SECURITY AGREEMENT
This SECURITY AGREEMENT (this "AGREEMENT") is dated as of March 22, 2002,
among DYNEGY MARKETING AND TRADE, a Colorado general partnership ("GRANTOR");
CHEVRON U.S.A. INC., a Pennsylvania corporation ("CUSA"); TEXACO EXPLORATION AND
PRODUCTION INC., a Delaware corporation ("TEPI"); TEXACO NATURAL GAS INC., a
Delaware corporation ("TNGI"); and CUSA as collateral agent for itself and for
TEPI, TNGI, and each other Person, if any, that becomes a "PRODUCER" under the
terms of the Gas Sales Agreement (as hereinafter defined) (in such capacity,
together with its successors in such capacity, the "COLLATERAL AGENT"). CUSA,
TEPI, TNGI, and each other Person, if any, so becoming such a Producer, are
hereinafter referred to as the "PRODUCERS," and CUSA, TEPI, TNGI, each such
other Producer, and the Collateral Agent are hereinafter referred to as the
"SECURED PARTIES."
RECITALS:
Reference is made to the Natural Gas Purchase and Sale Agreement dated as
of March 1, 2002, among Grantor and the Producers (as amended, supplemented or
otherwise modified from time to time, the "GAS SALES AGREEMENT").
Pursuant to Section 7.8.2 of the Gas Sales Agreement, Grantor has agreed to
enter into this Agreement granting the Security Interest (as defined herein).
Accordingly, in consideration of the premises and the mutual covenants and
agreements hereinafter set forth, Grantor and Secured Parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITION OF TERMS USED HEREIN.
(a) Unless the context otherwise requires, all capitalized terms used
herein but not defined herein shall have the meanings set forth in the Gas Sales
Agreement.
(b) As used herein, the following terms shall have the following meanings:
"ACCOUNT AGREEMENT" shall mean the Gas Deposit Account Agreement of even
date herewith among Grantor, the Collateral Agent and Bank or any similar
agreement entered into by Grantor and the Collateral Agent with any Bank and
approved in writing by the Collateral Agent (such approval not to be
unreasonably withheld or delayed).
"ACCOUNT DEBTOR" shall mean any Person who is or who may become obligated
to Grantor under, with respect to or on account of a Gas Receivable Right.
"ADDITIONAL SECURITY" shall mean, at any time, the sum of (i) the funds
then held in the Cash Collateral Account, and (ii) the aggregate undrawn and
available amount of all Qualifying Posted Security then held by the Collateral
Agent.
"AFFILIATE" shall mean, with respect to any Person, any other Person that
is in control or under the control of, or under common control with, such
Person. For purposes of the foregoing, "control", with respect to any Person,
means the ownership, directly or indirectly, of a majority of the capital stock,
partner interests, limited liability company interests, or other ownership or
equity interests of such Person, or the possession, directly or indirectly, of
the power to elect a majority of the board of directors or other governing body
of such Person, whether through ownership of voting securities or by contract or
otherwise, if in any such case the assets, liabilities and financial results of
such Person would be included in consolidated financial statements of the
controlling Person prepared in accordance with generally accepted accounting
principles.
"ALTERNATE SECURITY ARRANGEMENT" shall mean the arrangement described in
Section 7.8.3 of the Gas Sales Agreement pursuant to which Grantor is required
to provide certain letters of credit and/or surety bonds in accordance with the
terms and conditions set forth therein.
"BANK" shall mean Bank One, NA (Chicago), its successors and assigns and
any other banking institution designated by Grantor and approved in writing by
the Collateral Agent (such approval not to be unreasonably withheld or delayed).
"BUSINESS DAY" shall mean a day (other than a Saturday or Sunday) on which
banks generally are open for the conduct of business in Houston, Texas, New
York, New York, and in the city where the Designated Gas Account and Cash
Collateral Account are maintained with the Bank.
