitment as to any Eurodollar Advance by causing a branch, foreign or otherwise, or affiliate of such Bank to make such Advance and may transfer and carry such Advance at, to or for the account of any branch office or affiliate of such Bank; provided that in such event, for the purposes of this Agreement, such Advance shall be deemed to have been made by such Bank and the obligation of the Borrower to repay such Advance shall nevertheless be to such Bank and shall be deemed to be held by such Bank, to the extent of such Advance, for the account of such branch or affiliate. 2.8. Voluntary Conversion of Advances. The Borrower may on any Business Day, upon notice given to the Administrative Agent not later than 11:00 A.M. (x) in the case of a proposed Conversion into Eurodollar Advances, on the third Business Day prior to the date of the proposed Conversion, (y) in the case of a proposed Conversion into Adjusted CD Rate Advances, on the first Business Day prior to the date of the proposed Conversion, and (z) in the case of a proposed Conversion into Base Rate Advances, on the date of the proposed Conversion and subject to the limitations in Section 2.1 as to the number of permitted Interest Periods and subject to the provisions of Sections 2.7 and 2.11, Convert Advances of one Type into Advances of another Type; provided, however, that any Conversion of any Eurodollar Advances shall be made on, and only on, the last day of an Interest Period for such Eurodollar Advances and that any Conversion of any Adjusted CD Rate Advances shall be made on, and only on, the last day of an Interest Period for such Adjusted CD Rate Advances. Each such notice of a Conversion (a "Notice of Conversion") shall be by telecopy, confirmed immediately in writing, in substantially the form of Exhibit E, and shall, within the restrictions specified above, specify (1) the date of such Conversion, (2) the Advances to be Converted and the Type into which they are to be -14- 20 Converted, and (3) if such Conversion is into Adjusted CD Rate Advances or Eurodollar Advances, the duration of the Interest Period for each such Advance. 2.9. Prepayments. The Borrower may (x) in respect of Adjusted CD Rate Advances, upon at least one Business Day's notice, (y) in respect of Eurodollar Advances, upon at least three Business Days' notice, and, (z) in respect of Base Rate Advances, upon notice by 11:00 A.M. on the day of the proposed prepayment, to the Administrative Agent (which shall promptly notify each Bank) stating the proposed date and aggregate principal amount of the prepayment and the Types of Advances to be prepaid, and in the case of Eurodollar Advances or Adjusted CD Rate Advances, the specific Advances being prepaid, and if such notice is given the Borrower shall prepay the outstanding principal amounts of the Advances, in whole or ratably in part, together with accrued interest to the date of such prepayment on the principal amount prepaid without premium or penalty; provided, however, that each partial prepayment shall be in an aggregate principal amount not less than $5,000,000, and provided further, that if the Borrower prepays any Adjusted CD Rate Advance or any Eurodollar Advance on any day other than the last day of an Interest Period therefor, the Borrower shall compensate the Banks pursuant to Section 8.4(b). 2.10. Increased Costs; Capital Adequacy, Etc. (a) Subject to Section 8.8, if, due to either (1) the introduction of or any change (other than any change by way of imposition or increase of reserve requirements included in the Adjusted CD Rate Reserve Percentage) in or in the interpretation of any law or regulation by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof or (2) the compliance with any guideline or request from any governmental authority, central bank or comparable agency (whether or not having the force of law), there shall be any increase in the cost to any Bank of agreeing to make or making, funding or maintaining Adjusted CD Rate Advances or Eurodollar Advances (other than increased costs described in Section 2.6 or in clause (c) below), the Borrower shall from time to time, upon demand by such Bank (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Bank additional amounts sufficient to compensate such Bank for such increased cost. A certificate in reasonable detail as to the basis for and the amount of such increased cost, submitted to the Borrower and the Administrative Agent by such Bank, shall be conclusive and binding for all purposes, absent manifest error. Promptly after any Bank becomes aware of any such introduction, change or proposed compliance, such Bank shall notify the Borrower thereof. No Bank shall be permitted to recover increased costs incurred or accrued more than 90 days prior to such notice to the Borrower. (b) If the Borrower so notifies the Administrative Agent within five Business Days after any Bank notifies the Borrower of any increased cost pursuant to the provisions of Section 2.10(a), the Borrower shall Convert all Advances of the Type affected by such increased cost of all Banks then outstanding into Advances of another Type in accordance with Section 2.8 and, additionally, reimburse such Bank for such increased cost in accordance with Section 2.10(a). -15- 21 (c) If any Bank shall have determined that, after the date hereof, the adoption of any applicable law, rule, regulation or treaty regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its lending office) with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency (except to the extent such request or directive arises as a result of the individual creditworthiness of such Bank), has or would have the effect of increasing the amount of capital required or expected to be maintained as a result of its Commitment hereunder, such Bank shall have the right to give prompt written notice thereof to the Borrower with a copy to the Administrative Agent, which notice shall show in reasonable detail the calculation of such additional amounts as shall be required to compensate such Bank for the increased cost to such Bank as a result of such increase in capital and shall certify that such costs are generally being charged by such Bank to other similarly situated borrowers under similar credit facilities, which notice shall be conclusive and binding for all purposes, absent manifest error, although the failure to give any such notice shall not, unless such notice fails to set forth the information required above or except as otherwise expressly provided in Section 2.10(d), release or diminish any of the Borrower's obligations to pay additional amounts pursuant to Section 2.10(d). (d) Each Bank agrees that, upon giving notice specified in Section 2.10(c), at the request of the Borrower, it will promptly enter into good faith negotiations with the Borrower with respect to the method of reimbursement for the additional costs specified in such notice. No later than 15 days after the date of the giving of any such notice, and assuming the Bank giving same has made itself available for the aforesaid good faith negotiations, the Borrower shall have the option, to be exercised in writing, to (1) subject to Section 8.8, compensate such Bank for the specified additional costs on the basis, if any, negotiated between such Bank and the Borrower or (2) terminate such Bank as a Bank to the extent, and on the terms and conditions, specified in Section 2.10(e); provided that if the Borrower fails to so exercise such option, it shall be deemed to have agreed to reimburse such Bank from time to time on demand the additional costs specified in the Bank's notice delivered pursuant to Section 2.10(c). Notwithstanding the foregoing, the Borrower shall not be obligated to reimburse any Bank pursuant to this Section 2.10(d) or Section 2.10(e) or Section 2.18 for any additional costs under Section 2.10(c) incurred or accruing more than 90 days prior to the date on which such Bank gave the written notice specified in Section 2.10(c). (e) In the event that the Borrower has given notice to a Bank pursuant to Section 2.10(d) that it elects to terminate such Bank as a Bank (a copy of which notice shall be sent to the Administrative Agent), such termination shall become effective 15 days thereafter unless such Bank withdraws its request for additional compensation. On the date of the termination of any Bank as a Bank pursuant to this Section 2.10(e), (x) the Borrower shall deliver notice of the effectiveness of such termination to such Bank and to the Administrative Agent, (y) the Borrower shall pay all amounts owed by the Borrower to such Bank under this Agreement or under each Note payable to such Bank (including principal of and interest on each Advance owed -16- 22 to such Bank, and amounts specified in such Bank's notice delivered pursuant to Section 2.10(c) with respect to the period prior to such termination) and (z) upon the occurrence of the events set forth in clauses (x) and (y), such Bank shall cease to be a "Bank" hereunder for all purposes except for rights under Sections 2.6, 2.10, 2.13, 2.18 and 8.4 arising out of events and occurrences before or concurrently with its ceasing to be a "Bank" hereunder. The Borrower may elect to terminate a Bank as a Bank pursuant to Section 2.10(d) only if at such time: (1) no Event of Default is then in existence or would be in existence but for requirement that notice be given or time elapse or both; and (2) the Borrower has elected, or is then electing, to terminate all Banks as Banks which have made similar requests for increased compensation under this Section 2.10, which requests have not been withdrawn, provided, that requests may be determined by the Borrower to be dissimilar based on the negotiation of materially dissimilar rates of compensation under clause (1) of Section 2.10(d). (f) Each Bank shall use its reasonable efforts (consistent with its internal policies and legal and regulatory restrictions) to select a jurisdiction for its Applicable Lending Office or change the jurisdiction of its Applicable Lending Office, as the case may be, so as to avoid the imposition of any increased costs under this Section 2.10 or to eliminate the amount of any such increased cost which may thereafter accrue; provided that no such selection or change of the jurisdiction for its Applicable Lending Office shall be made if, in the reasonable judgment of such Bank, such selection or change would be disadvantageous to such Bank. (g) This Section 2.10 shall not apply to Taxes and Other Taxes, which are governed by Section 2.13. 2.11. Illegality. Notwithstanding any other provision of this Agreement, if the introduction of or any change in or in the interpretation of or compliance with any law or regulation shall make it unlawful, or any governmental authority, central bank or comparable agency shall assert that it is unlawful, for any Bank or its Eurodollar Lending Office to perform its obligations hereunder to make Eurodollar Advances or to continue to fund or maintain Eurodollar Advances hereunder, then, on notice thereof and demand therefor by such Bank to the Borrower through the Administrative Agent, (a) the obligation of the Banks to make Eurodollar Advances and to Convert Advances into Eurodollar Advances shall terminate and (b) the Borrower shall forthwith Convert all Eurodollar Advances of all Banks then outstanding into Advances of another Type in accordance with Section 2.8. 2.12. Payments and Computations. (a) The Borrower shall make each payment under any Loan Document not later than 11:00 A.M. on the day when due in dollars to the Administrative Agent at its Payment Office in same day funds. The Administrative Agent will promptly thereafter cause to be distributed like -17- 23 funds relating to the payment of principal or interest ratably (other than amounts payable pursuant to Section 2.6, 2.10, 2.13, 2.17, 2.18 or 8.4(b)) to the Banks (decreased, as to any Bank, for any taxes withheld in respect of such Bank as contemplated by Section 2.13(b)) for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Bank to such Bank for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. (b) All computations of interest based on the Base Rate (except during such times as the Base Rate is determined pursuant to clause (b) of the definition thereof) shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be, and, subject to Section 8.8, all computations of interest based on the Adjusted CD Rate, the Eurodollar Rate, the Federal Funds Rate or, during such times as the Base Rate is determined pursuant to clause (b) of the definition thereof, the Base Rate shall be made by the Administrative Agent, and all computations of interest pursuant to Section 2.6 shall be made by a Bank, on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. Each determination by the Administrative Agent (or, in the case of Section 2.6, by a Bank) of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error. For the purposes of the Interest Act (Canada) and disclosure thereunder, whenever any interest is made payable under any Note at any rate or percentage for or based on a period of three hundred sixty days (360), the yearly rate or percentage of interest to which such rate or percentage of interest is equivalent is the rate or percentage stipulated herein multiplied by the actual number of days in the applicable year divided by three hundred sixty (360). The foregoing sentence is for disclosure purposes only and shall not otherwise affect the terms of any Note as set forth herein. (c) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest; provided, however, if such extension would cause payment of interest on or principal of Eurodollar Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. (d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent the Borrower shall not have so made such payment in full to the Administrative Agent, each Bank shall, subject to Section 8.8, repay to the Administrative Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the earlier of (a) the date such Bank repays such amount to the Administrative Agent and (b) the date two Business Days after the date such amount is so distributed, at the Federal Funds Rate, -18- 24 and thereafter until the date such Bank repays such amount to the Administrative Agent at the Federal Funds Rate plus 2%. 2.13. Taxes. (a) Subject to Section 8.8, any and all payments by the Borrower hereunder or under the Notes shall be made, in accordance with Section 2.12, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges, fees, duties or withholdings, and all liabilities with respect thereto, excluding, in the case of each Bank and the Administrative Agent, (1) taxes imposed on its income, (2) franchise taxes imposed on it by the jurisdiction under the laws of which (or under the laws of a political subdivision of which) such Bank or Administrative Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Bank, franchise taxes imposed on it by the jurisdiction of such Bank's Applicable Lending Office or any political subdivision thereof and (3) any taxes imposed by the Government of Canada by means of withholding at the source (other than such taxes imposed on payments to a Bank whose Applicable Lending Office at the time such payment is made is located within the United States) if and to the extent that such taxes shall be in effect and shall be applicable, to payments to be made to such Bank or the Administrative Agent (all such non-excluded taxes, levies, imposts, deductions, charges, fees, duties, withholdings and liabilities being hereinafter referred to as "Taxes"). Subject to Section 8.8, if the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Bank or the Administrative Agent, (x) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.13) such Bank or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (y) the Borrower shall make such deductions and (z) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) Notwithstanding anything to the contrary contained in this Agreement, each of the Borrower and the Administrative Agent shall be entitled, to the extent it is required to do so by law, to deduct or withhold income or other similar taxes imposed by the United States of America from interest, fees or other amounts payable hereunder for the account of any Bank (without the payment by the Borrower of increased amounts to such Bank pursuant to clause (a) above) other than a Bank (1) which is a domestic corporation (as such term is defined in Section 7701 of the Code) for federal income tax purposes or (2) which has the Prescribed Forms on file with the Borrower and the Administrative Agent for the applicable year to the extent deduction or withholding of such taxes is not required as a result of the filing of such Prescribed Forms, provided that if the Borrower shall so deduct or withhold any such taxes, it shall provide a statement to the Administrative Agent and such Bank, setting forth the amount of such taxes so deducted or withheld, the applicable rate and any other information or documentation which such Bank or the Administrative Agent may reasonably request for assisting such Bank or the -19- 25 Administrative Agent to obtain any allowable credits or deductions for the taxes so deducted or withheld in the jurisdiction or jurisdictions in which such Bank is subject to tax. (c) In addition, subject to Section 8.8, the Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or the Notes (hereinafter referred to as "Other Taxes"). (d) THE BORROWER, TO THE FULLEST EXTENT PERMITTED BY LAW, WILL INDEMNIFY EACH BANK AND THE ADMINISTRATIVE AGENT FOR THE FULL AMOUNT OF TAXES OR OTHER TAXES (INCLUDING, WITHOUT LIMITATION, ANY TAXES OR OTHER TAXES IMPOSED BY ANY JURISDICTION ON AMOUNTS PAYABLE UNDER THIS SECTION 2.13) PAID BY SUCH BANK OR THE ADMINISTRATIVE AGENT (AS THE CASE MAY BE) AND ANY LIABILITY (INCLUDING PENALTIES, INTEREST AND EXPENSES) ARISING THEREFROM OR WITH RESPECT THERETO, (EXPRESSLY INCLUDING SUCH AMOUNTS PAID AS A RESULT OF THE ORDINARY, SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH BANK OR THE ADMINISTRATIVE AGENT, BUT EXCLUDING SUCH AMOUNTS PAID AS A RESULT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH BANK OR ADMINISTRATIVE AGENT), WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR LEGALLY ASSERTED. This indemnification shall be made within 30 days from the date such Bank or the Administrative Agent (as the case may be) makes written demand therefor. No Bank nor the Administrative Agent shall be indemnified for Taxes or Other Taxes incurred or accrued more than 90 days prior to the date that such Bank or the Administrative Agent notifies the Borrower thereof; provided that the foregoing 90-day limitation shall not apply to the Borrower's obligations under the parenthetical contained in clause (3) of Section 2.13(a), which shall be without limitation as to time. (e) Within 30 days after the date of any payment of Taxes by or at the direction of the Borrower, the Borrower will furnish to the Administrative Agent, at its address referred to in Section 8.2, the original or a certified copy of a receipt evidencing payment thereof. Should any Bank or the Administrative Agent ever receive any refund, credit or deduction from any taxing authority to which such Bank or the Administrative Agent would not be entitled but for the payment by the Borrower of Taxes as required by this Section 2.13 (it being understood that the decision as to whether or not to claim, and if claimed, as to the amount of any such refund, credit or deduction shall be made by such Bank or the Administrative Agent in its sole discretion), such Bank or the Administrative Agent, as the case may be, thereupon shall repay to the Borrower an amount with respect to such refund, credit or deduction equal to any net reduction in taxes actually obtained by such Bank or the Administrative Agent, as the case may be, and determined by such Bank or the Administrative Agent, as the case may be, to be attributable to such refund, credit or deduction. -20- 26 (f) Each Bank shall use its reasonable efforts (consistent with its internal policies and legal and regulatory restrictions) to select a jurisdiction for its Applicable Lending Office or change the jurisdiction of its Applicable Lending Office, as the case may be, so as to avoid the imposition of any Taxes or Other Taxes or to eliminate the amount of any such additional amounts which may thereafter accrue; provided that no such selection or change of the jurisdiction for its Applicable Lending Office shall be made if, in the reasonable judgment of such Bank, such selection or change would be disadvantageous to such Bank. (g) Without prejudice to the survival of any other agreement of the Borrower hereunder, but subject to the expiration of any applicable statute of limitations, the agreements and obligations of the Borrower contained in this Section 2.13 shall survive the payment in full of principal and interest hereunder and under the Notes. (h) The Administrative Agent agrees with the Borrower that the Administrative Agent will use reasonable efforts to (i) solicit relevant federal income tax documentation (including Form 4224 or Form 1001 as appropriate) from each Bank necessary to allow the Administrative Agent to properly withhold and report federal income taxes on payments made by the Administrative Agent hereunder, (ii) report to the Internal Revenue Service all reportable income paid hereunder by the Administrative Agent to any Bank that is not a domestic corporation ( as such term is defined in Section 7701 of the Code) for federal income tax purposes on Forms 1042 and 1042S or other appropriate form, (iii) deliver to each Bank that is not a domestic corporation (as such term is defined in Section 7701 of the Code) for federal income tax purposes a Form 1042S or other appropriate form by March 15 following any year in which payment is made hereunder by the Administrative Agent to such Bank, and (iv) upon request of the Borrower, deliver copies of such forms to the Borrower. 2.14. Sharing of Payments, Etc. If any Bank shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Advances made by it (other than pursuant to Section 2.6, 2.10, 2.13, 2.17, 2.18 or 8.4(b)) in excess of its ratable share of payments on account of the Advances obtained by all the Banks, such Bank shall forthwith purchase from the other Banks such participations in the Advances made by them as shall be necessary to cause such purchasing Bank to share the excess payment ratably with each of them, provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Bank, such purchase from each Bank shall be rescinded and such Bank shall repay to the purchasing Bank the purchase price to the extent of its ratable share (according to the proportion of (a) the amount of the participation purchased from such Bank as a result of such excess payment to (b) the total amount of such excess payment) of such recovery together with an amount equal to such Bank's ratable share (according to the proportion of (x) the amount of such Bank's required repayment to (y) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered. The Borrower agrees that any Bank so purchasing a participation from another Bank pursuant to this Section 2.14 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such -21- 27 participation as fully as if such Bank were the direct creditor of the Borrower in the amount of such participation. 2.15. Increase of Facility. The Borrower shall have the right, with the consent of the Administrative Agent and all of the Banks (which consents shall not be unreasonably withheld), to effectuate from time to time an increase in the total amount of the indebtedness outstanding under this Agreement by issuing additional Notes under this Agreement to one or more commercial banks or other financial institutions (who shall, upon completion of the requirements stated in this Section 2.15, constitute Banks hereunder), or by issuing additional Notes to one or more Banks hereunder, so that such additional Notes shall equal the amount of the indebtedness increased pursuant to this Section 2.15; provided that (a) no increase pursuant to this Section 2.15 shall result in the total indebtedness outstanding under this Agreement exceeding $150,000,000, and (b) no Bank shall be required to lend additional funds or purchase an additional Note without the consent of such Bank, given in its sole discretion. The Borrower shall give the Administrative Agent three (3) Business Days' notice of the Borrower's intention to increase the indebtedness under this Agreement pursuant to this Section 2.15. Such notice shall specify each new commercial bank or other financial institution, if any, the amount of the Note to be issued to such Person(s), the date of the Borrowing evidenced by such Notes, and such other information as is reasonably requested by the Administrative Agent. Each new commercial bank or other financial institution, and each Bank agreeing to lend additional funds, shall execute and deliver to the Administrative Agent a document satisfactory to the Administrative Agent pursuant to which it becomes a party hereto or agrees to lend additional funds, as the case may be, which document, in the case of a new commercial bank or other financial institution, shall (among other matters) specify the CD Lending Office, Domestic Lending Office and Eurodollar Lending Office of such new commercial bank or other financial institution. In addition, the Borrower shall execute and deliver a Note to each new commercial bank or other financial institution participating in the increase in the principal amount to be advanced by such new commercial bank or other financial institution, and an additional Note to each existing Bank participating in such increase in the principal amount to be advanced by such existing Bank. Such Notes and other documents of the nature referred to in Section 3.1 shall be furnished to the Administrative Agent in form and substance as may be reasonably required by it. Upon execution and delivery of such documents, such new commercial bank or other financial institution shall constitute a "Bank" hereunder, or such Bank shall be obligated to lend the additional funds specified therein, as the case may be. 2.16 Reserved. 2.17. Non-Ratable Repayment. In addition to the Borrower's rights pursuant to Section 2.9, the Borrower may prepay in whole (but not in part) all Advances owed to one or more Banks, non-ratably and without the requirement to prepay Advances owed to any other Banks, (x) in the case of Adjusted CD Rate Advances, upon at least one Business Days' notice, (y) in the case of Eurodollar Advances, upon at least three Business Days' notice, and (z) in the case of Base Rate Advances, upon notice by 11:00 A.M. on the day of the proposed prepayment, to the Administrative Agent stating the proposed date of prepayment, the Bank or Banks to which -22- 28 such prepayment is to be made, the aggregate principal amount of the prepayment and the principal amount to be prepaid to each Bank; provided that the Borrower shall not give any such notice if (i) any Event of Default then exists or any event then exists which would constitute an Event of Default but for the requirement that notice be given or time elapse or both, and (ii) the senior unsecured long-term debt of the Guarantor is rated BBB- or lower by Standard & Poor's or Baa3 or lower by Moody's. If the Borrower gives the notice contemplated by this Section 2.17, the Borrower shall prepay the outstanding principal amount of the Advances described in such notice, together with accrued interest to the date of such prepayment on the principal amount prepaid, without premium or penalty, and all other amounts, if any, owed to each Bank to which such prepayment is to be made (including any amount owed pursuant to Section 8.4(b)). 2.18. Replacement of Bank. In the event that any Bank shall either (i) refuse to the extend the Maturity Date following a request under Section 2.4(b), or (ii) claim payment of any increased costs pursuant to Section 2.10 or any additional amounts pursuant to Section 2.13, the Borrower shall have the right to replace such Bank with another commercial bank or other financial institution; provided that such replacement commercial bank or other financial institution, (a) if it is not a Bank, shall be reasonably acceptable to the Administrative Agent, (b) shall unconditionally offer in writing (with a copy to the Administrative Agent) to purchase all of such Bank's rights and assume all of such Bank's obligations hereunder and interest in the Advances owing to such Bank and the Note or Notes held by such Bank without recourse at the principal amount of such Note plus interest accrued thereon to the date of such purchase on a date therein specified, and (c) shall execute and deliver to the Administrative Agent a document satisfactory to the Administrative Agent pursuant to which such replacement commercial bank or other financial institution becomes a party hereto, which document, if such replacement commercial bank or other financial institution is not already a Bank, shall (among other matters) specify the CD Lending Office, Domestic Lending Office and Eurodollar Lending Office of such replacement commercial bank or other financial institution. Upon satisfaction of the requirements set forth in the first sentence of this Section 2.18, acceptance of such offer to purchase by the Bank to be replaced, payment to such Bank of the purchase price in immediately available funds, and, if required, the payment by the Borrower of all requested costs accruing to the date of purchase which the Borrower is obligated to pay under Section 8.4 and all other amounts owed by the Borrower to such Bank (other than the principal of and interest on the Advances of such Bank purchased by the replacement commercial bank or other financial institution), the replacement commercial bank or other financial institution shall constitute a "Bank" hereunder and the Bank being so replaced shall no longer constitute a "Bank" hereunder (with Annex I being amended to reflect same), except that the rights under Sections 2.6, 2.10, 2.13 and 8.4 of the Bank being so replaced shall continue with respect to matters arising out of events or occurrences before or concurrently with its ceasing to be a "Bank" hereunder. If, however, (x) a Bank accepts such an offer and such commercial bank or other financial institution fails to purchase such rights and interest on such specified date in accordance with the terms of such offer, the Borrower shall continue to be obligated to pay the increased costs to such Bank pursuant to Section 2.10 or the additional amounts pursuant to Section 2.13, as the case may be, or (y) the Bank proposed to be replaced fails to accept such purchase offer, the Borrower shall not be obligated to pay to such -23- 29 Bank such increased costs or additional amounts incurred or accrued from and after the date of such purchase offer. ARTICLE III CONDITIONS TO EACH BORROWING 3.1. Initial Conditions Precedent. The obligation of each Bank to fund its portion of the Borrowing on January 16, 1996 (or to fund any Borrowing pursuant to Section 2.15) pursuant to the terms and conditions of this Agreement is subject to the conditions precedent that the Administrative Agent shall have received the following, each dated on or before the date of such Borrowing, in form and substance satisfactory to the Administrative Agent: (a) Loan Documents. This Agreement, the Guaranty, and the executed Notes payable to the order of the Banks, respectively, in the amount of such Bank's Commitment as set forth on Annex I (in the case of the Borrowing made on January 16, 1996) and in the amount to be advanced by such Bank (in the case of a Borrowing pursuant to Section 2.15). (b) Corporate Documents. Certified copies of the resolutions of the Board of Directors of each of the Guarantor and the Borrower approving the execution, delivery and performance of, in the case of the Guarantor, the Guaranty, and in the case of the Borrower, the Loan Documents to which it is a party and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to each such Loan Document or the Guaranty and certified copies of the restated certificate of incorporation and bylaws of the Guarantor and of the memorandum and articles of association of the Borrower. (c) Incumbency. A certificate of the Secretary or an Assistant Secretary of each of the Guarantor and the Borrower certifying the names and true signatures of the officers of each authorized to sign, in the case of the Guarantor, the Guaranty, and in the case of the Borrower, each Loan Document to which it is a party and the other documents to be delivered hereunder. (d) Legal Opinions. A favorable opinion from each of the following: (i) Vinson & Elkins L.L.P., special counsel for the Guarantor and the Borrower, to be delivered to, and for the benefit of, the Banks and the Administrative Agent, at the express instruction of the Guarantor and the Borrower, substantially in the form of Exhibit C-1 and as to such other matters as any Bank through the Administrative Agent may reasonably request. (ii) Bennett Jones Verchere, special Canadian tax counsel for the Borrower, to be delivered to, and for the benefit of, the Banks and the Administrative Agent, at the -24- 30 express instruction of the Borrower, substantially in the form of Exhibit C-2 and as to such other matters as any Bank through the Administrative Agent may reasonably request. (iii) Stewart McKelvey Stirling Scales, special Nova Scotia counsel for the Borrower, to be delivered to, and for the benefit of, the Banks and the Administrative Agent, at the express instruction of the Borrower, substantially in the form of Exhibit C-3 and as to such other matters as any Bank through the Administrative Agent may reasonably request. (iv) A favorable opinion of Dennis M. Ulak, Vice President and General Counsel of the Guarantor, to be delivered to, and for the benefit of, the Banks and the Administrative Agent, at the express instruction of the Guarantor, in substantially the form of Exhibit D and as to such other matters as any Bank through the Administrative Agent may reasonably request. (e) Parol Certificate. A Notice of Entire Agreement, executed by the Borrower. 3.2. Additional Conditions Precedent to the Borrowings. The obligation of each Bank to fund its portion of the Borrowing on January 16, 1996 (or to fund any subsequent Borrowing pursuant to Section 2.15) shall be subject to the additional conditions precedent that on the date of the Borrowing: (a) Absence of Default. The following statements shall be true (and each of the giving of the applicable Notice of Borrowing and the acceptance by the Borrower of the proceeds of the Borrowing shall constitute a representation and warranty by the Borrower that on the date of the Borrowing such statements are true): (i) The representations and warranties contained in Section 4.1 of this Agreement and the other Loan Documents are correct on and as of the date of such Advance, before and after giving effect to the Borrowing and to the application of the proceeds therefrom, as though made on and as of such date, and (ii) No event has occurred and is continuing, or would result from the Borrowing or from the application of the proceeds therefrom, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; and (b) Notice of Borrowing. The Administrative Agent shall have received the Notice of Borrowing required by Section 2.2 and such other approvals, opinions or documents as any Bank through the Administrative Agent may reasonably request. -25- 31 ARTICLE IV REPRESENTATIONS AND WARRANTIES 4.1. Representations and Warranties of the Borrower. The Borrower represents and warrants to the Banks as follows: (a) Formation; Existence. The Borrower is duly formed, validly existing and in good standing under the laws of the jurisdiction of its formation. The Borrower has all power and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. (b) Authority; Etc. The execution, delivery and performance by the Borrower of each Loan Document to which it is or will be a party are within the Borrower's powers, have been duly authorized by all necessary action of the Borrower, require, in respect of the Borrower, no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of law or regulation (including Regulation X issued by the Federal Reserve Board) applicable to the Borrower or Regulation U issued by the Federal Reserve Board or the memorandum and articles of association of the Borrower or any judgment, injunction, order, decree or material ("material" for the purposes of this representation meaning creating a liability of $50,000,000 or more) agreement binding upon the Borrower or result in the creation or imposition of any lien, security interest or other charge or encumbrance on any asset of the Borrower. (c) Validity. This Agreement and each Note are, and each other Loan Document to which the Borrower is or will be a party, when executed and delivered in accordance with this Agreement will be, the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms, except as the enforceability thereof may be limited by the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general principles of equity. (d) Investment Company Act. The Borrower is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (e) Public Utility Holding Company Act. The Borrower is not a "holding company", a "subsidiary company" of a "holding company", an "affiliate" of a "holding company", or an "affiliate" of a "subsidiary company" of a "holding company", in each case as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. (f) Margin Stock. Following application of the proceeds of each Advance, not more than 25 percent of the value of the assets (both of the Borrower only and of the Borrower and its subsidiaries on a consolidated basis), which are subject to any arrangement with the Administrative Agent or any Bank (herein or otherwise) whereby the Borrower's right or ability -26- 32 to sell, pledge or otherwise dispose of assets is in any way restricted, will be margin stock (within the meaning of Regulation U issued by the Federal Reserve Board). ARTICLE V COVENANTS OF THE BORROWER 5.1. Affirmative Covenants. The Borrower covenants and agrees that so long as any Note shall remain unpaid, the Borrower will, unless the Majority Banks shall otherwise consent in writing: (a) Reporting Requirements. Furnish to each Bank, as soon as possible and in any event within five (5) days after an executive officer of the Borrower having obtained knowledge thereof, notice of the occurrence of any Event of Default or any event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default, continuing on the date of such notice, and a statement of the chief financial officer of the Borrower setting forth details of such Event of Default or event and the action which the Borrower (or the Guarantor) has taken and proposes to take with respect thereto; (b) Compliance with Laws, Etc. Comply with all applicable laws, rules, regulations and orders to the extent noncompliance therewith would have a material adverse effect on the Borrower, such compliance to include, without limitation, the paying before the same become delinquent of all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent contested in good faith by appropriate proceedings. (c) Use of Proceeds. Use the proceeds of each Borrowing for general business purposes of the Borrower and its subsidiaries. However, no part of the proceeds of any Borrowing shall be used for the purpose of purchasing or carrying margin stock within the meaning of Regulation U issued by the Federal Reserve Board. 5.2. Negative Covenants. So long as any Note shall remain unpaid, the Borrower will not at any time, without the written consent of the Majority Banks: (a) Disposition of Assets. Lease, sell, transfer or otherwise dispose of, voluntarily or involuntarily, all or substantially all of its assets; provided that the foregoing shall not apply to (i) any conversions of currency between U.S. Dollars and Canadian Dollars that the Borrower may undertake from time to time, or (ii) any lease, sale, transfer or other disposition of assets by the Borrower to any Person which is wholly-owned, directly or indirectly, by the Guarantor. (b) Mergers, Etc. Merge, amalgamate or consolidate with or into, any Person, unless (i) the Borrower is the survivor or (ii) the surviving Person, if not the Borrower, assumes, -27- 33 pursuant to a written agreement in form and substance satisfactory to the Administrative Agent, all obligations of the Borrower under this Agreement, provided, in each case that both immediately before and after giving effect to such proposed transaction, no Event of Default or event which, with the giving of notice or the lapse of time, or both, would constitute an Event of Default exists, or would exist or result. ARTICLE VI EVENTS OF DEFAULT 6.1. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing: (a) Payment Default. The Borrower shall fail to pay (1) any principal on any Note when due and payable or (2) any interest on any Note for more than five days after such interest becomes due and payable; or (b) Failure of Representation. Any representation or warranty made by the Borrower (or any of its officers) (including representations and warranties deemed made pursuant to Section 3.2) under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made or deemed made and such materiality is continuing; or (c) Failure to Comply with Covenants. The Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 5.2 or shall fail to perform or observe any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if, in the case of such other term, covenant or agreement, such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the Borrower by the Administrative Agent at the request of any Bank; or (d) Default on Other Indebtedness. The Borrower shall fail to pay any principal of or premium or interest on any indebtedness for borrowed money, which is outstanding in the principal amount of at least $50,000,000 in the aggregate, when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such indebtedness; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such indebtedness and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate the maturity of such indebtedness; or any such indebtedness shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment or as a result of the giving of notice of a voluntary prepayment), prior to the stated maturity thereof; or -28- 34 (e) Insolvency. The Borrower shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, including without limitation, the Companies' Creditors Arrangement Act (Canada), the Bankruptcy and Insolvency Act (Canada) or the Winding-up Act (Canada), or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), shall remain undismissed or unstayed for a period of 60 days; or the Borrower shall take any action to authorize any of the actions set forth above in this subsection (e); or (f) Guarantor Default. A Guarantor Default shall occur and be continuing; then, and in any such event, the Administrative Agent shall at the request, or may with the consent, of the Majority Banks, by notice to the Borrower, declare the principal balance of the Notes, all interest accrued thereon and all other accrued amounts payable under this Agreement to be forthwith due and payable, whereupon the principal balance of the Notes, all such accrued interest and all such accrued amounts shall become and be forthwith due and payable, without presentment, demand, protest, notice of intent to accelerate or further notice of any kind, all of which are, to the extent permitted by law, hereby expressly WAIVED by the Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code, the Companies' Creditors Arrangement Act (Canada), the Bankruptcy and Insolvency Act (Canada) or the Winding-up Act (Canada), the principal balance of the Notes, all accrued interest and all accrued amounts shall automatically become and be due and payable, without presentment, demand, protest, notice of intent to accelerate or any notice of any kind, all of which are, to the extent permitted by law, hereby expressly WAIVED by the Borrower. ARTICLE VII THE ADMINISTRATIVE AGENT 7.1. Authorization and Action. Each Bank hereby appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Loan Documents or the Guaranty as are delegated to the Administrative Agent, by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. As to any matters not expressly provided for by the Loan Documents or the Guaranty (including enforcement or collection of the Notes), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority -29- 35 Banks, and such instructions shall be binding upon all Banks and all holders of Notes; provided, however, that the Administrative Agent shall not be required to take any action which exposes the Administrative Agent to personal liability or which is contrary to any Loan Document, the Guaranty or applicable law and shall not be required to initiate or conduct any litigation or other proceedings. The Administrative Agent agrees to give to each Bank prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement. 7.2. Administrative Agent's Reliance, Etc. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with any Loan Document or the Guaranty, except for its or their own gross negligence or willful misconduct. The duties of the Administrative Agent shall be mechanical and administrative in nature; the Administrative Agent shall not have, by reason of this Agreement, any other Loan Document or the Guaranty, a fiduciary relationship in respect of any Bank or the holder of any Note; and nothing in this Agreement, any other Loan Document or the Guaranty, expressed or implied, is intended or shall be so construed as to impose upon the Administrative Agent any obligations in respect of this Agreement, any other Loan Document or the Guaranty, except as expressly set forth herein. Without limitation of the generality of the foregoing, the Administrative Agent: (a) may treat the payee of any Note as the holder thereof until the Administrative Agent receives written notice of the assignment or transfer thereof signed by such payee and in form satisfactory to the Administrative Agent; (b) may consult with legal counsel (including counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (c) makes no warranty or representation to any Bank and shall not be responsible to any Bank for any statements, warranties or representations made in or in connection with any Loan Document or the Guaranty; (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 any Loan Document or the Guaranty on the part of the Borrower or the Guarantor or to inspect the property (including the books and records) of the Borrower or the Guarantor and shall not be deemed to have knowledge of an Event of Default or of any event which with the giving of notice or the lapse of time or both would be an Event of Default (other than nonpayment of principal of or interest on the Notes) unless it has received from a Bank or the Borrower a notice specifying such default and stating that it is an "Notice of Default"; (e) shall not be responsible to any Bank for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of any Loan Document, the Guaranty or any other instrument or document furnished pursuant hereto; and (f) shall incur no liability under or in respect of any Loan Document or the Guaranty by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopier, telegram, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. 7.3. Administrative Agent and Its Affiliates. With respect to its Commitment, the Advances made by it and the Note issued to it, the Bank which is also the Administrative Agent shall have the same rights and powers under the Loan Documents and the Guaranty as any -30- 36 other Bank and may exercise the same as though it were not the Administrative Agent; and the term "Bank" or "Banks" shall, unless otherwise expressly indicated, include the Bank serving as the Administrative Agent in its individual capacity. The Bank serving as the Administrative Agent and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, the Borrower, any of its subsidiaries and any Person who may do business with or own securities of the Borrower or any of its subsidiaries, all as if such Bank were not the Administrative Agent and without any duty to account therefor to the Banks. 