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EXHIBIT 10(i)
AMENDED AND RESTATED BASKET AGREEMENT
THIS AGREEMENT made and entered into as of November 13, 1989 among
American Oil and Gas Corporation, a Delaware corporation ("American"), its
wholly-owned subsidiary, American Pipeline Company, a Delaware corporation
("Pipeline"), Cabot Corporation, a Delaware corporation ("Cabot") and its
indirect wholly-owned subsidiary, Cabot Transmission Corporation, a Delaware
corporation ("Transmission"), as amended and restated as of June 30, 1990;
WHEREAS, pursuant to an Amended and Restated Omnibus Acquisition
Agreement dated as of November 13, 1989 (the "Omnibus Agreement") by and among
American, Cabot and Transmission, and certain additional agreements referred to
therein, (i) American acquired from Transmission all of the capital stock of
Cabot Gas Supply Corporation, a Delaware corporation ("CGSC") and (ii) by way of
merger, the Merger Companies (as defined in the Omnibus Agreement) became
wholly-owned subsidiaries of American (CGSC and the Merger Companies being
collectively referred to herein as the "Acquired Companies");
WHEREAS, the capital stock of the Acquired Companies was assigned by
American to Pipeline;
WHEREAS, Cabot, Transmission, American and Pipeline originally entered
into this Agreement in order to make special provisions for allocating the
benefits, burdens and responsibilities for handling certain assets and
liabilities of the Acquired Companies;
WHEREAS, Cabot, Transmission, American and Pipeline desire to amend
certain terms of this Agreement as of June 30,1990, but effective November
13,1989, by restating this Agreement, as amended in its entirety;
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties, agreements and indemnities contained herein and in
the Omnibus Agreement, the parties hereto agree as follows:
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1. Capitalized Terms. Capitalized terms not otherwise defined
herein or in the preamble hereto shall have the same meaning ascribed to them
in the Omnibus Agreement.
2. Definitions.
2.1 "Annual Replacement Gas Cost Differential" shall mean,
with respect to each of the calendar years 1990 through 1993 an amount not less
than zero equal to the lesser of (i) the sum of the Monthly Replacement Gas Cost
Differential for each of the twelve calendar months in such year or (ii)
$1,500,000; provided, however, that for 1993, the Annual Replacement Gas Cost
Differential shall be the lesser of (a) the lesser of the amounts provided in
clauses (i) and (ii) above or (b) the positive difference between $5,000,000 and
the cumulative sum of Annual Replacement Gas Cost Differential for each of the
prior years for which such a determination was made (it being understood that in
no event shall the cumulative sum of Annual Replacement Gas Cost Differential
exceed $5,000,000); and provided further, that the Annual Replacement Gas Cost
Differential for the calendar year 1990 shall be annualized to include the
Monthly Replacement Gas Cost Differential for the final two calendar months of
1989.
2.2 "Basket Advance" is defined in the Revolving Credit Note.
2.3 "Basket Collections" means the cumulative aggregate amount
(without duplication) of cash collections realized by the Acquired Companies
after September 30,1988 until the date of determination from:
(i) the amortization in the actual weighted average cost of
gas used in billing customers or liquidation or recovery in any other
manner of prepaid gas assets of the Acquired Companies accrued in
connection with the settlement, discharge, compromise or release of
Take or Pay Claims (regardless of whether such prepaid gas assets
existed as of September 30, 1988, or are created thereafter either
prior to, on or after the Closing Date);
(ii) the portion of repayment of intercompany exchange gas
balances attributable to the exchange price differential of the
Acquired Companies existing as of September 30,1988, as reflected on
the combined balance sheet of the Acquired Companies as of such date,
but only to the extent that such exchange price differential is
amortized and realized in the manner specified in
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the penultimate paragraph of this Section 2.3 on or prior to March 31,
1990, which Basket Collections shall be deemed to be $9,242,000; and
(iii) the recovery by flow-through to customers or liquidation
or recovery in any other manner of other assets and costs (including,
without limitation, payments for unused transportation services, costs
of contract reformation and contract buy-downs, gas reservation fees,
premiums on gas purchases and direct outside legal fees) regardless of
whether such assets and costs existed as of September 30, 1988 or are
created or incurred thereafter (either prior to, on or after the
Closing Date) directly related to the settlement, discharge, compromise
or release of Take or Pay Claims.
For purposes of this Agreement, in the case of Basket Collections made
by an Acquired Company whose sales price of gas is regulated by a governmental
agency (a "Regulated Company"):
(i) Basket Collections which can be realized by including such
amounts in the cost of gas portion of such Regulated Company's rate
shall be considered realized by such Regulated Company during the
calendar month following the month in which funds related to the Basket
Collections are included in the actual weighted average cost of gas
utilized in billing its customers. If the rate mechanisms utilized in
billing the customers of a Regulated Company for gas costs are changed,
Basket Collections shall be considered realized by such Regulated
Company in the calendar month following the month in which funds
related to the Basket Collections are included in its calculation of
rates to be charged to its customers for such month. The amount of the
cash collection realized shall equal the amount included in the actual
weighted average cost of gas or in the calculation of rates.
(ii) In those instances where Basket Collections can be
realized only by including amounts in the non-cost of gas portion of a
Regulated Company's rates, Basket Collections shall be considered
realized during any given month in an amount equal to (i) the sales
volume of gas for such month multiplied by (ii) an incremental unit
cost equal to the amount of costs related to Basket Payments included
in the costs of such Regulated Company utilized in establishing the
rates divided by the gas volumes utilized in establishing such rates.
Notwithstanding any provision of this Section 2.3 to the contrary, an
Acquired Company that is not a Regulated Company (an "Unregulated Company")
shall realize Basket Collections only in the following manner and to the
following extent:
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(a) With respect to the liquidation or recovery prior to July
1, 1990 of prepaid gas assets of the type referred to in clause (i) of
the first paragraph of this Section 2.3, the dollar amount deemed
collected as a Basket Collection with respect to a volume of such
prepaid gas taken by such Unregulated Company during a calendar month
and attributable to a Basket Payment shall be the product of (x) the
number of units of volume (converted to MMBtu's) comprising such volume
and (y) the lesser of (a) the contractual unit cost of gas specified or
implied as one of the terms of such Basket Payment and (b) the weighted
average unit sales price of gas of such Unregulated Company during such
month, and such dollar amount shall be deemed to be collected during
the following calendar month; and
(b) with respect to the liquidation or recovery after June 30,
1990 of prepaid gas assets of the type referred to in clause (i) of the
first paragraph of this Section 2.3, the dollar amount deemed collected
as a Basket Collection with respect to a volume of such prepaid gas
taken by such Unregulated Company during a calendar month and
attributable to a Basket Payment shall be the product of (x) the number
of units of volume (converted to MMBtu's) comprising such volume and
(y) 80% of the Unregulated Monthly WASP calculated for such month, and
such dollar amount shall be deemed to be collected during the following
calendar month; and
(c) with respect to the liquidation or recovery of fees or
payments for the right to purchase gas in the future at a defined price
accrued as Basket Payments and paid in connection with the settlement,
discharge, compromise or release of Take or Pay Claims (regardless of
whether such fees or payments were paid prior to September 30, 1988, or
paid thereafter either prior to, on or after the Closing Date) (such
fees or payments being herein referred to as "Gas Reservation Fees"),
in the event a volume of gas is taken in a calendar month by an
Unregulated Company and with respect to such volume a Gas Reservation
Fee has been accrued as a Basket Payment, a Basket Collection shall be
deemed collected in the calendar month following the month of such take
in an amount equal to the lesser of (i) the aggregate Gas Reservation
Fee with respect to such volume and (ii) the amount by which (A) the
product of (x) the number of units of volume (converted to MMBtu's)
comprising such volume and (y) 80% of the Unregulated Monthly WASP
calculated for the calendar month of such take exceeds (B) the
aggregate gas purchase price accrued or paid for such volume of gas (it
being understood that in the event there is no such excess as
determined
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under this clause (ii), then there shall be no deemed Basket Collection
with respect to such Gas Reservation Fee); and
(d) with respect to the recovery of other assets (other than
prepaid gas assets of the type referred to in clause (i) of the first
paragraph of this Section 2.3) and costs of the type referred to in
clause (iii) of the first paragraph of this Section 2.3 (including,
without limitation, any charge for Take or Pay Recovery Costs but
excluding any deemed Basket Collection of gas reservation fees pursuant
to clause (c) of this paragraph ), a Basket Collection shall be
realized in the calendar month in which payment therefor is received
and only to the extent and only in the event such asset is purchased,
or cost is borne, by the purchaser of gas from the Unregulated Company
under a gas purchase contract that expressly provides that such cost or
asset shall be charged to, and paid by, the purchaser.
For purposes of this Agreement, with respect to clause (ii) of the
first paragraph of this Section 2.3:
(i) It is hereby stipulated and agreed that the exchange price
differential of the Acquired Companies existing as of September 30,
1988, and representing the dollar amount of gas owed by CEMCO (now
Anthem Energy Company) to CGSC (now Westar Transmission Company) at
such date was $12,310,000 (calculated on the basis of 14,319 MMcf of
gas at $0.86 per Mcf).
(ii) During each calendar month thereafter, beginning with
October 1988 and ending with March 1990, if there has been a net
reduction during such month in the volume of gas owed by CEMCO (now
Anthem Energy Company) to CGSC (now Westar Transmission Company), the
dollar amount attributable to such net reduction, which shall be
determined by multiplying the number of Mcf's comprising such net
reduction by $0.86, shall be deemed to be a Basket Collection of such
dollar amount realized by the Acquired Companies during such calendar
month, until the earlier of March 31, 1990 or such time as the
aggregate amount of such deemed Basket Collections shall equal
$12,310,000, at which time no further amounts shall be deemed to be
Basket Collections attributable to the exchange price differential of
the Acquired Companies.
If any amount included in Basket Collections by virtue of its
amortization in the actual weighted average cost of gas pursuant to clause (i)
of the first paragraph of this Section 2.3 is thereafter disallowed by final and
nonappealable order entered in any applicable rate proceeding or through good
faith negotiations with customers, the amount so disallowed shall thereupon be
deducted from Basket Collections, provided that after the Closing, American
shall act in good faith in any such rate
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proceeding or negotiations in recognition of the intent of the parties to this
Agreement that such amounts be included in Basket Collections to the extent
practicable. To the extent, if any, any such disallowance results in an
offsetting economic benefit to American, Pipeline or any of the Acquired
Companies, the fair value of such benefit, when and as realized, shall be deemed
to be a Basket Collection.
2.4 "Basket Collections Account" means an account maintained by
Pipeline and the Acquired Companies pursuant to Section 3 hereof for the purpose
of recording cumulative Basket Collections.
2.5 "Basket Deficit" is defined in Section 4.2 hereof.
2.6 "Basket Payments" means the cumulative sum (without duplication) as
of the date of determination of (i) consideration paid or otherwise incurred by
the Acquired Companies after September 30, 1988, in connection with the
discharge, settlement, compromise or release of any Take or Pay Claims
(including, without limitation, the value of prepayments for gas, payments for
unused transportation services, costs of contract reformation and contract
buy-downs, gas reservation fees and premiums on gas purchases), (ii) the amount
of any direct outside legal fees and expenses incurred by the Acquired Companies
after September 30, 1988, in connection with the discharge, settlement,
compromise or release of Take or Pay Claims and (iii) the aggregate of the
Annual Replacement Gas Cost Differentials for all calendar years ending prior to
the March 31 occurring on or next preceding the date of determination.