"CASH COLLATERAL ACCOUNT" shall mean the deposit account at Bank under the
dominion and control of the Collateral Agent as provided in Section 6.1(b) in
which funds may from time to time be on deposit as provided in Section 6.1(b).
"CASH COLLATERAL ACCOUNT AGREEMENT" shall mean the Cash Collateral Account
Agreement of even date herewith among Grantor, the Collateral Agent and Bank or
any similar agreement entered into by Grantor and the Collateral Agent with any
Bank and approved in writing by the Collateral Agent (such approval not to be
unreasonably withheld or delayed).
"CASH COLLATERAL ACCOUNT INVESTMENT PROPERTY" shall mean, collectively, all
rights, title and interests of Grantor in and to the following property in which
funds in the Cash Collateral Account may from time to time be invested pursuant
to the Sweep Agreement: (i) interests and accounts in mutual funds, (ii)
interests and accounts in U.S. dollar time deposits maintained at an offshore
branch of Bank, (iii) repurchase agreements in respect of government securities,
(iv) all other financial assets in which such funds may be invested from time to
time, and (v) each securities account and security entitlement associated with
any of the foregoing property (as the terms "financial assets", "securities
account" and "security entitlement" are defined in the UCC).
"CASH COLLATERAL EVENT" shall have the meaning specified in Section 6.1.
"COLLATERAL" shall mean, collectively, (a) all Gas Receivables and all
other Gas Receivable Rights, (b) the Gas Accounts, together with all funds and
other property from time to time held therein or credited thereto, (c) the
Lockbox Agreement (to the extent (but only to the extent) relating to any Gas
Account), (d) the Cash Collateral Account, together with all funds
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and other property from time to time held therein or credited thereto, (e) the
Cash Collateral Account Investment Property, (f) the Sweep Agreement, and (g)
Proceeds.
"COLLATERAL AGENT" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"COLLECTIONS" shall mean all cash, checks, notes, instruments and other
items of payment (including insurance proceeds, proceeds of cash sales and tax
refunds) in respect of any portions of the Collateral.
"CUSA" shall have the meaning assigned to such term in the preliminary
statement of this Agreement.
"DESIGNATED GAS ACCOUNT" shall mean the deposit account at Bank that is
subject to the Account Agreement.
"ELIGIBLE GAS RECEIVABLES" shall mean, at any time, that portion of the Gas
Receivables consisting of trade accounts receivable actually owing at such time
(including, without limitation, accounts receivable in respect of natural gas
that has been actually delivered at such time and will thereafter become due) to
the Grantor by its Qualifying Account Debtors at such time, provided that such
Gas Receivables are at such time subject to a duly perfected, first priority
security interest and lien in favor of the Collateral Agent, subject only to any
Permitted Liens, and after deducting therefrom (x) the portion thereof (but only
the portion thereof), if any, that is subject at such time to any dispute,
counterclaim, defense or right of setoff or deduction (including any discount or
allowance), and (y) any amounts owing that are subject to Liens at such time as
described in clause (b) of the definition of Permitted Liens as set forth herein
(other than any such Lien held by any Secured Party), but excluding, however, in
any event, any such Gas Receivable (except for any Gas Receivable owed by any
Producer or such Producer's Affiliate) or portion thereof:
(i) that is at such time more than 60 days past due or more than 90
days past original invoice or other billing date;
(ii) that is owed by an Account Debtor from which the total Gas
Receivables owed (in face amount) at such time represent more than 12% of
all Gas Receivables at such time (but only to the extent of the Gas
Receivables in excess of such percentage), unless the Collateral Agent
consents (in its sole discretion) in writing to the inclusion of such
excess;
(iii) for which cash has been deposited in advance of delivery of the
natural gas;
(iv) that at such time (a) is evidenced by any chattel paper or
instrument of any kind unless (x) such chattel paper or instrument has been