7.4. Bank Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Bank and based on the financial statements referred to in Section 4.1(a)(1) of the Guaranty and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement, the other Loan Documents or the Guaranty. The Administrative Agent shall not have any duty or responsibility, either initially or on a continuing basis, to provide any Bank or the holder of any Note with any credit or other information with respect thereto, whether coming into its possession before a Borrowing or at any time or times thereafter. The Administrative Agent shall not be responsible to any Bank or the holder of any Note for any recitals, statements, information, representations or warranties herein, in the Guaranty or in any document, certificate or other writing delivered in connection herewith or therewith or for the execution, effectiveness, genuineness, validity, enforceability, collectibility, priority or sufficiency of this Agreement, any other Loan Document or the Guaranty or the financial condition of either the Guarantor or the Borrower or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement, any other Loan Document or the Guaranty, or the financial condition of either the Guarantor or the Borrower or the existence or possible existence of any Event of Default or event of which would constitute an Event of Default but for the requirement that notice be given or time elapse or both. 7.5. Certain Rights of the Administrative Agent. If the Administrative Agent shall request instructions from all of the Banks (in the case of matters specified in the proviso of Section 8.1) or the Majority Banks (in all other cases) with respect to any act or action (including failure to act) in connection with this Agreement, any other Loan Document or the Guaranty, the Administrative Agent shall be entitled to refrain from such act or taking such action unless and until the Administrative Agent shall have received instructions from all of the Banks or the Majority Banks, as the case may be; and it shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Bank or the holder of any Note shall have any right of action whatsoever against the Administrative Agent as a result of its acting or refraining from acting hereunder, under any other Loan Document or under the Guaranty in accordance with the instructions of the Majority Banks or all of the Banks, as the case may be. Furthermore, except -31- 37 for action expressly required of the Administrative Agent hereunder, the Administrative Agent shall in all cases be fully justified in failing or refusing to act hereunder unless it shall be specifically indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. 7.6. Holders. Any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee, assignee or indorsee, as the case may be, of such Note or of any Note or Notes issued in exchange therefor. 7.7. Indemnification. The Banks agree to indemnify the Administrative Agent (to the extent not reimbursed by the Borrower), ratably according to the respective principal amounts of the Notes then held by each of them (or if no principal of the Notes is at the time outstanding or if any principal of the Notes is held by Persons which are not Banks, ratably according to the respective amounts of their Commitments then existing, or, if no such principal amounts are then outstanding and no Commitments are then existing, ratably according to the respective amounts of the Commitments existing immediately prior to the termination thereof), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Administrative Agent in any way relating to or arising out of any of the Loan Documents or the Guaranty or any action taken or omitted by the Administrative Agent under the Loan Documents or the Guaranty EXPRESSLY INCLUDING ANY SUCH LIABILITY, OBLIGATION, LOSS, DAMAGE, PENALTY, ACTION, JUDGMENT, SUIT, COST, EXPENSE OR DISBURSEMENT ATTRIBUTABLE TO THE ORDINARY, SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH INDEMNIFIED PARTY; PROVIDED THAT NO BANK SHALL BE LIABLE FOR ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING FROM THE ADMINISTRATIVE AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. IT IS THE INTENT OF THE BANKS THAT THE ADMINISTRATIVE AGENT SHALL, TO THE EXTENT PROVIDED IN THIS SECTION 7.7, BE INDEMNIFIED FOR ITS ORDINARY, SOLE OR CONTRIBUTORY NEGLIGENCE. Without limitation of the foregoing, each Bank agrees to reimburse the Administrative Agent promptly upon demand for such Bank's ratable share of any reasonable out-of-pocket expenses (including reasonable counsel fees) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, the Loan Documents, or any of them or the Guaranty, to the extent that the Administrative Agent is not reimbursed for such expenses by the Borrower. -32- 38 7.8. Resignation by the Administrative Agent. (a) The Administrative Agent may resign from the performance of all its functions and duties hereunder, under the other Loan Documents or the Guaranty at any time by giving 15 Business Days' prior written notice to the Borrower and the Banks. Such resignation shall take effect upon the appointment of a successor Administrative Agent pursuant to clauses (b) and (c) below or as otherwise provided below. (b) Upon any such notice of resignation, the Majority Banks shall have the right to appoint a successor Administrative Agent which shall be a commercial bank or trust company reasonably acceptable to the Borrower. (c) If a successor to a resigning Administrative Agent shall not have been so appointed within such 15 Business Day period, the resigning Administrative Agent, with the consent of the Borrower (which consent will not be unreasonably withheld), shall have the right to then appoint a successor Administrative Agent who shall serve as Administrative Agent until such time, if any, as the Majority Banks appoint a successor Administrative Agent as provided above. (d) If no successor Administrative Agent has been appointed pursuant to clause (b) or (c) above and shall have accepted such appointment by the 20th Business Day after the date such notice of resignation was given by the resigning Administrative Agent, the resigning Administrative Agent's resignation shall become effective and the Banks shall thereafter perform all the duties of the resigning Administrative Agent hereunder, under any other Loan Document or the Guaranty until such time, if any, as the Majority Banks appoint a successor Administrative Agent as provided above. ARTICLE VIII MISCELLANEOUS 8.1. Amendments, Etc. No amendment or waiver of any provision of any Loan Document, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Majority Banks, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all the Banks, do any of the following: (a) waive any of the conditions specified in Article III, (b) increase the Commitments of the Banks or subject the Banks to any additional obligations, except as provided in Section 2.15, (c) forgive or reduce the principal of, or interest on, the Notes or other amounts payable hereunder, (d) postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, (e) take any action which requires the consent of all the Banks pursuant to the terms of any Loan -33- 39 Document, (f) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes which shall be required for the Banks or any of them to take any action under any Loan Document or (g) amend this Section 8.1; and provided, further, that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Banks required above to take such action, affect the rights or duties of the Administrative Agent under any Loan Document. 8.2. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telecopier communication) and mailed, telecopied or delivered, if to the Borrower, at its address or telecopier number set forth below: EOG Company of Canada 1400 Smith Street Houston, Texas 77002 Attention: Senior Vice President, Chief Financial Officer and Treasurer Telecopier No.: 713-646-2113 if to any Bank, at its Domestic Lending Office; if to the Administrative Agent, at its address or telecopier number set forth below: Texas Commerce Bank National Association 712 Main Street Houston, Texas 77002 Attention: Manager Energy Group Telecopier No.: 713-216-4117 or, as to the Borrower or the Administrative Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to the Borrower and the Administrative Agent. All such notices and communications shall be effective, if delivered, upon such delivery; if mailed, three (3) Business Days after deposit in the mails; if sent by overnight courier, one Business Day after delivery to the courier company; and if sent by telecopier, when received by the receiving telecopier equipment, respectively; provided, however, that (a) notices and communications to the Administrative Agent shall not be effective until received by the Administrative Agent and (b) telecopied notices received by any party after its normal business hours (or on a day other than a Business Day) shall be effective on the next Business Day. -34- 40 8.3. No Waiver; Remedies. No failure on the part of any Bank or the Administrative Agent to exercise, and no delay in exercising, and no course of dealing with respect to, any right under any Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies provided in the Loan Documents are cumulative and not exclusive of any remedies provided by law or in equity. 8.4. Costs, Expenses and Taxes. (a) Subject to Section 8.8, the Borrower agrees to pay on demand (1) all reasonable costs and expenses in connection with the preparation, execution, delivery, administration, modification and amendment of the Loan Documents and the other documents to be delivered under the Loan Documents, including the reasonable fees and out-of- pocket expenses of one law firm as counsel for the Administrative Agent with respect to preparation, execution and delivery of the Loan Documents and the satisfaction of the matters referred to in Section 3.1, and (2) all legal and other costs and expenses, if any, of the Administrative Agent and each Bank in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of the Loan Documents and the other documents to be delivered under the Loan Documents or incurred in connection with any workout, restructuring or bankruptcy. (b) If any payment or purchase of principal of, or Conversion of, any Adjusted CD Rate Advance or Eurodollar Advance is made other than on the last day of an Interest Period relating to such Advance, as a result of a payment, purchase or Conversion pursuant to Sections 2.7(f), 2.8, 2.9, 2.10, 2.11, 2.13 or 2.18 or acceleration of the maturity of the Notes pursuant to Section 6.1 or for any other reason, the Borrower, subject to Section 8.8, shall, upon demand by any Bank (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Bank any amounts required to compensate such Bank for any additional losses, costs or expenses which it may reasonably incur as a result of such payment, purchase or Conversion, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Bank to fund or maintain such Advance. A certificate in reasonable detail as to the basis for and the amount of such loss, costs or expense, submitted to the Borrower and the Administrative Agent by such Bank, shall be conclusive and binding for all purposes, absent manifest error. (c) THE BORROWER AGREES, TO THE FULLEST EXTENT NOT PROHIBITED BY LAW, TO INDEMNIFY AND HOLD HARMLESS THE ADMINISTRATIVE AGENT AND EACH BANK AND EACH OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES, LIABILITIES AND EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL AND CLAIMS, DAMAGES, LIABILITIES AND EXPENSES RELATING TO ENVIRONMENTAL MATTERS) FOR WHICH ANY OF THEM MAY BECOME LIABLE OR WHICH MAY BE INCURRED BY OR ASSERTED AGAINST THE ADMINISTRATIVE AGENT OR SUCH BANK OR ANY SUCH DIRECTOR, OFFICER, EMPLOYEE OR AGENT OTHER THAN BY THE ADMINISTRATIVE AGENT OR ANOTHER BANK OR ANY OF THEIR -35- 41 RESPECTIVE SUCCESSORS OR ASSIGNS), IN EACH CASE IN CONNECTION WITH OR ARISING OUT OF OR BY REASON OF ANY INVESTIGATION, LITIGATION, OR PROCEEDING, WHETHER OR NOT THE ADMINISTRATIVE AGENT OR SUCH BANK OR ANY SUCH DIRECTOR, OFFICER, EMPLOYEE OR AGENT IS A PARTY THERETO, ARISING OUT OF, RELATED TO OR IN CONNECTION WITH THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY TRANSACTION IN WHICH ANY PROCEEDS OF ALL OR ANY PART OF THE ADVANCES ARE APPLIED (EXPRESSLY INCLUDING ANY SUCH CLAIM, DAMAGE, LIABILITY OR EXPENSE ATTRIBUTABLE TO THE ORDINARY, SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH INDEMNIFIED PARTY, BUT EXCLUDING ANY SUCH CLAIM, DAMAGE, LIABILITY OR EXPENSE ATTRIBUTABLE TO THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY). IT IS THE INTENT OF THE PARTIES HERETO THAT THE ADMINISTRATIVE AGENT AND EACH BANK, AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS, SHALL, TO THE EXTENT PROVIDED IN THIS SECTION 8.4(C), BE INDEMNIFIED FOR THEIR OWN ORDINARY, SOLE OR CONTRIBUTORY NEGLIGENCE. 8.5. Right of Set-Off. Upon (a) the occurrence and during the continuance of any Event of Default and (b) the making of the request or the granting of the consent specified by Section 6.1 to authorize the Administrative Agent to declare the Notes due and payable pursuant to the provisions of Section 6.1, each Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Bank to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement and the Note held by such Bank, irrespective of whether or not the Administrative Agent or such Bank shall have made any demand under this Agreement or such Note and although such obligations may be unmatured. Each Bank agrees promptly to notify the Borrower after any such set-off and application made by such Bank; provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Bank under this Section 8.5 are in addition to other rights and remedies (including, without limitation, other rights of set-off) which such Bank may have. 8.6. Binding Effect; Assignments; Participations. (a) This Agreement shall become effective when it shall have been executed by the Borrower and the Administrative Agent and when the Administrative Agent shall have, as to each Bank, either received a copy of a signature page hereof executed by such Bank or been notified by such Bank that such Bank has executed it and thereafter shall be binding upon and inure to the benefit of and be enforceable by the Borrower, the Administrative Agent and each Bank and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the express prior written consent of the Banks (other than an assignment effectuated by a merger or consolidation permitted by Section 5.2(b) to the surviving Person referred to therein). Each Bank may assign to one or more banks or other entities all or any part of, or may grant participations to one or more banks or other entities in accordance with applicable law in or to all or any part of, the Advances owing to such -36- 42 Bank and the Note held by such Bank and any such Bank's continuing obligations with respect thereto, and to the extent of any such assignment or participation (unless otherwise stated therein) the assignee or purchaser of such assignment or participation shall, to the fullest extent permitted by law, have the same rights to payment hereunder and under such Note as it would have if it were such Bank hereunder; provided that (x) such Bank's obligations under this Agreement, including its Commitment, shall remain unchanged, such Bank shall remain solely responsible for the performance thereof, such Bank shall remain the holder of any such Note for all purposes under this Agreement, and the Borrower, the other Banks and the Administrative Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement; (y) no such assignee or participant shall be entitled to receive any greater payment pursuant to Sections 2.6, 2.10 and 2.13 than such Bank would have been entitled to receive with respect to the rights assigned or participated except as a result of circumstances arising after the date of such assignment or participation to the extent that such circumstances affect other Banks and participants generally; and (z) no Bank shall assign or grant a participation that conveys to the assignee or participant the right to vote or consent under this Agreement, other than the right to vote upon or consent to (1) any increase in the amount of such Bank's Commitment; (2) any reduction of the principal amount of, or interest to be paid on, such Bank's Advance or Advances or Note; or (3) any postponement of the due date in respect of any amounts owed to such Bank under any Loan Document or the Guaranty. (b) Notwithstanding anything to the contrary in Section 8.6(a), in accordance with applicable law (x) any Bank may assign a portion of its Commitment and its rights and obligations to one or more Banks, and (y) any Bank may assign a portion, in an amount of at least $5,000,000 of its Commitment (provided such assignment does not result in the remaining Commitment of the assigning Bank being less than $10,000,000), and its rights and obligations hereunder to another commercial bank or financial institution, in the case of assignments pursuant to clause (y) above with prior written consents of the Administrative Agent and the Borrower, which consents shall not be unreasonably withheld, each of which assignees pursuant to clause (y) to become a party to this Agreement as a Bank by executing and delivering to the Administrative Agent an Assignment and Acceptance, in substantially the form of Exhibit F, with the assigning Bank; provided that, in the case of each such assignment, (A) at such time Annex I shall be modified to reflect the Commitments of such assignee Bank and of the existing Banks, (B) the Borrower shall issue new Notes to such assignee Bank and to the assigning Bank to reflect the revised Commitments and (C) the Administrative Agent shall receive at the time of such assignment, from the assigning or assignee Bank, a non-refundable assignment fee of $2,500. To the extent of any assignment pursuant to this Section 8.6(b), the assigning Bank shall be relieved of its obligations hereunder with respect to its assigned Commitment. (c) In addition to the assignments and participations permitted under subsections (a) and (b) of this Section 8.6, any Bank may assign, as collateral or otherwise, any of its rights (including rights to payments of principal of and/or interest on the Notes) under any Loan Document to any Federal Reserve Bank without notice to or consent of the Borrower or the -37- 43 Administrative Agent; provided, that no such assignment under this subsection (c) shall release the assigning Bank from its obligations hereunder. 8.7. Governing Law; Entire Agreement. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS. This Agreement, the Notes, the other Loan Documents and any fee letter to the Administrative Agent signed by the Borrower constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto. 8.8. Interest. The parties to this Agreement intend to strictly comply with all applicable laws, including applicable usury laws. Accordingly, the provisions of this Section 8.8 shall govern and control over every other provision of any Loan Document which conflicts or is inconsistent with this Section 8.8, even if such other provision declares that it controls. As used in this Section 8.8, the term "interest" includes the aggregate of all charges, fees, benefits or other compensation which constitute interest under applicable law; provided that, to the maximum extent permitted by applicable law, (a) any non-principal payment shall be characterized as an expense or as compensation for something other than the use, forbearance or detention of money, and not as interest and (b) all interest at any time contracted for, taken, reserved, charged or received shall be amortized, prorated, allocated and spread during the full term of the Advances and the Commitments. In no event shall the Borrower or any other Person be obligated to pay, or the Administrative Agent or any Bank have any right or privilege to reserve, receive or retain, (x) any interest in excess of the maximum amount of nonusurious interest permitted under the laws of the State of Texas or the applicable laws (if any) of the United States, the Government of Canada or of any other state or province thereof or (y) total interest in excess of the amount which the Administrative Agent or such Bank could lawfully have contracted for, taken, reserved, received, retained or charged had the interest been calculated for the full term of the Advances at the Highest Lawful Rate. On each day, if any, that the interest rate (the "Stated Rate") called for under any Loan Document exceeds the Highest Lawful Rate, the rate at which interest shall accrue shall automatically be fixed by operation of this sentence at the Highest Lawful Rate for that day, and shall remain fixed at the Highest Lawful Rate for each day thereafter until the total amount of interest accrued equals the total amount of interest which would have accrued if there were no such ceiling rate as is imposed by this sentence. Thereafter, interest shall accrue at the Stated Rate unless and until the Stated Rate again exceeds the Highest Lawful Rate when the provisions of the immediately preceding sentence shall again automatically operate to limit the interest accrual rate. The daily interest rates to be used in calculating interest at the Highest Lawful Rate shall be determined by dividing the applicable Highest Lawful Rate per annum by the number of days in the calendar year for which such calculation is being made. None of the terms and provisions contained in any Loan Document which directly or indirectly relate to interest shall ever be construed without reference to this Section 8.8, or be construed to create a contract to pay for the use, forbearance or detention of money at an interest rate in excess of the Highest Lawful Rate. If the term of any of the Notes is shortened by reason of acceleration of maturity or by reason of any required or permitted prepayment, and if for that (or any other) reason the -38- 44 Administrative Agent or any Bank at any time, including the stated maturity, is owed or receives (and/or has received) interest in excess of interest calculated at the Highest Lawful Rate, then and in any such event all of any such excess interest shall be cancelled automatically as of the date of such acceleration, prepayment or other event which produces the excess, and, if such excess interest has been paid to the Administrative Agent or such Bank, it shall be credited pro tanto against the then outstanding principal balance of the Borrower's obligations to the Administrative Agent or such Bank, effective as of the date or dates when the event occurs which causes it to be excess interest, until such excess is exhausted or all of such principal has been fully paid and satisfied, whichever occurs first, and any remaining balance of such excess shall be promptly refunded to its payor. 8.9. Captions. Captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement. 8.10. Confidentiality. Each Bank agrees that it will use reasonable efforts not to disclose without the prior consent of the Borrower (other than to its employees, auditors or counsel, to another Bank, or to such Bank's own holding or parent company and its affiliates, in each case if the disclosing Bank or its holding or parent company in its sole discretion determines that any such party should have access to such information) any information with respect to the Guarantor, the Borrower or its subsidiaries which is furnished pursuant to this Agreement, any other Loan Document or the Guaranty and which is designated by either the Guarantor or the Borrower to the Banks in writing as confidential; provided that any Bank may disclose any such information (a) as has become generally available to the public, (b) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or federal regulatory body having or claiming to have jurisdiction over such Bank or to the Federal Reserve Board or the FDIC or similar organizations (whether in the United States or elsewhere), (c) as may be required or appropriate in response to any summons or subpoena or in connection with any litigation, (d) in order to comply with any law, order, regulation or ruling applicable to such Bank, and (e) to the prospective transferee in connection with any contemplated transfer of any of the Notes or any interest therein by such Bank; provided, further, that such prospective transferee executes an agreement with the Borrower containing provisions substantially identical to those contained in this Section 8.10. 8.11. Survival; Term; Reinstatement. In addition to the other provisions of this Agreement expressly stated to survive the termination of this Agreement, the obligations of the Borrower under Sections 2.6, 2,10, 2.13, 2.18 and 8.4 and the last sentence of this Section 8.11 and the obligations of the Banks under Section 8.10 shall survive the termination of this Agreement. The Borrower agrees that if at any time all or any part of any payment previously applied by any Bank to any Advance or other sum hereunder is or must be returned by or recovered from such Bank for any reason (including the order of any bankruptcy court), the Loan Documents shall automatically be reinstated to the same effect as if the prior application had not been made, and the Borrower hereby agrees to indemnify such Bank against, and to save and hold -39- 45 such Bank harmless from, any required return by or recovery from such Bank of any such payment. 8.12. Severability. Whenever possible, each provision of the Loan Documents shall be interpreted in such manner as to be effective and valid under applicable law. If any provision of any Loan Document shall be invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality and enforceability of the remaining provisions of such Loan Document shall not be affected or impaired thereby. 8.13. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 8.14 Location of Transactions. The Administrative Agent and each Bank that is a party hereto on the date hereof and which is not a resident of Canada acknowledges: (a) that it has conducted all negotiations with respect to the Loan Documents and the Guaranty outside of Canada, (b) that it has made all credit decisions concerning the Loan Documents and the Guaranty outside of Canada, and (c) that it has executed the Loan Documents to which it is a party outside of Canada. The Borrower acknowledges: (a) that it has conducted all negotiations with the Administrative Agent and each Bank that is a party hereto on the date hereof and which is not a resident of Canada concerning the Loan Documents and the Guaranty outside of Canada, and (b) that it has executed the Loan Documents to which it is a party outside of Canada. 8.15. Currency Conversion and Indemnity. All payments made hereunder shall be made in the currency in respect of which the obligations requiring such payment arose. If, in connection with any action or proceeding brought in connection with this Agreement or any of the Loan Documents or any judgment or order obtained as a result thereof, it becomes necessary to convert any amount due hereunder in one currency (the "first currency") into another currency (the "second currency"), then the conversion shall be made at the Exchange Rate on the first Business Day prior to the day on which payment is received. If the conversion is not able to be made in the manner contemplated by the preceding paragraph in the jurisdiction in which the action or proceeding is brought, then the conversion shall be made at the Exchange Rate on the day on which the judgment is given. If the Exchange Rate on the date of payment is different from the Exchange Rate on such first Business Day or on the date of judgment, as the case may be, the Borrower shall pay such additional amount (if any) in the second currency as may be necessary to ensure that the amount paid on such payment date is the aggregate amount in the second currency which, when converted at the Exchange Rate on the date of payment, is the amount due in the first currency, together with all costs, charges and expenses of conversion. Any additional amount owing by the Borrower to the Banks pursuant to the provisions of this Section 8.15 shall be due as a separate -40- 46 debt and shall give rise to a separate cause of action and shall not be affected by or merged into any judgment obtained for any other amounts due under or in respect of this Agreement or any of the Loan Documents. -41- 47 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. BORROWER: EOG COMPANY OF CANADA By: /s/ W. C. Wilson ------------------------------------ Walter C. Wilson Senior Vice President, Chief Financial Officer and Treasurer [Signature Page 1] 48 ADMINISTRATIVE AGENT: TEXAS COMMERCE BANK NATIONAL ASSOCIATION By /s/ Scott Richardson ------------------------------------- Name: Scott Richardson Title: Vice President [Signature Page 2] 49 COMMERZBANK AKTIENGESELLSCHAFT, ATLANTA AGENCY By /s/ H. Yergey /s/ Paul Mahoney -------------------------------------------- Name: H. Yergey P. Mahoney Title: Vice President Assistant Cashier [Signature Page 3] 50 ROYAL BANK OF CANADA By /s/ B. J. Belliveau ------------------------------------- Name: B. J. Belliveau Title: Senior Manager [Signature Page 4] 51 TEXAS COMMERCE BANK NATIONAL ASSOCIATION By /s/ Scott Richardson ------------------------------------- Name: Scott Richardson Title: Vice President [Signature Page 5] 52 THE BANK OF NEW YORK By /s/ Raymond J. Palmer ------------------------------------- Name: Raymond J. Palmer Title: Vice President [Signature Page 6] 53 THE BANK OF NOVA SCOTIA By /s/ A. S. Norsworthy ------------------------------------- Name: A. S. Norsworthy Title: Assistant Agent [Signature Page 7] 54 ANNEX I COMMITMENTS
Bank Commitment Percentage Share ---- ---------- ---------------- Texas Commerce Bank $ 25,000,000 23.809523810% Commerzbank $ 25,000,000 23.809523810% Royal Bank of Canada $ 25,000,000 23.809523810% Bank of New York $ 15,000,000 14.285714286% Bank of Nova Scotia $ 15,000,000 14.285714286% ------------ ------------- $105,000,000 100%
55 SCHEDULE I APPLICABLE MARGIN
======================================================================= Rating Level Eurodollar Base Rate CD Rate - ----------------------------------------------------------------------- Level I .275% .000% .400% - ----------------------------------------------------------------------- Level II .300% .000% .425% - ----------------------------------------------------------------------- Level III .325% .000% .450% - ----------------------------------------------------------------------- Level IV .375% .000% .500% - ----------------------------------------------------------------------- Level V .500% .000% .625% - ----------------------------------------------------------------------- Level VI .750% .000% .875% =======================================================================
S&P Moody's Level I: A A2 Level II: A- A3 Level III: BBB+ Baa1 Level IV: BBB Baa2 Level V: BBB- Baa3 Level VI: BB+ Ba1 or lower
Note: The higher of Guarantor's S&P or Moody's Rating Level will apply. 56 SCHEDULE II LENDING OFFICES THE BANK OF NEW YORK Domestic, CD and Eurodollar Lending Office Eurodollar/Cayman Funding Area The Bank of New York 101 Barclay Street New York, New York 10286 Attn: Nina Russo Telephone: (212) 635-7921 Facsimile: (212) 635-7923/x7924 or x7552 with copy to: The Energy Industries Division The Bank of New York One Wall Street, 19th Floor New York, New York 10286 Attn: Raymond J. Palmer Vice President Telephone: (212) 635-7834 Facsimile: (212) 635-7923/x7924 THE BANK OF NOVA SCOTIA Domestic, CD and Eurodollar Lending Office 600 Peachtree Street, Suite 2700 Atlanta, Georgia 30308 Attn: Lauren Bianchi/Jefrey Jones Telephone: (404) 887-1549 Facsimile: (404) 888-8998 57 with copy to: The Bank of Nova Scotia 1100 Louisiana, Suite 3000 Houston, Texas 77002 Attn: Richard Slaid Telephone: (713) 759-3433 Facsimile: (713) 752-2425 COMMERZBANK AKTIENGESELLSCHAFT, ATLANTA AGENCY Domestic, CD and Eurodollar Lending Office 1230 Peachtree St., N.E., Suite 3500 Atlanta, Georgia 30309 Attn: G. Schmidtchen Telephone: (212) 266-7345 Facsimile: (212) 266-7593 or C. Perez - Gomes Telephone: (212) 266-7314 Facsimile: (212) 266-7593 with copy to: Commerzbank Aktiengesellschaft, Atlanta Agency 1230 Peachtree St., N.E., Suite 3500 Atlanta, Georgia 30309 Attn: Harry Yergey Telephone: (409) 888-6500 Facsimile: (404) 888-6539 ROYAL BANK OF CANADA Domestic, CD and Eurodollar Lending Office 1 Financial Square, 24th Floor New York, New York 10005-3531 58 Attn: Jewel Haines, Assistant Manager Telephone: (212) 428-6321 Facsimile: (212) 428-2372 with copy to: Royal Bank of Canada 600 Wilshire Blvd., Suite 800 Los Angeles, California 90017 Attn: Gil J. Bernard Senior Manager Telephone: (213) 955-5321 Facsimile: (213) 955-5350 TEXAS COMMERCE BANK NATIONAL ASSOCIATION Domestic, CD and Eurodollar Lending Office 712 Main Street Houston, Texas 77002 Attn: Loan Syndication Services Gale Manning Telephone: (713) 750-2784 Facsimile: (713) 750-3810 with copy to: Texas Commerce Bank National Association 707 Travis, 5th Floor, MS 5-TCBN-86 Houston, Texas 77002 Attn: Jim McBride Telephone: (713) 216-4395 Facsimile: (713) 216-4117 59 EXHIBIT A PROMISSORY NOTE U.S. $______________ Dated: _________, _____ FOR VALUE RECEIVED, the undersigned, EOG COMPANY OF CANADA, an unlimited liability company incorporated under the laws of the province of Nova Scotia (the "Borrower"), hereby promises to pay to the order of ________________________ (the "Bank") for the account of its Applicable Lending Office (as defined in the Credit Agreement referred to below) on or before the Maturity Date, principal sum of ___________________________ U.S. dollars (U.S. $________________) at the Payment Office of the Administrative Agent. The Borrower promises to pay to the order of the Bank interest on the unpaid principal amount of this Note from the date hereof until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement dated as of January 12, 1996 among the Borrower, the Bank, certain other lenders parties thereto and Texas Commerce Bank National Association, as Administrative Agent for the Bank and such other lenders (such Credit Agreement, as amended from time to time being herein referred to as the "Credit Agreement"). All capitalized terms used in this Note which are not defined herein shall have the meaning assigned such terms in the Credit Agreement. Both principal and interest are payable in lawful money of the United States of America to Texas Commerce Bank National Association, as Administrative Agent, at the Payment Office, in same day funds. All payments made on account of principal of the Advance evidenced hereby shall be recorded by the Bank and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Note; provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This Note is one of the Notes referred to in, and is subject to and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for this Note to evidence the indebtedness of the Borrower owing to the Bank in the amount of this Note, and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. Except only for any notices which are specifically required by the Credit Agreement, the Borrower waives notice (including, but not limited to, notice of intent to accelerate and notice of acceleration, notice of protest and notice of dishonor), demand, presentment, presentment for payment and protest. A-1 60 THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, OTHER THAN THE CONFLICT OF LAWS RULES THEREOF. EOG COMPANY OF CANADA By: ------------------------------------- Name: Title: A-2 61 PAYMENTS OF PRINCIPAL
Amount of Unpaid Principal Principal Notation Date Paid or Prepaid Balance Made By - ---- --------------- --------- --------
A-3 62 EXHIBIT B NOTICE OF BORROWING Texas Commerce Bank National Association, as Administrative Agent 712 Main Street Houston, Texas 77002 Attention: [Enron Account Officer] Ladies and Gentlemen: The undersigned, EOG Company of Canada, refers to the Credit Agreement, dated as of January 12, 1996 (such Credit Agreement, as amended from time to time being herein referred to as the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned, certain Banks parties thereto and Texas Commerce Bank National Association, as Administrative Agent for said Banks (in such capacity, the "Administrative Agent"), and hereby gives you notice, irrevocably, pursuant to Section 2.2 of the Credit Agreement that the undersigned hereby requests the Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Borrowing (the "Proposed Borrowing") as required by Section 2.2(a) of the Credit Agreement: (i) The day of the Proposed Borrowing is January 12, 1996. (ii) The Types of Advances comprising the Proposed Borrowing are as follows: [Adjusted CD Rate Advances in the aggregate amount of $_________________ with an Interest Period of ___ days]; [Base Rate Advances in the aggregate amount of $__________________] [Eurodollar Advances in the aggregate amount of $_________________ with an Interest Period of ___ months]. (iii) The aggregate amount of the Proposed Borrowing is $105,000,000. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing: _______________________________ B-1 63 (A) the representations and warranties contained in Section 4.1 of the Credit Agreement and the other Loan Documents to which the undersigned is a party are correct, before and after giving effect to the Proposed Borrowing and to the application of the proceeds therefrom, as though made on and as of such date; and (B) no event has occurred and is continuing, or would result from such Proposed Borrowing or from the application of the proceeds therefrom, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both. Very truly yours, EOG Company of Canada By: ------------------------------------- Name: Title: For the purposes of the Proposed Borrowing, Enron Oil & Gas Company, a Delaware corporation (the "Guarantor") certifies: (A) the representations and warranties contained in the Guaranty are correct, before and after giving effect to the Proposed Borrowing and to the application of the proceeds therefrom, as though made on and as of such date; and (B) no event has occurred and is continuing, or would result from such Proposed Borrowing or from the application of the proceeds therefrom, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both. Enron Oil & Gas Company By: ------------------------------------ Name: Title: B-2 64 EXHIBIT C-1 [VINSON & ELKINS LETTERHEAD] January 16, 1996 To each of the Banks parties to the Credit Agreement dated as of January 12, 1996 among EOG Company of Canada, said Banks and Texas Commerce Bank National Association, as Administrative Agent for said Banks and to such Administrative Agent RE: EOG Company of Canada Ladies and Gentlemen: This opinion is furnished to you pursuant to Section 3.1(d)(i) of the Credit Agreement, dated as of January 16, 1996 (the "Credit Agreement"), among EOG Company of Canada (the "Borrower"), the Banks parties thereto and Texas Commerce Bank National Association, as Administrative Agent for said Banks. Except as otherwise defined herein, terms defined in the Credit Agreement are used herein as therein defined. We have acted as counsel for the Borrower and Enron Oil & Gas Company, a Delaware corporation (the "Guarantor"), in connection with the preparation, execution, delivery and effectiveness of the Credit Agreement and the Guaranty dated as of even date with the Credit Agreement made by the Guarantor in favor of the Administrative Agent and the Banks. In that connection, we have examined: (1) the Credit Agreement; (2) the Notes; (3) the Guaranty; and (4) the other documents furnished by the Borrower pursuant to the conditions precedent set forth in Article III of the Credit Agreement. 65 Page 2 January 16, 1996 In addition, we have investigated such questions of law and relied on such certificates from officers and representatives of the Guarantor, the Borrower, Enron Corp., and from public officials, as we have deemed necessary or appropriate for the purposes of this opinion. In rendering the opinions herein set forth, we have assumed (i) the due authorization, execution and delivery of each document referred to in clauses (1), (2) and (3) of the third paragraph of this opinion by all parties to such documents and that each such document is valid, binding and enforceable (subject to limitations on enforceability of the types referred to in paragraphs (a) and (b) below) against the parties thereto other than the Guarantor and the Borrower, (ii) the legal capacity of natural persons, (iii) the genuineness of all signatures, (iv) the authenticity of all documents submitted to us as originals, (v) the conformity to original documents of all documents submitted to us as copies, and (vi) that Section 8.15 of the Credit Agreement is valid under the laws of Canada and each Province thereof, and that no laws of any jurisdiction (including, but not limited to, Canada, Nova Scotia and each other Province of Canada) other than the jurisdictions specified in the penultimate paragraph of this opinion will adversely affect the opinions set forth herein. Based upon the foregoing and upon such investigations as we have deemed necessary, we are of the following opinion: 1. No authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required to be made or obtained by the Borrower for the execution, delivery and performance by the Borrower of each Loan Document to which it is a party. 2. No authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required to be made or obtained by the Guarantor for the execution, delivery and performance by the Guarantor of the Guaranty. 3. The execution, delivery and performance by the Borrower of each Loan Document to which it is a party and the execution, delivery and performance by the Guarantor of the Guaranty, do not contravene any provision of law or regulation (including, without limitation, Regulation X issued by the Federal Reserve Board) applicable to the Borrower or the Guarantor, or of Regulation U issued by the Federal Reserve Board. 66 Page 3 January 16, 1996 4. The Credit Agreement and the Notes constitute the legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their terms. 5. The Guaranty constitutes the legal, valid and binding obligations of the Guarantor enforceable against the Guarantor in accordance with its terms. 6. The Credit Agreement has been duly executed and delivered by the Borrower. 7. Neither the Borrower nor the Guarantor is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 8. Neither the Borrower nor the Guarantor is a "holding company" or a "subsidiary company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended, or regulated pursuant to such Act or the rules and regulations promulgated thereunder or any order or interpretation of the Securities and Exchange Commission promulgated thereunder. The opinions set forth above are subject to the following qualifications: (a) Our opinions in paragraphs 4 and 5 above are subject, as to enforceability, to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors' rights generally. (b) Our opinions in paragraphs 4 and 5 above are subject, as to enforceability, to the effect of general principles of equity (regardless of whether considered in a proceeding in equity or at law), including without limitation, concepts of materiality, reasonableness, good faith and fair dealing, and also to the possible unavailability of specific performance or injunctive relief. Such principles of equity are of general application, and in applying such principles a court, among other things, might not allow a creditor to accelerate maturity of a debt upon the occurrence of a default deemed immaterial or might decline to order the Borrower or the Guarantor to perform covenants. We also express no opinion with respect to the enforceability of provisions purporting to waive or not give effect to rights to notice, demands, legal or equitable defenses or remedies or statutes of limitations, that cannot be waived or rendered ineffective under applicable law, to the extent that such provisions are contained in the Loan Documents or the Guaranty. (c) In rendering the opinion set forth in paragraph 4 above, we express no opinion as to the enforceability of Section 8.15 of the Credit Agreement. 67 Page 4 January 16, 1996 In rendering the opinions expressed herein, we have relied upon (A) the opinions stated in paragraphs 1 and 2 (so far as such paragraph 2 relates to the corporate powers of, and due authorization, execution and delivery of the Guaranty by the Guarantor and to no contravention of, and no default under, the Restated Certificate of Incorporation and By-laws, as amended, of the Guarantor) of the opinion, dated today, of the Vice President and General Counsel of the Guarantor which is being delivered to you pursuant to Section 3.1(d)(iii) of the Credit Agreement, and (B) the opinions stated in paragraphs 1, 2, 3(a) through (e), 4 and 8 of the opinion, dated today, of Stewart McKelvey Stirling Scales to the Borrower which is being delivered to you pursuant to Section 3.1(d)(ii) of the Credit Agreement. We have not been called upon to, and accordingly do not, express any opinion as to the various state and Federal laws of the United States of America regulating banks or the conduct of their business (except Regulation U issued by the Federal Reserve Board) that may relate to the Loan Documents or the Guaranty or the transactions contemplated thereby. Without limiting the generality of the foregoing, we express no opinion as to the effect of the law of any jurisdiction other than the State of Texas wherein any Bank may be located or where any enforcement of the Loan Documents or the Guaranty may be sought which limits the rates of interest legally chargeable or collectible. This opinion is limited to the laws of the State of Texas, the Federal law of the United States of America and, with respect to the Guarantor, the General Corporation law of the State of Delaware. The opinions herein have been furnished at your request and are solely for your benefit and the benefit of your respective successors, assigns, participants and other transferees in connection with the subject transaction and may not be relied upon by any other person or by you or any other person in any other context without the prior written consent of the undersigned. Very truly yours, Vinson & Elkins L.L.P. 68 EXHIBIT C-2 [BENNETT JONES VERCHERE LETTERHEAD] January 16, 1996 To each of the Banks (the "Banks") party to the Credit Agreement dated as of January 16, 1996 among EOG Company of Canada, the Banks and Texas Commerce Bank National Association, as Administrative Agent for the Banks and to such Administrative Agent Re: EOG Company of Canada (the "Borrower") Ladies and Gentlemen: This opinion is furnished to you pursuant to Article 3.1(d)(ii) of that certain Credit Agreement, dated as of January 16, 1996 (the "Credit Agreement"), among the Borrower, the Banks and Texas Commerce Bank National Association, as Administrative Agent for the Banks. Except as otherwise defined herein, terms defined in the Credit Agreement are used herein as therein defined. We have acted as special Canadian counsel to the Borrower and the Guarantor in connection with the execution of the Credit Agreement and the Guaranty. In that consideration and in rendering the opinions hereinafter set forth, we have examined: 1. the Credit Agreement; 2. the Guaranty; 3. the Notes (the Credit Agreement, the Guaranty and the Notes being collectively referred to as the "Loan Documents"); and 4. a certificate of status dated January 10, 1995 issued by the Registrar of Joint Stock Companies for the Province of Nova Scotia with respect to the Company. We have also examined and relied upon originals or photostatic or certified copies of such corporate records, certificates of officers of the Borrower (including certificates of encumbency and delivery and the certificate of Walter W. Wilson dated January 16, 1996, a copy of which is attached hereto) and of public officials, and such other agreements, documents and instruments as we have deemed relevant and necessary as the basis of the opinions hereinafter expressed. In such examination, we have assumed (i) the legal capacity of natural persons, (ii) the genuineness of all signatures, (iii) the authenticity of all documents submitted to us as originals and (iv) the conformity to original documents of all documents submitted to us as copies. 69 Page 2 Based upon the foregoing and upon such investigations as we have deemed necessary, we are of the opinion that: 1. The Borrower is not required, under the Income Tax Act (Canada), to withhold tax from interest or principal paid or credited by the Borrower on the Notes or any other amounts which may be paid or credited under the Credit Agreement to any non-resident of Canada with whom the Borrower is, at all times, dealing at arm's length within the meaning of the Income Tax ACT (Canada). 