2.7 "Basket Payments Account" means an account maintained by Pipeline
and the Acquired Companies pursuant to Section 3 hereof for the purpose of
recording cumulative Basket Payments.
2.8 "Basket Surplus" is defined in Section 4.1 hereof.
2.9 "Closing Date" and "Closing" are defined in the Omnibus Agreement.
2.10 "Determination Date" means October 31, 1989.
2.11 "Determination Date Basket Deficit" is defined in Section 3.2
hereof.
2.12 "Determination Date Basket Excess" is defined in Section 3.2
hereof.
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2.13 "El Paso" means E1 Paso Natural Gas Company, a Delaware
corporation.
2.14 "FERC" means the Federal Energy Regulatory Commission.
2.15 "Future Basket Collections" means all cash collections reasonably
estimated to be realized (as determined in accordance with Section 2.3 hereof)
by the Acquired Companies after the Settlement Date from the matters described
in clauses (i), (ii) and (iii) of the first paragraph of Section 2.3 hereof;
provided that Future Basket Collections shall not include any future collections
related to the recovery of Take or Pay Recovery Costs.
2.16 "Future Basket Payments" means all amounts described in clauses
(i) and (ii) of Section 2.6 hereof reasonably estimated to be paid or incurred
by the Acquired Companies after the Settlement Date; provided that Future Basket
Payments shall not include any future payment of Take or Pay Recovery Costs.
2.17 "Guaranty" means a Guaranty Agreement substantially in the
form attached hereto as Appendix C.
2.18 "Initial Settlement Date" means June 30,1994.
2.19 "Initial Take or Pay Account Statement" is defined in Section
3.1 hereof.
2.20 Monthly Minimum Residue Gas Volume" shall mean, for any given
month, the gas volume (expressed in Mcf's) obtained by multiplying the number of
days in such month by the following daily gas volumes applicable to such month:
(i) for months prior to January 1991- 50,000 Mcf, (ii) for months during 1991-
47,500 Mcf, (iii) for months during 1992 - 45,000 Mcf and (iv) for months during
1993- 42,500 Mcf.
2.21 "Monthly Replacement Gas Cost Differential" shall mean, with
respect to each calendar month commencing with November 1989 and ending with
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December 1993, a dollar amount equal to the product obtained by multiplying (i)
the applicable Monthly Residue Gas Volume Shortfall by (ii) the difference
(which may be positive or negative) obtained by subtracting the applicable
Residue Gas Contract Price from the applicable Replacement Gas Price; provided,
however, that if, in its good faith business judgment, American elects to make a
payment of a cash basis loss reimbursement under Section 3.1 of either Residue
Gas Contract (as hereinafter defined) so as to avoid the release of gas
attributable to a particular plant in a particular calendar month and such
payment is a lesser cost alternative to the release of the gas and the
replacement thereof at the Replacement Gas Price, the portion of the Monthly
Replacement Gas Cost Differential for such month attributable to such plant
shall be deemed (in lieu of the product computed as aforesaid with respect to
such plant) to be the amount of such cash basis loss reimbursement to the extent
such payment is necessary to avoid or reduce a monthly Residue Gas Volume
Shortfall.
2.22 "Monthly Residue Gas Volume Shortfall" shall mean, for any given
calendar month, the amount (measured in Mcf's) by which the aggregate amount of
residue gas available for purchase by the Acquired Companies from The Maple Gas
Corporation, or any successor thereto ("Maple"), under those certain Residue Gas
Purchase Agreements identified in Appendix D hereto (or any amendment or
modification thereof to which Cabot has consented in its discretion) (the
"Residue Gas Contracts") is less than the applicable Monthly Minimum Residue Gas
Volume; provided, however, that the Monthly Residue Gas Volume Shortfall shall
be zero for any month unless any portion of such shortfall below the Monthly
Minimum Residue Gas Volume solely or partially resulted from the release of gas
from the Residue Gas Contracts pursuant to Section 3.1 of either of the Residue
Gas Contracts or the exercise by Maple of any other economic or market "outs" or
similar rights which would have the effect of releasing residue gas under any
amendment or modification of the Residue Gas Contracts to which Cabot has
consented in its discretion; and provided further that in an event shall the
Monthly Residue Gas Volume Shortfall exceed the aggregate amount (measured in
Mcf's) of gas so released from the Residue Gas Contracts.
2.23 "Option Date" means the date of the closing of the acquisition by
American of Gathering Company pursuant to the exercise of the Gathering Company
Option.
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2.24 "Payment Date" is defined in Section 4.1 hereof.
2.25 "Replacement Gas Price" shall mean, for any given month, the
weighted average cost of gas per Mcf (as adjusted for MMbtu content) of all gas
purchased by CEMCO or its successor in such month from the alternative gas
purchase sources listed in Appendix E hereto, as it may be amended from time to
time by mutual agreement of American and Cabot.
2.26 "Residue Gas Contract Price" shall mean, for any given month, the
lowest contract sales price per Mcf (as adjusted for MMbtu content) of residue
gas in effect under the Residue Gas Purchase Contracts described in Appendix D
hereto (or under any renewal, amendment or modification thereof to which Cabot
has consented in its discretion); provided that if any of such contracts (or
under any renewal, amendment or modification thereof to which Cabot has
consented in its discretion) cease to be valid and enforceable against The Maple
Gas Corporation, or any successor thereto, the last effective contract sales
price of residue gas under such contract shall be considered in effect for the
purpose of determining the lowest contract sales price. If such last effective
contract price is stated by formula, then such formula shall be applied to the
month in which a Monthly Residue Gas Volume Shortfall exists.
2.27 "Revolving Credit Note" means a promissory note substantially in
the form attached hereto as Appendix B.
2.28 "Settlement Amount" is defined in Section 5(b) hereof.
2.29 "Settlement Date" means the Initial Settlement Date or any
extension thereof which may occur pursuant to Section 3.3 hereof.
2.30 "Settlement Date Value" means the net present value as of the
Settlement Date of each of (i) Future Basket Collections and (ii) Future Basket
Payments. Future Basket Collections and Future Basket Payments, and the timing
thereof, shall be based upon estimates of future deliverable supplies of gas,
projections of market conditions, and prices based on market prices in effect as
of the Settlement Date for similar gas. Estimates of Future Basket Collections
shall take into consideration the reasonable probabilities of recovery of such
costs through flow through under contracts, rules, orders and regulations in
effect as of the Settlement
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Date and taking into account projections of market conditions. The Settlement
Date Value shall be established using a discount rate, compounded semi-annually,
equal to the weighted average cost of borrowed money of American as of the
Settlement Date.
2.31 "Settlement Period" means the period from September 30, 1998
to the Settlement Date.
2.32 "Take or Pay Account Statement" is defined in Section 3.1
hereof.
2.33 "Take or Pay Claims" means (i) all claims, liabilities and losses
resulting from (a) the failure or alleged failure of any of the Acquired
Companies to take or pay (or take and pay) for minimum quantities of gas
attributable to any period prior to the Closing Date including, without
limitation, claims alleging violation of ratable take obligations and claims
alleging damages for failure to take-gas (but excluding Take or Pay Recovery
Costs included in clause (ii) hereof) or (b) the failure or alleged failure of
Cabot Pipeline Corporation to take or pay (or take and pay) for minimum
quantities of gas under the contracts specified in Appendix F hereto
attributable to the period from September 29, 1984 through June 30, 1985
including, without limitation, claims alleging violation of ratable take
obligations and claims alleging damages for failure to take gas (but excluding
Take or Pay Recovery Costs included in clause (ii) hereof) and (ii) all costs
resulting from the incurring by the Acquired Companies of any Take or Pay
Recovery Costs, but excluding all claims, liabilities and losses relating to any
of the matters described in Schedule 13.01(A) to the Omnibus Agreement.
2.34 "Take or Pay Recovery Costs" means any costs or other amounts paid
to past or future gas suppliers or gas transporters by the Acquired Companies
(whether in the form of a direct payment or billing or surcharge on future
purchases or transportation or otherwise) after October 31, 1989 pursuant to
filed tariffs, orders of a regulatory body or statute, under any program
established primarily for the purpose of providing such suppliers or
transporters with a mechanism to recover, or be reimbursed for, past take or pay
liabilities, whether under Order 500 promulgated by the FERC or any other rule
or order of any regulatory body, federal or state, having jurisdiction over gas
pipelines, suppliers or transporters, or otherwise, and whether or not such cost
or amount is determined with regard to the historical gas purchases or
transportation of the Acquired Companies.
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2.35 "Unrecovered Take or Pay Recovery Costs" means the amount (if
positive) obtained by subtracting $5 million from the aggregate Basket Payments
made by the Acquired Companies as of the Settlement Date relating to Take or Pay
Recovery Costs that have not been recouped or amortized by the Acquired
Companies by the realization of corresponding Basket Collections prior to the
Settlement Date.
2.36 "Unregulated Monthly WASP" means the weighted average unit sales
price per MMBtu received by Anthem Energy Company (formerly CEMCO) ("Anthem")
for all gas sold in the State of Texas in Texas Railroad Commission Districts 8,
8A and 10 under sales contracts with primary terms of less than 90 days, during
a given calendar month by Anthem, excluding sales to Anthem's affiliates,
determined by dividing the total number of MMbtu's of such gas sold by Anthem in
such calendar month into the net proceeds received from such sales in such month
after deducting any charges incurred by Anthem for third party transportation
relating to such gas (including, without limitation, transportation on pipelines
belonging to joint ventures or partnerships in which Anthem's affiliates have an
interest, but excluding charges, if any, for transportation of the gas through
facilities wholly owned by the Acquired Companies) and after adjusting for prior
period adjustments.
3. Accounting.
3.1 Take or Pay Account Statement. Cabot and American shall jointly
prepare, within 30 days after the Determination Date, a statement as of the
Determination Date which reflects the Basket Payments paid or otherwise incurred
by, and the Basket Collections realized by, the Acquired Companies since
September 30, 1988 (the "Initial Take or Pay Account Statement"). If Cabot and
American are unable to agree on the preparation of the Initial Take or Pay
Account Statement within 30 days after the Determination Date, the Initial Take
or Pay Account Statement shall be determined by an independent accounting firm
selected by mutual agreement of Cabot and American. The determinations included
in the Initial Take or Pay Account Statement prepared by such accounting firm
shall be final and binding on Cabot and American, and the fees and expenses of
such accounting firm shall be borne equally by Cabot and American. During the
period prior to Closing, Cabot shall have caused the Acquired Companies to
maintain, and, after Closing, American shall cause the Acquired Companies to
maintain, their books
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and records in such a manner that Basket Collections, Basket Payments and
potential flow-through costs incurred in the settlement, discharge, compromise
or release of Take or Pay Claims can be clearly identified and calculated.
During the Settlement Period, American shall cause the Acquired Companies to
make adjustments to the Initial Take or Pay Account Statement (the Initial Take
or Pay Account Statement and each successive adjusted statement delivered
pursuant to the next succeeding sentence are each herein described as a "Take or
Pay Account Statement") to reflect increases and decreases in the accounts on
such Take or Pay Account Statement in accordance with the terms hereof. Within
30 days after the end of each calendar quarter occurring after the Closing Date,
and ending with the last calendar quarter ending on a date prior to the
Settlement Date, American shall deliver a quarterly interim Take or Pay Account
Statement to Cabot reflecting such account adjustments made during the previous
calendar quarter and the balance of each account as of the end of such calendar
quarter.