delivered to the Collateral Agent, duly endorsed "without recourse or
warranty" as the same is required by Section 4.5 and (y) the Collateral
Agent has consented (in its sole discretion) in writing to the inclusion
thereof, or (b) has been reduced to judgment;
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(v) that is subject at such time to an agreement with the Account
Debtor to extend the time of payment thereof beyond the period set forth in
clause (i) of this definition;
(vi) that is owed by an Account Debtor organized or located outside
the United States of America or any Province of Canada (but excluding the
Province of Quebec), unless such Gas Receivable is supported by one or more
letters of credit issued or confirmed by a bank acceptable to the
Collateral Agent and that are in form and substance acceptable to the
Collateral Agent and payable in the full amount of such Gas Receivable in
freely convertible U.S. dollars at a place of payment within the United
States and which constitute "supporting obligations" (within the meaning of
the UCC) with respect to such Gas Receivable; or
(vii) the Account Debtor with respect to which is the subject (as
debtor) of any voluntary or involuntary case or proceeding under any
bankruptcy, insolvency or other similar law or as to which a trustee,
receiver, liquidator, custodian or other similar official has been
appointed for it or for any substantial part of its property, unless such
Gas Receivable is a post-petition account payable of an Account Debtor that
is then the subject (as debtor) of any Chapter 11 proceeding under the
Bankruptcy Code.
"GAS ACCOUNTS" shall mean, collectively, the Designated Gas Account and any
other deposit accounts, whether maintained at any Bank or any other bank or
financial institution, into which the Grantor has expressly instructed any
Account Debtor to deposit any Collections.
"GAS RECEIVABLE RIGHTS" shall mean all Gas Receivables, together with all
rights, title and interests of Grantor in any security and other "supporting
obligations" (as defined in the UCC) therefor, including guarantees, letters of
credit, and surety bonds with respect thereto, and including any rights of
stoppage in transit, replevin, reclamation and resale, and all related security
interests, liens and pledges, whether voluntary or involuntary, in any property
given as security therefor, in each case whether now existing or owned or
hereafter arising or acquired.
"GAS RECEIVABLES" shall mean, at any time, any and all rights, title and
interests of Grantor to payment (other than payment from West Coast Power, L.P.
or any successor or assign thereof or wholly-owned subsidiary thereof) for sales
by Grantor of natural gas for physical delivery to an Account Debtor or to a
non-affiliated intermediary for delivery to an Account Debtor, together with
related products and services in respect of such sales, including but not
limited to, transportation fees, gathering fees and associated gas delivery
services, whether nor not earned by performance, including any such rights,
title and interests evidenced by chattel paper or any instrument of any kind, in
each case whether due or to become due, whether or not then subject to any
invoice or billing statement from Grantor, and whether now or hereafter acquired
or arising in the future, including any such payments due from Affiliates of
Grantor or any Secured Party.
"GAS RECEIVABLES REPORT" shall have the meaning assigned to such term in
Section 4.10(a).
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"GAS SALES AGREEMENT" shall have the meaning assigned to such term in the
recitals to this Agreement.
"GOVERNMENTAL ENTITY" shall mean any court or tribunal in any jurisdiction
(domestic or foreign) or any public, governmental, or regulatory body, agency,
department, commission, board, bureau, or other governmental authority or
instrumentality (domestic or foreign) with jurisdiction over the matter in
question.
"GRANTOR" shall have the meaning assigned to such term in the preliminary
statement of this Agreement.
"GRANTOR REPORT DATE" shall mean the Scheduled Report Date, and the
effective date of any optional Gas Receivables Report submitted by Grantor
pursuant to Section 4.10(a), as the case may be.
"LIEN" shall mean any mortgage, pledge, lien, encumbrance, charge, or other
security interest.