2. The Guarantor is not required, under the Income Tax Act (Canada), to withhold tax from interest or principal paid or credited by the Guarantor o the Guaranty or any other amounts which may be required to be paid or credited under the Guaranty to any non-resident of Canada with whom the Guarantor is, at all times, dealing at arm's length within the meaning of the Income Tax Act (Canada). 3. Neither the Agents nor the Banks (except for The Bank of Nova Scotia and the Royal Bank of Canada) will be subject to taxation under the Income Tax Act (Canada) by virtue of executing the Loan Documents, or making the Advances, or commencing legal proceedings to enforce their rights, under the Loan Documents. 4. No franchise, income, sales, gross receipts or other like taxes, and no documentary or other tax, is payable under the Income Tax Act (Canada) by the Agent or the Banks (except for The Bank of Nova Scotia and the Royal Bank of Canada) in connection with the execution and delivery of the Loan Documents, or the making of the Advances, or the commencement of legal proceedings to enforce their rights, under the Loan Documents. 5. The execution and delivery of the Loan Documents and the making of the Advances, the performance by the parties of their obligations under the Loan Documents and the enforcement of the rights of the Agent and the Banks under the Loan Documents do not contravene the Bank Act (Canada), including section 508 thereof. 6. The execution, delivery and performance by the Borrower of each of the Loan Documents and the borrowings thereunder (a) do not require, in respect of the borrower, any action by or in respect of, or filing with, any governmental body, agency or official of the Government of Canada and (b) do not contravene or violate, or constitute a default under, any provision of any Canadian federal law or regulation applicable to the Borrower. The opinion expressed in paragraph 5 above does not apply to The Bank of Nova Scotia or the Royal Bank of Canada. The opinions set forth above are based on the following assumptions: (a) the Borrower is an unlimited liability company duly incorporated and organized, validly existing and in good standing under the laws of the Province of Nova Scotia; (b) the Guarantor is a non-resident of Canada within the meaning of the Income Tax Act (Canada) at the time any amounts are paid or payable by it under the Guaranty; (c) the Agents and the Banks (except for The Bank of Nova Scotia and the Royal Bank of Canada) are non-residents of Canada within the meaning of the Income Tax Act 70 Page 3 (Canada) at all times and do not, and will not, otherwise carry on business in Canada within the meaning of the Income ax Act (Canada) during any period up to and including the enforcement of their rights under the Loan Documents; and (d) the terms of the Loan Documents were negotiated and approved, and the Credit Agreement, the Guaranty and the other Loan Documents were executed and delivered, by the Banks (except for The Bank of Nova Scotia and the Royal Bank of Canada) outside Canada. This opinion is furnished in connection with the transactions evidenced by the Credit Agreement and anticipated in connection therewith and may not be relied upon in connection with any other transaction or by any person other than you; or provided, however, that Vinson & Elkins L.L.P. may rely upon this opinion or the purposes of rendering its opinion in connection with the Credit Agreement. Yours very truly, BENNETT JONES VERCHERE 71 EXHIBIT C-3 January 16, 1996 To each of the Banks (the "Banks") party to the Credit Agreement dated as of January 16, 1996 among EOG Company of Canada, the Banks and Texas Commerce Bank National Association, as Administrative Agent for the Banks and to such Administrative Agent RE: EOG Company of Canada (the "Borrower") Ladies and Gentlemen: This opinion is furnished to you pursuant to Article 3.1(d)(ii) of that certain Credit Agreement, dated as of January 16, 1996 (the "Credit Agreement"), among the Borrower, the Banks named therein (the "Banks") and Texas Commerce Bank National Association, as Administrative Agent for the Banks (the "Agent"). Except as otherwise defined herein, the capitalized terms defined in the Credit Agreement are used herein as therein defined. We have acted as special Nova Scotia counsel to the Borrower in connection with the execution of the following documents (collectively, the "Documents"): 1. the Credit Agreement; 2. promissory notes, each dated January 16, 1996 (a) payable to the order of Texas Commerce Bank National Association and in the principal amount of $US25,000,000; (b) payable to the order to Commezbank Aktingesellschaft and in the principal amount of $US25,000,000; (c) payable to the order of Royal Bank of Canada and in the principal amount of $US25,000,000; 72 January 16, 1996 Page 2 (d) payable to the order of Bank of New York and in the principal amount of $US15,000,000; and (e) payable to the order of Bank of Nova Scotia and in the principal amount of $US15,000,000; and 3. a notice of borrowing addressed to the Agent. In that consideration and in rendering the opinions hereinafter set forth, we have examined: (a) executed copies of each of the Documents; (b) the Memorandum of Association and Articles of Association of the Borrower; (c) a certificate of states dated January 10, 1996 issued by the Registrar of Joint Stock Companies for the Province of Nova Scotia with respect to the Borrower; (d) the corporate records of the Borrower including, in particular, a certified copy of a resolution of Borrower dated December 14, 1995 authorizing the Borrower to borrow money and give security therefor and a certified copy of a directors' resolution of the Borrower dated January 10, 1996 authorizing the Borrower to enter into the Credit Agreement and perform its obligations thereunder; and (e) such other documents, agreements and instruments, and such questions of law as we have deemed necessary as a basis for the opinions hereinafter expressed. We have also examined and relied upon originals or photostatic or certified copies of such corporate records, certificates of officers of the Borrower (including a certificate of encumbency, for the purposes of our opinions in paragraph 4 below a certificate attesting to the delivery of the Documents, and for the purposes of our opinions in paragraphs 2 and 3(c) below a certificate describing the business of the Borrower) and of public officials, and such other agreements, documents and instruments as we have deemed relevant and necessary as the basis for the opinions hereinafter expressed. In such examination, we have assumed (i) the legal capacity of natural persons, (ii) the genuineness of all signatures, (iii) the authenticity of all documents submitted to us as originals and (iv) the conformity to original documents of all documents submitted to us as copies. Based upon the foregoing and subject to the qualifications following we are of the opinion that: 1. The Borrower is an unlimited liability company duly incorporated and organized, validly existing and in good standing under the laws of the Province of Nova Scotia. 73 January 16, 1996 Page 3 2. The Borrower has all power and all material governmental licenses, authorizations, consents and approvals, if any, required to be issued by public authorities in the Province of Nova Scotia in order to permit the Borrower to carry on its business. 3. The execution, delivery and performance by the Borrower of each Document and the borrowings thereunder (a) are within the Borrower's corporate powers, (b) have been duly authorized by all necessary action of the Borrower, (c) require, in respect of the Borrower, no action by or in respect of, or filing with, any governmental body, agency or official in the Province of Nova Scotia, (d) do not contravene or violate, or constitute a default under, any provision of law or regulation of the Province of Nova Scotia applicable to the Borrower or the Memorandum of Association or the Articles of Association of the Borrower or, to the best of our knowledge, any judgment, injunction, order, decree or material agreement known to us and binding upon the Borrower, and (e) do not result in the creation or imposition of any lien, security interest or other charge or encumbrance on any asset of the Borrower. 4. The Documents have each been duly executed and delivered by the Borrower and, although the Documents contain choice of law provisions which state that they shall be governed by and construed in accordance with the laws of the State of Texas, in the event that any action in a Nova Scotia Court to enforce the obligations of the Borrower under the Documents Texas law was not provided or otherwise not applied and the laws of Nova Scotia were applied to govern the legality, validity and interpretation of the Documents, each of the Documents would constitute a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms. 5. To the best of our knowledge there is no litigation or legal, arbitral or administrative proceeding pending against Borrower. 6. The Borrower is not required, under any taxing legislation of the Province of Nova Scotia, to withhold tax from interest or principal paid or credited by the Borrower on the Notes or any other amounts which may be required to be paid or credited under the Credit Agreement to any non-resident of Canada with which the Borrower is dealing at arm's length within the meaning of the Income Tax Act (Canada). 7. The Guarantor is not required under any taxing legislation of the Province of Nova Scotia, to withhold tax from interest or principal paid or credited by the guarantor on the Guaranty or any other amounts which may be required to be paid or credited under the Guaranty to any non-resident of Canada with whom the Guarantor is dealing at arm's length within the meaning of the Income Tax Act (Canada). 8. The courts of the Province of Nova Scotia will enforce the choice of law provisions in the Documents. 74 January 16, 1996 Page 4 9. Any judgment for a fixed and definite sum of money rendered by the courts of the State of Texas (the "Foreign Court"), which has become final and conclusive under the judicial system of the State of Texas in respect of any suit, action or proceeding against the Borrower for the enforcement of its obligations under any of the Documents, in an action to enforce such judgments in the courts of the Province of Nova Scotia (the "Domestic Court"), be recognized as conclusive and enforceable without reconsideration of the merits adjudicated upon, provided that (i) such judgment does not conflict with another final and conclusive judgment on the same cause of action and no new admissible evidence relevant to the action is discovered prior to the rendering of judgment by the Domestic Court; (ii) such judgment was not obtained by fraud or in a manner contrary to natural justice and the claim for relief on which the foreign judgment was based is not repugnant to the public policy as that term is understood under the laws of the Province of Nova Scotia; (iii) the Foreign Court which rendered the judgment was impartial and provided procedures compatible with the due process and natural justice standards of the Domestic Court; (iv) the Foreign Court which rendered the judgment had jurisdiction over the relevant contracting parties and the subject matter and, if jurisdiction in the foreign court was based on personal service alone, the Foreign Court was not a seriously inconvenient forum for the trial of the action; (v) the proceedings in the Foreign Court were not contrary to an agreement under which the dispute in question was to be settled otherwise than by proceedings in that Foreign Court; (vi) such judgment is a subsisting judgment and has not been satisfied; (vii) such judgment, if issued in default of appearance of a contracting party, is not manifestly wrong; (viii) the enforcement of the judgment would not be contrary to any order made by the Attorney-General of Canada under the Foreign Extraterritorial Measures Act (Canada) or the Competition Tribunal under the Competition Act (Canada) in respect of certain judgments, laws, and directives having effects on competition in Canada; and (ix) after the date of judgment in the Foreign Court, application to the Domestic Court to enforce such judgment is made with the six year limitation period specified by the laws of the Province of Nova Scotia. 75 January 16, 1996 Page 5 10. Neither the Agent nor the Banks will be subject to taxation in the Province of Nova Scotia by virtue of entering into the Documents or making the Advances under the Documents. No franchise, income, sales, gross receipts or other like taxes, and no documentary or other tax, is payable in the Province of Nova Scotia in connection with the execution and delivery of the Documents or the making of the Advances under the Documents. 11. Neither the execution and delivery of the Documents nor the making of the Advances under the Documents will cause the Agent or any Bank to be transacting business within Canada or Nova Scotia so as to require the Agent or any Bank to qualify to do business in Nova Scotia or require the Agent or any Bank to register to carry on business therein. The opinions set forth above are subject in all respects to the following qualifications: (a) our opinions are based on and limited to the laws of the Province of Nova Scotia and the federal laws of Canada applicable therein. We render no opinion with respect to the laws of any other jurisdiction; (b) the validity and enforceability of the Documents may be limited by: i. Bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws (including court decisions) nor or hereafter in effect and affecting the rights of creditors generally; ii. The qualification that specific performance and other equitable remedies lie within the discretion of the court and may not be available if damages are deemed to be an adequate remedy; iii. The qualification that a court has power to grant relief from forfeiture, to stay proceedings before it and to stay executions on judgments; and iv. Applicable laws regarding limitation of actions; (c) the costs of or incidental to all proceedings taken in a court are in the discretion of the court and, notwithstanding any provisions of the Credit Agreement, the court has the discretion to determine by whom and to what extent the costs shall be paid and expenses recovered; (d) the provisions of the Credit Agreement permitting severance of any provision thereof which may be held to be illegal, invalid or unenforceable in order to save other provisions thereof, will be enforced only subject to the discretion of a court; (e) a judgment of a Canadian court may be awarded only in Canadian currency; 76 January 16, 1996 Page 6 (f) for the purposes of our opinion in paragraph 4 as to enforceability, we have assumed that i. each of the Documents has been duly authorized, and validly executed and delivered, by each party thereto other than the Borrower and is enforceable against each such person in accordance with its terms; ii. each of the Documents has been delivered by the Borrower in accordance with the laws of the State of Texas; and iii. the execution and delivery of the Documents and the making of the Advances, the performance by the parties of their obligations under the Documents and the enforcement of the rights of the Agent and the Banks under the Documents do not contravene the Bank Act (Canada), including section 508 thereof; (g) our opinion that the courts of the Province of Nova Scotia would enforce the choice of law provisions in the Documents is subject to the assumptions that i. such choice of law is legal under the laws of the State of Texas; ii. such choice of laws is bone fide (in the sense that it was not made with a view to avoiding the consequences of the law of the jurisdiction with which the transaction has its most real and substantial connection); iii. such choice of law is not contrary to public policy, public order or good morals, as such terms are interpreted under the laws of the Province of Nova Scotia and the federal laws of Canada applicable therein. We have no reason from reviewing the Documents to believe that such choice of law would be contrary to pubic policy, public order or good morals, as such terms are interpreted under the laws of the Province of Nova Scotia and the federal laws of Canada applicable therein; and is further subject to the qualifications that in any proceeding taken in the Province of Nova Scotia to interpret and enforce any of the Documents iv. the choice of law set forth in the relevant Document would only be recognized to the extent specifically pleaded and proved as a fact by expert evidence; v. the choice of law set forth in the relevant Document would only be recognized with respect to issues which under conflict of laws rules in effect in the Province of Nova Scotia are characterized to be substantive contract issues and the laws of Texas would not be applied to the extent such foreign laws were found to be (i) procedural in nature, or (ii) in conflict with the laws of the Province of Nova Scotia or the federal laws of Canada applicable therein as determined by such court to be of overriding or mandatory effect; and 77 January 16, 1996 Page 7 vi. a court of competent jurisdiction in the Province of Nova Scotia may decline to hear a proceeding where such court determines that the Province of Nova Scotia is not the convenient forum to hear the proceeding or if concurrent proceedings are brought elsewhere; (h) we express no opinion as to the enforceability of any provision of the Credit Agreement purporting to relieve any person from any liability which they might otherwise have; (i) the opinions expressed herein are as of the date hereof only, and we assume no obligation to update or supplement such opinions to reflect any fact or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur or become effective; (j) our opinions in paragraph 6 are based upon the assumption that the Borrower is not required, under the Income Tax Act (Canada), to withhold tax from interest or principal paid or credited by the Borrower on the Notes or any other amounts which may be required to be paid under the Credit Agreement to any non-resident of Canada with whom the Borrower is dealing at arm's length within the meaning of the Income Tax Act (Canada); 12. our opinions in paragraphs 7 are based upon the assumption that the Guarantor is not required, under the Income Tax Act (Canada), to withhold tax from interest or principal paid or credited by the Guarantor on the Guaranty or any other amounts which may be required to be paid under the Guaranty to any non-resident of Canada with whom the Guarantor is dealing at arm's length within the meaning of the Income Tax Act (Canada); and 13. our opinions in paragraphs 10 are based upon the assumption that neither the Agent nor the Banks will be subject to taxation under the Income Tax Act (Canada) by virtue of entering into the Documents or making the Advances under the Documents and that no franchise, income, sales, gross receipts or other like taxes, and no documentary or other tax, is payable under the Income Tax Act (Canada) in connection with the execution and delivery of the Documents or the making of the Advances under the Documents. This opinion is furnished in connection with the transactions evidenced by the Credit Agreement and anticipated in connection therewith and may not be relied upon in connection with any other transaction or by any person other than you; or provided, however, that Vinson & Elkins L.L.P. may rely upon this opinion or the purposes of rendering its opinion in connection with the Credit Agreement. Yours very truly, STEWART MCKELVEY STIRLING SCALES 78 EXHIBIT D [ENRON OIL & GAS COMPANY LETTERHEAD] January 16, 1996 To each of the Banks parties to the Credit Agreement dated as of January 16, 1996 among EOG Company of Canada, said Banks and Texas Commerce Bank National Association, as Administrative Agent for said Banks and to such Administrative Agent RE: Guaranty dated as of January 16, 1996 by Enron Oil & Gas Company, as Guarantor, in favor of the Banks named therein and Texas Commerce Bank National Association, as Administrative Agent Ladies and Gentlemen: As Vice President and General Counsel of Enron Oil & Gas Company, a Delaware corporation (the "Company"), I am familiar with the Guaranty (the "Guaranty") made and entered into as of January 16, 1996 by the Company in favor of the Banks named therein and Texas Commerce Bank National Association, as Administrative Agent. In such capacities, I am also familiar with the Restated Certificate of Incorporation, as amended, and By-laws, as amended, of the Company. This opinion is being furnished to you pursuant to Section 3.1(d)(iii) of that certain Credit Agreement dated as of January 16, 1996 among EOG Company of Canada, as the Borrower, and the Banks named therein and Texas Commerce Bank National Association, as Administrative Agent. Except as otherwise defined herein, terms defined in the Guaranty are used herein as therein defined. Before rendering the opinions hereinafter set forth, I (or other attorneys with the Company's legal department acting under my direction) have examined the Guaranty, and have examined and relied upon originals or photostatic or certified copies of such corporate records, certificates of officers of the Company and of public officials, and such agreements, documents and instruments, and made such investigations of law, as I (or such other attorneys) have deemed relevant and necessary as the basis for the opinions hereinafter expressed. In such examination, I (or such other attorneys) have assumed the genuineness of all signatures (other than those of officers of the 79 January 16, 1996 Page 2 Company) and the authenticity of all documents submitted to me (or such other attorneys) as originals, and the conformity to original documents of all documents submitted to me (or such other attorneys) as photostatic or certified copies. Upon the basis of the foregoing, and subject to the assumptions, qualifications and explanations set forth herein, I am of the opinion that: 1. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, except to the extent failure to obtain such licenses, authorizations, consents or approvals would not materially adversely affect the Company and its Principal Subsidiaries taken as a whole. 2. The execution, delivery and performance by the Company of the Guaranty are within the Company's corporate powers, have been duly authorized by all necessary corporate action on the part of the Company, and do not contravene, nor constitute a default under, (a) the Restated Certificate of Incorporation, as amended, or the By-laws, as amended, of the Company, (b) any contractual restriction contained in any material (meaning for purposes of this opinion those creating a monetary liability of $50,000,000 or more) agreement binding upon the Company, or (c) any judgment, injunction, order or decree known to me binding upon the Company. The execution, delivery and performance by the Company of the Guaranty will not result in the creation or imposition of any lien, security interest or other charge or encumbrance on any asset of the Company or any of its Subsidiaries. The Guaranty has been duly executed and delivered by the Company. 3. Except as disclosed in the Company's Form 10-K for the year ended December 31, 1994, or the Company's Form 10-Q for the quarter ended September 30, 1995, to my knowledge, there is no action, suit or proceeding pending or threatened against the Company or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which could materially adversely affect the consolidated financial position or consolidated results of operations of the Company and its Subsidiaries taken as a whole or which in any manner draws into question the validity of the Guaranty. 80 January 16, 1996 Page 3 4. Neither the Company nor any Subsidiary is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 5. Neither the Company nor any Principal Subsidiary is a "holding company", a "subsidiary company" of a "holding company", an "affiliate" of a "holding company", or an "affiliate" of a "subsidiary company" of a "holding company", in each case as such terms are defined in the Public Utility Holding Company Act of 1935, as amended, or regulated pursuant to such Act or the rules and regulations promulgated thereunder or any order or interpretation of the Securities and Exchange Commission or its staff issued pursuant thereto. The opinions set forth above are subject in all respects to the following qualifications: (a) In rendering the opinions expressed in paragraph 2 above, neither I nor any other attorney acting under my direction have made any examination of any accounting or financial matters related to certain of the covenants contained in certain documents to which the Company may be subject, and I express no opinion with respect thereto. (b) In rendering the opinions expressed in paragraph 3 above, I (or such other attorneys acting under my direction) have only reviewed the files and records of the Company and the Subsidiaries, and we have consulted with such senior officers of the Company and the Subsidiaries as we have deemed necessary. (c) This opinion is limited in all respects to the laws of the State of Texas and the General Corporation Law of the State of Delaware and the Federal law of the United States. (d) The opinions expressed herein are as of the date hereof only, and I assume no obligation to update or supplement such opinions to reflect any fact or circumstances that may hereafter come to my attention or any changes in law that may hereafter occur or become effective. This opinion is furnished in connection with the Guaranty and is solely for the benefit of the Banks, the Administrative Agent, and their respective successors, assigns, participants and other transferees, and may not be relied upon in connection with any other transaction or by any other person; provided, however, that Vinson & 81 January 16, 1996 Page 4 Elkins L.L.P. may rely on certain provisions of this opinion to the extent stated in its opinion for the purposes of rendering its opinion pursuant to Section 3.1(d)(i) of the Credit Agreement. Very truly yours, Dennis M. Ulak 82 EXHIBIT E NOTICE OF CONVERSION Texas Commerce Bank National Association as Administrative Agent 712 Main Street Houston, Texas 77002 Attention: Manager, Energy Group 5 TCB-N 86 Ladies and Gentlemen: The undersigned, EOG Company of Canada refers to the Credit Agreement, dated as of January 12, 1996 (such Credit Agreement, as amended from time to tome being herein referred to as the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned, certain Banks parties thereto and Texas Commerce Bank National Association, as Administrative Agent for said Banks, and hereby gives you notice, irrevocably, pursuant to Section 2.8 of the Credit Agreement that the undersigned hereby requests a Conversion under the Credit Agreement, and in that connection sets forth below the information relating to such Conversion (the "Proposed Conversion") as required by Section 2.8 of the Credit Agreement: (1) The Business Day of the Proposed Conversion is _______________, 199__. (2) The Advances to be converted are: ____________________ (3) The Advances are to be Converted into the following Types and amounts of Advances: [Base Rate Advances] [Adjusted CD Rate Advances] [Eurodollar Advances] Amount: E-1 83 *[(4) The Interest Period for each such Advance is _____ (days) (months).] Very truly yours, EOG COMPANY OF CANADA By: ------------------------------------ Title: --------------------------------- __________________________________ *To be included for a Proposed Conversion to Adjusted CD Rate Advances or Eurodollar Advances. E-2 84 EXHIBIT F [Form of] ASSIGNMENT AND ACCEPTANCE Dated: ___________________, _____ Reference is made to the Credit Agreement dated as of January 16, 1996 (as restated, amended, modified, supplemented and in effect from time to time, the "Credit Agreement"), among EOG Company of Canada, a Nova Scotia unlimited liability company (the "Borrower"), the banks named therein (the "Banks"), and Texas Commerce Bank National Association, as administrative agent for the Banks (the "Administrative Agent"). Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Credit Agreement. This Assignment and Acceptance between the Assignor (as defined and set forth on Schedule I hereto and made a part hereof) and the Assignee (as defined and set forth on Schedule I hereto and made a part hereof) is dated as of the Effective Date (as set forth on Schedule I hereto and made a part hereof). 1. The Assignor hereby irrevocably sells and assigns to the Assignee without recourse to the Assignor, and the Assignee hereby irrevocably purchases and assumes from the Assignor without recourse to the Assignor, as of the Effective Date, an undivided interest (the "Assigned Interest") in and to all the Assignor's rights and obligations under the Credit Agreement and Assignor's Note or Notes to the extent described on Schedule I hereto the ("Assigned Facility") in a principal amount as set forth on Schedule I. 2. The Assignor (i) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement, any other Loan Document or the Guaranty or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, any other Loan Document, the Guaranty or any other instrument or document furnished pursuant thereto, other than that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the Guarantor or the performance or observance by the Borrower or the Guarantor of any of its respective obligations under the Credit Agreement, any other Loan Document, the Guaranty or any other instrument or document furnished pursuant thereto; and (iii) attaches the Note(s) held by it evidencing the Assigned Facility and requests that the Administrative Agent exchange such Note(s) for a new Note or Notes payable to the Assignor (if the Assignor has retained any interest in the Assigned Facility) and a new Note or Notes payable to the Assignee in the respective amounts which reflect the assignment being made hereby (and after giving effect to any other assignments which have become effective on the Effective Date). 3. The Assignee (i) represents and warrants that it is legally authorized to enter into this Assignment and Acceptance; (ii) confirms that it has received a copy of the Credit F-1 85 Agreement and the Guaranty, together with copies of the financial statements referred to in Section 3.1(d) of the Guaranty, or if later, the most recent financial statements delivered pursuant to Section 4.1(a) of the Guaranty and such other documents and information as it has deemed appropriate to make its own credit analysis; (iii) agrees that it will, independently and without reliance upon the Administrative Agent, the Assignor or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement, the Guaranty and the Loan Documents; (iv) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement, the other Loan Documents and the Guaranty as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (v) agrees that it will be bound by the provisions of the Credit Agreement and will perform in accordance with its terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Bank; and (vi) if the Assignee is organized under the laws of a jurisdiction outside the United States, attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assignee's exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Credit Agreement or such other documents as are necessary to indicate that all such payments are subject to such tax at a rate reduced by an applicable tax treaty. 4. Following the execution of this Assignment and Acceptance, it will be delivered to the Administrative Agent for acceptance by it and the Borrower effective as of the Effective Date (which Effective Date shall, unless otherwise agreed to by the Administrative Agent, be at least five Business Days after the execution of this Assignment and Acceptance). 5. Upon such acceptance, from and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignee, whether such amounts have accrued prior to the Effective Date or accrue subsequent to the Effective Date. The Assignor and Assignee shall make all appropriate adjustments in payments for periods prior to the Effective Date by the Administrative Agent or with respect to the making of this assignment directly between themselves. 6. From and after the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Bank thereunder, and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. 7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, OTHER THAN THE CONFLICT OF LAWS RULES THEREOF. IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed by their respective duly authorized officers on Schedule I hereto. F-2 86 Schedule I to Assignment and Acceptance Legal Name of Assignor: ------------------------------------ Legal Name of Assignee: ------------------------------------ Effective Date of Assignment: , ----------------------- -----
Percentage Assigned of Each Note (to at least 8 Principal decimals) (Shown as percentage Amount of aggregate original principal Note Dated: Assigned original principal of all Banks) - ----------- -------- -------------------------------- January 16, 1996: $ % -------------- ------ : $ % ------------------- -------------- ------ : $ % -------------------- -------------- ------ Total $ --------------
Accepted: TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as the Administrative Agent By: ------------------------------ Name: ---------------------------- Title: --------------------------- EOG COMPANY OF CANADA By: ------------------------------ Name: ---------------------------- Title: --------------------------- FS-1 87 - --------------------------------- as Assignor By: ------------------------------ Name: ---------------------------- Title: --------------------------- - --------------------------------- as Assignee By: ------------------------------ Name: ---------------------------- Title: --------------------------- Domestic Lending Office of Assignee: - --------------------------------- - --------------------------------- - --------------------------------- CD Lending Office of Assignee: - --------------------------------- - --------------------------------- - --------------------------------- Eurodollar Lending Office of Assignee: - --------------------------------- - --------------------------------- - --------------------------------- Address for Notices to Assignee: - --------------------------------- - --------------------------------- - --------------------------------- Telephone No.: ------------------- Facsimile No.: ------------------- Attention: ----------------------- FS-2 EX-10.65 13 GUARANTY DATED 1/16/96 1 EXHIBIT 10.65 GUARANTY Dated as of January 16, 1996 by ENRON OIL & GAS COMPANY, as Guarantor in favor of THE BANKS NAMED HEREIN and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Administrative Agent 2 TABLE OF CONTENTS ARTICLE I 1.1. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 --------------------- 1.2. Other Defined Terms; Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ------------------------------------- 1.3. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ------------- ARTICLE II 2.1. Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 -------- 2.2. Guaranty Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ----------------- 2.3. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 ------ ARTICLE III 3.1. Representations and Warranties of the Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ----------------------------------------------- ARTICLE IV 4.1. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 --------------------- 4.2. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ------------------ ARTICLE V 5.1. Guarantor Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 ------------------ ARTICLE VI 6.1. Amendments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 --------------- 6.2. Addresses for Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 --------------------- 6.3. No Waiver; Cumulative Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 ----------------------------------------- 6.4. Continuing Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 ------------------- 6.5. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 ------------------------- 6.6. Governing Law; Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 ------------------------------- 6.7. Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 -------- 6.8. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 ------------ 6.9. Right of Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 ---------------- 6.10. Joinder; Independent Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 --------------------------- 6.11. Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 ------------------------- 6.12. Location of Certain Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 --------------------------- 6.13. Assignments to Federal Reserve Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 ------------------------------------ 6.14. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 -------- Exhibit A - Negative Pledge
3 GUARANTY This Guaranty (this "Guaranty"), dated effective as of January 16, 1996, is made by ENRON OIL & GAS COMPANY, a Delaware corporation (the "Guarantor"), in favor of the Banks (as such term is defined herein) and the Administrative Agent (as such term is defined herein). PRELIMINARY STATEMENTS A. EOG Company of Canada, an unlimited liability company incorporated under the laws of the province of Nova Scotia (the "Borrower"), has entered into the Credit Agreement with the Banks and the Administrative Agent. B. The Borrower is a direct or indirect wholly owned Subsidiary of the Guarantor. C. In order to induce the Banks and the Administrative Agent to enter into the Credit Agreement and to induce the Banks to lend money to the Borrower, the Guarantor has agreed to enter into this Guaranty. D. The guaranties provided in this Guaranty are reasonably expected to benefit, directly or indirectly, the Guarantor. Further, it is in the best interest of the Guarantor to provide the guaranties set forth hereunder, and such guaranties are necessary or convenient to the conduct, promotion or attainment of the business of the Guarantor and are also necessary or convenient to the conduct, promotion or attainment of the business of other directly or indirectly wholly-owned Subsidiaries of the Guarantor. NOW, THEREFORE, in consideration of the premises and in order to induce the Administrative Agent and the Banks to enter into the Credit Agreement, the Guarantor hereby agrees as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.1. Certain Defined Terms. As used in this Guaranty, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and the plural forms of the terms defined and such meanings shall apply and be interpreted together when two or more of such terms are used together): "Consolidated" refers to the consolidation of the accounts of the Guarantor and its Subsidiaries in accordance with GAAP. 1 4 "Consolidated Net Worth" means at any date the Consolidated shareholders' equity of the Guarantor and its Consolidated Subsidiaries. "Credit Agreement" means the Credit Agreement dated of even date herewith among the Borrower, the Administrative Agent and the Banks, as amended, supplemented or modified from time to time in the future. "Debt" of any Person means, at any date, without duplication, (a) obligations for the repayment of money borrowed which (1) are evidenced by bonds, notes, debentures, loan agreements, credit agreements or similar instruments or agreements and (2) are or should be shown on a balance sheet as debt in accordance with GAAP, (b) obligations as lessee under leases which, in accordance with GAAP, are capital leases, and (c) guaranties of payment or collection of any obligations described in clauses (a) and (b) of other Persons, provided, that clauses (a) and (b) include, in the case of obligations of the Borrower or any Subsidiary, only such obligations as are or should be shown as debt or capital lease liabilities on a Consolidated balance sheet in accordance with GAAP; provided, further, that none of the following shall constitute Debt: (A) transfers of accounts receivable pursuant to a receivables purchase facility considered as a sale under GAAP (and indemnification, recourse or repurchase obligations thereunder as are reasonable given market standards for transactions of similar type), (B) the liability of any Person as a general partner of a partnership for Debt of such partnership, if the partnership is not a Subsidiary of such Person, and (C) obligations (other than borrowings, capital leases or financial guaranties by the Borrower or any Subsidiary) related to the sale, purchase or delivery of hydrocarbons in respect of volumetric production payments conveyed in transfers constituting sales of real property interests for which proceeds are accounted for as deferred revenues under GAAP. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute of similar import, together with the regulations thereunder, as in effect from time to time. "ERISA Affiliate" means any trade or business (whether or not incorporated) which is a member of a group of which the Guarantor is a member and which is under common control within the meaning of the regulations under Section 414 of the Code. "GAAP" means generally accepted accounting principles consistent with those applied in the preparation of the audited consolidated financial statements referred to in Section 3.1(d). "Guaranteed Obligations" means (a) all amounts owed by and other obligations of the Borrower pursuant to the terms of the Loan Documents (including but not limited to the principal of and interest accrued on all Advances (including additional Advances under Section 2.15 of the Credit Agreement), the fees and the costs, indemnification payments or obligations and other amounts owed by the Borrower to the 2 5 Administrative Agent or any other Person under the Loan Documents), (b) all damages sustained by the Administrative Agent, any Bank or any other Person as a consequence of the falsity of a representation or warranty of the Borrower or the breach of a covenant of the Borrower under the Loan Documents, and (c) the reasonable out-of-pocket costs of the Administrative Agent and the Banks (including reasonable fees and expenses of legal counsel) incurred in connection with the enforcement of the Loan Documents and this Guaranty and in connection with the collection of the amounts and damages described in clauses (a) and (b) of this definition above. "Guarantor Default" shall have the meaning given such term in Section 5.1 hereof. "Guaranty" means this Guaranty, as the same may be amended, supplemented or modified from time to time. "Indenture" means that certain Indenture dated as of September 1, 1991 between the Guarantor and Texas Commerce Bank National Association, as Trustee, without giving effect to any amendment, modification or discharge thereof. "Insufficiency" means, with respect to any Plan, the amount, if any, by which the present value of the accrued benefits under such Plan exceeds the fair market value of the assets of such Plan allocable to such benefits. "Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which the Guarantor or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "Multiple Employer Plan" means an employee benefit plan, other than a Multiemployer Plan, subject to Title IV of ERISA to which the Guarantor or any ERISA Affiliate, and more than one employer other than the Guarantor or an ERISA Affiliate, is making or accruing an obligation to make contributions or, in the event that any such plan has been terminated, to which the Guarantor or any ERISA Affiliate made or accrued an obligation to make contributions during any of the five plan years preceding the date of termination of such plan. "PBGC" means the Pension Benefit Guaranty Corporation, or any federal agency or authority of the United States from time to time succeeding to its function. "Plan" means an employee benefit plan (other than a Multiemployer Plan) which is (or, in the event that any such plan has been terminated within five years after a transaction described in Section 4069 of ERISA, was) maintained for employees of the Guarantor or any ERISA Affiliate and covered by Title IV of ERISA. 3 6 "Principal Subsidiary" means at any time of determination any Subsidiary of the Guarantor (other than the Borrower) having total assets in excess of $100,000,000. For purposes of this definition, total assets shall be determined based on the most recent quarterly or annual financial statements available prior to such determination. "Subsidiary" means, with respect to any Person, any corporation, partnership, joint venture or other entity of which more than 50% of the outstanding capital stock or other equity interests having ordinary voting power (irrespective of whether or not at the time capital stock or other equity interest of any other class or classes of such corporation, partnership, joint venture or other entity shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person, or one or more of such Person's Subsidiaries, or such Person and one or more of its Subsidiaries. Unless otherwise indicated, any reference in this Guaranty to a "Subsidiary" shall be a reference to a Subsidiary of the Guarantor; provided, that the definition of "Subsidiary" in Exhibit A shall apply to Section 4.2(a) hereof and only to Section 4.2(a) hereof. "Termination Event" means (a) a "reportable event", as such term is described in Section 4043 of ERISA (other than a "reportable event" not subject to the provision for 30-day notice to the PBGC), or an event described in Section 4062(e) of ERISA, or (b) the withdrawal of the Guarantor or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a "substantial employer", as such term is defined in Section 4001(a)(2) of ERISA, or the incurrence of liability by the Guarantor or any ERISA Affiliate under Section 4064 of ERISA upon the termination of a Multiple Employer Plan, or (c) the distribution of a notice of intent to terminate a Plan pursuant to Section 4041(a)(2) of ERISA or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, or (d) the institution of proceedings to terminate a Plan by the PBGC 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 Plan. "Total Capitalization" means, at any time, the sum (without duplication) of (a) Total Debt, and (b) Consolidated Net Worth less any amount thereof attributable to "minority interests" (as defined below). For the purpose of this definition, "minority interests" means any investment or interest of the Guarantor in any corporation, partnership or other entity to the extent that the total amount thereof owned by the Guarantor (directly or indirectly) constitutes 50% or less of all outstanding interests or investments in such corporation, partnership or entity. "Total Debt" means, at any time, all Consolidated Debt of the Guarantor and its Consolidated Subsidiaries. "Withdrawal Liability" shall have the meaning given such term under Part I of Subtitle E of Title IV of ERISA. 4 7 1.2. Other Defined Terms; Accounting Terms. Capitalized terms used herein but not otherwise defined herein shall have the meaning given such terms in the Credit Agreement. All accounting terms not specifically defined herein shall be construed in accordance with, and certificates of compliance with financial covenants shall be based on, GAAP; provided, however, the financial statements and reports required pursuant to Sections 4.1(a)(1) and (8) shall be prepared in accordance with generally accepted accounting principles in effect at the time of application thereof except to the extent stated therein. 1.3. Miscellaneous. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Guaranty shall refer to this Guaranty as a whole and not to any particular provision of this Guaranty, and Article, Section and Exhibit references are to Articles and Sections of and Exhibits to this Guaranty, unless otherwise specified. The term "including" shall mean "including, without limitation,". ARTICLE II GUARANTY 2.1. Guaranty. The Guarantor hereby unconditionally and irrevocably guarantees to the Administrative Agent and the Banks the punctual payment when due (following the expiration of any applicable grace period), whether at stated maturity, by acceleration or otherwise, of the Guaranteed Obligations; provided that all payments by the Guarantor under this Guaranty shall be made in immediately available funds within one (1) Business Day after the Administrative Agent's demand therefor given in writing to the Guarantor (which demand will set forth the basis and calculation of the amount for which demand is made); provided further, that if the Guaranteed Obligations become due and payable by virtue of a Guarantor Default described in Section 5.1(d), the Guaranteed Obligations shall automatically become due and payable by the Guarantor hereunder without demand or any notice of any kind, all of which are hereby expressly WAIVED by the Guarantor. Without limiting the generality of the foregoing, the Guarantor's liability shall extend to all amounts which constitute part of the Guaranteed Obligations and would be owed by the Borrower to the Administrative Agent or any other Person under the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Borrower. 