3.2 Adjustments. If prior to Closing Cabot or any of the Acquired
Companies shall have settled, released, compromised or discharged any Take or
Pay Claims, or if after Closing American or any of the Acquired Companies
settles, releases, compromises or discharges any Take or Pay Claims, the Basket
Payments Account reflected on the then current Take or Pay Account Statement
shall be adjusted to reflect the amount of Basket Payments incurred by any of
the Acquired Companies. Basket Payments consisting of Annual Replacement Cost
Differential for any of the calendar years 1990 through 1993 shall be reflected
in Basket Payments on and as of the March 31 next following the end of such
calendar year. The Basket Collections Account reflected on the then current Take
or Pay Account Statement shall be adjusted to reflect the amount of Basket
Collections. If the Initial Take or Pay Statement reflects an excess as of the
Determination Date of the balance of the Basket Collections Account over the
balance of the Basket Payments Account (the "Determination Date Basket Excess"),
then the amount of such Determination Date Basket Excess shall be retained in
the Acquired Companies through the Determination Date for the benefit of
American and Pipeline and an amount equal to such Determination Date Basket
Excess shall be excluded as of the Determination Date from the calculation of
Working Capital (as defined in Section 13.01 of the Omnibus Agreement) of the
Acquired Companies for the purpose of Section 13.01 of the Omnibus Agreement. If
the Initial Take or Pay Statement reflects an excess as of the Determination
Date of the balance of the Basket Payments Account over the balance of the
Basket Collections Account (the "Determination Date Basket Deficit"),
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then the amount of such Determination Date Basket Deficit shall be deemed drawn
as a Basket Advance on the Revolving Credit Note on the Determination Date and
shall not be included in the calculation of Working Capital as of the
Determination Date pursuant to Section 13.01 of the Omnibus Agreement.
3.3 Final Statement. Within 30 days after the Initial Settlement Date
(and any subsequent Settlement Date in the event such date is extended pursuant
to this Section 3.3), American shall submit to Cabot a proposed final Take or
Pay Account Statement which shall reflect cumulative aggregate Basket
Collections and Basket Payments during the Settlement Period and the respective
balances of the Basket Collections Account and the Basket Payments Account as of
the applicable Settlement Date. In addition, the proposed final Take or Pay
Account Statement shall reflect American's estimate of Future Basket
Collections, Future Basket Payments and the Settlement Date Value of each.
Within 30 days after Cabot has received such proposed final Take or Pay Account
Statement, Cabot shall notify American whether Cabot agrees or disagrees with
all or a portion of such statement. If Cabot agrees with such statement in its
entirety, the parties shall settle in accordance with Paragraph 4 hereof. If the
parties are unable to agree on a final Take or Pay Account Statement within 30
days after Cabot has received American's proposed final Take or Pay Account
Statement with regard to the Initial Settlement Date, the Settlement Date shall
be extended to a date one year from the date of the Initial Settlement Date. At
the end of such extended Settlement Period, Cabot and American shall follow the
procedures set forth herein in an attempt to agree on a final Take or Pay
Account Statement. If within 60 days after the end of the extended Settlement
Period Cabot and American are unable to agree on a final Take or Pay Account
Statement, then Cabot and American shall submit any and all disputes concerning
the amounts reflected in the proposed final Take or Pay Account Statement to
arbitration in accordance with the arbitration procedures set forth in Appendix
A hereto. The decision of the arbitrators concerning the final Take or Pay
Account Statement shall be binding upon the parties as further specified in
Appendix A and, following any final decision rendered by the arbitrators, the
parties shall settle in accordance with Section 4 hereof.
3.4 Limitation on Post-Closing Obligations. Except as otherwise
provided in Section 5(a) hereof, nothing contained in this Agreement shall be
construed to obligate American, Pipeline or the Acquired Companies to file any
proceedings with any regulatory body or to institute litigation to attempt to
recover
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any cost incurred in the settlement, discharge, compromise or release of any
Take or Pay Claim; provided, however, that American and Pipeline shall, and
American and Pipeline shall cause the Acquired Companies to, exert reasonable
efforts in good faith to maintain rate recovery mechanisms existing as of the
date of this Agreement for take-or-pay related costs.
3.5 Amendment Date Take or Pay Account Statement. Attached as Appendix
G is a statement as of June 30, 1990 which reflects the Basket Payments paid or
otherwise incurred by, and the Basket Collections realized by, the Acquired
Companies since September 30, 1988.
4. Sharing of Basket Obligations.
4.1 Excess Net Assets. In the event that, as reflected in the final
Take or Pay Account Statement, the sum of (a) the cumulative aggregate Basket
Collections realized by the Acquired Companies during the Settlement Period plus
(b) the Settlement Date Value of Future Basket Collections exceeds the sum of
(i) the cumulative aggregate Basket Payments incurred by the Acquired Companies
during the Settlement Period (less the amount of any Unrecovered Take or Pay
Recovery Costs) plus (ii) the Settlement Date Value of Future Basket Payments
(the amount of any such excess being referred to herein as the "Basket
Surplus"), then American or Pipeline shall pay to Cabot an amount equal to the
sum of (i) the aggregate Annual Replacement Gas Cost Differentials, if any, for
the years 1990 through 1993 (but only to the extent of such Basket Surplus) plus
(ii) one-half of the remainder of such Basket Surplus after payment of the
amount specified in clause (i), if any, within the later of (A) three business
days after agreement on the final Take or Pay Account Statement or (B) three
business days after the date a final decision is rendered by the arbitrators
regarding the final Take or Pay Account Statement which is submitted to
arbitration pursuant to Section 3.3 hereof (the "Payment Date").
4.2 Excess Net Liabilities. In the event, as reflected in the final
Take or Pay Account Statement, the sum of (A) the cumulative aggregate Basket
Payments incurred by the Acquired Companies during the Settlement Period (less
the amount of any Unrecovered Take or Pay Recovery Costs) plus (B) the
Settlement Date Value of Future Basket Payments exceeds the sum of (x) the
cumulative aggregate Basket Collections realized by the Acquired Companies
during the Settlement Period plus (y) the Settlement Date Value of Future Basket
Collections (the amount of any such
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excess being referred to herein as the "Basket Deficit"), then Cabot shall pay
to American or Pipeline, on the Payment Date, a portion of the Basket Deficit as
follows:
(1) In the event that the Basket Deficit is less than $40
million, Cabot shall pay an amount equal to one-half of the Basket
Deficit, it being understood and agreed that American, Pipeline and the
Acquired Companies shall be fully responsible for the other half.
(2) In the event that the Basket Deficit is equal to or
greater than $40 million, Cabot shall pay an amount equal to $20
million plus all of the Basket Deficit in excess of $40 million, it
being understood and agreed that American, Pipeline and the Acquired
Companies shall remain fully responsible for the remaining $20 million.
4.3 Interest on Sharing Payments. Any payment made by American or
Pipeline pursuant to Section 4.1, or by Cabot pursuant to Section 4.2, shall
bear interest from (and including) the applicable Settlement Date to (but
excluding) the date of payment at an interest rate per annum equal to the rate
per annum that such amount would bear if it was an amount outstanding at the
time under the Revolving Credit Note. Payment of such interest shall be due when
payment of the amount to which it relates is due.
4.4 Character of Sharing Payments. Any payments made by American or
Pipeline pursuant to Section 4.1, or by Cabot pursuant to Section 4.2, shall be
treated as adjustments to the cost of acquiring CGSC pursuant to the Stock
Purchase Agreement.
5. Matters Concerning Gathering Company. (1) In the event American
exercises the Gathering Company Option during the Settlement Period, the
Acquired Companies and Pipeline shall pay over to Cabot, as collected, amounts
paid by Gathering Company prior to the Option Date in settlement, discharge,
compromise or release of take or pay and related claims against Gathering
Company and collected after the Option Date by flow-through to El Paso or to the
Acquired Companies. If, prior to the Option Date, Gathering Company shall have
filed an application with the FERC pursuant to Order 500 of the FERC and related
regulatory provisions to recover a portion of Gathering Company's take or pay
buyout and buydown and related costs, then after the Option Date American and
Pipeline shall cause
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Gathering Company to prudently prosecute such application before the FERC to
recover for Gathering Company a portion of all recoverable costs to the extent
permitted under FERC orders and regulations. If Gathering Company is granted
authority by the FERC to recover a portion of take or pay and related costs,
whether such authority is granted before or after the Option Date, American and
Pipeline shall cause Gathering Company to pay over to Cabot, as collected, all
amounts actually recovered from E1 Paso by Gathering Company pursuant to such
authority.
(b) Regardless of whether American exercises the Gathering Company
Option, in full and final settlement of all take or pay and related claims of
Gathering Company against CGSC, after the Closing Date, Pipeline shall cause
CGSC to pay to Gathering Company (i) to the extent that Gathering Company
remains subject to the jurisdiction of the FERC, any charges to CGSC made by
Gathering Company (whether in the form of a direct payment or surcharge on
future purchases or otherwise) pursuant to filed tariffs reflecting pass through
or recovery of take-or-pay associated costs under any program established and
authorized under Order 500 promulgated by the FERC in any Docket Number
beginning with the prefix "RM 87-34-" or similar rule or order (whether in the
form of a direct payment or surcharge on future purchases or otherwise) and (ii)
to the extent Gathering Company ceases to be subject to the jurisdiction of the
FERC, all amounts that may be owed by CGSC to Gathering Company under that
certain Gas Sales Contract dated December 31, 1957 by and between Gathering
Company, as Seller ("Seller'), and Pioneer Natural Gas Company, predecessor to
CGSC, as Buyer ("Buyer"), as amended (the "Gas Sales Contract") for all claims,
liabilities and losses sustained by Gathering Company as a result of the failure
of CGSC to take or pay for minimum quantities of gas attributable to any period
prior to the Closing Date. For purposes of paragraph 3 of that certain letter
agreement dated August 11, 1977, between Buyer and Seller (the "Letter
Agreement"), an amount equal to 18.12% of any settlements by or judgments
against Seller for take-or-pay liabilities paid or incurred and unpaid, in
either case, prior to Closing shall be considered "the amount necessary for
Seller to prepay Seller's producer suppliers . . . ," and Buyer shall have the
right to take from Seller as prepaid volumes only 18.12% of those volumes
actually recouped or taken by Seller as prepaid volumes as a result of payment
made by Seller to its producer suppliers pursuant to any judgment, settlement or
other contractual obligation. To the extent recoupment by Seller from its
producer suppliers is through a cash payment, Seller shall promptly pay over to
Buyer 18.12% of such payment. The rights and obligations of the parties
hereinabove set forth under the Letter
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Agreement shall survive the expiration date thereof. In no event, however, shall
the aggregate of any amounts owing and paid to Gathering Company under this
paragraph 5 and the Gas Sales Contract exceed $2,100,000 (the sum of all amounts
owing by CGSC hereunder to Gathering Company being herein referred to as the
"Settlement Amount"). Any payments made pursuant to (ii) of the next preceding
sentence shall be adjusted, as appropriate, for amounts paid pursuant to (i) of
such sentence so that the total amount paid thereunder shall not exceed the
amount which would have been payable if Gathering Company had been
non-jurisdictional at all times on and after the Closing Date. Except as
provided in this Section 5 with respect to payment of the Settlement Amount,
Gathering Company agrees to fully release and hold harmless CGSC, its
predecessors, their officers, directors, agents and representatives from and
against all take or pay, take and pay and related claims which Gathering Company
may have, or is alleged to have. In the event that Gathering Company ceases to
be subject to the jurisdiction of the FERC, Gathering Company agrees to execute
and deliver to CGSC an amendment to the Gas Sales Contract, in form and
substance satisfactory to Pipeline, providing in substance that there shall not
be included in any component of the purchase and sales price of gas under the
Gas Sales Contract (whether included in "Cost of Service" or otherwise) any cost
associated with the settlement, discharge, compromise or release of any take or
pay or related claims against Gathering Company attributable to any period prior
to the date of final payment of the Settlement Amount. For all purposes of this
Agreement, any payment of any portion of the Settlement Amount by CGSC shall
constitute a Basket Payment, and, to the extent recovered by the Acquired
Companies by flow-through to customers or liquidation or recovery in any other
manner, a Basket Collection.