"LOCKBOX AGREEMENT" shall mean the Service Agreement, dated January 26,
1998, between The First National Bank of Chicago (now known as Bank One, NA) and
Natural Gas Clearinghouse (referred to therein as NGC Corp.; now known as Dynegy
Holdings Inc.) and all "Subsidiaries" and "Affiliates" (as such terms are
defined therein).
"MATERIAL COVENANT BREACH" shall mean, at any time, any breach or failure
by Grantor to perform or observe (i) any covenant or agreement in Section
4.1(a), 4.3(b), or 4.8, or (ii) any other covenant or agreement contained in
this Agreement (but excluding covenants in respect of delivery of Gas
Receivables Reports) where the Gas Receivables or portions thereof that are
Materially Affected in respect of such breach or failure exceed 5% of the
Eligible Gas Receivables at such time, and in the case of any such breach or
failure described in clause (i) or (ii), such breach or failure continues for a
period longer than 10 days after the Collateral Agent has given Grantor written
notice thereof.
"MATERIAL REPRESENTATION BREACH" shall mean, as of any Representation Date,
(i) the failure of the representations and warranties in Section 3.1 and 3.2 to
be true and correct in all material respects or (ii) except as may be
specifically disclosed on any Gas Receivables Report delivered to the Collateral
Agent pursuant to Section 4.10, the failure of the representations and
warranties in Section 3.3, 3.4 or 3.5 to be true and correct where the Gas
Receivables or portions thereof that are Materially Affected in respect of such
failure exceed 5% of the Eligible Gas Receivables at such time.
"MATERIALLY AFFECTED" shall mean with respect to a Gas Receivable or any
portion thereof, where as a result of any event, circumstance, condition,
obligation, requirement or restriction that is the subject of a representation,
warranty, covenant, or agreement hereunder, (i) such Gas Receivable or portion
thereof does not qualify as an Eligible Gas Receivable hereunder, (ii) the
Security Interest in such Gas Receivable or portion thereof is not a valid,
perfected Lien thereon, (iii) such Gas Receivable or portion thereof is subject
to any other Lien (excluding any Permitted Lien), (iv) such Gas Receivable or
portion thereof has been the subject of any actual or purported sale, transfer,
assignment or other disposition by Grantor (excluding
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any Permitted Lien), (v) the validity, enforceability, collectibility or value
of such Gas Receivable or portion thereof has been impaired, or (vi) such Gas
Receivable or portion thereof is not supported by Grantor's books and records.
"MONTH" shall mean a calendar month.
"NETTING AGREEMENT" shall mean any agreement between or among one or more
of Grantor and its Affiliates and one or more of the Producers and their
respective Affiliates, which agreement by its terms expressly provides that it
is to be deemed a "Netting Agreement" for purposes of this Agreement.
"OBLIGATIONS" shall mean, collectively, without duplication:
(i) the Payment Obligations;
(ii) the obligations of Grantor to pay any other amounts due or to
become due to any Secured Party under the Gas Sales Agreement; and
(iii) the obligations of Grantor to pay to the Collateral Agent or any
other Secured Party any amounts due under the terms of this Agreement or
any other Security Document, in each case whenever existing or arising.
"OTHER GRANTOR ACCOUNT" means the deposit account at such bank as Grantor
shall have designated to the Collateral Agent in writing for purposes of
Sections 6.1 and 6.4.
"OUTSTANDING OBLIGATIONS" shall mean, at any time, without duplication, (i)
all Payment Obligations at such time and (ii) all Obligations within clauses
(ii) or (iii) of the definition thereof that are due and payable at such time.
"PAYMENT OBLIGATIONS" shall mean, collectively, as of any time of
determination, without duplication, the obligations of Grantor to pay (i) any
amounts due at such time of determination to any Producer under Section 7.1, 7.2
or 7.3 of the Gas Sales Agreement in respect of sales of natural gas delivered
on and after April 1, 2002 (including, without limitation, all interest thereon
as provided in said Article VII, including interest accruing at the then
applicable rate after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization, or like proceeding, of Grantor,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding); and (ii) the amounts that will become due and payable under
such Section 7.2 thereafter based on sales of natural gas delivered on and after
April 1, 2002 but prior to such time of determination; PROVIDED, HOWEVER, that
the foregoing amounts shall be adjusted at such time of determination to reflect
any amounts that Grantor is entitled to deduct at such time of determination
from amounts owed by the respective Producers under the terms of any Netting
Agreement as in effect at such time of determination.