2.2. Guaranty Absolute. The Guarantor guarantees that (subject to the demand and payment provisions set forth in Section 2.1) the Guaranteed Obligations will be paid strictly in accordance with the terms of the Credit Agreement. This Guaranty is a guaranty of payment and not of collection, and the Guarantor's obligations hereunder are primary obligations of the Guarantor concerning which the Guarantor is the principal obligor and not a surety, and are separate and several from the obligations of the Borrower under the Loan Documents. The obligations of the Guarantor hereunder shall not be 5 8 subject to, and payments by the Guarantor shall be made free and clear of any defense of the Borrower and without deduction for, any setoff, counterclaim, diminution, suspension or deferment that the Guarantor may have with respect to the Borrower or any other Person. The liability of the Guarantor under this Guaranty shall be absolute and unconditional irrespective of: (a) any lack of validity, legality or enforceability of the Credit Agreement, the Notes or any other Loan Document; (b) any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of the terms of the Credit Agreement, the Notes or any other Loan Document, or the rights of the Administrative Agent or any Bank with respect thereto; (c) any change in the time, manner or place of performance or payment of, or in any other term of, the Guaranteed Obligations, or any other amendment, extension or waiver of or any consent to departure from, or any indulgence or compromise with respect to, or any failure, omission, delay, neglect, refusal or lack of diligence on the part of the Administrative Agent or any Bank to enforce, the Credit Agreement, the Notes or any other Loan Document; (d) the existence of, or any release or amendment or waiver of or consent to departure from, any other guaranty, for all or any of the Guaranteed Obligations; (e) any assignment, mortgaging or transfer of the Guaranteed Obligations, any Loan Document, this Guaranty or any interest therein or any furnishing, acceptance or release of security or additional security; (f) any merger or consolidation of the Guarantor or the Borrower, into or with any other Person or any sale, lease, transfer, divestiture or other disposition of any or all of the assets of the Borrower; (g) any direct or indirect change in the ownership of the Borrower; (h) the voluntary or involuntary liquidation, dissolution, sale of all or substantially all of the assets, marshalling of the assets and liabilities, receivership, conservatorship, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of, or other similar proceeding with respect to the Guarantor (subject to the powers of a bankruptcy court under the Bankruptcy Code and the equitable powers of a bankruptcy court), the Borrower, the Administrative Agent or any Bank or any action taken by any trustee or receiver or by any court in any such proceeding; 6 9 (i) any withholding or diminution at the source, by reason of any taxes, expenses, indebtedness, obligations or liabilities or any claims, demands, charges or liens of any nature against any sums payable under the Loan Documents or this Guaranty; or (j) any election of remedies by the Administrative Agent or any Bank which results in any impairment or destruction of any subrogation rights of the Guarantor. This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by the Administrative Agent or any Bank for any reason, including, without limitation, the insolvency, bankruptcy or reorganization of the Guarantor (subject to the powers of a bankruptcy court under the Bankruptcy Code and the equitable powers of a bankruptcy court) or the Borrower or otherwise, all as though such payment had not been made, and, in such event, the Guarantor will pay to the Administrative Agent (for distribution to the Banks in the manner set forth in the Credit Agreement) an amount equal to any such payment that has been rescinded or returned, and such obligation of the Guarantor shall not be diminished, released, discharged, impaired or otherwise adversely affected by any prior cancellation or surrender of this Guaranty. This Guaranty shall be absolute and unconditional notwithstanding the occurrence of any other event or the existence of any other circumstances which might constitute a defense available to a guarantor or the Borrower (including failure of consideration, allegations of frauds, usury, forgery, breach of warranty, statute of fraud, statute of limitation, accord and satisfaction and any defense based on election of remedies) or a legal or equitable discharge of a surety or guarantor except indefeasible payment in full of the Guaranteed Obligations. The provisions of this paragraph will survive any release or termination of this Guaranty. It is further agreed that it shall never be necessary for this Guaranty to be ratified or confirmed in order for it to include among the Guaranteed Obligations any increase in the total amount of the indebtedness outstanding under the Credit Agreement pursuant to Section 2.15 of the Credit Agreement. No increase in the in the total amount of the indebtedness outstanding under the Credit Agreement pursuant to Section 2.15 of the Credit Agreement shall impair, diminish, discharge or release the liability of the Guarantor under this Guaranty. If and to the extent that the Guarantor makes any payment to the Administrative Agent, any Bank or to any other Person pursuant to or in respect of this Guaranty, any claim which the Guarantor may have against the Borrower by reason thereof shall be subject and subordinate to the prior indefeasible payment in full of the Guaranteed Obligations. 2.3. Waiver. Except as otherwise set forth herein, the Guarantor hereby waives, to the fullest extent permitted by applicable law, promptness, diligence, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this 7 10 Guaranty (including notice of any sale, transfer or other disposition of any right, title to or interest in any Loan Document or this Guaranty by the Administrative Agent or any Bank, notice of the existence of any matter described in Section 2.2, and notice or proof of reliance) and any requirement that the Administrative Agent and/or the Banks protect, secure, perfect or insure any collateral or exhaust any right or take any action against the Borrower or any other Person or any collateral. ARTICLE III REPRESENTATIONS AND WARRANTIES 3.1. Representations and Warranties of the Guarantor. The Guarantor represents and warrants to the Banks as follows (which representations and warranties are deemed made by the Guarantor on the date of each Borrowing and shall survive the execution and delivery of this Guaranty and the Loan Documents and the making of the Advances contemplated by the Credit Agreement): (a) The Guarantor and each Principal Subsidiary are corporations duly incorporated, validly existing and in good standing under the laws of their respective jurisdictions of incorporation. The Guarantor and each Principal Subsidiary have all corporate powers and all material governmental licenses, authorizations, consents and approvals required in each case to carry on its business as now conducted. (b) The execution, delivery and performance by the Guarantor of this Guaranty are within the Guarantor's corporate powers, have been duly authorized by all necessary corporate action of the Guarantor, require, in respect of the Guarantor, no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of law or regulation (including Regulation X issued by the Federal Reserve Board) applicable to the Guarantor or Regulation U issued by the Federal Reserve Board or the restated certificate of incorporation or by-laws of the Guarantor or any judgment, injunction, order, decree or material ("material" for the purposes of this representation meaning creating a liability of $50,000,000 or more) agreement binding upon the Guarantor or result in the creation or imposition of any lien, security interest or other charge or encumbrance on any asset of the Guarantor or any of its Subsidiaries. (c) This Guaranty is the legal, valid and binding obligation of the Guarantor enforceable against the Guarantor in accordance with its terms, except as the enforceability thereof may be limited by the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general principles of equity. 8 11 (d) The audited consolidated balance sheet of the Guarantor and its Subsidiaries as of December 31, 1994 and the related audited consolidated statements of income, cash flows and changes in shareholders' equity accounts for the fiscal year then ended and the unaudited consolidated balance sheet of the Guarantor and its Subsidiaries as of September 30, 1995, and the related unaudited consolidated statements of income, cash flows and changes in shareholders' equity accounts for the fiscal quarter then ended, certified by the chief financial or accounting officer of the Guarantor, copies of which have been delivered to each of the Banks, fairly present, in conformity with GAAP except as otherwise expressly noted therein, the consolidated financial position of the Guarantor and its Subsidiaries as of such dates and their consolidated results of operations and changes in financial position for such fiscal periods, subject (in the case of the unaudited balance sheet and statements) to changes resulting from audit and normal year-end adjustments. (e) Since December 31, 1994, there has been no material adverse change in the consolidated financial position or consolidated results of operations of the Guarantor and its Subsidiaries, considered as a whole. (f) Except as disclosed in the Guarantor's Form 10-K for the year ended December 31, 1994 or the Guarantor's Form 10-Q for the quarter ended September 30, 1995, which were delivered to the Banks prior to the date hereof, there is no action, suit or proceeding pending against the Guarantor or any of its Subsidiaries, or to the knowledge of the Guarantor threatened against the Guarantor or any of its Subsidiaries, before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which could materially adversely affect the consolidated financial position or consolidated results of operations of the Guarantor and its Subsidiaries taken as a whole or which in any manner draws into question the validity of this Guaranty. (g) No Termination Event has occurred or is reasonably expected to occur with respect to any Plan for which an Insufficiency in excess of $50,000,000 exists. Neither the Guarantor nor any ERISA Affiliate has received any notification (or has knowledge of any reason to expect) that any Multiemployer Plan is in reorganization or has been terminated, within the meaning of Title IV of ERISA, for which a Withdrawal Liability in excess of $50,000,000 exists. (h) United States federal income tax returns of the Guarantor and its Subsidiaries have been examined and closed through the fiscal year ended December 31, 1987. The Guarantor and its Subsidiaries have filed or caused to be filed all United States federal income tax returns and all other material domestic tax returns which to the knowledge of the Guarantor are required to be filed by them and have paid or provided for the payment, before the same become delinquent, of all taxes due pursuant to such returns or pursuant to any assessment received by the 9 12 Guarantor or any Subsidiary, other than those taxes contested in good faith by appropriate proceedings. The charges, accruals and reserves on the books of the Guarantor and its Subsidiaries in respect of taxes are, in the opinion of the Guarantor, adequate to the extent required by GAAP. (i) Neither the Guarantor nor any Subsidiary is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (j) Neither the Guarantor nor any Principal Subsidiary is a "holding company", a "subsidiary company" of a "holding company", an "affiliate" of a "holding company", or an "affiliate" of a "subsidiary company" of a "holding company", in each case as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. (k) This Guaranty is made as an inducement to the Banks to extend the Advances under the Credit Agreement, which extension of Advances benefits the Guarantor. The value of the consideration received and to be received by the Guarantor is, in the judgment of the Guarantor, reasonably worth at least as much as the liability and obligation of the Guarantor hereunder, and such liability and obligation will result in direct financial benefits to the Guarantor. (l) The Guarantor has had full and complete access to the Loan Documents and all other instruments and documents executed by the Borrower and any other Person in connection with the Guaranteed Obligations and has reviewed those documents and is fully aware of their contents. The Guarantor is fully informed of all circumstances which a diligent inquiry would reveal. The Guarantor has adequate means to obtain from the Borrower on a continuing basis information concerning the Loan Documents and it is not depending on the Administrative Agent or any Bank to provide such information, now or in the future. The Guarantor agrees that neither the Administrative Agent nor any Bank shall have any obligation to advise or notify it or to provide the Guarantor with any data or information. (m) Following application of the proceeds of each Borrowing, not more than 25 percent of the value of the assets (both of the Guarantor only and of the Guarantor and its Subsidiaries on a consolidated basis), which are subject to any arrangement with the Administrative Agent or any Bank (herein or otherwise) whereby the Guarantor's or any Subsidiary's right or ability to sell, pledge or otherwise dispose of assets is in any way restricted, will be margin stock (within the meaning of Regulation U issued by the Federal Reserve Board). 10 13 ARTICLE IV COVENANTS OF THE GUARANTOR 4.1. Affirmative Covenants. The Guarantor covenants and agrees that so long as any Note shall remain unpaid, the Guarantor will, unless the Majority Banks shall otherwise consent in writing: (a) Reporting Requirements. Furnish to each Bank: (1) (A) promptly after the sending or filing thereof, a copy of each of the Guarantor's reports on Form 8-K (or any comparable form), (B) promptly after the filing or sending thereof, and in any event within 75 days after the end of each of the first three fiscal quarters of each fiscal year of the Guarantor, a copy of the Guarantor's report on Form 10-Q (or any comparable form) for such quarter, which report will include the Guarantor's quarterly unaudited consolidated financial statements as of the end of and for such quarter, and (C) promptly after the filing or sending thereof, and in any event within 135 days after the end of each fiscal year of the Guarantor, a copy of the Guarantor's annual report which it sends to its public security holders, and a copy of the Guarantor's report on Form 10-K (or any comparable form) for such year, which annual report will include the Guarantor's annual audited consolidated financial statements as of the end of and for such year; (2) simultaneously with the delivery of each of the annual or quarterly reports referred to in clause (1) above, a certificate of the chief financial officer or the chief accounting officer of the Guarantor in a form acceptable to the Administrative Agent (x) setting forth in reasonable detail the calculations required to establish whether the Guarantor was in compliance with the requirements of Section 4.2(b) on the date of the financial statements contained in such report, and (y) stating whether there exists on the date of such certificate any Guarantor Default or event which, with the giving of notice or lapse of time, or both, would constitute an Guarantor Default, and, if so, setting forth the details thereof and the action which the Guarantor has taken and proposes to take with respect thereto; (3) as soon as is possible and in any event within five days after a change in, or issuance of, any rating of any of the Guarantor's senior unsecured long-term debt by Standard & Poor's or Moody's which causes a change in the applicable Rating Level, notice of such change; 11 14 (4) as soon as possible and in any event within five days after an executive officer of the Guarantor having obtained knowledge thereof, notice of the occurrence of any Guarantor Default or any event which, with the giving of notice or lapse of time, or both, would constitute an Guarantor Default, continuing on the date of such notice, and a statement of the chief financial officer of the Guarantor setting forth details of such Guarantor Default or event and the action which the Guarantor has taken and proposes to take with respect thereto; (5) as soon as possible and in any event (A) within 30 Business Days after the Guarantor or any ERISA Affiliate knows or has reason to know that any Termination Event described in clause (a) of the definition of Termination Event with respect to any Plan for which an Insufficiency in excess of $50,000,000 exists, has occurred and (B) within 10 Business Days after the Guarantor or any ERISA Affiliate knows or has reason to know that any other Termination Event with respect to any Plan for which an Insufficiency in excess of $50,000,000 exists, has occurred or is reasonably expected to occur, a statement of the chief financial officer or chief accounting officer of the Guarantor describing such Termination Event and the action, if any, which the Guarantor or such ERISA Affiliate proposes to take with respect thereto; (6) promptly and in any event within five Business Days after receipt thereof by the Guarantor or any ERISA Affiliate, copies of each notice received by the Guarantor or any ERISA Affiliate from the PBGC stating its intention to terminate any Plan for which an Insufficiency in excess of $50,000,000 exists or to have a trustee appointed to administer any Plan for which an Insufficiency in excess of $50,000,000 exists; (7) promptly and in any event within five Business Days after receipt thereof by the Guarantor or any ERISA Affiliate from the sponsor of a Multiemployer Plan, a copy of each notice received by the Guarantor or any ERISA Affiliate indicating liability in excess of $50,000,000 incurred or expected to be incurred by the Guarantor or any ERISA Affiliate in connection with (A) the imposition of a Withdrawal Liability by a Multiemployer Plan, (B) the determination that a Multiemployer Plan is, or is expected to be, in reorganization within the meaning of Title IV of ERISA, or (C) the termination of a Multiemployer Plan within the meaning of Title IV of ERISA; and (8) such other information respecting the Consolidated financial position or Consolidated results of operations (including an annual report or reports on oil and gas reserves of the 12 15 Guarantor and its Subsidiaries), of the Guarantor that any Bank through the Administrative Agent may from time to time reasonably request. (b) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to comply, with all applicable laws, rules, regulations and orders to the extent noncompliance therewith would have a material adverse effect on the Guarantor and its Subsidiaries taken as a whole, such compliance to include, without limitation, the paying before the same become delinquent of all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent contested in good faith by appropriate proceedings. (c) Visitation Rights. At any reasonable time and from time to time, after reasonable notice, permit the Administrative Agent or any of the Banks or any agents or representatives thereof to examine the records and books of account of, and visit the properties of, the Guarantor and any of the Principal Subsidiaries to discuss the affairs, finances and accounts of the Guarantor and any of the Principal Subsidiaries with any of the officers or directors of the Guarantor. (d) Maintenance of Insurance. Maintain, and cause each of the Principal Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties as the Guarantor or such Principal Subsidiary, provided, that self-insurance by the Guarantor or any such Principal Subsidiary shall not be deemed a violation of this covenant to the extent that companies engaged in similar businesses and owning similar properties as the Guarantor or such Principal Subsidiary self-insure. The Guarantor may maintain the Principal Subsidiaries' insurance on behalf of them. (e) Preservation of Corporate Existence, Etc. Preserve and maintain, and cause each of the Principal Subsidiaries to preserve and maintain, its corporate existence, rights (charter and statutory), and franchises; provided, however, that this Section 4.1(e) shall not apply to any transactions permitted by Section 4.2(c) or (d) and shall not prevent the termination of existence, rights and franchises of any Principal Subsidiary pursuant to any merger or consolidation to which such Principal Subsidiary is a party, and provided, further, that the Guarantor or any Principal Subsidiary shall not be required to preserve any right or franchise if the Guarantor or such Principal Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Guarantor or such Principal Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to the Banks. 4.2. Negative Covenants. So long as any Note shall remain unpaid, the Guarantor will not at any time, without the written consent of the Majority Banks: 13 16 (a) Negative Pledge. Fail to perform and observe any term, covenant or agreement contained in Section 1007 of the Indenture (as modified for purposes hereof as set forth in this Section 4.2). For purposes of this Section 4.2(a), Section 1007 and the definitions of all terms defined in the Indenture and used in or otherwise applicable to such Section 1007 are set forth on Exhibit A and are hereby incorporated in this Guaranty by reference as if such provisions and definitions were set forth in full herein; provided, however, that solely for purposes of this Section 4.2, the word "Securities" used in the Indenture shall mean the Notes, the word "Company" used therein shall mean the Guarantor, the phrase "Section 1007" used therein shall mean this Section 4.2(a), the word "Trustee" as used therein shall mean the Administrative Agent, the phrase "Board of Directors" used in the Indenture shall mean the management of the Guarantor, Section 301 of the Indenture shall not apply to any Note, and the phrase "So long as any of the Securities are outstanding" used therein shall mean so long as any Note shall remain unpaid or any Bank shall have any Commitment under the Credit Agreement. (b) Total Debt to Capitalization. Have a ratio of (i) Total Debt to (ii) Total Capitalization greater than 50%. (c) Disposition of Assets. Lease, sell, transfer or otherwise dispose of, voluntarily or involuntarily, all or substantially all of its assets. (d) Mergers, Etc. Merge or consolidate with or into, any Person, unless (1) the Guarantor is the survivor or (2) the surviving Person, if not the Guarantor, is organized under the laws of the United States or a state thereof and assumes all obligations of the Guarantor under this Guaranty; provided, in each case that both immediately before and after giving effect to such proposed transaction, no Guarantor Default or event which, with the giving of notice or the lapse of time, or both, would constitute an Guarantor Default exists, or would exist or result. (e) Compliance with ERISA. (1) Terminate, or permit any ERISA Affiliate to terminate, any Plan so as to result in any liability in excess of $50,000,000 of the Guarantor or any ERISA Affiliate to the PBGC, or (2) permit circumstances which give rise to a Termination Event described in clauses (b), (d) or (e) of the definition of Termination Event with respect to a Plan so as to result in any liability in excess of $50,000,000 of the Guarantor or any ERISA Affiliate to the PBGC. (f) Ownership of the Borrower. Own, directly or indirectly, less than fifty percent (50%) (other than directors' qualifying shares) of the issued and outstanding shares of the capital stock of the Borrower. 14 17 ARTICLE V GUARANTOR DEFAULT 5.1. Guarantor Defaults. If any of the following events (each a "Guarantor Default") shall occur and be continuing: (a) Any representation or warranty made or deemed made by the Guarantor (or any of its officers) hereunder shall prove to have been incorrect in any material respect when made or deemed made and such materiality is continuing; or (b) The Guarantor shall fail to perform or observe any term, covenant or agreement contained in Section 4.2 or shall fail to perform or observe any other term, covenant or agreement contained in this Guaranty on its part to be performed or observed if, in the case of such other term, covenant or agreement, such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the Guarantor by the Administrative Agent at the request of any Bank; or (c) The Guarantor or any Principal Subsidiary shall (1) fail to pay any principal of or premium or interest on any Debt (other than Debt described in clause (c) of the definition of Debt) which is outstanding in the principal amount of at least $50,000,000 in the aggregate, of the Guarantor or such Principal Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate the maturity of such Debt; or any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment or as a result of the giving of notice of a voluntary prepayment), prior to the stated maturity thereof, or (2) with respect to Debt described in clause (c) of the definition of Debt, fail to pay any such Debt which is outstanding in the principal amount of at least $50,000,000 in the aggregate, of the Guarantor or such Principal Subsidiary (as the case may be), when the same becomes due and payable, and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or (d) The Guarantor or any Principal Subsidiary shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Guarantor or any Principal Subsidiary 15 18 seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), shall remain undismissed or unstayed for a period of 60 days; or the Guarantor or any Principal Subsidiary shall take any corporate action to authorize any of the actions set forth above in this subsection (d); or (e) Any judgment, decree or order for the payment of money in excess of $50,000,000 shall be rendered against the Guarantor or any Principal Subsidiary and shall remain unsatisfied and either (1) enforcement proceedings shall have been commenced by any creditor upon such judgment, decree or order or (2) there shall be any period longer than (i) 30 consecutive days or (ii) such longer period as allowed by applicable law during which a stay of enforcement of such judgment, decree or order, by reason of a pending appeal or otherwise, shall not be in effect; or (f) Any Termination Event as defined in clauses (b), (d) or (e) of the definition thereof with respect to a Plan shall have occurred and, 30 days after notice thereof shall have been given to the Guarantor by the Administrative Agent, (1) such Termination Event shall still exist and (2) the sum (determined as of the date of occurrence of such Termination Event) of the liabilities to the PBGC resulting from all such Termination Events is equal to or greater than $100,000,000; or (g) The Guarantor or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan in an amount which, when aggregated with all other amounts required to be paid to Multiemployer Plans in connection with Withdrawal Liabilities (determined as of the date of such notification), exceeds $100,000,000 or requires payments exceeding $50,000,000 in any year; or (h) The Guarantor or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if as a result of such reorganization or termination the aggregate annual contributions of the Guarantor and its ERISA Affiliates to all Multiemployer Plans which are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the respective plan years which include the date hereof by an amount exceeding $50,000,000 in the aggregate; 16 19 then, and in such event, the Banks and the Administrative Agent shall have (a) all rights and remedies provided for in this Guaranty and in any Loan Document following a Guarantor Default, and (b) all rights and remedies at law or in equity following a Guarantor Default. ARTICLE VI MISCELLANEOUS 6.1. Amendments, Etc. No amendment or waiver of any provision of this Guaranty, nor consent to any departure by the Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Majority Banks, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all the Banks, do any of the following: (a) take any action which requires the consent of all the Banks pursuant to the terms of this Guaranty, (b) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes which shall be required for the Banks or any of them to take any action under this Guaranty, (c) amend this Section 6.1, or (d) release the Guarantor from its obligations under this Guaranty; and provided, further, that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Banks required above to take such action, affect the rights or duties of the Administrative Agent under this Guaranty. 6.2. Addresses for Notices. All notices and other communications provided for hereunder shall be in writing (including telecopier communication) and mailed, telecopied or delivered, if to the Guarantor, at its address or telecopier number set forth below: Enron Oil & Gas Company 1400 Smith Street Houston, Texas 77002 Attention: Senior Vice President and Chief Financial Officer Telecopier No.: 713-646-2113 17 20 if to any Bank, at its Domestic Lending Office specified in the Credit Agreement; if to the Administrative Agent, at its address or telecopier number set forth below: Texas Commerce Bank National Association 712 Main Street Houston, Texas 77002 Attention: Manager Energy Group Telecopier No.: 713-216-4117 or, as to the Guarantor or the Administrative Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to the Guarantor and the Administrative Agent. All such notices and communications shall be effective, if delivered, upon such delivery; if mailed, three (3) Business Days after deposit in the mails; if sent by overnight courier, one (1) Business Day after delivery to the courier company; and if sent by telecopier, when received by the receiving telecopier equipment, respectively; provided, however, that (a) notices and communications to the Administrative Agent shall not be effective until received by the Administrative Agent and (b) telecopied notices received by any party after its normal business hours (or on a day other than a Business Day) shall be effective on the next Business Day. 6.3. No Waiver; Cumulative Rights and Remedies. No failure on the part of the Administrative Agent to exercise, and no delay in exercising, and no course of dealing with respect to, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. Each of the rights and remedies herein provided are cumulative and not exclusive of any rights and remedies provided by law or in any other documents or in equity. 6.4. Continuing Guaranty. The obligations of the Guarantor under this Guaranty shall be continuing and (i) remain in full force and effect until termination of the Credit Agreement pursuant to Section 8.11 thereof, (ii) be binding upon the Guarantor, its successors and assigns, and (iii) inure to the benefit of and be enforceable by the Administrative Agent, the Banks and their respective successors, transferees and assigns; provided that the obligations of the Guarantor under Sections 4.1 and 4.2 hereof shall remain in effect only until the time specified in Sections 4.1 and 4.2. 6.5. Execution in Counterparts. This Guaranty may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 18 21 6.6. Governing Law; Entire Agreement. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS. THIS GUARANTY CONSTITUTES THE ENTIRE UNDERSTANDING AMONG THE GUARANTOR, THE ADMINISTRATIVE AGENT AND THE BANKS WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDES ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. 6.7. Captions. Captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Guaranty. 6.8. Severability. Whenever possible, each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under applicable law. If any provision of this Guaranty shall be invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality and enforceability of the remaining provisions of this Guaranty shall not be affected or impaired thereby. 6.9. Right of Set-Off. If the Guarantor fails to pay any Guaranteed Obligation at the time the Guarantor is required to make payment thereof pursuant to Section 2.1 hereof, each Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Bank to or for the credit or the account of the Guarantor against any and all of the obligations of the Guarantor now or hereafter existing under this Guaranty. Each Bank agrees promptly to notify the Guarantor after any such set-off and application made by such Bank; provided that the failure to give such notice shall not affect the validity of such set- off and application. The rights of each Bank under this Section 6.9 are in addition to other rights and remedies (including, without limitation, other rights of set-off) which such Bank may have. 6.10. Joinder; Independent Action. At the option of the Administrative Agent, the Guarantor may be joined in any action or proceeding in connection with or based on any of the Loan Documents, and recovery may be had against the Guarantor in such action or proceeding or in any independent action or proceeding against the Guarantor, without any requirement that the Administrative Agent or any Bank first assert, prosecute or exhaust any remedy or claim against the Borrower or any other Person. 6.11. Third Party Beneficiaries. There are no third-party beneficiaries to this Guaranty. 6.12. Location of Certain Actions. The Guarantor acknowledges that (a) it has conducted all negotiations with the Administrative Agent and the Banks which are not residents of Canada and which are parties to the Credit Agreement on the date hereof, outside of Canada, and (b) it has executed this Guaranty outside of Canada. 19 22 6.13. Assignments to Federal Reserve Board. In addition to the assignments and participations permitted under Section 8.6 of the Credit Agreement, any Bank may assign, as collateral or otherwise, any of its rights under this Guaranty to any Federal Reserve Bank without notice to or consent of the Borrower, the Guarantor or the Administrative Agent; provided, that no such assignment under this Section 6.13 shall release the assigning Bank from its obligations under the Credit Agreement or under this Guaranty. 6.14. Interest. The parties to this Guaranty intend to strictly comply with all applicable laws, including applicable usury laws. Accordingly, the provisions of this Section 6.14 shall govern and control over every other provision of any Loan Document or this Guaranty which conflicts or is inconsistent with this Section 6.14, even if such other provision declares that it controls. As used in this Section 6.14, the term "interest" includes the aggregate of all charges, fees, benefits or other compensation which constitute interest under applicable law; provided that, to the maximum extent permitted by applicable law, (a) any non-principal payment shall be characterized as an expense or as compensation for something other than the use, forbearance or detention of money, and not as interest and (b) all interest at any time contracted for, taken, reserved, charged or received shall be amortized, prorated, allocated and spread during the full term of the Advances and the Commitments. In no event shall the Guarantor, the Borrower or any other Person be obligated to pay, or the Administrative Agent or any Bank have any right or privilege to reserve, receive or retain, (x) any interest in excess of the maximum amount of nonusurious interest permitted under the laws of the State of Texas or the applicable laws (if any) of the United States, the Government of Canada or of any other state or province thereof or (y) total interest in excess of the amount which the Administrative Agent or such Bank could lawfully have contracted for, taken, reserved, received, retained or charged had the interest been calculated for the full term of the Advances at the Highest Lawful Rate. On each day, if any, that the interest rate (the "Stated Rate") called for under any Loan Document exceeds the Highest Lawful Rate, the rate at which interest shall accrue shall automatically be fixed by operation of this sentence at the Highest Lawful Rate for that day, and shall remain fixed at the Highest Lawful Rate for each day thereafter until the total amount of interest accrued equals the total amount of interest which would have accrued if there were no such ceiling rate as is imposed by this sentence. Thereafter, interest shall accrue at the Stated Rate unless and until the Stated Rate again exceeds the Highest Lawful Rate when the provisions of the immediately preceding sentence shall again automatically operate to limit the interest accrual rate. The daily interest rates to be used in calculating interest at the Highest Lawful Rate shall be determined by dividing the applicable Highest Lawful Rate per annum by the number of days in the calendar year for which such calculation is being made. None of the terms and provisions contained in this Guaranty or any Loan Document which directly or indirectly relate to interest shall ever be construed without reference to this Section 6.14, or be construed to create a contract to pay for the use, forbearance or detention of money at an interest rate in excess of the Highest Lawful Rate. If the term of any of the Notes is shortened by reason of acceleration of maturity or by reason of any required or permitted prepayment, and if for that (or any other) reason the Administrative 20 23 Agent or any Bank at any time, including the stated maturity, is owed or receives (and/or has received) interest in excess of interest calculated at the Highest Lawful Rate, then and in any such event all of any such excess interest shall be cancelled automatically as of the date of such acceleration, prepayment or other event which produces the excess, and, if such excess interest has been paid to the Administrative Agent or such Bank, it shall be credited pro tanto against the then outstanding principal balance of the Borrower's (or the Guarantor's, as appropriate) obligations to the Administrative Agent or such Bank, effective as of the date or dates when the event occurs which causes it to be excess interest, until such excess is exhausted or all of such principal has been fully paid and satisfied, whichever occurs first, and any remaining balance of such excess shall be promptly refunded to its payor. 21 24 IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. ENRON OIL & GAS COMPANY By: /s/ Ben B. Boyd ----------------------------------- Ben B. Boyd Vice President and Controller THIS GUARANTY CONSTITUTES THE ENTIRE UNDERSTANDING AMONG THE GUARANTOR, THE ADMINISTRATIVE AGENT AND THE BANKS WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDES ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. ENRON OIL & GAS COMPANY By: /s/ Ben B. Boyd ----------------------------------- Ben B. Boyd Vice President and Controller TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Administrative Agent for the Banks By: /s/ Scott Richardson ----------------------------------- Name: Scott Richardson Title: Vice President 22 25 Section 1007. Negative Pledge and Exceptions Thereto. Except as otherwise specified as contemplated by Section 301 for Securities of any series, so long as any of the Securities are outstanding, the Company will not create or suffer to exist, or permit any of its Subsidiaries to create or suffer to exist, except in favor of the Company or any Subsidiary, any Lien upon any Principal Property at any time owned by it, to secure any Funded Debt of the Company or any Subsidiary, without making effective provisions whereby the Securities shall be equally and ratably secured with any and all such Funded Debt and with any other indebtedness similarly entitled to be equally and ratably secured; provided, however, that this restriction shall not apply to or prevent the creation or existence of any: (a) Acquisition Lien or Permitted Encumbrance; or (b) Lien created or assumed by the Company or any Subsidiary in connection with the issuance of debt securities the interest on which is excludable from gross income of the holder of such security pursuant to the Internal Revenue Code of 1986, as amended, for the purpose of financing, in whole or in part, the acquisition or construction of property or assets to be used by the Company or a Subsidiary. In case the Company or any Subsidiary shall propose to create or permit to exist a Lien on any Principal Property at any time owned by it to secure any Funded Debt of the Company or any Subsidiary, other than Funded Debt permitted to be secured under clauses (a) or (b) of this Section 1007, the Company will prior thereto give written notice thereof to the Trustee, and the Company will, or will cause such Subsidiary to, prior to or simultaneously with such creation or permission to exist, by supplemental indenture executed to the Trustee (or to the extent legally necessary to another trustee or additional or separate trustee), in form satisfactory to the Trustee, effectively secure all the Securities equally and ratably with such Funded Debt and any other indebtedness entitled to be equally and ratably secured. Notwithstanding the foregoing provisions of this Section 1007, the Company or a Subsidiary may issue, assume or guarantee Funded Debt secured by Liens which would otherwise be subject to the foregoing restrictions in an aggregate amount which, together with all other Funded Debt of the Company or a Subsidiary secured by Liens which (if originally issued, assumed or guaranteed at such time) would otherwise be subject to the foregoing restrictions (not including Funded Debt permitted to be secured under clauses (a) or (b) above) does not at the time exceed 10% of the Consolidated Net Tangible Assets of the Company, as shown on the audited consolidated financial statements of the Company as of the end of the fiscal year preceding the date of determination. Page 1 of 6 Pages EXHIBIT A 26 "Acquisition Lien" means any (i) Lien upon any property heretofore or hereafter acquired, created at the time of acquisition or within one year thereafter to secure all or a portion of the purchase price thereof, or existing thereon at the date of acquisition, whether or not assumed by the Company or any Subsidiary, provided that any such Lien shall apply only to the property so acquired and fixed improvements thereon, (ii) Lien upon any property heretofore or hereafter acquired by any corporation that is or becomes a Subsidiary after the date hereof ("Acquired Entity"), provided that any such Lien (I) shall either (A) exist prior to the time the Acquired Entity becomes a Subsidiary or (B) be created at the time the Acquired Entity becomes a Subsidiary or within one year thereafter to secure all or a portion of the acquisition price thereof and (2) shall only apply to those properties owned by the Acquired Entity at the time it becomes a Subsidiary or thereafter acquired by it from sources other than the Company or any other Subsidiary, and (iii) any extension, renewal or refunding, in whole or in part, of any Lien permitted by clause (i) or (ii) above, if limited to the same property or any portion thereof subject to, and securing not more than the amount secured by, the Lien extended, renewed or refunded. "Consolidated Net Tangible Assets" means total assets less (a) total current liabilities (excluding indebtedness due within 12 months) and (b) goodwill, patents and trademarks, all as reflected in the Company's audited consolidated balance sheet preceding the date of a determination under the last paragraph of Section 1007. "Funded Debt" as applied to the Company or any Subsidiary means all indebtedness incurred, created, assumed or guaranteed by the Company or any Subsidiary, or upon which such corporation customarily pays interest charges, which matures, or is renewable by the Company or any Subsidiary to a date, more than one year after the date as of which Funded Debt is being determined. "Indebtedness", as applied to the Company or any Subsidiary, shall mean bonds, debentures, notes and other instruments representing obligations created or assumed by any such corporation for the repayment of money borrowed (other than unamortized debt discount or premium). All indebtedness secured by a Lien upon property owned by the Company or any Subsidiary and upon which indebtedness any such corporation customarily pays interest, although any such corporation has not assumed or become liable for the payment of such indebtedness, shall for all purposes hereof be deemed to be indebtedness of any such corporation. All indebtedness for money borrowed incurred by other persons which is directly guaranteed as to payment of principal by the Company or any Subsidiary shall for all purposes hereof be deemed to be indebtedness of any such corporation, but no other contingent obligation of any such corporation in respect of indebtedness incurred by other persons shall for any purpose be deemed indebtedness of such corporation. Indebtedness of the Company or any Subsidiary shall not include (i) any amount representing capitalized lease obligations; (ii) indirect guarantees or other contingent obligations in connection with the indebtedness of others, including agreements, contingent Page 2 of 6 Pages EXHIBIT A 27 or otherwise, with such other persons or with third persons with respect to, or to permit or ensure the payment of, obligations of such other persons, including, without limitation, agreements to purchase or repurchase obligations of such other persons, agreements to advance or supply funds to or to invest in such other persons or agreements to pay for property, products, or services of such other persons (whether or not conferred, delivered or rendered), and any demand charge, throughput, take-or-pay, keep-well, make-whole, cash deficiency, maintenance of working capital or earnings or similar agreements; and (iii) any guarantees with respect to lease or other similar periodic payments to be made by other persons. "Lien" means any mortgage, pledge, lien, security interest or similar charge or encumbrance. "Permitted Encumbrances" means any (a) undetermined or inchoate Lien incidental to construction, maintenance, development or operation of any property; (b) Lien for any tax or assessment for the then current year; (c) Lien for any tax or assessment not at the time delinquent; (d) Lien for specified tax or assessment which is delinquent but the validity of which is being contested at the time by the Company or any Subsidiary in good faith; (e) Lien reserved in any oil, gas or other mineral lease for rent, royalty or delay rental under such lease and for compliance with the terms of such lease; (f) Lien for any judgments or attachments in an aggregate amount not in excess of $10,000,000, or for any judgment or attachment the execution or enforcement of which has been stayed or which has been appealed and secured, if necessary, by the filing of appeal bond; (g) mechanics' or materialmen's Lien, any Lien or charge arising by reason of any pledge or deposit to secure payment of workmen's compensation or other insurance, good faith deposit in connection with any tender, lease of real estate, bid or contract (other than any contract for the payment of indebtedness), deposit to secure any duty or public or statutory obligation, deposit to secure, or in lieu of, surety, stay or appeal bond, and deposit as security for the payment of any tax or assessment or similar charge; Page 3 of 6 Pages EXHIBIT A 28 (h) Lien arising by reason of any deposit with, or the giving of any form of security to, any governmental agency or any body created or approved by law for any purpose at any time in connection with the financing of the acquisition or construction of property to be used in the business of the Company