(c) Except as otherwise provided in Section 5(a), nothing contained in
this section shall be construed to obligate American, Pipeline or the Acquired
Companies (or, in the event the Gathering Company Option is exercised, Gathering
Company) to file any proceedings with any regulatory body or institute
litigation to attempt to recover any cost incurred in the settlement, discharge,
compromise or release of any take or pay and related claims of Gathering
Company.
6. Revolving Credit Facility. Pipeline has executed and delivered to
Cabot the Revolving Credit Note dated as of the date hereof and American and
Cabot have executed and delivered the Guaranty. Cabot agrees to lend from time
to time to Pipeline, and Pipeline agrees to pay, the respective amounts provided
in the
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Revolving Credit Note in accordance with the terms thereof. Subject to the terms
hereof, Cabot accepts and agrees to be bound by the terms of the Revolving
Credit Note.
7. Settlement of Take or Pay Claims. After the Closing, the Acquired
Companies shall have sole and complete authority to settle, discharge,
compromise or release, or otherwise negotiate or resolve or attempt to resolve
all controversies related to, any Take or Pay Claims; provided that (i) the
Acquired Companies shall keep Cabot reasonably advised, and shall upon request
consult with Cabot, from time to time during the Settlement Period on the status
of the negotiations and proposed resolution of all matters related to Take or
Pay Claims and (ii) with respect to the settlement of any Take or Pay Claim in
an amount in excess of $1,000,000, Cabot shall have the right of prior written
consent. If Cabot does not deliver a written objection to a proposed settlement
in excess of such amount within 15 days after American has delivered a written
proposal of settlement to Cabot, then Cabot shall be deemed to have consented to
such proposal of settlement.
8. Governing Law. Except for the agreement to arbitrate and the other
provisions respecting arbitration contained herein and in Appendix A, which
shall be governed by and construed in accordance with the Federal Arbitration
Act, 9 U.S.C.A. ▇▇.▇▇. 1-14, as amended, and other applicable U.S. federal law
in each case as in effect on the date hereof, this Agreement shall be governed
by and construed in accordance with the laws of the State of Texas.
9. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto, their respective successors
and assigns. No assignment of this Agreement shall release any party of any
obligations under this Agreement.
10. Notices. Notices required to be delivered hereunder shall be in
writing and shall be deemed delivered when delivered in accordance with the
notice provisions of the Revolving Credit Note.
11. Effect of Amendment. It is the intent of the parties hereto that
the amendments to the original Basket Agreement effected by this Amended and
Restated Basket Agreement are to be effected retroactively to November 13,1989.
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12. Approval of Certain Creditors. Notwithstanding any provision of
this Amended and Restated Basket Agreement to the contrary, the amendment and
restatement of this Agreement shall not be effective unless and until this
Amended and Restated Basket Agreement is approved, or consented to, by The
Prudential Insurance Company of America and Pruco Life Insurance Company, as
holders of the 11.38% Senior Notes due September 30, 1999 and 12.69% Senior
Subordinated Notes due September 30, 1999 of Pipeline under that certain
Securities Purchase Agreement dated as of November 13, 1989.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
AMERICAN OIL AND GAS AMERICAN PIPELINE COMPANY
CORPORATION
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------- ----------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
President President
CABOT CORPORATION CABOT TRANSMISSION
CORPORATION CORPORATION
By:/s/ ▇▇▇▇ ▇. ▇. ▇▇▇▇▇ By:/s/ ▇▇▇▇ ▇. ▇. ▇▇▇▇▇
--------------------------------- -------------------
▇▇▇▇ ▇. ▇. ▇▇▇▇▇ ▇▇▇▇ ▇. ▇. ▇▇▇▇▇
Vice-Chairman President
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APPENDIX A TO
BASKET AGREEMENT
ARBITRATION PROCEDURES
1. Arbitration Period. The Arbitration Period shall begin 60 days from
the extended Settlement Date, as provided in the Basket Agreement, if the
parties have been unable to reach an agreement on the final Take or Pay Account
Statement by such date; and it shall continue until the Arbitrators have
rendered their decision or the parties have reached a final agreement with
respect to such final Take or Pay Account Statement.
2. Selection of Arbitrators. Each of Cabot (on behalf of itself and
Transmission) and American (on behalf of itself and Pipeline) shall designate an
arbitrator within fourteen days after the beginning of the Arbitration Period
and the two arbitrators so designated shall select a third arbitrator within
thirty days after the beginning of the Arbitration Period. The panel of such
three arbitrators (the "Arbitrators") shall decide any dispute between the
parties with respect to the final Take or Pay Account Statement, as provided in
Section 3.3 of the Basket Agreement, with a vote of two of the Arbitrators
required to render a decision.
3. Location. The arbitration shall be conducted in Houston, Texas.
4. Decision. The decision of the Arbitrators shall be in writing and
shall contain a reasonably complete description of the legal and factual bases
of the award. Except to the extent otherwise provided by applicable law, the
award of the Arbitrators shall be final, binding and unappealable, and such
award shall receive recognition and enforcement in any court of competent
jurisdiction.
5. Governing Rules and Law. The Arbitrators, American, Pipeline, Cabot
and Transmission shall observe and be bound by the procedures set forth herein,
as supplemented (to the extent of lack of conflict) by the Commercial
Arbitration Rules of the American Arbitration Association as in effect on the
effective date of the Basket Agreement. The agreement to arbitrate and the other
provisions respecting arbitration contained herein and in the Basket Agreement
shall be governed by and construed in accordance with the Federal Arbitration
Act, 9, U.S.C.A. ▇▇.▇▇. 1-14, as amended. and other applicable U.S. federal law
in each case as in effect on the effective date of the Basket Agreement.
6. Costs and Expenses. The costs and expenses of the arbitration shall
be borne and paid by the parties in equal shares and shall include compensation
to the Arbitrators, which compensation shall be negotiated among the parties and
the Arbitrators, plus out-of- pocket expenses. Each party shall bear and be
responsible for the fees of its own counsel and other advisors and any costs
associated with obtaining evidence or the testimony of witnesses or otherwise
making such witnesses available to testify. If the testimony of a witness or
other item of evidence is obtained by both parties, the costs associated with
obtaining such testimony or evidence shall be borne equally between the parties.
▇▇
▇▇▇▇▇▇▇▇ ▇ TO BASKET AGREEMENT
Form of Revolving Credit Note
REVOLVING CREDIT NOTE
22
REVOLVING CREDIT NOTE:
$25,000,000.00 November 13, 1989
FOR VALUE RECEIVED, the undersigned, American Pipeline Company, a
Delaware corporation ("Maker") hereby promises to pay to the order of Cabot
Corporation, a Delaware corporation with its principal offices in Waltham,
Massachusetts ("Lender"), on or before the Payment Date as defined in Section
4.1 of the Basket Agreement hereinafter referred to (the "Maturity Date"), the
lesser of (i) Twenty Five Million Dollars ($25,000,000) and (ii) the aggregate
unpaid principal amount of advances outstanding hereunder, plus all interest
accrued and unpaid hereunder. Maker also agrees to make additional payments of
principal under this Note as provided herein.
This Note is the Revolving Credit Note provided for in, and is entitled
to the benefits of, the Basket Agreement dated the date hereof among American
Oil and Gas Corporation ("American"), American Pipeline Company ("Pipeline"),
Cabot Transmission Corporation and Lender, as and if amended from time to time
(the "Basket Agreement"). It is contemplated that by reason of prepayments
hereon there may be times when no indebtedness is owing hereunder, but
notwithstanding such occurrences, this Note shall remain valid and shall be in
full force and effect as to Basket Advances (as hereinafter defined) and Working
Capital Advances (as hereinafter defined) made pursuant hereto subsequent to
each such occurrence.
1. Interest Rate. This Note shall bear interest on the unpaid principal
amount hereof from time to time outstanding, until maturity (whether by
acceleration or otherwise), at a rate per annum equal to the lesser of (i) the
rate determined in accordance with Schedule I hereto (the "Floating Rate") and
(ii) the
23
maximum non-usurious contract rate of interest permitted by applicable law (the
"Highest Lawful Rate"). After maturity, the unpaid principal amount hereunder,
and, to the extent permitted by law, accrued unpaid interest hereon, shall bear
interest until paid in full at the rate per annum equal to the lesser of (x) the
Floating Rate plus 5% per annum and (y) the Highest Lawful Rate. Interest
charges will be calculated on amounts owing hereunder on the actual number of
days said amounts are outstanding on the basis of a 360 day year.
2. Working Capital Advances. On any date prior to November 13, 1991,
Maker may borrow and reborrow from time to time on a revolving credit basis for
general working capital purposes (including, without limitation, to fund
advances made by Maker to the Acquired Companies (as defined in the Basket
Agreement) for general working capital purposes) an amount of principal
hereunder upon prior written notice of at least two Business Days (as
hereinafter defined) from Maker to Lender specifying the date and aggregate
principal amount of such advance (such advances are herein referred to as
"Working Capital Advances"); provided that at no time shall the aggregate amount
of Working Capital Advances hereunder exceed $4,000,000 at any one time
outstanding. Each Working Capital Advance to be made hereunder shall be in a
principal amount of not less than $50,000, or any larger amount that is an
integral multiple of $50,000.
3. Basket Advances. Maker may borrow and reborrow from time to time on
a revolving credit basis for the purpose of funding, on a current basis, the
excess of cumulative aggregate Basket Payments (including, for the purposes of
this Note, advances from Maker to the Acquired Companies to fund any Basket
Payments of the Acquired Companies) over cumulative aggregate Basket Collections
(as such terms are defined in the Basket Agreement) an amount of principal as
provided hereunder (such advances are herein referred to as "Basket Advances").
On the Determination Date, Maker shall be deemed to have drawn as a Basket
Advance an
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amount of principal hereunder equal to the Determination Date Basket Deficit (as
defined in the Basket Agreement), as such amount is derived from the Initial
Take-or-Pay Account Statement (as defined in the Basket Agreement). Maker may at
any time and from time to time, but solely for the purpose set forth in the
first sentence of this paragraph, on or before November 13, 1994, borrow and
reborrow an additional amount 0of principal hereunder as a Basket Advance upon
at least two Business Days' prior written notice to Lender specifying the date
and aggregate principal amount of such Basket Advance; provided, however, that
at no time shall the total of aggregate outstanding Working Capital Advances and
aggregate outstanding Basket Advances exceed Twenty-Five Million Dollars
($25,000,000).
4. Advance Procedures and Records. Lender shall deposit the proceeds of
a requested Working Capital Advance or Basket Advance no later than 1:00 p.m.