"PERFECTION CERTIFICATE" shall mean a certificate substantially in the form
of Annex I hereto, completed and supplemented with the schedules and attachments
contemplated thereby, and duly executed by Grantor.
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"PERMITTED LIENS" shall mean (a) Liens for taxes not yet due and payable or
for taxes that the taxpayer is contesting in good faith through appropriate
proceedings, (b) any Liens arising under Section 9.343 of the UCC or similar
statutes of states other than Texas, including without limitation the Oklahoma
Oil and Gas Owner's Lien Act, Okla. Stat. Xxx. tit. 52, Section 548.1, et. seq.
(1994); and the New Mexico Oil and Gas Products Lien Act, N.M. Stat. Xxx.
Section 48-9-1 et seq. (Xxxxxx 1978), and (c) other Liens arising in the
ordinary course of business and not incurred in connection with the borrowing of
money (including, without limitation, setoff rights as described in Section
7.9).
"PERSON" shall mean any domestic or foreign individual, corporation,
partnership, limited liability company, joint venture, association, joint-stock
company, trust, enterprise, unincorporated organization or Governmental Entity.
"PROCEEDS" shall mean any consideration, whether cash or non-cash, and
whether in the form of chattel paper, instruments, general intangibles, natural
gas or other inventory or accounts (as such terms are defined in the UCC),
received from the sale, exchange, license, lease or other disposition of any
asset or property that constitutes Collateral, any value received as a
consequence of the possession of any Collateral and any payment received from
any insurer or other Person as a result of the destruction, loss, theft, damage
or other involuntary conversion of whatever nature of any asset or property that
constitutes Collateral, EXCLUDING, in any such case, however, any funds
withdrawn from any Gas Account by Grantor to the extent permitted by the terms
of this Agreement, any funds remitted to the Other Grantor Account from the Cash
Collateral Account pursuant to Section 6.1, and any funds withdrawn from any Gas
Account by the Collateral Agent that have been remitted to Grantor pursuant to
Sections 6.3 or 6.4.
"QUALIFYING ACCOUNT DEBTOR" shall mean, at any time, each Account Debtor,
but excluding any Account Debtor (other than any Producer or such Producer's
Affiliate):
(i) that is an Affiliate of Grantor;
(ii) having 20% or more of its Gas Receivables that at such time (x)
are more than 60 days past due and/or 90 days past their respective
original invoice dates and (y) are not subject to bona fide dispute;
(iii) to which the Grantor has ceased to continue selling natural gas,
or has notified such Account Debtor of its intent to cease selling it
natural gas, in any event due to a dispute or a concern regarding such
Account Debtor's creditworthiness or financial condition; or
(iv) with respect to which the Collateral Agent has given notice to
the Grantor in writing at least 5 Business Days prior to such time that the
Collateral Agent has determined, in the exercise of its reasonable credit
judgment, that the collection of Gas Receivables from such Account Debtor
has become insecure or payment thereof has become doubtful or will be
delayed due to such Account Debtor's financial condition or the prospect of
payment by such Account Debtor has become impaired.