or Subsidiary or as required by law as a condition to the transaction of any business or the exercise of any privilege or license, or to enable the Company or a Subsidiary to maintain self-insurance or to participate in any fund established to cover any insurance risk or in connection with workmen's compensation, unemployment insurance, old age pension or other social security, or to share in the privileges or benefits required for companies participating in such arrangements; (i) easement, servitude, right-of-way or other right, exception, reservation, condition, limitation, covenant or other restriction or imperfection in title which does not materially detract from or interfere with the operation, value or use of the properties affected thereby; (j) preferential right to purchase entered into the ordinary course of business; (k) conventional provision contained in any contract or agreement affecting properties under which the Company or a Subsidiary is required immediately before the expiration, termination or abandonment of a particular property to reassign to the Company's or a Subsidiary's predecessor in title all or a portion of the Company's or a Subsidiary's rights, titles and interest in and to all or a portion of such property; (l) sale or other transfer of crude oil, condensate, natural gas, natural gas liquids or other similar hydrocarbon substances in place, or the future production thereof, for a period of time until, or in an amount such that, the transferee will realize therefrom a specified amount (however determined) of money or a specified amount of such crude oil, condensate, natural gas, natural gas liquids or other similar hydrocarbon substances or any sale or other transfer of any other interest in property of the character commonly referred to as a "production payment," "overriding royalty," "net profits interest," "royalty" or similar burden on any oil and gas property or mineral interest owned by the Company or any Subsidiary; (m) Lien consisting of or reserved in any (i) grant or conveyance in the nature of a farm-out or conditional assignment to the Company or any of its Subsidiaries entered into the ordinary course of business to secure undertakings of the Company or any Subsidiary in such grant or conveyance, (ii) interest of an assignee of any proved undeveloped lease or proved undeveloped portion of any producing property transferred to such assignee for the purpose of the development Page 4 of 6 Pages EXHIBIT A 29 of such lease or property, (iii) unitization or pooling agreement or declaration, (v) contract for the sale, purchase, exchange or processing of production, or (v) operating agreement, area of mutual interest agreement or other agreement which is customary in the oil and gas business and which agreement does not materially detract from the value, or materially impair the use of, the property affected thereby; (n) Lien consisting of any (i) statutory landlord's lien under any lease to which the Company or any Subsidiary is a party or any other Lien on leased property reserved in any lease thereof for rent or for compliance with the terms of such lease, (ii) right reserved to or vested in any municipality or governmental, statutory or public authority to control or regulate any property of the Company or any Subsidiary or to use such property in any manner which does not materially impair the use of such property for the purpose for which it is held by the Company or any such Subsidiary, (iii) obligation or duty to any municipality or public authority with respect to any franchise, grant, license, lease or permit and the rights reserved or vested in any governmental authority or public utility to terminate any such franchise, grant, license, lease or permit or to condemn or expropriate any property, or (iv) zoning law, ordinance or municipal regulation; (o) Lien arising out of any forward contract, futures contract, swap agreement or other commodities contract entered into by the Company or any Subsidiary; (p) Lien on oil and gas property of the Company or any Subsidiary thereof, or on production therefrom, to secure any liability of the Company or such Subsidiary for all or part of the Development Cost for such property under any joint operating, drilling or similar agreement for exploration, drilling or development of such property, or any renewal or extension of any such Lien (as used in this subclause, "Development Cost" means, for any oil and gas property, the cost of exploration, drilling or development of such property or of altering or repairing equipment used in connection with such exploration, drilling or development, or in the case of property which is substantially unimproved for the use intended by the Company or such Subsidiary, the cost of construction of improvements directly related to such exploration, drilling or development of such property); (q) Lien on any property of the Company or any Subsidiary thereof in favor of the government of the United States of America or of any State, or any political subdivision of either thereof, or any department, agency or instrumentality of either thereof (collectively, "Governments"), in order to permit the Company or such Subsidiary to perform any contract or subcontract made with or at the request of such Government, securing any partial, progress, advance or other payment by such Government to the Company or such Subsidiary under such contract or Page 5 of 6 Pages EXHIBIT A 30 subcontract, to the extent such Lien is required by such contract or subcontract or by any law relating thereto; and (r) Lien to secure any indebtedness incurred in connection with the construction, installation or financing of any pollution control or abatement facility or other form of industrial revenue bond financing issued or guaranteed by the United States, any State or any department, agency or instrumentality of either. "Principal Property" means any property interest in oil and gas reserves located in the United States or offshore the United States owned by the Company or any Subsidiary and which is capable of producing crude oil, condensate, natural gas, natural gas liquids or other similar hydrocarbon substances in paying quantities, the net book value of which property interest or interests exceeds two (2) percent of Consolidated Net Tangible Assets, except any such property interest or interests that in the opinion of the Board of Directors is not of material importance to the total business conducted by the Company and its Subsidiaries as a whole. Without limitation, the term "Principal Property" shall not include (i) accounts receivable and other obligations of any obligor under a contract for the sale, exploration, production, drilling, development, processing or transportation of crude oil, condensate, natural gas, natural gas liquids or other similar hydrocarbon substances by the Company or any of its Subsidiaries, and all related rights of the Company or any of is Subsidiaries, and all guarantees, insurance, letters of credit and other agreements or arrangements of whatever character supporting or securing payment of such receivables or obligations, or (ii) the production or any proceeds from production of crude oil, condensate, natural gas, natural gas liquids or other similar hydrocarbon substances. "Subsidiary" means a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For the purposes of this definition, "voting stock" means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. Page 6 of 6 Pages EXHIBIT A EX-10.66 14 ISDA AGREEMENT BETWEEN ROYAL BANK & EOG CANADA 1 EXHIBIT 10.66 ISDA International Swap Dealers Association, Inc. MASTER AGREEMENT dated as of January 16, 1996 ROYAL BANK OF CANADA and EOG COMPANY OF CANADA have entered and/or anticipate entering into one or more transactions (each a "Transaction") that are or will be governed by this Master Agreement, which includes the schedule (the "Schedule"), and the documents and other confirming evidence (each a "Confirmation") exchanged between the parties confirming those Transactions. Accordingly, the parties agree as follows:- 1. INTERPRETATION (a) DEFINITIONS. The terms defined in Section 14 and in the Schedule will have the meanings therein specified for the purpose of this Master Agreement. (b) INCONSISTENCY. In the event of any inconsistency between the provisions of the Schedule and the other provisions of this Master Agreement, the Schedule will prevail. In the event of any inconsistency between the provisions of any Confirmation and this Master Agreement (including the Schedule), such Confirmation will prevail for the purpose of the relevant Transaction. (c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the fact that this Master Agreement and all Confirmations form a single agreement between the parties (collectively referred to as this "Agreement"), and the parties would not otherwise enter into any Transactions. 2. OBLIGATIONS (a) GENERAL CONDITIONS. (i) Each party will make each payment or delivery specified in each Confirmation to be made by it, subject to the other provisions of this Agreement. (ii) Payments under this Agreement will be made on the due date for value on that date in the place of the account specified in the relevant Confirmation or otherwise pursuant to this Agreement, in freely transferable funds and in the manner customary for payments in the required currency. Where settlement is by delivery (that is, other than by 1 2 payment), such delivery will be made for receipt on the due date in the manner customary for the relevant obligation unless otherwise specified in the relevant Confirmation or elsewhere in this Agreement. (iii) Each obligation of each party under Section 2(a)(i) is subject to (1) the condition precedent that no Event of Default or Potential Event of Default with respect to the other party has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant Transaction has occurred or been effectively designated and (3) each other applicable condition precedent specified in this Agreement. (b) CHANGE OF ACCOUNT. Either party may change its account for receiving a payment or delivery by giving notice to the other party at least five Local Business Days prior to the scheduled date for the payment or delivery to which such change applies unless such other party gives timely notice of a reasonable objection to such change. (c) NETTING. If on any date amounts would otherwise be payable:- (i) in the same currency; and (ii) in the respect of the same Transaction, by each party to the other, then, on such date, each party's obligation to make payment of any such amount will be automatically satisfied and discharged and, if the aggregate amount that would otherwise have been payable by one party exceeds the aggregate amount that would otherwise have been payable by the other party, replaced by an obligation upon the party by whom the larger aggregate amount would have been payable to pay to the other party the excess of the larger aggregate amount over the smaller aggregate amount. The parties may elect in respect of two or more Transactions that a net amount will be determined in respect of all amounts payable on the same date in the same currency in respect of such Transactions, regardless of whether such amounts are payable in respect of the same Transaction. The election may be made in the Schedule or a Confirmation by specifying that subparagraph (ii) above will not apply to the Transactions identified as being subject to the election, together with the starting date (in which case subparagraph (ii) above will not, or will cease to, apply to such Transactions from such date). This election may be made separately for different groups of Transactions and will apply separately to each pairing of Offices through which the parties make and receive payments or deliveries. (d) DEDUCTION OR WITHHOLDING FOR TAX. (i) GROSS UP. All payments under this Agreement will be made without deduction or withholding for or on account of any Tax unless such deduction or withholding is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, then in effect. If a party is so required to deduct or withhold, then that party ("X") will:-- (1) promptly notify the other party ("Y") of such requirement; (2) pay to the relevant authorities the full amount required to be deducted or withheld (including the full amount required to be deducted or withheld from any additional amount paid by X to Y under this Section 2(d)) promptly upon the earlier of determining that such deduction or withholding is required or receiving notice that such amount has been assessed against Y; (3) promptly forward to Y an official receipt (or a certified copy), or other documentation reasonably acceptable to Y, evidencing such payment to such authorities; and (4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to the payment to which Y is otherwise entitled under this Agreement, such additional amount as is necessary to ensure that the net amount actually received by Y (free and clear of Indemnifiable Taxes, whether assessed against X or Y) will equal the full amount Y would have received had no such deduction or withholding been required. However, X will not be required to pay any additional amount to Y to the extent that it would not be required to be paid but for:-- (A) the failure by Y to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d); or (B) the failure of a representation made by Y pursuant to Section 3(f) to be accurate and true unless such failure would not have occurred but for (I) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (II) a Change in Tax Law. (ii) LIABILITY. If:-- (1) X is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, to make any deduction or withholding in respect of which X would not be required to pay an additional amount to Y under Section 2(d)(i)(4); (2) X does not so deduct or withhold; and (3) a liability resulting from such Tax is assessed directly against X, then, except to the extent Y has satisfied or then satisfies the liability resulting from such Tax, Y will promptly pay to X the amount of such liability (including any related liability for interest, but including any related liability for penalties only if Y has failed to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d). (e) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or 2 3 effective designation of an Early Termination Date in respect of the relevant Transaction, a party that defaults in the performance of any payment obligation will, to the extent permitted by law and subject to Section 6(c), be required to pay interest (before as well as after judgment) on the overdue amount to the other party on demand in the same currency as such overdue amount, for the period from (and including) the original due date for payment to (but excluding) the date of actual payment, at the Default Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. If, prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party defaults in the performance of any obligation required to be settled by delivery, it will compensate the other party on demand if and to the extent provided for in the relevant Confirmation or elsewhere in this Agreement. 3. REPRESENTATIONS Each party represents to the other party (which representations will be deemed to be repeated by each party on each date on which a Transaction is entered into and, in the case of the representations in Section 3(f), at all times until the termination of this Agreement) that:- (a) BASIC REPRESENTATIONS. (i) STATUS. It is duly organised and validly existing under the laws of the jurisdiction of its organisation or incorporation and, if relevant under such laws, in good standing; (ii) POWERS. It has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and any obligations it has under any Credit Support Document to which it is a party and has taken all necessary action to authorise such execution, delivery and performance; (iii) NO VIOLATION OR CONFLICT. Such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision of its constitutional documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting it or any of its assets; (iv) CONSENTS. All governmental and other consents that are required to have been obtained by it with respect to this Agreement or any Credit Support Document to which it is a party have been obtained and are in full force and effect and all conditions of any such consents have been complied with; and 3 4 (v) OBLIGATIONS BINDING. Its obligations under this Agreement and any Credit Support Document to which it is a party constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganisation, insolvency, moratorium or similar laws affecting creditors' rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)). (b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of Default or, to its knowledge, Termination Event with respect to it has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement or any Credit Support Document to which it is a party. (c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge, threatened against it or any of its Affiliates any action, suit or proceeding at law or in equity or before any court, tribunal, governmental body, agency or official or any arbitrator that is likely to affect the legality, validity or enforceability against it of this Agreement or any Credit Support Document to which it is a party or its ability to perform its obligations under this Agreement or such Credit Support Document. (d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is furnished in writing by or on behalf of it to the other party and is identified for the purpose of this Section 3 (d) in the Schedule is, as of the date of the information, true, accurate and complete in every material respect. (e) PAYER TAX REPRESENTATION. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(e) is accurate and true. (f) PAYEE TAX REPRESENTATIONS. Each representation specified in the Schedule as being made by it for the purposes of this Section 3(f) is accurate and true. 4. AGREEMENTS Each party agrees with the other that, so long as either party has or may have any obligation under this Agreement or under any Credit Support Document to which it is a party:- (a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party or, in certain cases under subparagraph (iii) below, to such government or taxing authority as the other party reasonably directs:-- (i) any forms, documents or certificates relating to taxation specified in the Schedule or any Confirmation; (ii) any other documents specified in the Schedule or any Confirmation; and (iii) upon reasonable demand by such other party, any form or document that may be required or reasonably requested in writing in order to allow such other party or its Credit Support Provider to make a payment under this Agreement or any applicable Credit Support Document without any deduction or withholding for or on account of any Tax or with such deduction or withholding at a reduced rate (so long as the completion, execution or submission of such form or document would not materially prejudice the legal or commercial position of the party in receipt of such demand), with any such form or document to be accurate and completed in a manner reasonably satisfactory to such other party and to be executed and to be delivered with any reasonably required certification, in each case by the date specified in the Schedule or such Confirmation or, if none is specified, as soon as reasonably practicable. (b) MAINTAIN AUTHORISATIONS. It will use all reasonable efforts to maintain in full force and effect all consents of any governmental or other authority that are required to be obtained by it with respect to this Agreement or any Credit Support Document to which it is a party and will use all reasonable efforts to obtain any that may become necessary in the future. (c) COMPLY WITH LAWS. It will comply in all material respects with 4 5 all applicable laws and orders to which it may be subject if failure so to comply would materially impair its ability to perform its obligations under this Agreement or any Credit Support Document to which it is a party. (d) TAX AGREEMENT. It will give notice of any failure of a representation made by it under Section 3(f) to be accurate and true promptly upon learning of such failure. (e) PAYMENT OF STAMP TAX. Subject to Section 11, it will pay any Stamp Tax levied or imposed upon it or in respect of its execution or performance of this Agreement by a jurisdiction in which it is incorporated, organized, managed and controlled, or considered to have its seat, or in which a branch or office through which it is acting for the purpose of this Agreement is located ("Stamp Tax Jurisdiction") and will indemnify the other party against any Stamp Tax levied or imposed upon the other party or in respect of the other party's execution or performance of this Agreement by any such Stamp Tax Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the other party. 5. EVENTS OF DEFAULT AND TERMINATION EVENTS (a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any of the following events constitutes an event of default (an "Event of Default") with respect to such party:- (i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when due, any payment under this Agreement or delivery under Section 2(a)(i) or 2(e) required to be made by it if such failure is not remedied on or before the third Local Business Day after notice of such failure is given to the party; (ii) BREACH OF AGREEMENT. Failure by the party to comply with or perform any agreement or obligation (other than an obligation to make any payment under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give notice of a Termination Event or any agreement or obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party in accordance with this Agreement if such failure is not remedied on or before the thirtieth day after notice of such failure is given to the party; (iii) CREDIT SUPPORT DEFAULT. (1) Failure by the party or any Credit Support Provider of such party to comply with or perform any agreement or obligation to be complied with or performed by it in accordance with any Credit Support Document if such failure is continuing after any applicable grace period has elapsed; (2) the expiration or termination of such Credit Support Document or the failing or ceasing of such Credit Support Document to be in full force and effect for the purpose of this Agreement (in either case other than in accordance with its terms) prior to the satisfaction of all obligations of such party under each Transaction to which such Credit Support Document relates without the written consent of the other party; or (3) the party or such Credit Support Provider disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, such Credit Support Document; 5 6 (iv) MISREPRESENTATION. A representation (other than a representation under Section 3(e) or (f) made or repeated or deemed to have been made or repeated by the party or any Credit Support Provider of such party in this Agreement or any Credit Support Document proves to have been incorrect or misleading in any material respect when made or repeated or deemed to have been made or repeated; (v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party (1) defaults under a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, there occurs a liquidation of, an acceleration of obligations under, or an early termination of, that Specified Transaction, (2) defaults, after giving effect to any applicable notice requirement or grace period, in making any payment or delivery due on the last payment, delivery or exchange date of, or any payment on early termination of, a Specified Transaction (or such default continues for at least three Local Business Days if there is no applicable notice requirement or grace period) or (3) disaffirms, disclaims, repudiates or rejects, in whole or in part, a Specified Transaction (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf); (vi) CROSS DEFAULT. If "Cross Default" is specified in the Schedule as applying to the party, the occurrence or existence of (1) a default, event of default or other similar condition or event (however described) in respect of such party, any Credit Support Provider of such party or any applicable Specified Entity of such party under one or more agreements or instruments relating to Specified Indebtedness of any of them (individually or collectively) in an aggregate amount of not less than this applicable Threshold Amount (as specified in the Schedule) which has resulted in such Specified Indebtedness becoming, or becoming capable at such time of being declared, due and payable under such agreements or instruments, before it would otherwise have been due and payable or (2) a default by such party, such Credit Support Provider or such Specified Entity (individually or collectively) in making one or more payments on the due date thereof in an aggregate amount of not less than the applicable Threshold Amount under such agreements or instruments (after giving effect to any applicable notice requirement or grace period); (vii) BANKRUPTCY. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party:- (1) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (2) becomes insolvent or is unable to pay its debts or fails or admits in writing its 6 7 inability generally to pay its debts as they become due; (3) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (4) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (A) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (B) is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof; (5) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (6) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets; (7) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter; (8) causes or is subject to any event with respect to it which, under the applicable laws or any jurisdiction, has an analogous effect to any of the events specified in clauses (1) to (7) (inclusive); or (9) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts; or (viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support Provider of such party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and, at the time of such consolidation, amalgamation, merger or transfer:- (1) the resulting, surviving or transferee entity fails to assume all the obligations of such party or such Credit Support Provider under this Agreement or any Credit Support Document to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other party to this Agreement; or (2) the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the 7 8 performance by such resulting, surviving or transferee entity of its obligations under this Agreement. (b) TERMINATION EVENTS. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any event specified below constitutes an Illegality if the event is specified in (i) below, a Tax Event, if the event is specified in (ii) below or a Tax Event Upon Merger if the event is specified in (iii) below, and, if specified to be applicable, a Credit Event Upon Merger if the event is specified pursuant to (iv) below or an Additional Termination Event if the event is specified pursuant to (v) below:- (i) ILLEGALITY. Due to the adoption of, or any change in, any applicable law after the date on which a Transaction is entered into, or due to the promulgation of, or any change in, the interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable law after such date, it becomes unlawful (other than as a result of a breach by the party of Section 4(b)) for such party (which will be the Affected Party):- (1) to perform any absolute or contingent obligation to make a payment or delivery or to receive a payment or delivery in respect of such Transaction or to comply with any other material provision of this Agreement relating to such Transaction; or (2) to perform, or for any Credit Support Provider of such party to perform, any contingent or other obligation which the party (or such Credit Support Provider) has under any Credit Support Document relating to such Transaction; (ii) TAX EVENT. Due to (x) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (y) a Change in Tax Law, the party (which will be the Affected Party) will, or there is a substantial likelihood that it will, on the next succeeding Scheduled Payment Date (1) be required to pay to the other party an additional amount in respect of a Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount is required to be deducted or withhold for or on account of a Tax (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) and no additional amount is required to be paid in respect of such Tax under Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A) or (B)); (iii) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the next succeeding Scheduled Payment Date will either (1) be required to pay an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has been deducted or withheld for or on account of any Indemnifiable Tax in respect of which the other party is not required to pay an additional amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a party consolidating or amalgamating with, or merging with or into, or transferring all or substantially all its assets to, another entity (which will be the Affected Party) where such action does not constitute an event described in Section 5(a)(viii); (iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is specified in the Schedule as applying to the party, such party ("X"), any Credit Support Provider of X or any applicable Specified Entity of X consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and such action does not constitute an event described in Section 5(a)(viii) but the creditworthiness of the resulting, surviving or transferee entity is materially weaker than that of X, such Credit Support Provider or such Specified Entity, as the case may be, immediately prior to such action (and, in such event, X or its successor or transferee, as appropriate, will be the Affected Party); or (v) ADDITIONAL TERMINATION EVENT. If any "Additional Termination Event" is specified in the Schedule or any Confirmation as applying, the occurrence of such event (and, in such event, the Affected Party or Affected Parties shall be as specified for such Additional Termination Event in the 8 9 Schedule or such Confirmation). (c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which would otherwise constitute or give rise to an Event of Default also constitutes an Illegality, it will be treated as an Illegality and will not constitute an Event of Default. 6. EARLY TERMINATION (a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of Default with respect to a party (the "Defaulting Party") has occurred and is then continuing, the other party (the "Non-defaulting Party") may, by not more than 20 days notice to the Defaulting Party specifying the relevant Event of Default, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all outstanding Transactions. If, however, "Automatic Early Termination" is specified in the Schedule as applying to a party, then an Early Termination Date in respect of all outstanding Transactions will occur immediately upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the extent analogous thereto, (8), and as of the time immediately preceding the institution of the relevant proceeding or the presentation of the relevant petition upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8). (b) RIGHTS TO TERMINATE FOLLOWING TERMINATION EVENT. (i) NOTICE. If a Termination Event occurs, an Affected Party will, promptly upon becoming aware of it, notify the other party, specifying the nature of that Termination Event and each Affected Transaction and will also give such other information about that Termination Event as the other party may reasonably require. (ii) TRANSFER TO AVOID TERMINATION EVENT. If either an Illegality under Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the Affected Party, the Affected Party will, as a condition to its right to designate an Early Termination Date under Section 6(b)(iv), use all reasonable efforts (which will not require such party to incur a loss, excluding immaterial, incidental expenses) to transfer within 20 days after it gives notice under Section 6(b)(i) all its rights and obligations under this Agreement in respect of the Affected Transactions to another of its Offices or Affiliates so that such Termination Event ceases to exist. If the Affected Party is not able to make such a transfer it will give notice to the other party to that effect within such 20 day period, whereupon the other party may effect such a transfer within 30 days after the notice is given under Section 6(b)(i). Any such transfer by a party under this Section 6(b)(ii) will be subject to and conditional upon the prior written consent of the other party, which consent will not be withheld if such other party's policies in effect at such time would permit it to enter into transactions with the transferee on the terms proposed. (iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)(1) occurs and there are two Affected Parties, each party will use all reasonable efforts to reach agreement within 30 days after notice thereof is given under Section 6(b)(i) on action to avoid that Termination Event. (iv) RIGHT TO TERMINATE. If:- (1) a transfer under Section 6(b)(ii) or an agreement under Section 6(b)(iii), as the case may be, has not been effected with respect to all Affected Transactions within 30 days after an Affected Party gives notice under Section 6(b)(i); or (2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon Merger or an Additional Termination Event occurs, or a Tax Event Upon Merger occurs and the Burdened Party is not the Affected Party, 9 10 either party in the case of an Illegality, the Burdened Party in the case of a Tax Event Upon Merger, any Affected Party in the case of a Tax Event or an Additional Termination Event if there is more than one Affected Party, or the party which is not the Affected Party in the case of a Credit Event Upon Merger or an Additional Termination Event if there is only one Affected Party may, by not more than 20 days notice to the other party and provided that the relevant Termination Event is then continuing, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all Affected Transactions. (c) EFFECT OF DESIGNATION. (i) If notice designating an Early Termination Date is given under Section 6(a) or (b), the Early Termination Date will occur on the date so designated, whether or not the relevant Event of Default or Termination Event is then continuing. (ii) Upon the occurrence of effective designation of an Early Termination Date, no further payments or deliveries under Section 2(a)(i) or 2(e) in respect of the Terminated Transactions will be required to be made, but without prejudice to the other provisions of this Agreement. The amount, if any, payable in respect of an Early Termination Date shall be determined pursuant to Section 6(e). (d) CALCULATIONS. (i) STATEMENT. On or as soon as reasonably practicable following the occurrence of an Early Termination Date, each party will make the calculations on its part, if any, contemplated by Section 6(e) and will provide to the other party a statement (1) showing, in reasonable detail, such calculations (including all relevant quotations and specifying any amount payable under Section 6(e)) and (2) giving details of the relevant account to which any amount payable to it is to be paid. In the absence of written confirmation from the source of a quotation obtained in determining a Market Quotation, the records of the party obtaining such quotation will be conclusive evidence of the existence and accuracy of such quotation. (ii) PAYMENT DATE. An amount calculated as being due in respect of any Early Termination Date under Section 6(e) will be payable on the day that notice of the amount payable is effective (in the case of an Early Termination Date which is designated or occurs as a result of an Event of Default) and on the day which is two Local Business Days after the day on which notice of the amount payable is effective (in the case of an Early Termination Date which is designated as a result of a Termination Event). Such amount will be paid together with (to the extent permitted under applicable law) interest 10 11 thereon (before as well as after judgment) in the Termination Currency, from (and including) the relevant Early Termination Date to (but excluding) the date such amount is paid, at the Applicable Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. (e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the following provisions shall apply based on the parties' election in the Schedule of a payment measure, either "Market Quotation" or "Loss", and a payment method, either the "First Method" or the "Second Method". If the parties fail to designate a payment measure or payment method in the Schedule, it will be deemed that "Market Quotation" or the "Second Method", as the case may be, shall apply. The amount, if any, payable in respect of an Early Termination Date and determined pursuant to this Section will be subject to any Set-off. (i) EVENTS OF DEFAULT. If the Early Termination Date results from an Event of Default:- (1) FIRST METHOD AND MARKET QUOTATION. If the First Method and Market Quotation apply, the Defaulting Party will pay to the Non-defaulting Party the excess, if a positive number, of (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party over (B) theTermination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party. (2) FIRST METHOD AND LOSS. If the First Method and Loss apply, the Defaulting Party will pay to the Non-defaulting Party, if a positive number, the Non-defaulting Party's Loss in respect of this Agreement. (3) SECOND METHOD AND MARKET QUOTATION. If the Second Method and Market Quotation apply, an amount will be payable equal to (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect to the Terminated Transactions and theTermination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party less (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party. (4) SECOND METHOD AND LOSS. If the Second Method and Loss apply, an amount will be payable equal to the Non-defaulting Party's Loss in respect of this Agreement. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the 11 12 absolute value of that amount to the Defaulting Party. (ii) TERMINATION EVENTS. If the Early Termination Date results from a Termination Event:- (1) ONE AFFECTED PARTY. If there is one Affected Party, the amount payable will be determined in accordance with Section 6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4), if Loss applies, except that, in either case, references to the Defaulting Party and to the Non-defaulting Party will be deemed to be references to the Affected Party and the party which is not the Affected Party, respectively, and, if Loss applies and fewer than all the Transactions are being terminated, Loss shall be calculated in respect of all Terminated Transactions. (2) TWO AFFECTED PARTIES. If there are two Affected Parties:- (A) if Market Quotation applies, each party will determine a Settlement Amount in respect of the Terminated Transactions, and an amount will be payable equal to (I) the sum of (a) one-half of the difference between the Settlement Amount of the party with the higher Settlement Amount ("X") and the Settlement Amount of the party with the lower Settlement Amount ("Y") and (b) the Termination Currency Equivalent of the Unpaid Amounts owing to X less (II) the Termination Currency Equivalent of the Unpaid Amounts owing to Y; and (B) if Loss applies, each party will determine its Loss in respect of this Agreement (or, if fewer than all the Transactions are being terminated, in respect of all Terminated Transactions) and an amount will be payable equal to one-half of the difference between the Loss of the party with the higher Loss ("X") and the Loss of the party with the lower Loss ("Y"). If the amount payable is a positive number, Y will pay it to X; if it is a negative number, X will pay the absolute value of that amount to Y. (iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early Termination Date occurs because "Automatic Early Termination" applies in respect of a party, the amount determined under this Section 6(e) will be subject to such adjustments as are appropriate and permitted by law to reflect any payments or deliveries made by one party to the other under this Agreement (and retained by such other party) during the period from the relevant Early Termination Date to the 12 13 date for payment determined under Section 6(d)(ii). (iv) PRE-ESTIMATE. The parties agree that if Market Quotation applies an amount recoverable under this Section 6(e) is a reasonable pre-estimate of loss and not a penalty. Such amount is payable for the loss of bargain and the loss of protection against future risks and except as otherwise provided in this Agreement neither party will be entitled to recover any additional damages as a consequence of such losses. 7. TRANSFER Subject to Section 6(b)(ii), neither this Agreement nor any interest or obligation in or under this Agreement may be transferred (whether by way of security or otherwise) by either party without the prior written consent of the other party, except that:- (a) a party may make such a transfer of this Agreement pursuant to a consolidation or amalgamation with, or merger with or into, or transfer of all or substantially all its assets to, another entity (but without prejudice to any other right or remedy under this Agreement); and (b) a party may make such a transfer of all or any part of its interest in any amount payable to it from a Defaulting Party under Section 6(e). Any purported transfer that is not in compliance with this Section will be void. 8. CONTRACTUAL CURRENCY (a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement will be made in the relevant currency specified in this Agreement for that payment (the "Contractual Currency"). To the extent permitted by applicable law, any obligation to make payments under this Agreement in the Contractual Currency will not be discharged or satisfied by any tender in any currency other than the Contractual Currency, except to the extent such tender results in the actual receipt by the party to which payment is owed, acting a reasonable manner and in good faith in converting the currency so tendered into the Contractual Currency, of the full amount in the Contractual Currency of all amounts payable in respect of this Agreement. If for any reason the amount in the Contractual Currency so received falls short of the amount in the Contractual Currency payable in respect of this Agreement, the party required to make the payment will, to the extent permitted by applicable law, immediately pay such additional amount in the Contractual Currency as may be necessary to compensate for the shortfall. If for any reason the amount in the Contractual Currency so received exceeds the amount in the Contractual Currency payable in respect of this Agreement, the party receiving the payment will refund promptly the amount of such excess. (b) JUDGMENTS. To the extent permitted by applicable law, if any judgment or order expressed in a currency other than the contractual Currency is rendered (i) for the payment of any amount owing in respect of this Agreement, (ii) for the payment of any amount relating to any early termination in respect of this Agreement or (iii) in respect of a judgment or order of another court for the payment of any amount described in (i) or (ii) above, the party seeking recovery, after recovery in full of the aggregate amount to which such party is entitled pursuant to the judgment or order, will be entitled to receive immediately from the other party the amount of any shortfall of the Contractual Currency received by such party as consequence of sums paid in such other currency and will refund promptly to the other party any excess of the Contractual Currency received by such party as a consequence of sums paid in such other currency if such shortfall or such excess arises or results from any variation between the rate of exchange at which the Contractual Currency is converted into the currency of the judgment or order for the purposes of such judgment or order and the rate of exchange at which such party is able, acting in a reasonable manner and in good faith in converting the currency received into the Contractual Currency, to purchase the Contractual Currency with the amount of the currency of the judgment or other actually received by such party. The term "rate of exchange" includes, without limitation, any premiums and costs of exchange payable in connection with the purchase of or conversion into the Contractual Currency. (c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these indemnities constitute separate and independent obligations from the other obligations in this Agreement, will be enforceable as separate and independent causes of action, will apply notwithstanding any indulgence granted by the party to which any payment is owed and will not be affected by judgment being obtained or claim or proof being made for any other sums payable in respect of this Agreement. (d) EVIDENCE OF LOSS. For the purpose of this Section 8, it will be sufficient for a party to demonstrate that it would have suffered a loss had an actual exchange or purchase been made. 9. MISCELLANEOUS (a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communication and prior writings with respect thereto. (b) AMENDMENTS. No amendment, modification or waiver in respect of this Agreement will be effective unless in writing (including a writing evidenced by a facsimile transmission) and executed by each of the parties or confirmed by an exchange of telexes or electronic messages on an electronic messaging system. (c) SURVIVAL OF OBLIGATIONS. Without prejudice to Section 2(a)(iii) and 6(c)(ii), the obligations of the parties under this Agreement will survive the termination of any Transaction. (d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights, powers remedies and privileges provided in this Agreement are cumulative and not exclusive of any rights, powers, remedies and privileges provided by law. 13 14 (e) COUNTERPARTS AND CONFIRMATIONS. (i) This Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts (including by facsimile transmission), each of which will be deemed an original. (ii) The parties intend that they are legally bound by the terms of each Transaction from the moment they agree to those terms (whether orally or otherwise). A Confirmation shall be entered into as soon as practicable and may be executed and delivered in counterparts (including by facsimile transmission) or created by an exchange of telexes or by an exchange of electronic messages on an electronic messaging system, which in each case will be sufficient for all purposes to evidence a binding supplement to this Agreement. The parties will specify therein or through another effective means that any such counterpart, telex or electronic message constitutes a Confirmation. (f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power or privilege in respect of this Agreement will not be presumed to operate as a waiver, and a single or partial exercise of any right, power or privilege will not be presumed to preclude any subsequent or further exercise, of that right, power or privilege or the exercise of any other right, power or privilege. (g) HEADINGS. The headings used in this Agreement are for convenience of reference only and are not to affect the construction of or to be taken into consideration in interpreting this Agreement. 10. OFFICES; MULTIBRANCH PARTIES (a) If Section 10(a) is specified in the Schedule as applying, each party that enters into a Transaction through an Office other than its head or home office represents to the other party that, notwithstanding the place of booking office or jurisdiction of incorporation or organisation of such party, the obligations of such party are the same as if it had entered into the Transaction through its head or home office. This representation will be deemed to be repeated by such party on each date on which a Transaction is entered into. (b) Neither party may change the Office through which is makes and receives payments or deliveries for the purpose of a Transaction without the prior written consent of the other party. (c) If a party is specified as a Multibranch Party in the Schedule, such Multibranch Party may make and receive payments or deliveries under any Transaction through any Office listed in the Schedule, and the Office through which it makes and receives payments or deliveries with respect to a Transaction will be specified in the relevant Confirmation. 