Houston time on the date so specified in any such notice of the requested
advance to such demand deposit account maintained at a commercial bank as Maker
shall have designated in such notice. Working Capital Advances or Basket
Advances made by Lender to Maker and all prepayments or repayments thereof shall
be recorded by Lender and, prior to any transfer hereof, endorsed by Lender on
Schedule II attached hereto, or on a continuation of such Schedule II to be
attached to and made a part hereof. The failure of Lender to so record any
advance or repayment shall not affect Maker's liability for any Working Capital
Advance or Basket Advance.
5. Mandatory Prepayments. (1) Within three Business Days following the
delivery to Cabot of any quarterly interim Take-or-Pay Account Statement (as
defined in the Basket Agreement), or if such statement is not delivered when
required under the Basket Agreement, within three Business Days following the
date upon which such statement is required to be delivered pursuant to Section
3.1 of the Basket Agreement, Maker shall prepay the outstanding principal
related to Basket Advances in such amount, if any, as may be required so that
the aggregate principal
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amount of all outstanding Basket Advances shall not exceed the sum of (i) the
amount of the excess, if any, of the balance of the Basket Payments Account over
the balance of the Basket Collections Account as of the end of the preceding
calendar quarter and (ii) the aggregate amount of permitted Basket Advances
loaned to Maker since the last day of such calendar quarter, together with
accrued and unpaid interest on the principal amount being prepaid.
(b) Maker shall prepay all outstanding principal related to Working
Capital Advances together with accrued and unpaid interest on the principal
amount thereof on November 13, 1991.
6. Optional Prepayments. Maker may on any Business Day prepay, without
penalty, amounts of principal outstanding hereunder in whole at any time or in
part from time to time in an aggregate principal amount of $50,000 (except in
connection with prepayments made pursuant to paragraph 5 hereof) or any larger
amount that is an integral multiple of $50,000, together with accrued and unpaid
interest on the principal amount being prepaid to the date of prepayment;
provided that Maker shall have given Lender at least one Business Day's prior
written notice of such prepayment. Maker shall designate in such notice the date
and the proposed principal amount being prepaid, in whole or in part, and
whether such prepayment is to reduce outstanding Working Capital Advances or
Basket Advances. Amounts prepaid by Maker as aforesaid shall be applied to
prepay principal as designated.
7. Interest Payments. Interest accrued on all principal amounts
remaining unpaid hereon shall be payable quarterly as it accrues on the last day
of each calendar quarter and at maturity of the respective amounts to which such
interest relates.
8. Procedures on Payments. Payments of both principal and interest are
to be made in lawful money of the United States of America at the office of
Lender or, at Lender's written direction, by wire transfer of such funds to a
commercial bank
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account of Lender. If any payment of principal or interest on this Note shall
become due on a day other than a Business Day, such payment shall be made on the
next Business Day and such extension of time shall in such case be included in
computing interest in connection with such payment. In this Note, the term
"Business Day" shall mean any day other than a Saturday, a Sunday or a day on
which national banks in Houston, Texas, are required or permitted by law to
close.
9. Usury Savings. It is the intention of Maker and Lender to conform
strictly to all applicable usury laws. It is therefore agreed that (i) in the
event that the maturity hereof is accelerated by reason of an election by
Lender, or if the same is prepaid prior to maturity, all unearned interest, if
any, shall be canceled automatically or, if theretofore paid, shall be credited
on the unpaid principal amount of this Note with the excess, if any, refunded to
Maker, (ii) the aggregate of all interest and other consideration and charges
constituting interest under applicable law and contracted for, chargeable or
receivable under this Note or otherwise in connection with the transaction for
which this Note is given shall never exceed the Highest Lawful Rate, nor produce
a rate in excess of the Highest Lawful Rate that Lender may charge Maker under
applicable law and in regard to which Maker may not successfully assert the
claim or defense of usury, and (iii) if any interest above the Highest Lawful
Rate is provided for, it shall be deemed a mistake and the same shall be
credited on the unpaid principal amount of this Note with the excess thereof, if
any, being refunded to Maker and this Note shall be automatically deemed
reformed so as to permit only the collection of the Highest Lawful Rate and
amount of interest allowed by applicable law. All sums paid or agreed to be paid
to the holder or holders of this Note for the use, forbearance or detention of
the indebtedness evidenced hereby shall, to the full extent permitted by
applicable law, be amortized, prorated, allocated and spread through the fullest
term of this Note. Lender and Maker further agree that insofar as the provisions
of Article 1.04, Subtitle 1, Title 79, of the Revised
▇-▇
▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇, as amended, are applicable to the determination
of the Highest Lawful Rate with respect to this Note, the indicated rate ceiling
computed from time to time pursuant to Section (a) of such Article shall apply
to this Note; provided, however, that to the extent permitted by such Article,
Lender may from time to time by notice from Lender to Maker revise the election
of such interest rate ceiling as such ceiling affects the then current or future
balances of the indebtedness outstanding under this Note. The provisions of
Chapter 15 of Subtitle 3 of the said Title 79 do not apply to this Note.
10. Events of Default. Each of the following events shall constitute
an event of default under this Note:
(a) failure by Maker to pay any principal amounts becoming due and
payable on this Note either (i) on the Maturity Date or (ii) pursuant to
paragraph 5(b) hereof; or
(b) failure by Maker to pay any amounts becoming due and payable on
this Note (including principal and accrued and unpaid interest) other than the
amounts referred to in paragraph 10(a) hereof, and continuation of such
nonpayment for a period of 10 days; or
(c) Maker or American makes an assignment for the benefit of creditors,
admits in writing its inability to pay its debts as such debts become due or
fails generally to pay its debts as such debts become due; or
(d) Maker or American petitions or applies to any tribunal for or
consents to the appointment of, or taking possession by, a trustee, receiver,
custodian, liquidator or similar official, of it or any substantial part of its
assets, or commences any proceedings relating to it under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
other liquidation law of any jurisdiction or takes corporate action in
furtherance of any of the foregoing; or
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28
(e) any petition or application of the type referred to in clause (d)
above is filed, or any such proceedings are commenced, against Maker or
American, and such petition or application is not dismissed within 30 days of
the date of such filing, or Maker or American by any act indicates its approval
thereof, consent thereto or acquiescence therein, or an order for relief is
entered in an involuntary case under the bankruptcy law of the United States, or
an order, judgment or decree is entered appointing any such trustee, receiver,
custodian, liquidator or similar official or adjudicating Maker or American
bankrupt or insolvent, or approving the petition in any such proceedings, and
such order, judgment or decree remains unstayed and in effect for more than 30
days; or
(f) any order, judgment or decree is entered in any proceeding against
any of Maker or American decreeing the dissolution or split-up of Maker or
American, and such order, judgment or decree remains unstayed and in effect for
more than 60 days; or
(g) any of the Revolving Notes, the Senior Notes, or the Senior
Subordinated Notes (as those terms are defined in Securities Purchase Agreement
dated as of November 13, 1989 among American, Maker, The Prudential Insurance
Company of America and Pruco Life Insurance Company (the "Securities Purchase
Agreement")) shall become or be declared due prior to its stated maturity, or
there is a default in the payment of any such indebtedness at the final stated
maturity thereof, or Maker fails to make any payment required to be made under
Section 5F of the Securities Purchase Agreement; or
(h) any other obligation of Maker or American for money borrowed (or
any capitalized lease obligation, any obligation under a conditional sale or
other title retention agreement, any obligation issued or assumed as full or
partial payment for property whether or not secured by a purchase money mortgage
or any obligation under notes payable or drafts accepted representing extensions
of credit) shall
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29
become or be declared due prior to its stated maturity, or there is a default in
the payment of any such obligation at the final stated maturity thereof,
provided in any case that the aggregate outstanding principal amount of all such
obligations declared due prior to stated maturity or not paid at final stated
maturity shall be $2,500,000 or more; or
(i) Maker defaults in the performance or observance of paragraph 13
hereof.
11. Remedies Upon Default. Upon the occurrence of an event of default
specified in clause (c), (d), (e), (f), (g), or, if the Senior Notes, Senior
Subordinated Notes and Revolving Notes are no longer outstanding, clause (h) of
paragraph 10 hereof, the unpaid principal of, and accrued and unpaid interest
on, this Note shall automatically become immediately due and payable without any
requirement of notice to Maker except as may be required by law. Upon the
occurrence of any other event of default hereunder, Lender may, by notice to
Maker, declare the unpaid principal of, and accrued and unpaid interest on, this
Note to be due and payable and such principal and interest shall become due and
payable upon the first to occur of (i) an acceleration under the Revolving
Notes, the Senior Subordinated Notes or the Senior Notes (written notice of
which Maker shall give to the Lender as promptly as practical after the
occurrence thereof), (ii) the fifth Business Day after receipt by Maker and the
holders of the Revolving Notes, the Senior Subordinated Notes and the Senior
Notes of such declaration given hereunder and (iii) immediately upon such
declaration if no Revolving Notes, Senior Subordinated Notes or Senior Notes are
outstanding. In the event this Note is in default or its maturity may be brought
about, and it is placed in the hands of an attorney for collection, or is
collected through probate, bankruptcy or other proceedings, Maker promises to
pay all costs and reasonable attorneys' fees incurred by Lender as a result
thereof.
▇-▇
▇▇
▇▇. Concerning Advances. Each request by any of Maker for an advance
hereunder shall be deemed to include a representation and warranty by Maker that
(i) Maker is authorized and entitled to obtain such advance hereunder, (ii) such
advance is being requested solely for a purpose authorized hereunder, (iii) no
event of default has recurred and is continuing nor has any event occurred and
is continuing that with notice, lapse of time, or both, would constitute an
event of default and (iv) no default by Maker or American in the payment when
due (beyond any applicable grace period) of any principal or interest on any
obligation referred to in clause (g) or any other obligation or obligations
(aggregating $2,500,000 or more in principal amount) referred to in clause (h)
of paragraph 10 hereof has occurred and is continuing. Notwithstanding any other
provision of this Note or the Basket Agreement, Maker shall not be entitled to
an advance hereunder, nor shall Lender be obligated to make an advance
hereunder. upon the occurrence and continuation of an event of default or of an
event that with notice, lapse of time, or both, would constitute an event of
default or if Maker or American shall default in the payment when due (beyond
any applicable grace period) of any principal or interest on any obligation
referred to in clause (g) or any other obligation or obligations (aggregating
$2,500,000 or more in principal amount) referred to in clause (h) of paragraph
10 hereof and such default shall be continuing.
13. Covenant to Secure or Guarantee this Note Equally: Etc. Maker
covenants that if it or any of its Subsidiaries (as defined in the Securities
Purchase Agreement) shall create any Lien (as defined in the Securities Purchase
Agreement) upon any of its property to secure the payment of any Designated
Indebtedness (as hereinafter defined), Maker will grant or will cause such
Subsidiaries to grant (as applicable) a Lien on such property to secure equally
and ratably the payment of this Note; provided that so long as any Designated
Indebtedness is secured by such Lien Lender shall have no control over the sale
or disposition of the property encumbered
B-9
31
by any such Lien until such Designated Indebtedness has been paid in full; and
provided further that the creation of any such security shall not in any way
alter the rights of the holders of Senior Indebtedness in relation to, and the
subordination of, this Note as provided in paragraph 14. Maker further covenants
that if any of its Subsidiaries guarantees the payment of any Designated
Indebtedness, Maker will cause such Subsidiary to guarantee payment of this Note
pursuant to a guarantee containing provisions similar to paragraph 14 hereof
with respect to the subordination of the obligations of Maker or such Subsidiary
thereunder to Senior Indebtedness; provided that the making of any such
guarantee shall not in any way alter the rights of the holders of Senior
Indebtedness in relation to, and the subordination of, this Note as provided in
paragraph 14. "Designated Indebtedness" means (a) the Senior Subordinated Notes
so long as they are outstanding, (b) the Revolving Notes and the Senior Notes if
the Senior Subordinated Notes are not outstanding and (c) any Debt (as defined
in the Securities Purchase Agreement) if no Senior Subordinated Notes, Revolving
Notes or Senior Notes are outstanding.