11. EXPENSES A Defaulting Party will, on demand, indemnify and hold harmless the other party for and against all reasonable out-of-pocket expenses, including legal fees and Stamp Tax, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement or any Credit Support Document to which the Defaulting Party is a party or by reason of the early termination of any Transaction, including, but not limited to, costs of collection. 12. NOTICES (a) EFFECTIVENESS. Any notice or other communication in respect of this Agreement may be given in any manner set forth below (except that a notice or other communication under Section 5 or 6 may not be given by facsimile transmission or electronic messaging system) to the address or number or in accordance with the electronic messaging system details provided (see the Schedule) and will be deemed effective as indicated:- 14 15 (i) if in writing and delivered in person or by courier, on the date it is delivered; (ii) if sent by telex, on the date the recipient's answerback is received; (iii) if sent by facsimile transmission, on the date that transmission is received by a responsible employee of the recipient in legible form (it being agreed that the burden of proving receipt will be on the sender and will not be met by a transmission report generated by the sender's facsimile machine); (iv) if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt requested), on the date that mail is delivered or its delivery is attempted; or (v) if sent by electronic messaging system, on the date that electronic message is received, unless the date of delivery (or attempted delivery) or that receipt, as applicable, is not a Local Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Local Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Local Business Day. (b) CHANGE OF ADDRESSES. Either party may by notice to the other change the address, telex or facsimile number or electronic messaging system details at which notices or other communications are to be given to it. 13. GOVERNING LAW AND JURISDICTION (a) GOVERNING LAW. This Agreement will be governed by and construed in accordance with the law specified in the Schedule. (b) JURISDICTION. With respect to any suit, action or proceedings relating to this Agreement ("Proceedings"), each party irrevocably:- (i) submits to the jurisdiction of the English courts, if this Agreement is expressed to be governed by English law, or to the non-exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City, if this Agreement is expressed to be governed by the laws of the State of New York; and (ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an 15 16 inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party. Nothing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction (outside, if this Agreement is expressed to be governed by English law, the Contracting States, as defined in Section 1(3) of the Civil Jurisdiction and Judgments Act 1982 or any modification, extension or re-enactment thereof for the time being in force) nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction. (c) SERVICE OF PROCESS. Each party irrevocably appoints the Process Agent (if any) specified opposite its name in the Schedule to receive, for it and on its behalf, service of process in any Proceedings. If for any reason any party's Process Agent is unable to act as such, such party will promptly notify the other party and within 30 days appoint a substitute process agent acceptable to the other party. The parties irrevocably consent to service of process given in the manner provided for notices in Section 12. Nothing in this Agreement will affect the right of either party to serve process in any other manner permitted by law. (d) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest extent permitted by applicable law, with respect to itself and its revenues and assets (irrespective of their use or intended use), all immunity on the grounds of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of injunction, order for specific performance or for recovery of property, (iv) attachment of its assets (whether before or after judgment) and (v) execution or enforcement of any judgment to which it or its revenues or assets might otherwise be entitled in any Proceedings in the courts of any jurisdiction and irrevocably agrees, to the extent permitted by applicable law, that it will not claim any such immunity in any Proceedings. 14. DEFINITIONS As used in this Agreement:- "Additional Termination Event" has the meaning specified in Section 5(b). "Affected Party" has the meaning specified in Section 5(b). "Affected Transactions" means (a) with respect to any Termination Event consisting of an Illegality,Tax Event or Tax Event Upon Merger, all Transactions affected by the occurrence of such Termination Event and (b) with respect to any other Termination Event, all Transactions. "Affiliate" means, subject to the Schedule, in relation to any person, any entity controlled, directly or indirectly, by the person, any entity that controls, directly or indirectly, the person or any entity directly or indirectly under common control with the person. For this purpose, "control" of any entity or person means ownership of a majority of the voting power of the entity or person. "Applicable Rate" means:- (a) in respect of obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate; 16 17 (b) in respect of an obligation to pay an amount under Section 6(e) of either party from and after the date (determined in accordance with Section 6(d)(ii)) on which that amount is payable, the Default Rate; (c) in respect of all other obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default Rate; and (d) in all other cases, the Termination Rate. "Burdened Party" has the meaning specified in Section 5(b). "Change in Tax Law" means the enactment, promulgation, execution or ratification of, or any change in or amendment to, any law (or in the application or official interpretation of any law) that occurs on or after the date on which the relevant Transaction is entered into. "consent" includes a consent, approval, action, authorisation, exemption, notice, filing, registration or exchange control consent. "Credit Event Upon Merger" has the meaning specified in Section 5(b). "Credit Support Document" means any agreement or instrument that is specified as such in this Agreement. "Credit Support Provider" has the meaning specified in the Schedule. "Default Rate" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the relevant payee (as certified by it) if it were to fund or of funding the relevant amount plus 1% per annum. "Defaulting Party" has the meaning specified in Section 6(a). "Early Termination Date" means the date determined in accordance with Section 6(a) or 6(b)(iv). "Event of Default" has the meaning specified in Section 5(a) and, if applicable, in the Schedule. "Illegality" has the meaning specified in Section 5(b). "Indemnifiable Tax" means any Tax other than a Tax that would not be imposed in respect of a payment under this Agreement but for a present or former connection between the jurisdiction of the government or taxation authority imposing such Tax and the recipient of such payment or a person related to such recipient (including, without limitation, a connection arising from such recipient or related person being or having been a citizen or resident of such jurisdiction, or being or having been organised, present or engaged in a trade or business in such jurisdiction, or having or having had a permanent establishment or fixed place of business in such jurisdiction, but excluding a connection arising solely from such recipient or related person having executed, delivered, performed its obligations or received a payment under, or enforced, this Agreement or a Credit Support Document). "law" includes any treaty, law, rule or regulation (as modified, in the case of tax matters, by the practice of any relevant governmental revenue authority) and "lawful" and "unlawful" will be construed accordingly. "Local Business Day" means, subject to the Schedule, a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) (a) in relation to any obligation under Section 2(a)(i), in the place(s) specified in the relevant Confirmation or, if not so specified, as otherwise agreed by the parties in writing or determined pursuant to provisions contained, or incorporated by reference, in this Agreement, (b) in relation to any other payment, in the place where the relevant account is located, and, if different, in the principal financial centre, if any, of the currency of such payment, (c) in relation to any notice or other communication, including notice contemplated under Section 17 18 5(a)(i), in the city specified in the address for notice provided by the recipient and, in the case of a notice contemplated by Section 2(b), in the place where the relevant new account is to be located and (d) in relation to Section 5(a)(v)(2), in the relevant locations for performance with respect to such Specified Transaction. "Loss" means, with respect to this Agreement or one or more Terminated Transactions, as the case may be, and a party, the Termination Currency Equivalent of an amount that party reasonably determines in good faith to be its total losses and costs (or gain, in which case expressed as a negative number) in connection with this Agreement or that Terminated Transaction or group of Terminated Transactions, as the case may be, including any loss of bargain, cost of funding or, at the election of such party but without duplication, loss or cost incurred as a result of its terminating, liquidating, obtaining or reestablishing any hedge or related trading position (or any gain resulting from any of them). Loss includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each applicable condition precedent) on or before the relevant Early Termination Date and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and out-of-pocket expenses referred to under Section 11. A party will determine its Loss as of the relevant Early Termination Date, or, if that is not reasonably practicable, as of the earliest date thereafter as it reasonably practicable. A party may (but need not) determine its Loss by reference to quotations of relevant rates or prices from one or more leading dealers in the relevant markets. "Market Quotation" means, with respect to one or more Terminated Transactions and a party making the determination, an amount determined on the basis of quotations from Reference Market-makers. Each quotation will be for an amount, if any, that would be paid to such party (expressed as a negative number) or by such party (expressed as a positive number) in consideration of an agreement between such party (taking into account any existing Credit Support Document with respect to the obligations of such party) and the quoting Reference Market-maker to enter into a transaction (the "Replacement Transaction") that would have the effect of preserving for such party the economic equivalent of any payment or delivery (whether the underlying obligation was absolute or contingent and assuming the satisfaction of each applicable condition precedent) by the parties under Section 2(a)(i) in respect of such Terminated Transaction or group of Terminated Transactions that would, but for the occurrence of the relevant Early Termination Date, have been required after that date. For this purpose, Unpaid Amounts in respect of the Terminated Transaction or group of Terminated Transactions are to be excluded but, without limitation, any payment or delivery that would, but for the relevant Early Termination Date, have been required (assuming satisfaction of each 18 19 applicable condition precedent) after that Early Termination Date is to be included. The Replacement Transaction would be subject to such documentation as such party and the Reference Market-maker may, in good faith, agree. The party making the determination (or its agent) will request each Reference Market-maker to provide its quotation to the extent reasonably practicable as of the same day and time (without regard to different time zones) on or as soon as reasonably practicable after the relevant Early Termination Date. The day and time as of which those quotations are to be obtained will be selected in good faith by the party obliged to make a determination under Section 6(e), and, if each party is so obliged, after consultation with the other. If more than three quotations are provided, the Market Quotation will be the arithmetic mean of the quotations, without regard to the quotations having the highest and lowest values. If exactly three such quotations are provided, the Market Quotation will be the quotation remaining after disregarding the highest and lowest quotations. For this purpose, if more than one quotation has the same highest value or lowest value, then one of such quotations shall be disregarded. If fewer than three quotations are provided, it will be deemed that the Market Quotation in respect of such Terminated Transaction or group of Terminated Transactions cannot be determined. "Non-default Rate" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the Non-defaulting Party (as certified by it) if it were to fund the relevant amount. "Non-defaulting Party" has the meaning specified in Section 6(a). "Office" means a branch or office of a party, which may be such party's head or home office. "Potential Event of Default" means any event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default. "Reference Market-makers" means four leading dealers in the relevant market selected by the party determining a Market Quotation in good faith (a) from among dealers of the highest credit standing which satisfy all the criteria that such party applies generally at the time in deciding whether to offer or to make an extension of credit and (b) to the extent practicable, from among such dealers having an office in the same city. "Relevant Jurisdiction" means, with respect to a party, the jurisdictions (a) in which the party is incorporated, organised, managed and controlled or considered to have its seat, (b) where an Office through which the party is acting for purposes of this Agreement is located, (c) in which the party executes this Agreement and (d) in relation to any payment, from or through which such payment is made. "Scheduled Payment Date" means a date on which a payment or delivery is to be made under Section 2(a)(i) with respect to a Transaction. "Set-off" means set-off, offset, combination of accounts, right of retention or withholding or similar right or requirement to which the payer of an amount under Section 6 is entitled or subject (whether arising under this Agreement, another contract, applicable law or otherwise) that is exercised by, or imposed on, such payer. 19 20 "Settlement Amount" means, with respect to a party and any Early Termination Date, the sum of:- (a) the Termination Currency Equivalent of the Market Quotations (whether positive or negative) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation is determined; and (b) such party's Loss (whether positive or negative and without reference to any Unpaid Amounts) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation cannot be determined or would not (in the reasonable belief of the party making the determination) produce a commercially reasonable result. "Specified Entity" has the meaning specified in the Schedule. "Specified Indebtedness" means, subject to the Schedule, any obligation (whether present or future, contingent or otherwise, as principal or surety or otherwise) in respect of borrowed money. "Specified Transaction" means, subject to the Schedule, (a) any transaction (including an agreement with respect thereto) now existing or hereafter entered into between one party to this Agreement (or any Credit Support Provider of such party or any applicable Specified Entity of such party) and the other party to this Agreement (or any Credit Support Provider of such other party or any applicable Specified Entity of such other party) which is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions), (b) any combination of these transactions and (c) any other transaction identified as a Specified Transaction in this Agreement or the relevant confirmation. "Stamp Tax" means any stamp, registration, documentation or similar tax. "Tax" means any present or future tax, levy, import, duty, charge assessment or fee of any nature (including interest, penalties and additions thereto) that is imposed by any government or other taxing authority in respect of any payment under this Agreement other than a stamp, registration, documentation or similar tax. "Tax Event" has the meaning specified in Section 5(b). "Tax Event Upon Merger" has the meaning specified in Section 5(b). "Terminated Transactions" means with respect to any Early Termination Date (a) if resulting from a Termination Event, all Affected Transactions and (b) if resulting from an Event of Default, all Transactions (in either case) in effect immediately before the effectiveness of the notice designating that Early Termination Date (or, if "Automatic Early Termination" applies, immediately before that Early Termination Date). "Termination Currency" has the meaning specified in the Schedule. "Termination Currency Equivalent" means, in respect of any amount denominated in the Termination Currency, such Termination Currency amount and, in respect of any amount denominated in a currency other than the Termination Currency (the "Other Currency"), the amount in the Termination Currency determined by the party making the relevant determination as being required to purchase such amount of such Other Currency as at the relevant Early Termination Date, or, if the relevant Market Quotation or Loss (as the case may be), is determined as of a later date, that later date, with the Termination Currency at the rate equal to the spot exchange rate of the foreign exchange agent (selected as provided below) for the purchase of such Other Currency with the Termination Currency at or about 11:00 a.m. (In the city in which such foreign exchange agent is located) on such date as would be customary for the determination of such a rate for the purchase of such Other Currency for value on the relevant Early Termination Date or that later date. The foreign exchange agent will, if only one party is obligated to make a determination under Section 6(e), be selected in good faith by that party and otherwise will be agreed by the parties. "Termination Event" means an Illegality, a Tax Event or a Tax Event Upon Merger or, if specified to be applicable, a Credit Event Upon Merger or an Additional Termination Event. "Termination Rate" means a rate per annum equal to the arithmetic mean of the cost (without proof or evidence of any actual cost) to 20 21 each party (as certified by such party) if it were to fund or of funding such amounts. "Unpaid Amounts" owing to any party means, with respect to an Early Termination Date, the aggregate of (a) in respect of all Terminated Transactions, the amounts that became payable (or that would have become payable but for Section 2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early Termination Date and which remain unpaid as at such Early Termination Date and (b) in respect of each Terminated Transaction, for each obligation under Section 2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be settled by delivery to such party on or prior to such Early Termination Date and which has not been so settled as at such Early Termination Date, an amount equal to the fair market value of that which was (or would have been) required to be delivered as of the originally scheduled date for delivery, in each case together with (to the extent permitted under applicable law) interest, in the currency of such amounts, from (and including) the date such amounts or obligations were or would have been required to have been paid or performed to (but excluding) such Early Termination Date, at the Applicable Rate. Such amounts of interest will be calculated on the basis of daily compounding and the actual number of days elapsed. The fair market value of any obligation referred to in clause (b) above shall be reasonably determined by the party obliged to make the determination under Section 6(e) or, if each party is so obliged, it shall be the average of the Termination Currency Equivalents of the fair market values reasonably determined by both parties. IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with effect from the date specified on the first page of this document. ROYAL BANK OF CANADA (Name of Party) BY: /s/ Karen Haist ----------------------------- Name: Karen Haist Title: Manager, Documentation Date: February 16/96 EOG COMPANY OF CANADA (Name of Party) 21 22 BY: /s/ W. C. Wilson ------------------------------ Name: Walter C. Wilson Title: Senior VP and Chief Financial Officer and Treasurer Date: 22 23 SCHEDULE TO MASTER AGREEMENT (MULTICURRENCY-CROSS BORDER) dated as of January 16, 1996 ROYAL BANK OF CANADA ("Party A") and EOG COMPANY OF CANADA ("Party B") PART 1 TERMINATION PROVISIONS In this Master Agreement: (1) "Specified Entity" does not apply. (2) "Specified Transaction" will have the meaning specified in Section 14. (3) The "Cross Default" provisions of Section 5(a)(vi) will apply to Party A and to Party B. "Specified Indebtedness" shall mean all obligations (whether present or future, contingent or otherwise, as principal or surety or otherwise) in respect of borrowed money and evidenced by bonds, debentures, notes, guarantees, reimbursement agreements or other similar obligations, except that such term shall not include obligations in respect of deposits received in the ordinary course of Party A's banking business. "Threshold Amount" means, with respect to any party, an amount equal to USD $50,000,000. (4) The "Credit Event Upon Merger" provision of Section 5(b)(iv) will not apply to Party A or to Party B. (5) The "Automatic Early Termination" provision of Section 6(a) will not apply to Party A or to Party B. (6) Payments on Early Termination. For purposes of Section 6(e), Market Quotation and Second Method will apply. (7) "Termination Currency" means United States Dollars. 24 PART 2 TAX REPRESENTATIONS PAYOR REPRESENTATIONS. For the purpose of Section 3(e), each party makes the following representation: It is not required by any applicable law, as modified by the practice of any relevant governmental revenue authority of any Relevant Jurisdiction to make any deduction or withholding for, or on account of, any Tax from any payment (other than interest under Section 2(e), Section 6(d)(ii) or Section 6(e)) to be made by it to the other party under this Master Agreement. In making this representation, it may rely on: (i) the accuracy of any representation made by the other party pursuant to Section 3(f); (ii) the satisfaction of the agreement of the other party contained in Section 4(a)(i) or Section 4(a)(iii) and the accuracy and effectiveness of any document provided by the other party pursuant to Section 4(a)(i) or Section 4(a)(iii); and (iii) the satisfaction of the agreement of the other party contained in Section 4(d), provided that it shall not be a breach of this representation where reliance is placed on clause (ii) and the other party does not deliver a form or document under Section 4(a)(iii) by reason of material prejudice to its legal or commercial position; provided further, that for the purposes of Section 3(c) of this Master Agreement, Party A's Payer Representation shall not apply in respect of Canadian Tax where payments under the Transactions entered pursuant to this Master Agreement do not have matching or corresponding Scheduled Payment Dates or where Party A's Scheduled Payment Dates occur more frequently than Party B's Scheduled Payment Dates. PAYEE REPRESENTATIONS. For the purpose of Section 3(f) of this Master Agreement, each of Party A and Party B represent that it is not a non-resident of Canada. PART 3 DOCUMENTS TO BE DELIVERED For the purpose of Section 4(a): (1) Tax forms, documents or certificates to be delivered are: IRS Form 4224 or Form 1001, as applicable, and any form, certificate or document required or reasonably requested in writing by either Party A or Party B to allow the other party to make payments under this Master Agreement without any deduction or withholding for, or on account of, any Taxes or with such deduction or withholding at a reduced rate. Such forms, documents or certificates are to be furnished upon execution of this Master Agreement and thereafter as required by applicable law. Such forms, documents or certificates, if specified, shall be governed by the representation contained in Section 3(d) of this Master Agreement. 25 (2) Other documents to be delivered are: (a) Party A shall deliver upon the execution of this Master Agreement a certificate of its secretary, assistant secretary or other duly authorized officer certifying the incumbent officers of each who are authorized to sign this Master Agreement and such Confirmations and their specimen signatures. Such certificate shall be covered by the representation contained in Section 3(d) of this Master Agreement. Party B may conclusively rely upon such certificate until notified to the contrary by Party A. (b) Party B shall deliver upon the execution of this Master Agreement a certificate of its secretary, assistant secretary or other duly authorized officer certifying (i) resolutions of its board of directors or other proof of authorizations with respect to its authority to execute and deliver this Master Agreement and the Confirmations contemplated hereby and perform its respective obligations hereunder and thereunder, (ii) the incumbent officers of each who are authorized to sign this Master Agreement and such Confirmations and their specimen signatures, (iii) if requested, that attached thereto are true and complete copies of its charter documents. Such certificate shall be covered by the representation contained in Section 3(d) of this Master Agreement. Party A may conclusively rely upon such certificate until notified to the contrary by Party B. (c) Each of Party A and Party B shall deliver, promptly upon written request, such other documents as the other party may reasonably request in connection with each Transaction. Such documents, if specified, shall be governed by the representation contained in Section 3(d) of this Master Agreement. PART 4 MISCELLANEOUS (1) ADDRESS FOR NOTICES. For the purpose of Section 12(a): Address for notices or communications to Party A with respect to this Master Agreement and relating to a particular Transaction concluded with its Toronto office, shall be given to it at the following address: Address: Royal Bank of Canada 17th Floor, South Tower Royal Bank Plaza 200 Bay Street Toronto, Ontario CANADA M5J 2J5 Attention: Manager, Capital Market Products Operations 26 Telex No.: 06-217897 Answerback: ROYSWAP TOR Facsimile No.: (416) 974-7043 or 574-5635 Electronic Messaging System Details: Not Applicable Address for notices or communications to Party A relating to a particular Transaction concluded with its Tokyo Office, shall be given to it at the following address: Address: Royal Bank of Canada Treasury Department 12th Floor, Hibiya Kokusai Bldg. 2-3 Uchisaiwaicho, 2-chome Chlyoda-ku, Tokyo 100 JAPAN Attention: Manager, Capital Markets Telex: J26636 Answerback: ROYALTK Facsimile No.: (03) 3508-2507 Address for notices or communications to Party A relating to a particular Transaction concluded with its London office, shall be given to it at the following address: Address: Royal Bank of Canada 71/71A Queen Victoria Street London EC4V 4DE ENGLAND Attention: Derivative Product Operation Telex: 92 6933 Answerback: RBCSWP G Facsimile No.: 44-171-329-6156 Address for notices or communications to Party A relating to a particular Transaction concluded with its New York Office, shall be given to it at the following address: Address: Royal Bank of Canada New York Branch Financial Square New York, New York 10005-3531 U.S.A. 27 Attention: Investment Banking & Treasury- Swaps Telex: 420464 Answerback: RBOC Facsimile No.: 212-968-1314 Address for notices or communications to Party A relating to a particular Transaction concluded with its Singapore Office, shall be given to it at the following address: Address: Royal Bank of Canada 140 Cecil Street #01-00 PIL Building Singapore 0106 Republic of Singapore Attention: Head, Treasury Operations, Asia Telex: RS 29338 Answerback: ROYSPO Facsimile: 65-224-0185 Address for notices or communications (other than with respect to payments) to Party B: EOG Company of Canada c/o Enron Oil & Gas Company 1400 Smith Street Suite 4341 Houston, Texas 77002 Attn: Assistant Treasurer - Corporate Treasury Facsimile No: (713) 646-2375 (2) CALCULATION AGENT. The Calculation Agent is Party A, unless otherwise specified in a Confirmation relating to the relevant Transaction. (3) CREDIT SUPPORT DOCUMENT. Guaranty of Enron Oil & Gas Company dated of even date herewith in favor of Party A. (4) CREDIT SUPPORT PROVIDER. With respect to Party A, none; and with respect to Party B, Enron Oil & Gas Company. (5) GOVERNING LAW. THIS MASTER AGREEMENT (INCLUDING, BUT NOT LIMITED TO, THE VALIDITY AND ENFORCEABILITY HEREOF) WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, OTHER THAN THE CONFLICT OF LAWS RULES THEREOF. 28 (6) NETTING OF PAYMENTS. From the date hereof, Subparagraph (ii) of Section 2(c) will apply to each Transaction unless specified in the relevant Confirmation. (7) MULTIBRANCH PARTIES; OFFICES. (a) OFFICES. The provisions of Section 10(a) will apply to Party A and Party B; provided, however, that without in any way limiting the effect of the foregoing, each party agrees to deal first with the office of the other party specified in the Confirmation rather than such party's head or home office with respect to resolving any default that results solely from wire transfer difficulties or an error or omission of an administrative or operational nature. Notwithstanding the foregoing, a party (the "Owed Party") may seek payment from the head or home office of the other party (the "Owing Party") with respect to this Master Agreement in the event that an amount payable to the Owed Party by the Owing Party pursuant to this Master Agreement as a result of the designation of an Early Termination Date has not been said in full when due. (b) MULTI-BRANCH. For the purpose of Section 10(c) of this Master Agreement: Party A is a Multibranch Party and may act through its Toronto, New York, Tokyo, London and Singapore offices. Party B is not a Multi-branch Party. (8) PROCESS AGENT. There shall be no Process Agent for either Party A or Party B. PART 5 OTHER PROVISIONS (1) DEFINITIONS. This Master Agreement incorporates, and is subject to and governed by, unless otherwise specified in a Confirmation, the 1991 ISDA Definitions (the "1991 Definitions"), and the 1992 ISDA FX and Currency Option Definitions (the "FX Definitions"), in each case published by the International Swap and Derivatives Association, Inc. (formerly known as the International Swap Dealers Association, Inc.). In the event of any inconsistency between this Master Agreement, the 1991 Definitions or the FX Definitions, this Master Agreement will prevail. In the event of any inconsistency between the provisions of any Confirmation and this Master Agreement, the 1991 Definitions or the FX Definitions, such Confirmation will prevail for the purpose of the relevant Transaction. In the event of any inconsistency between the provisions of the 1991 Definitions and the FX Definitions, the FX Definitions will prevail. (2) CONFIRMATIONS; RECORDINGS. With respect to each Transaction, Party A shall on or promptly after the Trade Date send Party B a Confirmation, via facsimile transmission, which shall be promptly acknowledged by Party B. Subject to the terms of Section 9(e)(ii), the failure by Party B to acknowledge receipt or affirm a Confirmation shall not 29 constitute an acceptance or affirmation of the terms thereof. Each party (i) consents to the recording of the telephone conversations of trading and marketing personnel of the parties and their Affiliates in connection with this Master Agreement or any potential Transaction and (ii) agrees to obtain any necessary consent of, and give notice of such recording to, such personnel of it and its Affiliates. Such record of telephone conversations may be used as evidence of any Transaction in any proceeding. (3) CROSS DEFAULT. The words ", or becoming capable at such time of being declared," as they appear after the word "becoming" and before the word "due" in the seventh line of Section 5(a)(vi) are deleted. (4) BANKRUPTCY. For purposes of this Master Agreement, Section 5(a)(vii) is hereby modified by deleting the number "30" as it appears after the word "within" and before the word "days" in the tenth and eighteenth lines thereof and inserting the number "60" in place thereof. (5) ILLEGALITY. For purposes of Section 5(b)(i), the obligation of Party A to comply with any official directive issued or given by any government agency or authority having competent jurisdiction which has the result referred to in Section 5(b)(i) will be deemed to be an "Illegality". (6) TAX EVENT. Section 5(b)(ii) is amended by deleting the words ", or there is a substantial likelihood that it will" from the fourth line thereof. (7) SET-OFF. Section 6 of the Master Agreement is amended by adding the following new subsection 6(f): (f) Notwithstanding anything to the contrary contained in this Master Agreement, in the event of a designation of an Early Termination Date as a result of an Event of Default or a Termination Event, if the Defaulting Party or the Affected Party would be owed amounts under this Master Agreement in respect of the Terminated Transactions as a result of such designation, the Non-defaulting Party or the non-Affected Party shall be entitled, at its option, to set off any obligations owed (whether or not then due, in U.S. Dollars or any other currency) by the Defaulting Party or Affected Party to the Non-defaulting Party or non-Affected Party (including any of its offices or branches) under this Master Agreement or another Specified Transaction, against the amounts owed by the Non-defaulting Party or the non-Affected Party to the Defaulting Party or the Affected Party or any Credit Support Provider or any Specified Entity of such party under this Master Agreement or another Specified Transaction. The obligation of the Non-defaulting Party or the non-Affected Party hereunder in respect of such Terminated Transactions shall be deemed satisfied and discharged to the extent of any such setoff. Any obligation of the Non-defaulting Party or the non-Affected Party to make any payment to a Defaulting Party or the Affected Party hereunder shall in any event be conditioned upon and shall arise only upon the date of the payment (by setoff, by cash payment or otherwise) in full by the 30 Defaulting Party or the Affected Party or any Credit Support Provider or any Specified Entity of such party of all obligations then due and owing hereunder or under another Specified Transaction by the Defaulting Party or the Affected Party or any Credit Support Provider or any Specified Entity of such party to the Non-defaulting Party or the non-Affected Party (including any of its offices or branches). (8) BUSINESS PURPOSE REPRESENTATION. Party A represents that it has entered into this Master Agreement (including each Transaction now or hereafter entered into in connection herewith) in conjunction with its line of business, including financial intermediation, or the financing of its business and not for speculative purposes. Party B represents and warrants that it has entered into this Master Agreement (including each Transaction now or hereafter entered into in connection herewith) to hedge its actual or expected exposure to changes in currency exchange rates and/or interest rates or for other normal business purposes independent of this Master Agreement, and not for speculative purposes. Each party represents that it is an "eligible swap participant" for purposes of the exemption of swap agreements (17 C.F.R. Section 35.2), as in the case of Party A, a bank acting on its own behalf, and, in the case of Party B, a corporation that meets the requirements further set forth in 17 C.F.R. Section 35.1(2)(vi). (9) SUITABILITY REPRESENTATION. Each party represents that in entering into this Master Agreement and each Transaction: (i) it understands and acknowledges that the other party has been and will be acting only on an arm's length basis and not as its agent, fiduciary, broker or advisor in any respect, (ii) it is relying solely upon its own evaluation of this Master Agreement and any Transaction (including the present and future results, consequences, risks and benefits thereof, whether financial, accounting, tax, legal or otherwise) and upon advice from its own professional advisors, (iii) it understands this Master Agreement and the Transactions contemplated hereby and the risks associated therewith, has determined that those risks are appropriate for it, and is willing to assume those risks, and (iv) it has not relied and will not be relying upon any evaluation or advice (including any recommendation, opinion or representation) from the other party or its Affiliates or the representatives or advisors of the other party or its Affiliates. (10) ENTIRE AGREEMENT. THIS MASTER AGREEMENT AND EACH OF THE CONFIRMATIONS 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. (11) SUBMISSION TO JURISDICTION. The provisions of Section 13(b) are hereby deleted in their entirety and inserted in lieu thereof, the following: "(b) JURISDICTION. With respect to any suit, action or proceedings relating to this Master Agreement ("Proceedings"), neither party waives any objection which it may have at any time to the laying of venue of any Proceedings 31 brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum or waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party. Nothing in this Master Agreement precludes either party from bringing Proceedings in any jurisdiction nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction." (12) LIMITATION OF RATE. In no event shall the Default Rate, Non-default Rate or the Termination Rate be permitted to exceed the Highest Lawful Rate. For purposes hereof, "Highest Lawful Rate" shall mean, with respect to each party hereto, the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the subject indebtedness under the laws applicable to such party which are presently in effect or, to the extent allowed by law, which under such applicable laws may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow. (13) APPLICATION OF UNIFORM COMMERCIAL CODE. The parties agree that to the fullest extent permitted by applicable law, Section 2-609 of the New York Uniform Commercial Code and any equivalent rights existing at common law shall not apply to this Master Agreement or any Transaction. (14) EQUIVALENCY CLAUSE. For the purposes of the Interest Act (Canada) and disclosure thereunder, whenever any interest is made payable under this Master Agreement at any rate or percentage for or based on a period of three hundred sixty days (360), the yearly rate or percentage of interest to which such rate or percentage of interest is equivalent is the rate or percentage stipulated herein multiplied by the actual number of days in a period of one (1) year divided by three hundred sixty (360). The foregoing sentence is for disclosure purposes only and shall not otherwise affect the terms of this Master Agreement as set forth herein. (15) MATCHING PAYMENTS. The parties agree and confirm that Transactions entered into pursuant to this Master Agreement either shall have matching or corresponding Scheduled Payment Dates or shall have Party A's Scheduled Payment Dates occurring more frequently than Party B's Scheduled Payment Dates. If, despite the foregoing, a Transaction is entered into other than as above, the parties shall make (i) such amendments to this Master Agreement; (ii) include such provisions in the Confirmation for such Transaction; or (iii) enter into such other arrangements, as may reasonably be necessary to give effect to such Transaction pursuant to this Master Agreement. EX-10.67 15 ISDA MASTER AGMT BETWEEN ROYAL BANK & EOG 1 EXHIBIT 10.67 ISDA International Swap Dealers Association, Inc. MASTER AGREEMENT dated as ofJanuary 16, 1996 ROYAL BANK OF CANADA and ENRON OIL & GAS COMPANY have entered and/or anticipate entering into one or more transactions (each a "Transaction") that are or will be governed by this Master Agreement, which includes the schedule (the "Schedule"), and the documents and other confirming evidence (each a "Confirmation") exchanged between the parties confirming those Transactions. Accordingly, the parties agree as follows:- 1. INTERPRETATION (a) DEFINITIONS. The terms defined in Section 14 and in the Schedule will have the meanings therein specified for the purpose of this Master Agreement. (b) INCONSISTENCY. In the event of any inconsistency between the provisions of the Schedule and the other provisions of this Master Agreement, the Schedule will prevail. In the event of any inconsistency between the provisions of any Confirmation and this Master Agreement (including the Schedule), such Confirmation will prevail for the purpose of the relevant Transaction. (c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the fact that this Master Agreement and all Confirmations form a single agreement between the parties (collectively referred to as this "Agreement"), and the parties would not otherwise enter into any Transactions. 2. OBLIGATIONS (a) GENERAL CONDITIONS. (i) Each party will make each payment or delivery specified in each Confirmation to be made by it, subject to the other provisions of this Agreement. (ii) Payments under this Agreement will be made on the due date for value on that date in the place of the account specified in the relevant Confirmation or otherwise pursuant to this Agreement, in freely transferable funds and in the manner customary for payments in the required currency. Where settlement is by delivery (that is, other than by 1 2 payment), such delivery will be made for receipt on the due date in the manner customary for the relevant obligation unless otherwise specified in the relevant Confirmation or elsewhere in this Agreement. (iii) Each obligation of each party under Section 2(a)(i) is subject to (1) the condition precedent that no Event of Default or Potential Event of Default with respect to the other party has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant Transaction has occurred or been effectively designated and (3) each other applicable condition precedent specified in this Agreement. (b) CHANGE OF ACCOUNT. Either party may change its account for receiving a payment or delivery by giving notice to the other party at least five Local Business Days prior to the scheduled date for the payment or delivery to which such change applies unless such other party gives timely notice of a reasonable objection to such change. (c) NETTING. If on any date amounts would otherwise be payable:- (i) in the same currency; and (ii) in the respect of the same Transaction, by each party to the other, then, on such date, each party's obligation to make payment of any such amount will be automatically satisfied and discharged and, if the aggregate amount that would otherwise have been payable by one party exceeds the aggregate amount that would otherwise have been payable by the other party, replaced by an obligation upon the party by whom the larger aggregate amount would have been payable to pay to the other party the excess of the larger aggregate amount over the smaller aggregate amount. The parties may elect in respect of two or more Transactions that a net amount will be determined in respect of all amounts payable on the same date in the same currency in respect of such Transactions, regardless of whether such amounts are payable in respect of the same Transaction. The election may be made in the Schedule or a Confirmation by specifying that subparagraph (ii) above will not apply to the Transactions identified as being subject to the election, together with the starting date (in which case subparagraph (ii) above will not, or will cease to, apply to such Transactions from such date). This election may be made separately for different groups of Transactions and will apply separately to each pairing of Offices through which the parties make and receive payments or deliveries. (d) DEDUCTION OR WITHHOLDING FOR TAX. (i) GROSS UP. All payments under this Agreement will be made without deduction or 3 withholding for or on account of any Tax unless such deduction or withholding is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, then in effect. If a party is so required to deduct or withhold, then that party ("X") will:-- (1) promptly notify the other party ("Y") of such requirement; (2) pay to the relevant authorities the full amount required to be deducted or withheld (including the full amount required to be deducted or withheld from any additional amount paid by X to Y under this Section 2(d)) promptly upon the earlier of determining that such deduction or withholding is required or receiving notice that such amount has been assessed against Y; (3) promptly forward to Y an official receipt (or a certified copy), or other documentation reasonably acceptable to Y, evidencing such payment to such authorities; and (4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to the payment to which Y is otherwise entitled under this Agreement, such additional amount as is necessary to ensure that the net amount actually received by Y (free and clear of Indemnifiable Taxes, whether assessed against X or Y) will equal the full amount Y would have received had no such deduction or withholding been required. However, X will not be required to pay any additional amount to Y to the extent that it would not be required to be paid but for:-- (A) the failure by Y to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d); or (B) the failure of a representation made by Y pursuant to Section 3(f) to be accurate and true unless such failure would not have occurred but for (I) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (II) a Change in Tax Law. (ii) LIABILITY. If:-- (1) X is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, to make any deduction or withholding in respect of which X would not be required to pay an additional amount to Y under Section 2(d)(i)(4); (2) X does not so deduct or withhold; and (3) a liability resulting from such Tax is assessed directly against X, then, except to the extent Y has satisfied or then satisfies the liability resulting from such Tax, Y will promptly pay to X the amount of such liability (including any related liability for interest, but including any related liability for penalties only if Y has failed to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d). (e) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or 2 4 effective designation of an Early Termination Date in respect of the relevant Transaction, a party that defaults in the performance of any payment obligation will, to the extent permitted by law and subject to Section 6(c), be required to pay interest (before as well as after judgment) on the overdue amount to the other party on demand in the same currency as such overdue amount, for the period from (and including) the original due date for payment to (but excluding) the date of actual payment, at the Default Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. If, prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party defaults in the performance of any obligation required to be settled by delivery, it will compensate the other party on demand if and to the extent provided for in the relevant Confirmation or elsewhere in this Agreement. 