14. Subordination of this Note.
(a) Subordination of Note. Anything in this Note or the Basket
Agreement to the contrary notwithstanding, the indebtedness evidenced by this
Note, both principal and interest, shall be subordinated and junior to the
extent set forth in subparagraphs (i) to (v), inclusive, below to all Senior
Indebtedness.
(i) Upon the maturity of any Senior Indebtedness by lapse of
time, acceleration or otherwise, then all principal of, premium, if
any, and interest on all such matured Senior Indebtedness shall first
be paid in full, or such payment shall have been provided for in cash
or in a manner satisfactory to each of the holders, respectively, of
such matured Senior Indebtedness, before any payment on account of
principal or interest is made upon this Note or is made to acquire this
Note.
B-10
32
(ii) Upon the occurrence of an event of default with respect
to any Senior Indebtedness, as such event of default is defined therein
or in the instrument under which it is outstanding, which event of
default may result in the acceleration of the maturity thereof, any
holder or holders of the Senior Notes, the Senior Subordinated Notes or
the Senior Revolving Notes may request (in writing specifying such
event of default with a copy to Lender) that Maker cease payment of all
amounts due on this Note (a "Subordination Notice") and, in the event
such a Subordination Notice is delivered, the holder of this Note shall
not be entitled to receive any amounts due on this Note during the
period (the "Standstill Period") commencing the date of receipt by
Lender of the Subordination Notice and ending the earliest of (a) the
first date on which no such default shall be continuing, (b) the date
on which the provisions of subparagraph (i) or (iii) of this paragraph
14(a) shall become applicable (and all Senior Indebtedness shall have
been paid in full, or such payment shall have been provided for in cash
or in a manner satisfactory to each of the holders, respectively, of
the Senior Indebtedness) and (c) the 60th day after the receipt of such
Subordination Notice (unless (x) another event of default shall have
occurred and be continuing and another Subordination Notice shall have
been received by Lender or (y) an existing event of default is
continuing and another Subordination Notice with respect to such event
of default shall have been received by Lender during such Standstill
Period, provided that the period under this clause (c) during which the
holder of this Note shall not be entitled to receive amounts due on
this Note shall never exceed 120 days). Anything in this subparagraph
(ii) to the contrary notwithstanding, there shall not be more than two
Standstill Periods (each of which not to exceed 120 consecutive days)
during any consecutive 365-day period. Anything in this subparagraph
(ii) to the contrary notwithstanding, Lender shall be entitled to
receive all amounts
B-11
33
then accrued and unpaid in respect of this Note immediately upon the
termination of the Standstill Period unless another Subordination
Notice shall have been received by the Lender.
(iii) In the event of any insolvency, bankruptcy, liquidation,
reorganization or other similar proceedings, or any receivership
proceedings in connection therewith, relative to Maker, and in the
event of any proceedings for voluntary liquidation, dissolution or
other winding up of Maker, whether or not involving insolvency or
bankruptcy proceedings, then all principal of and interest on all
Senior Indebtedness shall first be paid in full, or such payment shall
have been provided for in cash or in a manner satisfactory to each of
the holders, respectively, of such Senior Indebtedness, before any
payment on account of principal or interest is made upon this Note or
is made to acquire this Note.
(iv) In any of the proceedings referred to in subparagraph
(iii) above, any payment or distribution of any kind or character,
whether in cash, property, stock, partnership interests or obligations,
which may be payable or deliverable in respect of this Note shall be
paid or delivered directly to the holders of Senior Indebtedness (or to
a banking institution selected by the court or Person making the
payment or delivery or designated by any holder of Senior Indebtedness)
for application in payment thereof in accordance with the priorities
existing among such holders, unless and until all principal of,
premium, if any, and interest on all Senior Indebtedness shall have
been paid in full, or such payment shall have been provided for in cash
or in a manner satisfactory to each of the holders, respectively, of
such Senior Indebtedness; provided, however, that:
(a) in the event that payment or delivery of such
cash, property, stock, partnership interests or obligations to
the holder of this Note is
B-12
34
authorized by an order or decree giving effect, and stating in
such order or decree that effect is given, to the
subordination of this Note to Senior Indebtedness, and made by
a court of competent jurisdiction in a reorganization
proceeding under any applicable bankruptcy or reorganization
law, no payment or delivery of such cash, property, stock,
interests or obligations payable or deliverable with respect
to this Note shall be make to the holders of Senior
Indebtedness, provided that this clause (a) shall cease to be
applicable and shall be deemed no longer included herein if at
any time the Senior Subordinated Notes are outstanding and a
provision comparable to this clause (a) is no longer included
in the subordination provisions thereof; and
(b) no such delivery shall be made to holders of
Senior Indebtedness of stock, partnership interests or
obligations which are issued pursuant to reorganization
proceedings or dissolution or liquidation proceedings, or upon
any merger, consolidation, sale, lease, transfer or other
disposal not prohibited by the provisions of the Securities
Purchase Agreement, by Maker, as reorganized, or by the Person
succeeding to Maker or acquiring its property and assets, if
such stock, partnership interests or obligations are
subordinate and junior at least to the extent provided in this
paragraph to the payment of any stock or obligations which are
issued in exchange or substitution for any Senior Indebtedness
then outstanding.
(v) If any payment or distribution of any character, whether
in cash, securities or other properties, shall be received by Lender in
contravention of this paragraph 14 and before all Senior Indebtedness
shall have been paid in full, such payment or distribution shall be
held in trust for the benefit of, and shall be forthwith paid over and
delivered to, the holders of Senior
B-13
35
Indebtedness, or their representative(s) or trustee(s) acting on their
behalf (pro rata as to each such holder, representative or trustee on
the basis of the respective amounts of unpaid Senior Indebtedness held
or represented by each at the time of such payment), as their
respective interests may appear, for application to the payment of all
Senior Indebtedness remaining unpaid to the extent necessary to pay all
Senior Indebtedness in full in accordance with its terms, after giving
effect to any concurrent payment or distribution or provision therefor
to the holders of Senior Indebtedness.
(b) Obligation of Maker Unconditional. The provisions
of this paragraph 14 are for the purpose of defining the
relative rights of the holders of Senior Indebtedness on the
one hand, and Lender on the other hand, against Maker and its
property, and nothing herein shall impair, as between Maker
and Lender, the obligation of Maker, which is unconditional
and absolute, to pay to the holder hereof the principal
thereof and interest thereon in accordance with the provisions
hereof (including, without limitation, all principal and
interest payments due or accruing after any of the events
described in subparagraph (iii) of paragraph 14(a) above), nor
shall anything herein prevent Lender from exercising all
remedies otherwise permitted by applicable law or hereunder
upon default hereunder, subject to the right, if any, under
this paragraph of holders of Senior Indebtedness to receive
cash, property, stock, partnership interests or obligations
otherwise payable or deliverable to Lender; provided, however,
that upon the commencement and during the continuance of a
Standstill Period, Lender (to the extent it is otherwise
entitled to do so) will not accelerate the maturity of this
Note or pursue any other remedy to enforce payment thereof
(except with respect to an event of default specified in
clause (i) of paragraph 10) or initiate any bankruptcy or
insolvency proceeding relative to Maker unless and until the
earlier of (i) the end of such Standstill Period, (ii) the
acceleration of, or a default in the payment at the final
stated maturity or when
B-14
36
required to be repaid pursuant to Section 5F of the Securities
Purchase Agreement of, any obligation referred to in clause
(g) of paragraph 10 hereof or any other obligation or
obligations (aggregating $2,500,000 or more in principal
amount) referred to in clause (h) of paragraph 10 hereof.
(c) Subrogation. Upon payment in full of Senior
Indebtedness, Lender shall be subrogated to the rights of the
holders of the Senior Indebtedness to receive payments or
distributions of assets of Maker made on Senior Indebtedness
until the principal of and interest on this Note shall be paid
in full, and, for the purposes of such subrogation, no
payments to the holders of Senior Indebtedness of any cash,
property, stock, partnership interests or obligations to which
Lender would be entitled except for the provisions of
subparagraph (iv) of paragraph 14(a) above shall, as between
Maker, its creditors (other than the holders of Senior
Indebtedness) and Lender, be deemed to be a payment by Maker
to or on account of Senior Indebtedness.
(d) Rights of Holders of Senior Indebtedness. The
provisions of this paragraph 14 shall be deemed a continuing
offer to all holders of Senior Indebtedness to act in reliance
on such provisions (but no such reliance shall be required to
be proven to receive the benefits hereof) and may be enforced
by such holders and no right of any present or future holders
of any Senior Indebtedness to enforce subordination as
provided herein shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of Maker or
by any act or failure to act, in good faith, by any such
holder, or by any noncompliance by Maker with the terms of
this Note, regardless of any knowledge thereof which any such
holder may have or be otherwise charged with, and no purported
change in the provisions of this paragraph 14 shall be
effective as against any holder of Senior Indebtedness
existing at the time of such change without the consent of
such holder. Without in any way limiting the generality of the
foregoing, the holders of Senior Indebtedness may, at any time
and from time to time, without the consent of or notice to
Lender, and
B-15
37
without impairing or releasing the subordination provided in
this paragraph 14 or the obligations hereunder of Lender to
the holders of Senior Indebtedness, do any one or more of the
following: (i) change the manner, place or terms of payment or
extend the time of payment of, or renew or alter, or waive
defaults under, or take additional guarantees or collateral
for the benefit of, Senior Indebtedness, or otherwise amend or
supplement in any manner Senior Indebtedness or any instrument
evidencing the same or any agreement under which Senior
Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Indebtedness; (iii) release any
Person liable in any manner for the collection of Senior
Indebtedness; and (iv) exercise or refrain from exercising any
rights against Maker and any other Person. The provisions of
this paragraph 14 shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any
part thereof, of any of Senior Indebtedness is rescinded or
must otherwise be restored or returned by the holders of
Senior Indebtedness upon the insolvency, bankruptcy.
dissolution. liquidation or reorganization of Maker or upon or
as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, Maker or
any substantial part of its property, or otherwise, all as
though such payments had not been made.
(e) Agreement to Effectuate Subordination. Lender
agrees to take such reasonable action as may be requested by
the holders of Senior Indebtedness to effectuate the
subordination provided in this paragraph 14, at the expense of
such holders of Senior Indebtedness, including, in the event
of any dissolution, winding up, liquidation or reorganization
of Maker (whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the benefit of creditors
or otherwise) tending toward liquidation of the business and
assets of Maker, the immediate filing of a claim for the
unpaid balance of this Note in the form required in said
proceedings and the taking of all reasonable steps necessary
to cause said claim
B-16
38
to be approved. If any such holder does not file a proper
claim or proof of debt in the form required in such
proceedings prior to 30 days before the expiration of the time
to file such claim or claims, then at any time 15 days after
sending written notice to such holder (to its last known
address, if any) by certified mail, postage prepaid, return
receipt requested, the holders of Senior Indebtedness are
hereby authorized to have the right to file and are hereby
authorized to file an appropriate claim for and on behalf of
Lender.