3. REPRESENTATIONS Each party represents to the other party (which representations will be deemed to be repeated by each party on each date on which a Transaction is entered into and, in the case of the representations in Section 3(f), at all times until the termination of this Agreement) that:- (a) BASIC REPRESENTATIONS. (i) STATUS. It is duly organised and validly existing under the laws of the jurisdiction of its organisation or incorporation and, if relevant under such laws, in good standing; (ii) POWERS. It has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and any obligations it has under any Credit Support Document to which it is a party and has taken all necessary action to authorise such execution, delivery and performance; (iii) NO VIOLATION OR CONFLICT. Such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision of its constitutional documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting it or any of its assets; (iv) CONSENTS. All governmental and other consents that are required to have been obtained by it with respect to this Agreement or any Credit Support Document to which it is a party have been obtained and are in full force and effect and all conditions of any such consents have been complied with; and 3 5 (v) OBLIGATIONS BINDING. Its obligations under this Agreement and any Credit Support Document to which it is a party constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganisation, insolvency, moratorium or similar laws affecting creditors' rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)). (b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of Default or, to its knowledge, Termination Event with respect to it has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement or any Credit Support Document to which it is a party. (c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge, threatened against it or any of its Affiliates any action, suit or proceeding at law or in equity or before any court, tribunal, governmental body, agency or official or any arbitrator that is likely to affect the legality, validity or enforceability against it of this Agreement or any Credit Support Document to which it is a party or its ability to perform its obligations under this Agreement or such Credit Support Document. (d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is furnished in writing by or on behalf of it to the other party and is identified for the purpose of this Section 3 (d) in the Schedule is, as of the date of the information, true, accurate and complete in every material respect. (e) PAYER TAX REPRESENTATION. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(e) is accurate and true. (f) PAYEE TAX REPRESENTATIONS. Each representation specified in the Schedule as being made by it for the purposes of this Section 3(f) is accurate and true. 4. AGREEMENTS Each party agrees with the other that, so long as either party has or may have any obligation under this Agreement or under any Credit Support Document to which it is a party:- (a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party or, in certain cases under subparagraph (iii) below, to such government or taxing authority as the other party reasonably directs:-- (i) any forms, documents or certificates relating to taxation specified in the Schedule or any Confirmation; (ii) any other documents specified in the Schedule or any Confirmation; and (iii) upon reasonable demand by such other party, any form or document that may be required or reasonably requested in writing in order to allow such other party or its Credit Support Provider to make a payment under this Agreement or any applicable Credit Support Document without any deduction or withholding for or on account of any Tax or with such deduction or withholding at a reduced rate (so long as the completion, execution or submission of such form or document would not materially prejudice the legal or commercial position of the party in receipt of such demand), with any such form or document to be accurate and completed in a manner reasonably satisfactory to such other party and to be executed and to be delivered with any reasonably required certification, in each case by the date specified in the Schedule or such Confirmation or, if none is specified, as soon as reasonably practicable. (b) MAINTAIN AUTHORISATIONS. It will use all reasonable efforts to maintain in full force and effect all consents of any governmental or other authority that are required to be obtained by it with respect to this Agreement or any Credit Support Document to which it is a party and will use all reasonable efforts to obtain any that may become necessary in the future. (c) COMPLY WITH LAWS. It will comply in all material respects with 4 6 all applicable laws and orders to which it may be subject if failure so to comply would materially impair its ability to perform its obligations under this Agreement or any Credit Support Document to which it is a party. (d) TAX AGREEMENT. It will give notice of any failure of a representation made by it under Section 3(f) to be accurate and true promptly upon learning of such failure. (e) PAYMENT OF STAMP TAX. Subject to Section 11, it will pay any Stamp Tax levied or imposed upon it or in respect of its execution or performance of this Agreement by a jurisdiction in which it is incorporated, organized, managed and controlled, or considered to have its seat, or in which a branch or office through which it is acting for the purpose of this Agreement is located ("Stamp Tax Jurisdiction") and will indemnify the other party against any Stamp Tax levied or imposed upon the other party or in respect of the other party's execution or performance of this Agreement by any such Stamp Tax Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the other party. 5. EVENTS OF DEFAULT AND TERMINATION EVENTS (a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any of the following events constitutes an event of default (an "Event of Default") with respect to such party:- (i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when due, any payment under this Agreement or delivery under Section 2(a)(i) or 2(e) required to be made by it if such failure is not remedied on or before the third Local Business Day after notice of such failure is given to the party; (ii) BREACH OF AGREEMENT. Failure by the party to comply with or perform any agreement or obligation (other than an obligation to make any payment under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give notice of a Termination Event or any agreement or obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party in accordance with this Agreement if such failure is not remedied on or before the thirtieth day after notice of such failure is given to the party; (iii) CREDIT SUPPORT DEFAULT. (1) Failure by the party or any Credit Support Provider of such party to comply with or perform any agreement or obligation to be complied with or performed by it in accordance with any Credit Support Document if such failure is continuing after any applicable grace period has elapsed; (2) the expiration or termination of such Credit Support Document or the failing or ceasing of such Credit Support Document to be in full force and effect for the purpose of this Agreement (in either case other than in accordance with its terms) prior to the satisfaction of all obligations of such party under each Transaction to which such Credit Support Document relates without the written consent of the other party; or (3) the party or such Credit Support Provider disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, such Credit Support Document; 5 7 (iv) MISREPRESENTATION. A representation (other than a representation under Section 3(e) or (f) made or repeated or deemed to have been made or repeated by the party or any Credit Support Provider of such party in this Agreement or any Credit Support Document proves to have been incorrect or misleading in any material respect when made or repeated or deemed to have been made or repeated; (v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party (1) defaults under a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, there occurs a liquidation of, an acceleration of obligations under, or an early termination of, that Specified Transaction, (2) defaults, after giving effect to any applicable notice requirement or grace period, in making any payment or delivery due on the last payment, delivery or exchange date of, or any payment on early termination of, a Specified Transaction (or such default continues for at least three Local Business Days if there is no applicable notice requirement or grace period) or (3) disaffirms, disclaims, repudiates or rejects, in whole or in part, a Specified Transaction (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf); (vi) CROSS DEFAULT. If "Cross Default" is specified in the Schedule as applying to the party, the occurrence or existence of (1) a default, event of default or other similar condition or event (however described) in respect of such party, any Credit Support Provider of such party or any applicable Specified Entity of such party under one or more agreements or instruments relating to Specified Indebtedness of any of them (individually or collectively) in an aggregate amount of not less than this applicable Threshold Amount (as specified in the Schedule) which has resulted in such Specified Indebtedness becoming, or becoming capable at such time of being declared, due and payable under such agreements or instruments, before it would otherwise have been due and payable or (2) a default by such party, such Credit Support Provider or such Specified Entity (individually or collectively) in making one or more payments on the due date thereof in an aggregate amount of not less than the applicable Threshold Amount under such agreements or instruments (after giving effect to any applicable notice requirement or grace period); (vii) BANKRUPTCY. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party:- (1) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (2) becomes insolvent or is unable to pay its debts or fails or admits in writing its 6 8 inability generally to pay its debts as they become due; (3) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (4) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (A) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (B) is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof; (5) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (6) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets; (7) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter; (8) causes or is subject to any event with respect to it which, under the applicable laws or any jurisdiction, has an analogous effect to any of the events specified in clauses (1) to (7) (inclusive); or (9) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts; or (viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support Provider of such party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and, at the time of such consolidation, amalgamation, merger or transfer:- (1) the resulting, surviving or transferee entity fails to assume all the obligations of such party or such Credit Support Provider under this Agreement or any Credit Support Document to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other party to this Agreement; or (2) the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the 7 9 performance by such resulting, surviving or transferee entity of its obligations under this Agreement. (b) TERMINATION EVENTS. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any event specified below constitutes an Illegality if the event is specified in (i) below, a Tax Event, if the event is specified in (ii) below or a Tax Event Upon Merger if the event is specified in (iii) below, and, if specified to be applicable, a Credit Event Upon Merger if the event is specified pursuant to (iv) below or an Additional Termination Event if the event is specified pursuant to (v) below:- (i) ILLEGALITY. Due to the adoption of, or any change in, any applicable law after the date on which a Transaction is entered into, or due to the promulgation of, or any change in, the interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable law after such date, it becomes unlawful (other than as a result of a breach by the party of Section 4(b)) for such party (which will be the Affected Party):- (1) to perform any absolute or contingent obligation to make a payment or delivery or to receive a payment or delivery in respect of such Transaction or to comply with any other material provision of this Agreement relating to such Transaction; or (2) to perform, or for any Credit Support Provider of such party to perform, any contingent or other obligation which the party (or such Credit Support Provider) has under any Credit Support Document relating to such Transaction; (ii) TAX EVENT. Due to (x) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (y) a Change in Tax Law, the party (which will be the Affected Party) will, or there is a substantial likelihood that it will, on the next succeeding Scheduled Payment Date (1) be required to pay to the other party an additional amount in respect of a Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount is required to be deducted or withhold for or on account of a Tax (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) and no additional amount is required to be paid in respect of such Tax under Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A) or (B)); (iii) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the next succeeding Scheduled Payment Date will either (1) be required to pay an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has been deducted or withheld for or on account of any Indemnifiable Tax in respect of which the other party is not required to pay an additional amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a party consolidating or amalgamating with, or merging with or into, or transferring all or substantially all its assets to, another entity (which will be the Affected Party) where such action does not constitute an event described in Section 5(a)(viii); (iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is specified in the Schedule as applying to the party, such party ("X"), any Credit Support Provider of X or any applicable Specified Entity of X consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and such action does not constitute an event described in Section 5(a)(viii) but the creditworthiness of the resulting, surviving or transferee entity is materially weaker than that of X, such Credit Support Provider or such Specified Entity, as the case may be, immediately prior to such action (and, in such event, X or its successor or transferee, as appropriate, will be the Affected Party); or (v) ADDITIONAL TERMINATION EVENT. If any "Additional Termination Event" is specified in the Schedule or any Confirmation as applying, the occurrence of such event (and, in such event, the Affected Party or Affected Parties shall be as specified for such Additional Termination Event in the 8 10 Schedule or such Confirmation). (c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which would otherwise constitute or give rise to an Event of Default also constitutes an Illegality, it will be treated as an Illegality and will not constitute an Event of Default. 6. EARLY TERMINATION (a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of Default with respect to a party (the "Defaulting Party") has occurred and is then continuing, the other party (the "Non-defaulting Party") may, by not more than 20 days notice to the Defaulting Party specifying the relevant Event of Default, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all outstanding Transactions. If, however, "Automatic Early Termination" is specified in the Schedule as applying to a party, then an Early Termination Date in respect of all outstanding Transactions will occur immediately upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the extent analogous thereto, (8), and as of the time immediately preceding the institution of the relevant proceeding or the presentation of the relevant petition upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8). (b) RIGHTS TO TERMINATE FOLLOWING TERMINATION EVENT. (i) NOTICE. If a Termination Event occurs, an Affected Party will, promptly upon becoming aware of it, notify the other party, specifying the nature of that Termination Event and each Affected Transaction and will also give such other information about that Termination Event as the other party may reasonably require. (ii) TRANSFER TO AVOID TERMINATION EVENT. If either an Illegality under Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the Affected Party, the Affected Party will, as a condition to its right to designate an Early Termination Date under Section 6(b)(iv), use all reasonable efforts (which will not require such party to incur a loss, excluding immaterial, incidental expenses) to transfer within 20 days after it gives notice under Section 6(b)(i) all its rights and obligations under this Agreement in respect of the Affected Transactions to another of its Offices or Affiliates so that such Termination Event ceases to exist. If the Affected Party is not able to make such a transfer it will give notice to the other party to that effect within such 20 day period, whereupon the other party may effect such a transfer within 30 days after the notice is given under Section 6(b)(i). Any such transfer by a party under this Section 6(b)(ii) will be subject to and conditional upon the prior written consent of the other party, which consent will not be withheld if such other party's policies in effect at such time would permit it to enter into transactions with the transferee on the terms proposed. (iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)(1) occurs and there are two Affected Parties, each party will use all reasonable efforts to reach agreement within 30 days after notice thereof is given under Section 6(b)(i) on action to avoid that Termination Event. (iv) RIGHT TO TERMINATE. If:- (1) a transfer under Section 6(b)(ii) or an agreement under Section 6(b)(iii), as the case may be, has not been effected with respect to all Affected Transactions within 30 days after an Affected Party gives notice under Section 6(b)(i); or (2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon Merger or an Additional Termination Event occurs, or a Tax Event Upon Merger occurs and the Burdened Party is not the Affected Party, 9 11 either party in the case of an Illegality, the Burdened Party in the case of a Tax Event Upon Merger, any Affected Party in the case of a Tax Event or an Additional Termination Event if there is more than one Affected Party, or the party which is not the Affected Party in the case of a Credit Event Upon Merger or an Additional Termination Event if there is only one Affected Party may, by not more than 20 days notice to the other party and provided that the relevant Termination Event is then continuing, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all Affected Transactions. (c) EFFECT OF DESIGNATION. (i) If notice designating an Early Termination Date is given under Section 6(a) or (b), the Early Termination Date will occur on the date so designated, whether or not the relevant Event of Default or Termination Event is then continuing. (ii) Upon the occurrence of effective designation of an Early Termination Date, no further payments or deliveries under Section 2(a)(i) or 2(e) in respect of the Terminated Transactions will be required to be made, but without prejudice to the other provisions of this Agreement. The amount, if any, payable in respect of an Early Termination Date shall be determined pursuant to Section 6(e). (d) CALCULATIONS. (i) STATEMENT. On or as soon as reasonably practicable following the occurrence of an Early Termination Date, each party will make the calculations on its part, if any, contemplated by Section 6(e) and will provide to the other party a statement (1) showing, in reasonable detail, such calculations (including all relevant quotations and specifying any amount payable under Section 6(e)) and (2) giving details of the relevant account to which any amount payable to it is to be paid. In the absence of written confirmation from the source of a quotation obtained in determining a Market Quotation, the records of the party obtaining such quotation will be conclusive evidence of the existence and accuracy of such quotation. (ii) PAYMENT DATE. An amount calculated as being due in respect of any Early Termination Date under Section 6(e) will be payable on the day that notice of the amount payable is effective (in the case of an Early Termination Date which is designated or occurs as a result of an Event of Default) and on the day which is two Local Business Days after the day on which notice of the amount payable is effective (in the case of an Early Termination Date which is designated as a result of a Termination Event). Such amount will be paid together with (to the extent permitted under applicable law) interest 10 12 thereon (before as well as after judgment) in the Termination Currency, from (and including) the relevant Early Termination Date to (but excluding) the date such amount is paid, at the Applicable Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. (e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the following provisions shall apply based on the parties' election in the Schedule of a payment measure, either "Market Quotation" or "Loss", and a payment method, either the "First Method" or the "Second Method". If the parties fail to designate a payment measure or payment method in the Schedule, it will be deemed that "Market Quotation" or the "Second Method", as the case may be, shall apply. The amount, if any, payable in respect of an Early Termination Date and determined pursuant to this Section will be subject to any Set-off. (i) EVENTS OF DEFAULT. If the Early Termination Date results from an Event of Default:- (1) FIRST METHOD AND MARKET QUOTATION. If the First Method and Market Quotation apply, the Defaulting Party will pay to the Non-defaulting Party the excess, if a positive number, of (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party over (B) theTermination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party. (2) FIRST METHOD AND LOSS. If the First Method and Loss apply, the Defaulting Party will pay to the Non-defaulting Party, if a positive number, the Non-defaulting Party's Loss in respect of this Agreement. (3) SECOND METHOD AND MARKET QUOTATION. If the Second Method and Market Quotation apply, an amount will be payable equal to (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect to the Terminated Transactions and theTermination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party less (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party. (4) SECOND METHOD AND LOSS. If the Second Method and Loss apply, an amount will be payable equal to the Non-defaulting Party's Loss in respect of this Agreement. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the 11 13 absolute value of that amount to the Defaulting Party. (ii) TERMINATION EVENTS. If the Early Termination Date results from a Termination Event:- (1) ONE AFFECTED PARTY. If there is one Affected Party, the amount payable will be determined in accordance with Section 6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4), if Loss applies, except that, in either case, references to the Defaulting Party and to the Non-defaulting Party will be deemed to be references to the Affected Party and the party which is not the Affected Party, respectively, and, if Loss applies and fewer than all the Transactions are being terminated, Loss shall be calculated in respect of all Terminated Transactions. (2) TWO AFFECTED PARTIES. If there are two Affected Parties:- (A) if Market Quotation applies, each party will determine a Settlement Amount in respect of the Terminated Transactions, and an amount will be payable equal to (I) the sum of (a) one-half of the difference between the Settlement Amount of the party with the higher Settlement Amount ("X") and the Settlement Amount of the party with the lower Settlement Amount ("Y") and (b) the Termination Currency Equivalent of the Unpaid Amounts owing to X less (II) the Termination Currency Equivalent of the Unpaid Amounts owing to Y; and (B) if Loss applies, each party will determine its Loss in respect of this Agreement (or, if fewer than all the Transactions are being terminated, in respect of all Terminated Transactions) and an amount will be payable equal to one-half of the difference between the Loss of the party with the higher Loss ("X") and the Loss of the party with the lower Loss ("Y"). If the amount payable is a positive number, Y will pay it to X; if it is a negative number, X will pay the absolute value of that amount to Y. (iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early Termination Date occurs because "Automatic Early Termination" applies in respect of a party, the amount determined under this Section 6(e) will be subject to such adjustments as are appropriate and permitted by law to reflect any payments or deliveries made by one party to the other under this Agreement (and retained by such other party) during the period from the relevant Early Termination Date to the 12 14 date for payment determined under Section 6(d)(ii). (iv) PRE-ESTIMATE. The parties agree that if Market Quotation applies an amount recoverable under this Section 6(e) is a reasonable pre-estimate of loss and not a penalty. Such amount is payable for the loss of bargain and the loss of protection against future risks and except as otherwise provided in this Agreement neither party will be entitled to recover any additional damages as a consequence of such losses. 7. TRANSFER Subject to Section 6(b)(ii), neither this Agreement nor any interest or obligation in or under this Agreement may be transferred (whether by way of security or otherwise) by either party without the prior written consent of the other party, except that:- (a) a party may make such a transfer of this Agreement pursuant to a consolidation or amalgamation with, or merger with or into, or transfer of all or substantially all its assets to, another entity (but without prejudice to any other right or remedy under this Agreement); and (b) a party may make such a transfer of all or any part of its interest in any amount payable to it from a Defaulting Party under Section 6(e). Any purported transfer that is not in compliance with this Section will be void. 8. CONTRACTUAL CURRENCY (a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement will be made in the relevant currency specified in this Agreement for that payment (the "Contractual Currency"). To the extent permitted by applicable law, any obligation to make payments under this Agreement in the Contractual Currency will not be discharged or satisfied by any tender in any currency other than the Contractual Currency, except to the extent such tender results in the actual receipt by the party to which payment is owed, acting a reasonable manner and in good faith in converting the currency so tendered into the Contractual Currency, of the full amount in the Contractual Currency of all amounts payable in respect of this Agreement. If for any reason the amount in the Contractual Currency so received falls short of the amount in the Contractual Currency payable in respect of this Agreement, the party required to make the payment will, to the extent permitted by applicable law, immediately pay such additional amount in the Contractual Currency as may be necessary to compensate for the shortfall. If for any reason the amount in the Contractual Currency so received exceeds the amount in the Contractual Currency payable in respect of this Agreement, the party receiving the payment will refund promptly the amount of such excess. (b) JUDGMENTS. To the extent permitted by applicable law, if any judgment or order expressed in a currency other than the contractual Currency is rendered (i) for the payment of any amount owing in respect of this Agreement, (ii) for the payment of any amount relating to any early termination in respect of this Agreement or (iii) in respect of a judgment or order of another court for the payment of any amount described in (i) or (ii) above, the party seeking recovery, after recovery in full of the aggregate amount to which such party is entitled pursuant to the judgment or order, will be entitled to receive immediately from the other party the amount of any shortfall of the Contractual Currency received by such party as consequence of sums paid in such other currency and will refund promptly to the other party any excess of the Contractual Currency received by such party as a consequence of sums paid in such other currency if such shortfall or such excess arises or results from any variation between the rate of exchange at which the Contractual Currency is converted into the currency of the judgment or order for the purposes of such judgment or order and the rate of exchange at which such party is able, acting in a reasonable manner and in good faith in converting the currency received into the Contractual Currency, to purchase the Contractual Currency with the amount of the currency of the judgment or other actually received by such party. The term "rate of exchange" includes, without limitation, any premiums and costs of exchange payable in connection with the purchase of or conversion into the Contractual Currency. (c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these indemnities constitute separate and independent obligations from the other obligations in this Agreement, will be enforceable as separate and independent causes of action, will apply notwithstanding any indulgence granted by the party to which any payment is owed and will not be affected by judgment being obtained or claim or proof being made for any other sums payable in respect of this Agreement. (d) EVIDENCE OF LOSS. For the purpose of this Section 8, it will be sufficient for a party to demonstrate that it would have suffered a loss had an actual exchange or purchase been made. 9. MISCELLANEOUS (a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communication and prior writings with respect thereto. (b) AMENDMENTS. No amendment, modification or waiver in respect of this Agreement will be effective unless in writing (including a writing evidenced by a facsimile transmission) and executed by each of the parties or confirmed by an exchange of telexes or electronic messages on an electronic messaging system. (c) SURVIVAL OF OBLIGATIONS. Without prejudice to Section 2(a)(iii) and 6(c)(ii), the obligations of the parties under this Agreement will survive the termination of any Transaction. (d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights, powers remedies and privileges provided in this Agreement are cumulative and not exclusive of any rights, powers, remedies and privileges provided by law. 13 15 (e) COUNTERPARTS AND CONFIRMATIONS. (i) This Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts (including by facsimile transmission), each of which will be deemed an original. (ii) The parties intend that they are legally bound by the terms of each Transaction from the moment they agree to those terms (whether orally or otherwise). A Confirmation shall be entered into as soon as practicable and may be executed and delivered in counterparts (including by facsimile transmission) or created by an exchange of telexes or by an exchange of electronic messages on an electronic messaging system, which in each case will be sufficient for all purposes to evidence a binding supplement to this Agreement. The parties will specify therein or through another effective means that any such counterpart, telex or electronic message constitutes a Confirmation. (f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power or privilege in respect of this Agreement will not be presumed to operate as a waiver, and a single or partial exercise of any right, power or privilege will not be presumed to preclude any subsequent or further exercise, of that right, power or privilege or the exercise of any other right, power or privilege. (g) HEADINGS. The headings used in this Agreement are for convenience of reference only and are not to affect the construction of or to be taken into consideration in interpreting this Agreement. 10. OFFICES; MULTIBRANCH PARTIES (a) If Section 10(a) is specified in the Schedule as applying, each party that enters into a Transaction through an Office other than its head or home office represents to the other party that, notwithstanding the place of booking office or jurisdiction of incorporation or organisation of such party, the obligations of such party are the same as if it had entered into the Transaction through its head or home office. This representation will be deemed to be repeated by such party on each date on which a Transaction is entered into. (b) Neither party may change the Office through which is makes and receives payments or deliveries for the purpose of a Transaction without the prior written consent of the other party. (c) If a party is specified as a Multibranch Party in the Schedule, such Multibranch Party may make and receive payments or deliveries under any Transaction through any Office listed in the Schedule, and the Office through which it makes and receives payments or deliveries with respect to a Transaction will be specified in the relevant Confirmation. 11. EXPENSES A Defaulting Party will, on demand, indemnify and hold harmless the other party for and against all reasonable out-of-pocket expenses, including legal fees and Stamp Tax, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement or any Credit Support Document to which the Defaulting Party is a party or by reason of the early termination of any Transaction, including, but not limited to, costs of collection. 12. NOTICES (a) EFFECTIVENESS. Any notice or other communication in respect of this Agreement may be given in any manner set forth below (except that a notice or other communication under Section 5 or 6 may not be given by facsimile transmission or electronic messaging system) to the address or number or in accordance with the electronic messaging system details provided (see the Schedule) and will be deemed effective as indicated:- 14 16 (i) if in writing and delivered in person or by courier, on the date it is delivered; (ii) if sent by telex, on the date the recipient's answerback is received; (iii) if sent by facsimile transmission, on the date that transmission is received by a responsible employee of the recipient in legible form (it being agreed that the burden of proving receipt will be on the sender and will not be met by a transmission report generated by the sender's facsimile machine); (iv) if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt requested), on the date that mail is delivered or its delivery is attempted; or (v) if sent by electronic messaging system, on the date that electronic message is received, unless the date of delivery (or attempted delivery) or that receipt, as applicable, is not a Local Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Local Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Local Business Day. (b) CHANGE OF ADDRESSES. Either party may by notice to the other change the address, telex or facsimile number or electronic messaging system details at which notices or other communications are to be given to it. 13. GOVERNING LAW AND JURISDICTION (a) GOVERNING LAW. This Agreement will be governed by and construed in accordance with the law specified in the Schedule. (b) JURISDICTION. With respect to any suit, action or proceedings relating to this Agreement ("Proceedings"), each party irrevocably:- (i) submits to the jurisdiction of the English courts, if this Agreement is expressed to be governed by English law, or to the non-exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City, if this Agreement is expressed to be governed by the laws of the State of New York; and (ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an 15 17 inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party. Nothing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction (outside, if this Agreement is expressed to be governed by English law, the Contracting States, as defined in Section 1(3) of the Civil Jurisdiction and Judgments Act 1982 or any modification, extension or re-enactment thereof for the time being in force) nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction. (c) SERVICE OF PROCESS. Each party irrevocably appoints the Process Agent (if any) specified opposite its name in the Schedule to receive, for it and on its behalf, service of process in any Proceedings. If for any reason any party's Process Agent is unable to act as such, such party will promptly notify the other party and within 30 days appoint a substitute process agent acceptable to the other party. The parties irrevocably consent to service of process given in the manner provided for notices in Section 12. Nothing in this Agreement will affect the right of either party to serve process in any other manner permitted by law. (d) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest extent permitted by applicable law, with respect to itself and its revenues and assets (irrespective of their use or intended use), all immunity on the grounds of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of injunction, order for specific performance or for recovery of property, (iv) attachment of its assets (whether before or after judgment) and (v) execution or enforcement of any judgment to which it or its revenues or assets might otherwise be entitled in any Proceedings in the courts of any jurisdiction and irrevocably agrees, to the extent permitted by applicable law, that it will not claim any such immunity in any Proceedings. 14. DEFINITIONS As used in this Agreement:- "Additional Termination Event" has the meaning specified in Section 5(b). "Affected Party" has the meaning specified in Section 5(b). "Affected Transactions" means (a) with respect to any Termination Event consisting of an Illegality,Tax Event or Tax Event Upon Merger, all Transactions affected by the occurrence of such Termination Event and (b) with respect to any other Termination Event, all Transactions. "Affiliate" means, subject to the Schedule, in relation to any person, any entity controlled, directly or indirectly, by the person, any entity that controls, directly or indirectly, the person or any entity directly or indirectly under common control with the person. For this purpose, "control" of any entity or person means ownership of a majority of the voting power of the entity or person. "Applicable Rate" means:- (a) in respect of obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate; 16 18 (b) in respect of an obligation to pay an amount under Section 6(e) of either party from and after the date (determined in accordance with Section 6(d)(ii)) on which that amount is payable, the Default Rate; (c) in respect of all other obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default Rate; and (d) in all other cases, the Termination Rate. "Burdened Party" has the meaning specified in Section 5(b). "Change in Tax Law" means the enactment, promulgation, execution or ratification of, or any change in or amendment to, any law (or in the application or official interpretation of any law) that occurs on or after the date on which the relevant Transaction is entered into. "consent" includes a consent, approval, action, authorisation, exemption, notice, filing, registration or exchange control consent. "Credit Event Upon Merger" has the meaning specified in Section 5(b). "Credit Support Document" means any agreement or instrument that is specified as such in this Agreement. "Credit Support Provider" has the meaning specified in the Schedule. "Default Rate" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the relevant payee (as certified by it) if it were to fund or of funding the relevant amount plus 1% per annum. "Defaulting Party" has the meaning specified in Section 6(a). "Early Termination Date" means the date determined in accordance with Section 6(a) or 6(b)(iv). "Event of Default" has the meaning specified in Section 5(a) and, if applicable, in the Schedule. "Illegality" has the meaning specified in Section 5(b). "Indemnifiable Tax" means any Tax other than a Tax that would not be imposed in respect of a payment under this Agreement but for a present or former connection between the jurisdiction of the government or taxation authority imposing such Tax and the recipient of such payment or a person related to such recipient (including, without limitation, a connection arising from such recipient or related person being or having been a citizen or resident of such jurisdiction, or being or having been organised, present or engaged in a trade or business in such jurisdiction, or having or having had a permanent establishment or fixed place of business in such jurisdiction, but excluding a connection arising solely from such recipient or related person having executed, delivered, performed its obligations or received a payment under, or enforced, this Agreement or a Credit Support Document). "law" includes any treaty, law, rule or regulation (as modified, in the case of tax matters, by the practice of any relevant governmental revenue authority) and "lawful" and "unlawful" will be construed accordingly. "Local Business Day" means, subject to the Schedule, a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) (a) in relation to any obligation under Section 2(a)(i), in the place(s) specified in the relevant Confirmation or, if not so specified, as otherwise agreed by the parties in writing or determined pursuant to provisions contained, or incorporated by reference, in this Agreement, (b) in relation to any other payment, in the place where the relevant account is located, and, if different, in the principal financial centre, if any, of the currency of such payment, (c) in relation to any notice or other communication, including notice contemplated under Section 17 19 5(a)(i), in the city specified in the address for notice provided by the recipient and, in the case of a notice contemplated by Section 2(b), in the place where the relevant new account is to be located and (d) in relation to Section 5(a)(v)(2), in the relevant locations for performance with respect to such Specified Transaction. "Loss" means, with respect to this Agreement or one or more Terminated Transactions, as the case may be, and a party, the Termination Currency Equivalent of an amount that party reasonably determines in good faith to be its total losses and costs (or gain, in which case expressed as a negative number) in connection with this Agreement or that Terminated Transaction or group of Terminated Transactions, as the case may be, including any loss of bargain, cost of funding or, at the election of such party but without duplication, loss or cost incurred as a result of its terminating, liquidating, obtaining or reestablishing any hedge or related trading position (or any gain resulting from any of them). Loss includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each applicable condition precedent) on or before the relevant Early Termination Date and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and out-of-pocket expenses referred to under Section 11. A party will determine its Loss as of the relevant Early Termination Date, or, if that is not reasonably practicable, as of the earliest date thereafter as it reasonably practicable. A party may (but need not) determine its Loss by reference to quotations of relevant rates or prices from one or more leading dealers in the relevant markets. "Market Quotation" means, with respect to one or more Terminated Transactions and a party making the determination, an amount determined on the basis of quotations from Reference Market-makers. Each quotation will be for an amount, if any, that would be paid to such party (expressed as a negative number) or by such party (expressed as a positive number) in consideration of an agreement between such party (taking into account any existing Credit Support Document with respect to the obligations of such party) and the quoting Reference Market-maker to enter into a transaction (the "Replacement Transaction") that would have the effect of preserving for such party the economic equivalent of any payment or delivery (whether the underlying obligation was absolute or contingent and assuming the satisfaction of each applicable condition precedent) by the parties under Section 2(a)(i) in respect of such Terminated Transaction or group of Terminated Transactions that would, but for the occurrence of the relevant Early Termination Date, have been required after that date. For this purpose, Unpaid Amounts in respect of the Terminated Transaction or group of Terminated Transactions are to be excluded but, without limitation, any payment or delivery that would, but for the relevant Early Termination Date, have been required (assuming satisfaction of each 18 20 applicable condition precedent) after that Early Termination Date is to be included. The Replacement Transaction would be subject to such documentation as such party and the Reference Market-maker may, in good faith, agree. The party making the determination (or its agent) will request each Reference Market-maker to provide its quotation to the extent reasonably practicable as of the same day and time (without regard to different time zones) on or as soon as reasonably practicable after the relevant Early Termination Date. The day and time as of which those quotations are to be obtained will be selected in good faith by the party obliged to make a determination under Section 6(e), and, if each party is so obliged, after consultation with the other. If more than three quotations are provided, the Market Quotation will be the arithmetic mean of the quotations, without regard to the quotations having the highest and lowest values. If exactly three such quotations are provided, the Market Quotation will be the quotation remaining after disregarding the highest and lowest quotations. For this purpose, if more than one quotation has the same highest value or lowest value, then one of such quotations shall be disregarded. If fewer than three quotations are provided, it will be deemed that the Market Quotation in respect of such Terminated Transaction or group of Terminated Transactions cannot be determined. "Non-default Rate" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the Non-defaulting Party (as certified by it) if it were to fund the relevant amount. "Non-defaulting Party" has the meaning specified in Section 6(a). "Office" means a branch or office of a party, which may be such party's head or home office. "Potential Event of Default" means any event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default. "Reference Market-makers" means four leading dealers in the relevant market selected by the party determining a Market Quotation in good faith (a) from among dealers of the highest credit standing which satisfy all the criteria that such party applies generally at the time in deciding whether to offer or to make an extension of credit and (b) to the extent practicable, from among such dealers having an office in the same city. "Relevant Jurisdiction" means, with respect to a party, the jurisdictions (a) in which the party is incorporated, organised, managed and controlled or considered to have its seat, (b) where an Office through which the party is acting for purposes of this Agreement is located, (c) in which the party executes this Agreement and (d) in relation to any payment, from or through which such payment is made. "Scheduled Payment Date" means a date on which a payment or delivery is to be made under Section 2(a)(i) with respect to a Transaction. "Set-off" means set-off, offset, combination of accounts, right of retention or withholding or similar right or requirement to which the payer of an amount under Section 6 is entitled or subject (whether arising under this Agreement, another contract, applicable law or otherwise) that is exercised by, or imposed on, such payer. 