(f) For the purpose of this Note:
"Credit Agreement" shall mean the Credit Agreement dated as of even
date herewith by and among the Company, as borrower, American, as guarantor, and
The Prudential Insurance Company of America, as lender, or any agreement
refunding, refinancing, renewing, or taking the place of the Credit Agreement;
provided, however, that any such agreement refunding, refinancing, renewing or
taking the place of the Credit Agreement shall be limited to a maximum principal
amount which may be outstanding thereunder of $20,000,000, and provided further,
that only one Credit Agreement may exist at one time and that (subject to the
foregoing) any agreement providing for revolving credit borrowings entered into
within 3 months subsequent to the expiration or termination of a prior Credit
Agreement and designated by the Company as refunding, refinancing, renewing or
taking the place of the Credit Agreement shall be conclusively presumed to be an
agreement refunding, refinancing, renewing or taking the place of the Credit
Agreement.
"Senior Indebtedness" shall mean and include all obligations (whether
now outstanding or hereafter incurred), for the payment of which Maker is
responsible or liable as obligor, guarantor or otherwise in respect of (i) all
payment obligations under or in respect of the Senior Notes and Senior
Subordinated Notes and under the Securities Purchase Agreement, including,
without limitation,
B-17
39
principal, interest, premium, fees, expenses and indemnities, whether now owing
or hereafter incurred (including any interest accruing subsequent to the
commencement of a proceeding described in paragraph 14(a)(iii), regardless of
whether the claims of holders of such payment obligations for such interest are
allowed in any such proceeding), (ii) all payment obligations under or in
respect of the Senior Revolving Notes and Credit Agreement, including, without
limitation, principal, interest, fees, reimbursement obligations under letters
of credit, expenses and indemnities, whether now owing or hereafter incurred
(including any interest accruing subsequent to the commencement of a proceeding
described in paragraph 14(a)(iii), regardless of whether the claims of holders
of such payment obligations for such interest are allowed in any such
proceeding), (iii) all obligations in respect of other Debt of Maker (including
reimbursement obligations under letters of credit) incurred in compliance with
the provisions of Section 6C(2)(vi) of the Securities Purchase Agreement and
which is designated as Senior Indebtedness for the purposes of the Securities
Purchase Agreement at the time of incurrence thereof, or the time of entering
into the agreement providing for the same, as evidenced by a notice to such
effect delivered to Lender and to the holders of the Senior Subordinated Notes
within 30 days after such incurrence or the entering of any such agreement.
15. No Waiver. To the fullest extent permitted by applicable law, no
failure to exercise and no delay on the part of Lender in exercising any power
or right in connection herewith or any other document or instrument now or
hereafter existing and executed as security herefor or otherwise in connection
herewith shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power.
▇-▇▇
▇▇
▇▇. Notices. Any notice required or permitted to be delivered to Maker
by Lender shall be deemed delivered upon receipt on a Business Day of such
notice by American Oil and Gas Corporation at its corporate headquarters in
Houston, Texas by certified mail or overnight courier delivery, or facsimile
transmission, addressed to the attention of the General Counsel. Any notice
required or permitted to be delivered to Lender by Maker or a holder of Senior
Indebtedness shall be deemed delivered upon receipt on a Business Day of such
notice by Cabot Corporation at its corporate headquarters in Waltham,
Massachusetts by certified mail or overnight courier delivery, or facsimile
transmission (Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇ or -3704), addressed to the attention of
the Treasurer, or at such other address as Cabot shall specify by notice to
Maker as aforesaid and by like notice given to each holder of the Senior Notes,
the Senior Subordinated Notes and the Senior Revolving Notes. For purposes of
giving notice of a change of address to the holders of Senior Notes, Senior
Subordinated Notes and Senior Revolving Notes as provided in the preceding
sentence. Cabot shall be entitled to rely on a certificate of Maker as to the
identity and addresses of such holders (which Maker agrees to supply to Cabot
forthwith upon request).
17. Successors and Assigns. The terms and provisions hereof shall be
binding upon and inure to the benefit of Maker and Lender and their respective
successors and assigns.
18. Governing Law. THIS NOTE SHALL BE DEEMED TO BE A CONTRACT UNDER THE
LAWS OF THE STATE OF TEXAS AND FOR ALL PURPOSES SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF SUCH STATE AND, WHEN APPLICABLE, THE UNITED
STATES OF AMERICA.
AMERICAN PIPELINE COMPANY
By: _____________________________________
Title: __________________________________
▇-▇▇
▇▇
▇▇▇▇▇▇▇▇ ▇ TO REVOLVING CREDIT NOTE
The "Floating Rate" under this Note shall be LIBOR plus an applicable
margin as indicated on the following chart. The applicable LIBOR rate shall be
floating, adjusting on the first day of each calendar month, based upon the one
month LIBOR rate as quoted in the first Wall Street Journal of such month and
such rate shall remain fixed for that month. The margin shall be adjusted on the
first day of each month according to the rating given Cabot Corporation's senior
unsecured debt by Standard & Poor's Corporation effective on such day and
according to the passage of time as follows:
Standard & Poor's 1993-
Rating 1989-1990 1991-1992 Forward
----------------- --------- --------- -------
BBB + + 0.675% + 0.80% + 0.925%
or higher
BBB + 0.925% + 1.05% + 1.175%
or BBB -
BB + + 1.175% + 1.30% + 1.425%
or less
If Cabot has no such rating on the first day of a calendar month, the rating
used will be the last available published rating. With the exception of the
requirements of Regulation D promulgated by the Federal Reserve Board, if Cabot
Corporation is charged or has clear evidence that it would be charged for
increased costs under a LIBOR-based revolving credit agreement to which it is
now or becomes a party, it may pass on those costs to Maker to the extent it
evidences same.
42
SCHEDULE II TO REVOLVING CREDIT NOTE
Nature of Advance or Unpaid Name of
Repayment Principal Person
Amount of Principal (Working Capital Balance of Making
Date Advance Repaid or Basket) Note Notation
---- --------- --------- -------------------- ---------- --------
43
Appendix C to
Basket Agreement
GUARANTY AGREEMENT
This Guaranty Agreement, executed as of November 13, 1989, between
AMERICAN OIL AND GAS CORPORATION, a Delaware corporation (the "Guarantor"), and
CABOT CORPORATION, a Delaware corporation ("Cabot");
W I T N E S S E T H:
WHEREAS, the Guarantor and Cabot have executed a Basket Agreement,
dated as of November 13, 1989 (the "Basket Agreement"), by and among the
Guarantor, American Pipeline Company, a Delaware corporation and wholly-owned
subsidiary of the Guarantor ("Pipeline"), Cabot and Cabot Transmission
Corporation, a Delaware corporation and an indirect wholly-owned subsidiary of
Cabot ("Transmission");
WHEREAS, pursuant to its obligation under the Basket Agreement,
Pipeline has executed and delivered a Revolving Credit Note in the principal
amount of $25,000,000 (the "Revolving Credit Note");
WHEREAS, Pipeline is the maker (the "Maker") under the Revolving Credit
Note; and
44
WHEREAS, this Guaranty Agreement is required as a condition to the
extension of credit by Cabot to the Maker pursuant to the Revolving Credit Note.
NOW, THEREFORE, the Guarantor and Cabot agree as follows:
1. Capitalized Terms. Capitalized terms not otherwise defined herein
shall have the same meaning ascribed to them in the Revolving Credit Note.
2.1 The Guaranty. The Guarantor hereby unconditionally and irrevocably
guarantees to Cabot the due and punctual payment when due, whether at stated
maturity, by acceleration or otherwise, of all obligations of the Maker now or
hereafter existing under, evidenced by or arising out of the Revolving Credit
Note, whether for principal, interest or otherwise (such obligations being the
"Obligations"). In case of failure by the Maker punctually to pay any of the
obligations, the Guarantor hereby unconditionally agrees to cause such payment
to be made punctually as and when the same shall become due and payable, whether
at stated maturity, by acceleration or otherwise.
2.2 Guaranty Absolute. The Guarantor guarantees that the Obligations
will be paid strictly in accordance with the terms of the Revolving Credit Note,
regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of Cabot with respect
thereto. The obligations of the Guarantor hereunder are
2
45
independent of the Obligations, and, to the fullest extent permitted by law, a
separate action or actions may be brought and prosecuted against the Guarantor
to enforce this Guaranty Agreement, irrespective of whether any action is
brought against the Maker or whether the Maker is joined in any such action or
actions. To the fullest extent permitted by applicable law, the liability of the
Guarantor hereunder shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Revolving
Credit Note or any other agreement or instrument relating thereto; or
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to departure from the Revolving
Credit Note, including, without limitation, any increase in the
Obligations resulting from the extension of additional credit to the
Maker or any of its subsidiaries or otherwise; or
(c) any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent
to departure from any other guaranty, for all or any of the
Obligations; or
(d) any manner of application of collateral, or proceeds
thereof, to all or any of the Obligations, or any manner of sale or
other disposition of any collateral for all or any of the Obligations
or any other assets of the Maker or any of its Subsidiaries; or
3
46
(e) any change, restructuring or termination of the corporate
structure or existence of the Maker or any of its Subsidiaries; or
(f) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Maker or a guarantor.
If at any time any payment of any of the Obligations is rescinded or must be
otherwise restored or returned upon the insolvency, bankruptcy or reorganization
of the Maker or otherwise, the Guarantor's obligations hereunder with respect to
such payment shall be reinstated at such time as though such payment had become
due but had not been made at such time.
2.3 Subordination. (a) Anything in this Guaranty Agreement to the
contrary notwithstanding, the indebtedness of the Guarantor evidenced by this
Guaranty Agreement in respect of principal of and interest on the Revolving
Credit Note (the "Subordinated Indebtedness") shall be subordinated and junior
to the extent set forth in subparagraphs (b) to (f), inclusive, below to all
obligations of the Guarantor (as a guarantor or otherwise) in respect of Senior
Indebtedness (as defined in the Revolving Credit Agreement).
(b) Upon any distribution to creditors of the Guarantor in a voluntary
or involuntary liquidation or dissolution of the Guarantor or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Guarantor or its property:
4
47
(i) the holders of Senior Indebtedness shall be entitled to
receive payment in full, in cash or in a manner satisfactory to each of
the holders, respectively, of Senior Indebtedness, of all amounts on or
in respect of the Senior Indebtedness before any holder of the
Subordinated Indebtedness shall be entitled to receive any payment or
distribution of any kind or character on account of the principal and
interest on the Subordinated Indebtedness; and
(ii) until the Senior Indebtedness is paid in full, in cash or
cash equivalents, any payment or distribution, to which a holder of
Subordinated Indebtedness would be entitled but for this Section 2.3(b)
shall be made to the holders of Senior Indebtedness, as their interests
may appear.
Upon any distribution of assets of the Guarantor, the holders of
Subordinated Indebtedness shall be entitled to rely upon any order or decree of
a court of competent jurisdiction in which such proceedings are pending for the
purposes of ascertaining the persons entitled to participate in such
distribution, the holders of the Senior Indebtedness, the amount thereof or
payable thereon and all other facts pertinent thereto or to this Section 2.3(b),
and the holders of Subordinated Indebtedness shall be entitled to rely upon a
certificate of the liquidating trustee or agent or other person making any
distribution to the holders of Subordinated Indebtedness for the purposes of
ascertaining the persons entitled to participate in such distribution, the
holders of the Senior Indebtedness, the amount thereof or payable thereon, the
5
48
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Section 2.3(b); provided, however, that the foregoing shall
apply only if such court, trustee, liquidating trustee or other person has been
fully apprized of the provisions of this Section 2.3(b) and of Section 2.3(c).