19 21 "Settlement Amount" means, with respect to a party and any Early Termination Date, the sum of:- (a) the Termination Currency Equivalent of the Market Quotations (whether positive or negative) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation is determined; and (b) such party's Loss (whether positive or negative and without reference to any Unpaid Amounts) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation cannot be determined or would not (in the reasonable belief of the party making the determination) produce a commercially reasonable result. "Specified Entity" has the meaning specified in the Schedule. "Specified Indebtedness" means, subject to the Schedule, any obligation (whether present or future, contingent or otherwise, as principal or surety or otherwise) in respect of borrowed money. "Specified Transaction" means, subject to the Schedule, (a) any transaction (including an agreement with respect thereto) now existing or hereafter entered into between one party to this Agreement (or any Credit Support Provider of such party or any applicable Specified Entity of such party) and the other party to this Agreement (or any Credit Support Provider of such other party or any applicable Specified Entity of such other party) which is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions), (b) any combination of these transactions and (c) any other transaction identified as a Specified Transaction in this Agreement or the relevant confirmation. "Stamp Tax" means any stamp, registration, documentation or similar tax. "Tax" means any present or future tax, levy, import, duty, charge assessment or fee of any nature (including interest, penalties and additions thereto) that is imposed by any government or other taxing authority in respect of any payment under this Agreement other than a stamp, registration, documentation or similar tax. "Tax Event" has the meaning specified in Section 5(b). "Tax Event Upon Merger" has the meaning specified in Section 5(b). "Terminated Transactions" means with respect to any Early Termination Date (a) if resulting from a Termination Event, all Affected Transactions and (b) if resulting from an Event of Default, all Transactions (in either case) in effect immediately before the effectiveness of the notice designating that Early Termination Date (or, if "Automatic Early Termination" applies, immediately before that Early Termination Date). "Termination Currency" has the meaning specified in the Schedule. "Termination Currency Equivalent" means, in respect of any amount denominated in the Termination Currency, such Termination Currency amount and, in respect of any amount denominated in a currency other than the Termination Currency (the "Other Currency"), the amount in the Termination Currency determined by the party making the relevant determination as being required to purchase such amount of such Other Currency as at the relevant Early Termination Date, or, if the relevant Market Quotation or Loss (as the case may be), is determined as of a later date, that later date, with the Termination Currency at the rate equal to the spot exchange rate of the foreign exchange agent (selected as provided below) for the purchase of such Other Currency with the Termination Currency at or about 11:00 a.m. (In the city in which such foreign exchange agent is located) on such date as would be customary for the determination of such a rate for the purchase of such Other Currency for value on the relevant Early Termination Date or that later date. The foreign exchange agent will, if only one party is obligated to make a determination under Section 6(e), be selected in good faith by that party and otherwise will be agreed by the parties. "Termination Event" means an Illegality, a Tax Event or a Tax Event Upon Merger or, if specified to be applicable, a Credit Event Upon Merger or an Additional Termination Event. "Termination Rate" means a rate per annum equal to the arithmetic mean of the cost (without proof or evidence of any actual cost) to 20 22 each party (as certified by such party) if it were to fund or of funding such amounts. "Unpaid Amounts" owing to any party means, with respect to an Early Termination Date, the aggregate of (a) in respect of all Terminated Transactions, the amounts that became payable (or that would have become payable but for Section 2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early Termination Date and which remain unpaid as at such Early Termination Date and (b) in respect of each Terminated Transaction, for each obligation under Section 2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be settled by delivery to such party on or prior to such Early Termination Date and which has not been so settled as at such Early Termination Date, an amount equal to the fair market value of that which was (or would have been) required to be delivered as of the originally scheduled date for delivery, in each case together with (to the extent permitted under applicable law) interest, in the currency of such amounts, from (and including) the date such amounts or obligations were or would have been required to have been paid or performed to (but excluding) such Early Termination Date, at the Applicable Rate. Such amounts of interest will be calculated on the basis of daily compounding and the actual number of days elapsed. The fair market value of any obligation referred to in clause (b) above shall be reasonably determined by the party obliged to make the determination under Section 6(e) or, if each party is so obliged, it shall be the average of the Termination Currency Equivalents of the fair market values reasonably determined by both parties. IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with effect from the date specified on the first page of this document. ROYAL BANK OF CANADA (Name of Party) BY: /s/ Karen Haist --------------- Name: Karen Haist Title: Manager, Documentation Date: January 16/96 ENRON OIL & GAS COMPANY (Name of Party) 21 23 BY: /s/Ben B. Boyd -------------- Name: Ben B. Boyd Title: Vice President and Controller Date: 22 24 SCHEDULE TO MASTER AGREEMENT (MULTICURRENCY-CROSS BORDER) dated as of January 16, 1996 ROYAL BANK OF CANADA ("Party A") and ENRON OIL & GAS COMPANY ("Party B") PART 1 TERMINATION PROVISIONS In this Master Agreement: (1) "Specified Entity" in relation to Party A shall not apply, and, in relation to Party B, shall mean for the purpose of: Section 5(a)(v): EOG Company of Canada. Section 5(a)(vi): EOG Company of Canada. Section 5(a)(vii): EOG Company of Canada. Section 5(b)(iv): EOG Company of Canada. (2) "Specified Transaction" will have the meaning specified in Section 14. (3) The "Cross Default" provisions of Section 5(a)(vi) will apply to Party A and to Party B. "Specified Indebtedness" shall mean all obligations (whether present or future, contingent or otherwise, as principal or surety or otherwise) in respect of borrowed money and evidenced by bonds, debentures, notes, guarantees, reimbursement agreements or other similar obligations, except that such term shall not include obligations in respect of deposits received in the ordinary course of Party A's banking business. "Threshold Amount" means, with respect to any party, an amount equal to USD $50,000,000. (4) The "Credit Event Upon Merger" provision of Section 5(b)(iv) will not apply to Party A or to Party B. (5) The "Automatic Early Termination" provision of Section 6(a) will not apply to Party A or to Party B. 25 (6) Payments on Early Termination. For purposes of Section 6(e), Market Quotation and Second Method will apply. (7) "Termination Currency" means United States Dollars. PART 2 TAX REPRESENTATIONS PAYOR REPRESENTATIONS. For the purpose of Section 3(e), each party makes the following representation: It is not required by any applicable law, as modified by the practice of any relevant governmental revenue authority of any Relevant Jurisdiction to make any deduction or withholding for, or on account of, any Tax from any payment (other than interest under Section 2(e), Section 6(d)(ii) or Section 6(e)) to be made by it to the other party under this Master Agreement. In making this representation, it may rely on: (i) the accuracy of any representation made by the other party pursuant to Section 3(f); (ii) the satisfaction of the agreement of the other party contained in Section 4(a)(i) or Section 4(a)(iii) and the accuracy and effectiveness of any document provided by the other party pursuant to Section 4(a)(i) or Section 4(a)(iii); and (iii) the satisfaction of the agreement of the other party contained in Section 4(d), provided that it shall not be a breach of this representation where reliance is placed on clause (ii) and the other party does not deliver a form or document under Section 4(a)(iii) by reason of material prejudice to its legal or commercial position; provided further, that for the purposes of Section 3(c) of this Master Agreement, Party A's Payer Representation shall not apply in respect of Canadian Tax where payments under the Transactions entered pursuant to this Master Agreement do not have matching or corresponding Scheduled Payment Dates or where Party A's Scheduled Payment Dates occur more frequently than Party B's Scheduled Payment Dates. PAYEE REPRESENTATIONS. For the purpose of Section 3(f) of this Master Agreement, Party A and Party B make the representations specified below, if any: (i) The following representation will apply to Party A and will apply to Party B: It is fully eligible for the benefits of the "Business Profits" or "Industrial and Commercial Profits" provision, as the case may be, the "Interest" provision or the "Other Income" provision (if any) of the Specified Treaty with respect to any payment described in such provisions and received or to be received by it in connection with this Master Agreement and no such payment is attributable to a trade or business carried on by it through a permanent establishment in the Specified Jurisdiction. For the purposes of such representation: "SPECIFIED TREATY" means, with respect to Party A, the income tax convention or treaty, if any, 26 between the Government of Canada and the Government of the United States of America. "SPECIFIED JURISDICTION" means, with respect to Party A, the United States of America. "SPECIFIED TREATY" means, with respect to Party B, the income tax convention or treaty, if any, between the Government of the United States of America and the Government of the jurisdiction in which Party A's office located for the purpose of the relevant Transaction. "SPECIFIED JURISDICTION" means, with respect to Party B, the country in which the office through which Party A is acting for the purpose of the relevant Transaction is located. (ii) The following representation will apply to Party A when acting out of its New York office and will apply to Party B: Each payment received or to be received by it in connection with this Master Agreement will be effectively connected with its conduct of a trade or business in the Specified Jurisdiction. For purposes of such representation: "SPECIFIED JURISDICTION" means, with respect to Party A and Party B, the United States of America. (iii) The following representation will apply to Party A when acting out of its London office and will not apply to Party B: (A) It is entering into each Transaction in the ordinary course of its trade as, and is, is either (1) a recognized U.K. bank or (2) a recognized U.K. swaps dealer (in either case (1) or (2), for purposes of the United Kingdom Inland Revenue extra statutory concession C17 on interest and currency swaps dated March 14, 1989), and (B) it will bring into account payments made and received in respect of each Transaction in computing its income for United Kingdom tax purposes. PART 3 DOCUMENTS TO BE DELIVERED For the purpose of Section 4(a): (1) Tax forms, documents or certificates to be delivered are: IRS Form 4224 or Form 1001, as applicable, and any form, certificate or document required or reasonably requested in writing by either Party A or Party B to allow the other party to make payments under this Master Agreement without any deduction or withholding for, or on account of, any Taxes or with such deduction or withholding at a reduced rate. Such forms, documents or certificates are to be furnished upon execution of this Master Agreement and thereafter as required by applicable law. Such forms, documents or certificates, if specified, shall be governed by the representation 27 contained in Section 3(d) of this Master Agreement. (2) Other documents to be delivered are: (a) Party A shall deliver upon the execution of this Master Agreement a certificate of its secretary, assistant secretary or other duly authorized officer certifying the incumbent officers of each who are authorized to sign this Master Agreement and such Confirmations and their specimen signatures. Such certificate shall be covered by the representation contained in Section 3(d) of this Master Agreement. Party B may conclusively rely upon such certificate until notified to the contrary by Party A. (b) Party B shall deliver upon the execution of this Master Agreement a certificate of its secretary, assistant secretary or other duly authorized officer certifying (i) resolutions of its board of directors or other proof of authorizations with respect to its authority to execute and deliver this Master Agreement and the Confirmations contemplated hereby and perform its respective obligations hereunder and thereunder, (ii) the incumbent officers of each who are authorized to sign this Master Agreement and such Confirmations and their specimen signatures, (iii) if requested, that attached thereto are true and complete copies of its charter documents. Such certificate shall be covered by the representation contained in Section 3(d) of this Master Agreement. Party A may conclusively rely upon such certificate until notified to the contrary by Party B. (c) Each of Party A and Party B shall deliver, promptly upon written request, such other documents as the other party may reasonably request in connection with each Transaction. Such documents, if specified, shall be governed by the representation contained in Section 3(d) of this Master Agreement. PART 4 MISCELLANEOUS (1) ADDRESS FOR NOTICES. For the purpose of Section 12(a): Address for notices or communications to Party A with respect to this Master Agreement and relating to a particular Transaction concluded with its Toronto office, shall be given to it at the following address: Address: Royal Bank of Canada 17th Floor, South Tower Royal Bank Plaza 200 Bay Street Toronto, Ontario CANADA M5J 2J5 Attention: Manager, Capital Market 28 Products Operations Telex No.: 06-217897 Answerback: ROYSWAP TOR Facsimile No.: (416) 974-7043 or 574-5635 Electronic Messaging System Details: Not Applicable Address for notices or communications to Party A relating to a particular Transaction concluded with its Tokyo Office, shall be given to it at the following address: Address: Royal Bank of Canada Treasury Department 12th Floor, Hibiya Kokusai Bldg. 2-3 Uchisaiwaicho, 2-chome Chlyoda-ku, Tokyo 100 JAPAN Attention: Manager, Capital Markets Telex: J26636 Answerback: ROYALTK Facsimile No.: (03) 3508-2507 Address for notices or communications to Party A relating to a particular Transaction concluded with its London office, shall be given to it at the following address: Address: Royal Bank of Canada 71/71A Queen Victoria Street London EC4V 4DE ENGLAND Attention: Derivative Product Operation Telex: 92 6933 Answerback: RBCSWP G Facsimile No.: 44-171-329-6156 Address for notices or communications to Party A relating to a particular Transaction concluded with its New York Office, shall be given to it at the following address: 29 Address: Royal Bank of Canada New York Branch Financial Square New York, New York 10005-3531 U.S.A. Attention: Investment Banking & Treasury-Swaps Telex: 420464 Answerback: RBOC Facsimile No.: 212-968-1314 Address for notices or communications to Party A relating to a particular Transaction concluded with its Singapore Office, shall be given to it at the following address: Address: Royal Bank of Canada 140 Cecil Street #01-00 PIL Building Singapore 0106 Republic of Singapore Attention: Head, Treasury Operations, Asia Telex: RS 29338 Answerback: ROYSPO Facsimile: 65-224-0185 Address for notices or communications (other than with respect to payments) to Party B: Enron Oil & Gas Company 1400 Smith Street Suite 4341 Houston, Texas 77002 Attn: Assistant Treasurer - Corporate Treasury Facsimile No: (713) 646-2375 (2) CALCULATION AGENT. The Calculation Agent is Party A, unless otherwise specified in a Confirmation relating to the relevant Transaction. (3) CREDIT SUPPORT DOCUMENT. There shall be no Credit Support Documents. (4) CREDIT SUPPORT PROVIDER. Credit Support Provider shall not apply 30 (5) GOVERNING LAW. THIS MASTER AGREEMENT (INCLUDING, BUT NOT LIMITED TO, THE VALIDITY AND ENFORCEABILITY HEREOF) WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, OTHER THAN THE CONFLICT OF LAWS RULES THEREOF. (6) NETTING OF PAYMENTS. From the date hereof, Subparagraph (ii) of Section 2(c) will apply to each Transaction unless specified in the relevant Confirmation. (7) MULTIBRANCH PARTIES; OFFICES. (a) OFFICES. The provisions of Section 10(a) will apply to Party A and Party B; provided, however, that without in any way limiting the effect of the foregoing, each party agrees to deal first with the office of the other party specified in the Confirmation rather than such party's head or home office with respect to resolving any default that results solely from wire transfer difficulties or an error or omission of an administrative or operational nature. Notwithstanding the foregoing, a party (the "Owed Party") may seek payment from the head or home office of the other party (the "Owing Party") with respect to this Master Agreement in the event that an amount payable to the Owed Party by the Owing Party pursuant to this Master Agreement as a result of the designation of an Early Termination Date has not been said in full when due. (b) MULTI-BRANCH. For the purpose of Section 10(c) of this Master Agreement: Party A is a Multibranch Party and may act through its Toronto, New York, Tokyo, London and Singapore offices. Party B is not a Multi-branch Party. (8) PROCESS AGENT. There shall be no Process Agent for either Party A or Party B. PART 5 OTHER PROVISIONS (1) DEFINITIONS. This Master Agreement incorporates, and is subject to and governed by, unless otherwise specified in a Confirmation, the 1991 ISDA Definitions (the "1991 Definitions"), and the 1992 ISDA FX and Currency Option Definitions (the "FX Definitions"), in each case published by the International Swap and Derivatives Association, Inc. (formerly known as the International Swap Dealers Association, Inc.). In the event of any inconsistency between this Master Agreement, the 1991 Definitions or the FX Definitions, this Master Agreement will prevail. In the event of any inconsistency between the provisions of any Confirmation and this Master Agreement, the 1991 Definitions or the FX Definitions, such Confirmation will prevail for the purpose of the relevant Transaction. In the event of any inconsistency between the provisions of the 1991 Definitions and the FX Definitions, the FX Definitions will prevail. 31 (2) CONFIRMATIONS; RECORDINGS. With respect to each Transaction, Party A shall on or promptly after the Trade Date send Party B a Confirmation, via facsimile transmission, which shall be promptly acknowledged by Party B. Subject to the terms of Section 9(e)(ii), the failure by Party B to acknowledge receipt or affirm a Confirmation shall not constitute an acceptance or affirmation of the terms thereof. Each party (i) consents to the recording of the telephone conversations of trading and marketing personnel of the parties and their Affiliates in connection with this Master Agreement or any potential Transaction and (ii) agrees to obtain any necessary consent of, and give notice of such recording to, such personnel of it and its Affiliates. Such record of telephone conversations may be used as evidence of any Transaction in any proceeding. (3) CROSS DEFAULT. The words ", or becoming capable at such time of being declared," as they appear after the word "becoming" and before the word "due" in the seventh line of Section 5(a)(vi) are deleted. (4) BANKRUPTCY. For purposes of this Master Agreement, Section 5(a)(vii) is hereby modified by deleting the number "30" as it appears after the word "within" and before the word "days" in the tenth and eighteenth lines thereof and inserting the number "60" in place thereof. (5) ILLEGALITY. For purposes of Section 5(b)(i), the obligation of Party A to comply with any official directive issued or given by any government agency or authority having competent jurisdiction which has the result referred to in Section 5(b)(i) will be deemed to be an "Illegality". (6) TAX EVENT. Section 5(b)(ii) is amended by deleting the words ", or there is a substantial likelihood that it will" from the fourth line thereof. (7) SET-OFF. Section 6 of the Master Agreement is amended by adding the following new subsection 6(f): (f) Notwithstanding anything to the contrary contained in this Master Agreement, in the event of a designation of an Early Termination Date as a result of an Event of Default or a Termination Event, if the Defaulting Party or the Affected Party would be owed amounts under this Master Agreement in respect of the Terminated Transactions as a result of such designation, the Non-defaulting Party or the non-Affected Party shall be entitled, at its option, to set off any obligations owed (whether or not then due, in U.S. Dollars or any other currency) by the Defaulting Party or Affected Party to the Non-defaulting Party or non-Affected Party (including any of its offices or branches) under this Master Agreement or another Specified Transaction, against the amounts owed by the Non-defaulting Party or the non-Affected Party to the Defaulting Party or the Affected Party or any Credit Support Provider or any Specified Entity of such party under this Master Agreement or another Specified Transaction. The obligation of the Non-defaulting Party or the non-Affected Party hereunder in respect of such Terminated Transactions shall be deemed satisfied and discharged 32 to the extent of any such setoff. Any obligation of the Non-defaulting Party or the non-Affected Party to make any payment to a Defaulting Party or the Affected Party hereunder shall in any event be conditioned upon and shall arise only upon the date of the payment (by setoff, by cash payment or otherwise) in full by the Defaulting Party or the Affected Party or any Credit Support Provider or any Specified Entity of such party of all obligations then due and owing hereunder or under another Specified Transaction by the Defaulting Party or the Affected Party or any Credit Support Provider or any Specified Entity of such party to the Non-defaulting Party or the non-Affected Party (including any of its offices or branches). (8) BUSINESS PURPOSE REPRESENTATION. Party A represents that it has entered into this Master Agreement (including each Transaction now or hereafter entered into in connection herewith) in conjunction with its line of business, including financial intermediation, or the financing of its business and not for speculative purposes. Party B represents and warrants that it has entered into this Master Agreement (including each Transaction now or hereafter entered into in connection herewith) to hedge its actual or expected exposure to changes in currency exchange rates and/or interest rates or for other normal business purposes independent of this Master Agreement, and not for speculative purposes. Each party represents that it is an "eligible swap participant" for purposes of the exemption of swap agreements (17 C.F.R. Section 35.2), as in the case of Party A, a bank acting on its own behalf, and, in the case of Party B, a corporation that meets the requirements further set forth in 17 C.F.R. Section 35.1(2)(vi). (9) SUITABILITY REPRESENTATION. Each party represents that in entering into this Master Agreement and each Transaction: (i) it understands and acknowledges that the other party has been and will be acting only on an arm's length basis and not as its agent, fiduciary, broker or advisor in any respect, (ii) it is relying solely upon its own evaluation of this Master Agreement and any Transaction (including the present and future results, consequences, risks and benefits thereof, whether financial, accounting, tax, legal or otherwise) and upon advice from its own professional advisors, (iii) it understands this Master Agreement and the Transactions contemplated hereby and the risks associated therewith, has determined that those risks are appropriate for it, and is willing to assume those risks, and (iv) it has not relied and will not be relying upon any evaluation or advice (including any recommendation, opinion or representation) from the other party or its Affiliates or the representatives or advisors of the other party or its Affiliates. (10) ENTIRE AGREEMENT. THIS MASTER AGREEMENT AND EACH OF THE CONFIRMATIONS 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. (11) SUBMISSION TO JURISDICTION. The provisions of Section 13(b) are hereby deleted in their entirety and inserted in lieu thereof, the following: 33 "(b) JURISDICTION. With respect to any suit, action or proceedings relating to this Master Agreement ("Proceedings"), neither party waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum or waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party. Nothing in this Master Agreement precludes either party from bringing Proceedings in any jurisdiction nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction." (12) LIMITATION OF RATE. In no event shall the Default Rate, Non-default Rate or the Termination Rate be permitted to exceed the Highest Lawful Rate. For purposes hereof, "Highest Lawful Rate" shall mean, with respect to each party hereto, the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the subject indebtedness under the laws applicable to such party which are presently in effect or, to the extent allowed by law, which under such applicable laws may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow. (13) APPLICATION OF UNIFORM COMMERCIAL CODE. The parties agree that to the fullest extent permitted by applicable law, Section 2-609 of the New York Uniform Commercial Code and any equivalent rights existing at common law shall not apply to this Master Agreement or any Transaction. (14) EQUIVALENCY CLAUSE. For the purposes of the Interest Act (Canada) and disclosure thereunder, whenever any interest is made payable under this Master Agreement at any rate or percentage for or based on a period of three hundred sixty days (360), the yearly rate or percentage of interest to which such rate or percentage of interest is equivalent is the rate or percentage stipulated herein multiplied by the actual number of days in a period of one (1) year divided by three hundred sixty (360). The foregoing sentence is for disclosure purposes only and shall not otherwise affect the terms of this Master Agreement as set forth herein. (15) MATCHING PAYMENTS. The parties agree and confirm that Transactions entered into pursuant to this Master Agreement either shall have matching or corresponding Scheduled Payment Dates or shall have Party A's Scheduled Payment Dates occurring more frequently than Party B's Scheduled Payment Dates. If, despite the foregoing, a Transaction is entered into other than as above, the parties shall make (i) such amendments to this Master Agreement; (ii) include such provisions in the Confirmation for such Transaction; or (iii) enter into such other arrangements, as may reasonably be necessary to give effect to such Transaction pursuant to this Master Agreement. EX-10.68 16 GUARANTY DATED EFFECTIVE 1/16/96 1 Exhibit 10.68 ENRON OIL & GAS COMPANY Guaranty This Agreement (this "Guaranty"), dated effective as of January 16, 1996, is made and entered into by Enron Oil & Gas Company, a Delaware corporation ("Guarantor"). W I T N E S S E T H WHEREAS, Royal Bank of Canada ("Counterparty") and EOG Company of Canada (the "Company"), is a subsidiary of Guarantor, are contemplating entering into a Master Agreement dated as of the effective date hereof, a copy of which is attached hereto as Exhibit "A" (such Master Agreement, as the same may from time to time be modified, amended and supplemented, shall be referred to herein as the "Contract"); and Guarantor will directly or indirectly benefit from the transactions to be entered into between the Company and Counterparty. NOW THEREFORE, in consideration of Counterparty entering into the Contract, Guarantor hereby covenants and agrees as follows: 1. GUARANTY. Subject to the provisions hereof, Guarantor hereby irrevocably and unconditionally guarantees the timely payment when due of the obligations of Company (the "Obligations") to Counterparty under the Contract. To the extent that Company shall fail to pay any Obligations, Guarantor shall promptly pay to Counterparty the amount due. This Guaranty shall constitute a guarantee of payment and not of collection. The liability of Guarantor under the Guaranty shall be subject to the following: a. Guarantor's liability hereunder shall be and is specifically limited to payments expressly required to be made under the Contract (even if such payments are deemed to be damages) and, except to the extent specifically provided in the Contract, in no event shall Guarantor be subject hereunder to consequential, exemplary, equitable, loss of profits, punitive, tort, or any other damages, costs, or attorney's fees. 2. DEMANDS AND NOTICE. If Company fails or refuses to pay any Obligations, Counterparty shall notify Company in writing of the manner in which Company has failed to pay and demand that payment be made by Company. If Company's failure or refusal to pay continues for a period of fifteen (15) days after the date of Counterparty's notice to Company, and Counterparty has elected to exercise its rights under this Guaranty, Counterparty shall make a demand upon Guarantor (hereinafter referred to as a "Payment Demand"). A Payment Demand shall be in writing and shall reasonably and briefly specify in what manner and what amount Company has failed to pay and an explanation of why such payment is due, with a specific statement that Counterparty is calling upon Guarantor to pay under this Guaranty. A Payment Demand satisfying the foregoing requirements shall be deemed sufficient notice to Guarantor that 2 it must pay the Obligations. A single written Payment Demand shall be effective as to any specific default during the continuance of such default, until Company or Guarantor has cured such default, and additional written demands concerning such default shall not be required until such default is cured. 3. REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants that: (a) It is a corporation duly organized and validly existing under the laws of the State of Delaware and has the corporate power and authority to execute, deliver and carry out the terms and provisions of the Guaranty; (b) no authorization, approval, consent or order of, or registration or filing with, any court or other governmental body having jurisdiction over Guarantor is required on the part of Guarantor for the execution and delivery of this Guaranty; and; (c) this Guaranty, when executed and delivered, will constitute a valid and legally binding agreement of Guarantor, except as the enforceability of this Guaranty may be limited by the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditor's rights generally and by general principles of equity. 4. SETOFFS AND COUNTERCLAIMS. Without limiting Guarantor's own defenses and rights hereunder, Guarantor reserves to itself all rights, setoffs, counterclaims and other defenses to which Company or any other subsidiary of Guarantor is or may be entitled to arising from or out of the Contract or otherwise, except for defenses arising out of the bankruptcy, insolvency, dissolution or liquidation of Company. 5. AMENDMENT OF GUARANTY. No term or provision of this Guaranty shall be amended, modified, altered, waived, or supplemented except in a writing signed by Guarantor and Counterparty. 6. WAIVERS. Guarantor hereby waives (a) notice of acceptance of this Guaranty; (b) presentment and demand concerning the liabilities of Guarantor, except as expressly hereinabove set forth; and (c) any right to require that any action or proceeding be brought against Company or any other person, or except as expressly hereinabove set forth, to require that Counterparty seek enforcement of any performance against Company or any other person, prior to any action against Guarantor under the terms hereof. Except as to applicable statutes of limitation, no delay of Counterparty in the exercise of, or failure to exercise, any rights hereunder shall operate as a waiver of such rights, a waiver of any other rights or a release of Guarantor from any obligations hereunder. 3 Guarantor consents to the renewal, compromise, extension, acceleration or other changes in the time of payment of or other changes in the terms of the Obligations, or any part thereof or any changes or modifications to the terms of the Contract. Guarantor may terminate this Guaranty by providing written notice of such termination to Counterparty. No such termination shall be effective until five (5) business days after receipt by Counterparty of such termination notice. No such termination shall affect Guarantor's liability with respect to any Transaction (as defined in the Contract) entered into prior to the time the termination is effective, which Transaction shall remain guaranteed pursuant to the terms of this Guaranty. 7. NOTICE. Any Payment Demand, notice, request, instruction, correspondence or other document to be given hereunder by any party to another (herein collectively called "Notice") shall be in writing and delivered personally or mailed by certified mail, postage prepaid and return receipt requested, or by telegram or telecopier, as follows: Counterparty: Royal Bank of Canada Guarantor: Enron Oil & Gas Company Treasury Division 1400 Smith 16th Floor, South Tower Houston, Texas 77002 Royal Bank Plaza Attn: Senior Vice President Toronto, Ontario and Chief Financial Officer CANADA M5J 2J5 Fax No: (713) 646-2113 Attn: Documentation Manager Fax No.: (416) 974-7987
Notice given by personal delivery or mail shall be effective upon actual receipt. Notice given by telegram or telecopier shall be effective upon actual receipt if received during the recipient's normal business hours, or at the beginning of the recipient's next business day after receipt if not received during the recipient's normal business hours. All Notices by telegram or telecopier shall be confirmed promptly after transmission in writing by certified mail or personal delivery. Any party may change any address to which Notice is to be given to it by giving notice as provided above of such change of address. 8. MISCELLANEOUS. THIS GUARANTY SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. This Guaranty shall be binding upon Guarantor, its successors and assigns and inure to the benefit of and be enforceable by Counterparty, its successors and assigns. The Guaranty embodies the entire agreement and understanding between Guarantor and Counterparty and supersedes all prior agreements and understandings relating to the subject matter hereof. The headings in this Guaranty are for purposes of reference only, and shall not affect the meaning hereof. This Guaranty may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. 4 IN WITNESS WHEREOF, the Guarantor has executed this Guaranty on the date first above written. ENRON OIL & GAS COMPANY By: /s/ BEN B. BOYD ___________________________ Name: Ben. B. Boyd _________________________ Title: VP and Controller ________________________ EX-21 17 LIST OF SUBSIDIARIES 1 ENRON OIL & GAS COMPANY LIST OF SUBSIDIARIES EXHIBIT 21
Date of Where Company Name Incorporation Incorporated - -------------------------------------------------------------------- ------------- ------------ Enron Oil & Gas Company 06/12/85 Delaware Enron Oil & Gas International, Inc. 05/27/93 Delaware EOGI-Trinidad, Inc. 06/02/93 Delaware EOGI Trinidad Company 06/02/93 Cayman Islands Enron Gas & Oil Trinidad Limited 11/04/92 Trinidad Enron Oil & Gas Capital Management I, Ltd. 12/08/95 Cayman Islands EOGI - Trinidad U(a) Block, Inc. 11/07/95 Delaware EOGI Trinidad - U(a) Block Company 11/09/95 Cayman Islands Enron Gas & Oil Trinidad - U(a) Block Limited 11/10/95 Cayman Islands EOGI-Australia, Inc. 06/02/93 Delaware EOGI Australia Company 06/02/93 Cayman Islands Enron Exploration Australia Pty Ltd 11/23/92 Australia EOGI-France, Inc. 06/02/93 Delaware Enron Exploration France S.A. 11/13/92 France EOGI-Russia, Inc. 07/29/93 Delaware Enron Exploration and Production (Russia) Limited 11/09/92 Cyprus EOGI-Kazakhstan, Inc. 07/29/93 Delaware Enron Oil & Gas Kazakhstan Ltd. 08/18/94 Cayman Islands EOGI-United Kingdom, Inc. 07/29/93 Delaware EOGI United Kingdom Company B.V. 12/04/81 The Netherlands Enron Oil UK Limited 05/22/90 England EOGI-India, Inc. 03/17/94 Delaware Enron Oil & Gas India Ltd. 06/02/93 Cayman Islands EOGI-China, Inc. 08/18/94 Delaware Enron Oil & Gas China Ltd. 08/19/94 Cayman Islands EOGI-Qatar, Inc. 09/22/94 Delaware Enron Oil & Gas Qatar Ltd. 09/23/94 Cayman Islands EOGI-Uzbekistan, Inc. 01/30/95 Delaware Enron Oil & Gas Uzbekistan Ltd. 01/31/95 Cayman Islands EOGI - Kuwait, Inc. 04/11/95 Delaware Enron Oil & Gas Kuwait Ltd. 04/12/95 Cayman Islands EOGI - Algeria, Inc. 11/07/95 Delaware Enron Oil & Gas Algeria Ltd. 11/09/95 Cayman Islands Enron Oil & Gas Jordan Ltd. 12/08/95 Cayman Islands Enron Oil & Gas Venezuela Ltd. 01/11/96 Cayman Islands Enron Oil & Gas - Carthage, Inc. 03/21/95 Delaware ERSO, Inc. 04/24/67 Texas Enron Oil & Gas Property Management, Inc. 04/20/95 Delaware Enron Oil & Gas Investments, Inc. 04/24/95 Delaware EOG Expat Services, Inc. 02/01/96 Delaware Enron Oil & Gas Marketing, Inc. 04/09/90 Delaware EOG - Canada, Inc. 03/13/85 Delaware EOG Company of Canada 12/14/95 Nova Scotia EOG Canada Company Ltd. 12/12/95 Alberta Enron Oil Canada Ltd. 04/01/82 Alberta Nilo Operating Company 04/04/94 Delaware
EX-23.1 18 CONSENT OF DEGOLYER & MACNAUGHTON 1 EXHIBIT 23.1 [DEGOLYER AND MACNAUGHTON LETTERHEAD] February 29, 1996 Enron Oil & Gas Company 1400 Smith Street Houston, Texas 77002 Gentlemen: We hereby consent to the references to our firm and to our opinions delivered to Enron Oil & Gas Company, hereinafter referred to as the "Company," relating to our comparison of estimates prepared by us to those furnished to us by the Company of proved oil, condensate, natural gas liquids, and natural gas reserves of certain selected properties owned by the Company as expressed in our letter reports dated January 27, 1994, January 13, 1995, and January 22, 1996, for estimates as of January 1, 1994, January 1, 1995, and December 31, 1995, respectively, to be included in the section "Supplemental Information to Consolidated Financial Statements - Oil and Gas Producing Activities" in the Company's Annual Report on Form 10-K for the year ended December 31, 1995, to be filed with the Securities and Exchange Commission on or about March 5, 1996. We also consent to the inclusion of our letter report, dated January 22, 1996, addressed to the Company as Exhibit (23.2) to the Company's Annual Report on Form 10-K for the year ended December 31, 1995, to be filed with the Securities and Exchange Commission. Additionally, we hereby consent to the incorporation by reference of such references to our firm and to our opinions included in the Company's Form 10-K in the Company's previously filed Registration Statement nos. 33-42620, 33-52201, 33-58103, and 33-62005. Very truly yours, /s/ DEGOLYER AND MACNAUGHTON DeGOLYER and MacNAUGHTON EX-23.2 19 OPINION OF DEGOLYER & MACNAUGHTON DATED 01/22/96 1 EXHIBIT 23.2 [DEGOLYER AND MACNAUGHTON LETTERHEAD] January 22, 1996 Enron Oil & Gas Company 1400 Smith Street Houston, Texas 77002 Gentlemen: Pursuant to your request, we have prepared estimates, as of December 31, 1995, of the proved oil, condensate, natural gas liquids, and natural gas reserves of certain selected properties in the United States, Canada, and Trinidad owned by Enron Oil & Gas Company, hereinafter referred to as "Enron." The properties consist of working interests located onshore in the states of New Mexico, Texas, Utah, and Wyoming and in the offshore waters of Texas, Louisiana, and Alabama, in the province of Saskatchewan in Canada, and in the offshore waters of Trinidad. The estimates are reported in detail in our "Report as of December 31, 1995 on Proved Reserves of Certain Properties in the United States owned by Enron Oil & Gas Company c Selected Properties," our "Report as of December 31, 1995 on Proved Reserves of Certain Properties in Canada owned by Enron Oil & Gas Company c Selected Properties," and our "Report as of December 31, 1995 on Proved Reserves of the Kiskadee Field, SECC Block, Offshore Trinidad for Enron Oil and Gas Company," hereinafter collectively referred to as the "Reports." We also have reviewed information provided to us by Enron that it represents to be Enron's estimates of the reserves, as of December 31, 1995, for the same properties as those included in the Reports. Proved reserves estimated by us and referred to herein are judged to be economically producible in future years from known reservoirs under existing economic and operating conditions and assuming continuation of current regulatory practices using conventional production methods and equipment. Proved reserves are defined as those that have been proved to a high degree of certainty by reason of actual completion, successful testing, or in certain cases by adequate core analyses and electrical-log interpretation when the producing characteristics of the formation 2 are known from nearby fields. These reserves are defined areally by reasonable geological interpretation of structure and known continuity of oil- or gas-saturated material. This definition is in agreement with the definition of proved reserves prescribed by the Securities and Exchange Commission. Enron represents that its estimates of the proved reserves, as of December 31, 1995, net to its leasehold interests in the properties included in the Reports are as follows:
Oil, Condensate, and Natural Gas Liquids Natural Gas Net Equivalent (thousand barrels) (million cubic feet) Million Cubic Feet -------------------- -------------------- ------------------ 17,536 1,408,800 1,514,016
Note: Net equivalent million cubic feet is based on 1 barrel of oil, condensate, or natural gas liquids being equivalent to 6,000 cubic feet of gas. Enron has advised us, and we have assumed, that its estimates of proved oil, condensate, natural gas liquids, and natural gas reserves are in accordance with the rules and regulations of the Securities and Exchange Commission. Proved reserves estimated by us for the properties included in the Reports, as of December 31, 1995, are as follows:
Oil, Condensate, and Natural Gas Liquids Natural Gas Net Equivalent (thousand barrels) (million cubic feet) Million Cubic Feet -------------------- -------------------- ------------------ 15,615 1,345,077 1,438,767
Note: Net equivalent million cubic feet is based on 1 barrel of oil, condensate, or natural gas liquids being equivalent to 6,000 cubic feet of gas. In making a comparison of the detailed reserves estimates prepared by us and by Enron of the properties involved, we have found differences, both positive and negative, in reserves estimates for individual properties. These differences appear to be compensating to a great extent when considering the reserves of Enron in the properties included in our reports, resulting in overall differences not being substantial. It is our opinion that the reserves estimates prepared by Enron on the properties reviewed by us and referred to above, when compared on the basis of net 3 equivalent million cubic feet of gas, do not differ materially from those prepared by us. Submitted, /s/ DEGOLYER AND MACNAUGHTON DeGOLYER and MacNAUGHTON [SEAL] /s/ VERNON E. PRINGLE, JR., P.E. ---------------------------------------- Vernon E. Pringle, Jr., P.E. Senior Vice President DeGolyer and MacNaughton EX-23.3 20 CONSENT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 23.3 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report on the consolidated financial statements of Enron Oil & Gas Company and subsidiaries included in this Form 10-K, into the Company's previously filed Registration Statement File Nos. 33-42620, 33-58103 and 33-62005. ARTHUR ANDERSEN LLP Houston, Texas March 5, 1996 EX-24 21 POWERS OF ATTORNEY 1 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned, as a director of Enron Oil & Gas Company, a Delaware corporation (the "Company"), in connection with the filing by the Company of its Annual Report on Form 10-K for the year ended December 31, 1995, with the Securities and Exchange Commission, does hereby make, constitute and appoint Forrest E. Hoglund, Walter C. Wilson and Angus H. Davis, each of them with full power (any one of them acting alone), as true and lawful attorneys-in-fact and agents, for and on behalf and in the name, place and stead of the undersigned, in any and all capacities, to sign, execute and file such Annual Report on Form 10-K, together with any amendments or supplements thereto, with all exhibits and any and all documents required to be filed with respect thereto with any regulatory authority, granting unto each above-mentioned individual the full power and authority to do and perform each and every act and action requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and confirming all the said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereto set his hand this __________ day of February, 1996. ________________________________________ Fred C. Ackman 2 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned, as a director of Enron Oil & Gas Company, a Delaware corporation (the "Company"), in connection with the filing by the Company of its Annual Report on Form 10-K for the year ended December 31, 1995, with the Securities and Exchange Commission, does hereby make, constitute and appoint Forrest E. Hoglund, Walter C. Wilson and Angus H. Davis, each of them with full power (any one of them acting alone), as true and lawful attorneys-in-fact and agents, for and on behalf and in the name, place and stead of the undersigned, in any and all capacities, to sign, execute and file such Annual Report on Form 10-K, together with any amendments or supplements thereto, with all exhibits and any and all documents required to be filed with respect thereto with any regulatory authority, granting unto each above-mentioned individual the full power and authority to do and perform each and every act and action requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and confirming all the said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereto set his hand this __________ day of February, 1996. _______________________________________ Edward Randall, III 3 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned, as a director of Enron Oil & Gas Company, a Delaware corporation (the "Company"), in connection with the filing by the Company of its Annual Report on Form 10-K for the year ended December 31, 1995, with the Securities and Exchange Commission, does hereby make, constitute and appoint Forrest E. Hoglund, Walter C. Wilson and Angus H. Davis, each of them with full power (any one of them acting alone), as true and lawful attorneys-in-fact and agents, for and on behalf and in the name, place and stead of the undersigned, in any and all capacities, to sign, execute and file such Annual Report on Form 10-K, together with any amendments or supplements thereto, with all exhibits and any and all documents required to be filed with respect thereto with any regulatory authority, granting unto each above-mentioned individual the full power and authority to do and perform each and every act and action requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and confirming all the said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereto set his hand this __________ day of February, 1996. ________________________________________ Kenneth L. Lay 4 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned, as a director of Enron Oil & Gas Company, a Delaware corporation (the "Company"), in connection with the filing by the Company of its Annual Report on Form 10-K for the year ended December 31, 1995, with the Securities and Exchange Commission, does hereby make, constitute and appoint Forrest E. Hoglund, Walter C. Wilson and Angus H. Davis, each of them with full power (any one of them acting alone), as true and lawful attorneys-in-fact and agents, for and on behalf and in the name, place and stead of the undersigned, in any and all capacities, to sign, execute and file such Annual Report on Form 10-K, together with any amendments or supplements thereto, with all exhibits and any and all documents required to be filed with respect thereto with any regulatory authority, granting unto each above-mentioned individual the full power and authority to do and perform each and every act and action requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and confirming all the said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereto set his hand this __________ day of February, 1996. ________________________________________ Richard D. Kinder EX-27 22 FINANCIAL DATA SCHEDULE
5 12-MOS DEC-31-1995 DEC-31-1995 23,039 0 168,514 0 11,697 217,832 3,380,924 (1,499,379) 2,147,258 169,297 0 0 0 201,600 962,059 2,147,258 576,493 648,702 0 453,393 (669) 0 11,924 184,054 41,936 142,118 0 0 0 142,118 .89 .00
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