In the event that a holder of Subordinated Indebtedness determines in good faith
that further evidence is required with respect to the right of any person, as a
holder of Senior Indebtedness, to participate in any payment or distribution
pursuant to this Section 2.3(b), such holder of Subordinated Indebtedness may
request such person (at the expense of such holder of Subordinated Indebtedness)
to furnish evidence to the reasonable satisfaction of such holder of
Subordinated Indebtedness as to the amount of such Senior Indebtedness held by
such person, as to the extent to which such person is entitled to participate in
such payment or distribution, and as to other facts pertinent to the rights of
such person under this Section 2.3(b), and if such evidence is not furnished,
such holder of Subordinated Indebtedness may defer any payment to such person,
and will retain such amount in trust, pending judicial determination as to the
right of such person to receive payment.
(c) (i) Upon the maturity of any Senior Indebtedness by lapse of time,
acceleration or otherwise, then all principal of, premium, if any, and interest
on all such matured Senior Indebtedness shall first be paid is full, or such
payment shall have been provided for in cash or in a manner satisfactory to each
of the holders, respectively, of such matured Senior Indebtedness, before any
payment on account of principal or interest is made by the Guarantor on the
Subordinated Indebtedness.
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49
(ii) No payment shall be made by the Guarantor on the Subordinated
Indebtedness during the period in which paragraph 14(a)(iii) of the Revolving
Credit Note shall be applicable or during any Standstill Period in effect under
paragraph 14(a)(ii) of the Revolving Credit Note.
(iii) In the event that notwithstanding the provisions of this Section
2.3(c), the Guarantor shall make any payment to a holder of Subordinated
Indebtedness on account of this Guarantee Agreement in violation of Section
2.3(c)(i) or Section 2.3(c)(ii), then such payment shall be held in trust for
the benefit of, and shall be forthwith paid over and delivered to, the holders
of Senior Indebtedness, or their representative(s) or trustee(s) acting on their
behalf (pro rata as to each such holder, representative or trustee on the basis
of the respective amounts of unpaid Senior Indebtedness held or represented by
each at the time of such payment), as their respective interests may appear, for
application to the payment of all Senior Indebtedness remaining unpaid to the
extent necessary to pay all Senior Indebtedness in full in accordance with its
terms, after giving effect to any concurrent payment or distribution or
provision therefor to or for the holders of Senior Indebtedness.
(d) Upon payment in full of Senior Indebtedness, the holders of
Subordinated Indebtedness shall be subrogated to the rights against the
Guarantor of the holders of Senior Indebtedness to receive payments from or
distributions of assets of the Guarantor applicable to Senior Indebtedness to
the extent that such payments or distributions otherwise payable to the holders
of Subordinated Indebtedness have been paid or applied to the payment of Senior
7
50
Indebtedness. A payment or distribution made by the Guarantor under this
Section 2.3 to the holders of Senior Indebtedness that otherwise (except for the
provisions of this Section 2.3) would have been made to the holders of
Subordinated Indebtedness is not, as between the Guarantor, its creditors (other
than the holders of Senior Indebtedness) and the holders of the Subordinated
Indebtedness, payment by the Guarantor under this Guaranty Agreement.
(e) The provision of this Section 2.3 are for the purpose of defining
the relative rights of the holders of Senior Indebtedness on the one hand, and
the holders of Subordinated Indebtedness on the other hand with respect to the
Guarantor, and nothing herein shall impair, as between the Guarantor and Cabot,
the obligation of the Guarantor, which is unconditional and absolute, to pay the
Subordinated Indebtedness in accordance with the terms of this Guaranty
Agreement, nor shall anything herein prevent Cabot from exercising all remedies
otherwise permitted by applicable law hereunder, subject to the provisions of
Section 2.3(c)(ii) and provided, however, that upon the commencement and during
the continuance of a Standstill Period in effect under Paragraph 14(a)(ii) of
the Revolving Credit Note, Cabot (to the extent it is otherwise entitled to do
so) will not pursue any remedy to enforce payment under this Guaranty Agreement
(except with respect to an event of default specified in clause (i) of paragraph
10 of the Revolving Credit Note) or initiate any bankruptcy or insolvency
proceeding relative to the Guarantor unless and until the earlier of (i) the end
of such Standstill Period, (ii) the acceleration of, or a default in the payment
at the final stated maturity or when required to be repaid pursuant to Section
5F of the Securities Purchase Agreement of, any obligation referred to in clause
(g) of paragraph 10 of the Revolving Credit Note or any other obligation or
obligations (aggregating
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$2,500,000 or more in principal amount) referred to in clause (h) of paragraph
10 of the Revolving Credit Note.
(f) The provisions of this Section 2.3 shall be deemed a continuing
offer to all holders of Senior Indebtedness to act in reliance on such
provisions (but no such reliance shall be required to be proven to receive the
benefits hereof) and may be enforced by such holders and no right of any present
or future holders of any Senior Indebtedness to enforce subordination as
provided herein shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Guarantor or by any act or failure to
act, in good faith, by any such holder, or by any noncompliance by the Guarantor
with the terms of this Guaranty Agreement, regardless of any knowledge thereof
which any such holder may have or be otherwise charged with, and no purported
change in the provisions of this Section 2.3 shall be effective as against any
holder of Senior Indebtedness existing at the time of such change without the
consent of such holder. Without in any way limiting the generality of the
foregoing, the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to Cabot, and without impairing or
releasing the subordination provided in this Section 2.3 or the obligations
hereunder of Cabot to the holders of Senior Indebtedness, do any one or more of
the following: (i) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, or waive defaults under, or take
additional guarantees or collateral for the benefit of, Senior Indebtedness, or
otherwise amend or supplement in any manner Senior Indebtedness or any
instrument evidencing the same or any agreement under which Senior Indebtedness
is outstanding; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged
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or otherwise securing Senior Indebtedness; (iii) release any person liable in
any manner for the collection of Senior Indebtedness; and (iv) exercise or
refrain from exercising any rights against the Maker and any other person. The
provisions of this Section 2.3 shall continue to be effective, or be reinstated,
as the case may be, if at any time payment, or any part thereof, of any of
Senior Indebtedness by the Guarantor is rescinded or must otherwise be restored
or returned by the holders of Senior Indebtedness upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Guarantor or upon
or as a result of the appointment of a receiver, intervenor or conservator of,
or trustee or similar officer for, the Guarantor or any substantial part of its
property, or otherwise, all as though such payments had not been made.
(g) Cabot agrees to take such reasonable action as may be requested by
the holders of Senior Indebtedness to effectuate the subordination provided in
this Section 2.3, at the expense of such holders of Senior Indebtedness,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of the Guarantor (whether in bankruptcy, insolvency or
receivership proceedings or upon an assignment for the benefit of creditors or
otherwise) tending toward liquidation of the business and assets of the
Guarantor, the immediate filing of an appropriate claim for the maximum amount
for which Cabot in good faith determines it is entitled to file under applicable
law, is the form required in said proceedings and the taking of all reasonable
steps necessary to cause said claim to be approved. If any such holder does not
file a proper claim or proof of debt in the form required in such proceedings
prior to 30 days before the expiration of the time to file such claim or claims,
then at any time 15 days after sending written notice to such holder (to its
last known address, if any) by certified mail, postage prepaid, return
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receipt requested, the holders of Senior Indebtedness are hereby authorized to
have the right to file and are hereby authorized to file an appropriate claim
for and on behalf of Cabot.
2.4 Waiver. The Guarantor irrevocably waives promptness, diligence,
notice of acceptance and to the fullest extent permitted by law, any other
notice with respect to any of the Obligations and this Guaranty Agreement and
any requirement that any holder of the Revolving Credit Note protect, secure,
perfect or insure any security interest or lien or any property subject thereto
or exhaust any right or take any action against the Maker or any other person or
entity or any collateral. To the fullest extent permitted by applicable law, the
Guarantor specifically waives any rights it may have pursuant to Rule 31, Texas
Rules of Civil Procedure, Section 17.001 of the Texas Civil Practice and
Remedies Code and any requirements imposed by Chapter 34 of the Texas Business
and Commerce Code.
2.5 Subrogation. Upon the making by the Guarantor of any payment
hereunder for the account of the Maker, the Guarantor shall be subrogated to the
rights of the payee against the Maker with respect to such payment to the
fullest extent permitted by law, provided that the Guarantor shall not enforce
any payment by way of subrogation until all amounts of principal of and interest
on the Revolving Credit Note have been paid in full.
2.6 Stay of Acceleration. If acceleration of the time for payment of
any amount payable under the Revolving Credit Note is stayed upon the
insolvency, bankruptcy or reorganization of the Maker, all such amounts
otherwise subject to acceleration under the terms
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of the Revolving Credit Note shall nonetheless by payable by the Guarantor
hereunder forthwith on demand by Cabot.
3.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given (i) when delivered personally, (ii) when
received if sent by registered or certified mail, return receipt requested, or
delivery service or (iii) when received by facsimile transmission, in each case
to the parties at the following addresses (or at such other address as a party
may specify by like notice):
(A) If to the Guarantor, to:
American Oil and Gas Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone confirmation: (▇▇▇) ▇▇▇-▇▇▇▇
(B) If to Cabot to:
Cabot Corporation
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ or -3704
Telephone confirmation: (▇▇▇) ▇▇▇-▇▇▇▇
3.2 Choice of Law. THIS GUARANTY AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF TEXAS.
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3.3 Headings. The headings contained in this Guaranty Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Guaranty Agreement.
3.4 Amendments, Etc. No amendment or waiver of any provision of this
Guaranty Agreement nor consent to any departure by the Guarantor herefrom shall
in any event be effective unless the same shall be in writing and signed by
Cabot.
3.5 Assignment. The Guarantor shall not assign this Guaranty Agreement
or any part thereof without the prior written consent of Cabot. This Guaranty
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
3.6 Severability. If any term or other provision of this Guaranty
Agreement is or shall become invalid, illegal or incapable of being enforced in
any jurisdiction, all other conditions and provisions of this Guaranty Agreement
shall nevertheless remain in full force and effect in such jurisdiction and such
illegal, invalid or unenforceable provision shall be legal, valid and
enforceable in all other jurisdictions.
3.7 Counterparts. This Guaranty Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all of
which together slsall constitute but one and the same agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Guaranty
Agreement as of the date first written above.
AMERICAN OIL AND GAS
CORPORATION
By:
Name:
Title:
CABOT CORPORATION
By:
Name:
Title:
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Appendix D
to Basket Agreement
RESIDUE GAS PURCHASE AGREEMENTS
1. Residue Gas Purchase Agreement dated June 30, 1989 between Cabot Energy
Marketing Corporation ("CEMCO") and Cabot Gas Processing Corporation.
2. Residue Gas Purchase Agreement dated June 30, 1989 between Cabot Gas Supply
Corporation ("CGSC") and Cabot Gas Processing Corporation.
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APPENDIX E
ALTERNATIVE GAS PURCHASE SOURCES
▇▇▇▇ Petroleum - State of Oklahoma
Oklahoma Natural - State of Oklahoma
Maxus Energy - ▇▇▇▇▇ Plant, ▇▇▇▇▇ County, Texas
▇▇▇▇-▇▇▇▇▇ - Hobart Plant, ▇▇▇▇▇▇▇▇ County, Texas
▇▇▇▇▇▇▇▇ Petroleum Co. - ▇▇▇▇▇▇▇▇▇ Plant, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