"QUALIFYING POSTED SECURITY" shall mean an executed irrevocable standby
letter of credit or letters of credit issued by a bank or banks acceptable to
the Collateral Agent or a surety bond
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or bonds issued by a surety company or companies acceptable to the Collateral
Agent, which letter(s) of credit and/or surety bond(s) shall be satisfactory in
form and substance to the Collateral Agent, or a combination of such letters of
credit or surety bonds, PROVIDED THAT, unless otherwise agreed in writing by the
Collateral Agent, (i) at the time of issuance and delivery to the Collateral
Agent thereof, the Receivables Ratio (as of a Report Date not more than 5
Business Days prior to such issuance and delivery) shall be not less than 1.10
to 1.00, or (ii) the obligations of Grantor or other account party or principal
in respect of such letter(s) of credit or surety bond(s) to the issuer(s)
thereof (x) shall not be secured by any assets or properties of Grantor or such
account party or principal, or (y) if such obligations are so secured, the
Collateral Agent shall have received an opinion of counsel to the Grantor,
subject to customary assumptions, acceptable to the Collateral Agent to the
effect that neither the delivery thereof nor any draw or payment thereunder will
be subject to avoidance as a preference or fraudulent conveyance in any
bankruptcy or other insolvency proceeding in respect of the Grantor or such
account party or principal.
"RECEIVABLES RATIO" shall mean, as of any date, the ratio of (x) the
Eligible Gas Receivables on such date, to (y) the Payment Obligations on such
date.
"RECEIVABLES SHORTFALL AMOUNT" shall mean, with respect to any Report Date,
(i) the amount, if any, by which the Eligible Gas Receivables on such Report
Date are insufficient to satisfy the Required Ratio or (ii) if there is no
insufficiency as of such Report Date, zero.
"REPORT DATE" shall mean any Grantor Report Date or Special Report Date, as
the case may be.
"REPRESENTATION DATE" shall mean the date of this Agreement and each Report
Date, as the case may be.
"REQUIRED AMOUNT" shall mean, with respect to any Report Date, (i) the
Receivables Shortfall Amount, if any, with respect to such Report Date divided
by the Required Ratio or (ii) if the Receivables Shortfall Amount with respect
to such Report Date is zero, zero.
"REQUIRED RATIO" shall mean (i) 2.00 to 1.00 with respect to any Grantor
Report Date, and (ii) 1.20 to 1.00 with respect to any Special Report Date.
"SCHEDULED REPORT DATE" shall have the meaning assigned to such term in
Section 4.10(a).
"SECURED PARTIES" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"SECURITY DOCUMENTS" shall mean this Agreement, the Account Agreement, the
Cash Collateral Account Agreement, the Lockbox Agreement (to the extent (but
only to the extent) relating to any Gas Account) and each Gas Receivables
Report.
"SECURITY INTEREST" shall have the meaning assigned to such term in Section
2.2.
"SPECIAL REPORT DATE" shall have the meaning assigned to such term in
Section 4.10(b).
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"SWEEP AGREEMENT" shall mean the service agreement dated March 22, 2002,
between Grantor and Bank providing for One Sweep(R) Investment Services in
respect of any funds from time to time on deposit in the Cash Collateral Account
pursuant to which such funds are to be invested on an overnight basis and
re-credited to the Cash Collateral Account at the beginning of the next banking
day, and any similar agreement entered into by Grantor and Bank and approved in
writing by the Collateral Agent (such approval not to be unreasonably withheld
or delayed).
"TEPI" shall have the meaning assigned to such term in the preliminary
statement of this Agreement.
"TNGI" shall have the meaning assigned to such term in the preliminary
statement of this Agreement.
"TRIGGERING EVENT" shall mean:
(i) a failure by Grantor to pay any amount due to any Producer under
Section 7.1, 7.2 or 7.3 of the Gas Sales Agreement that is not disputed by
Grantor in good faith under the terms of Section 7.3 of the Gas Sales
Agreement and the continuance of such failure for a period longer than 2
Business Days after the giving by such Producer to Grantor of written
notice of such non-payment; or
(ii) a dissolution or liquidation of Grantor (other than pursuant to
a consolidation, acquisition, amalgamation, merger or other reorganization
not arising from bankruptcy or insolvency proceedings, PROVIDED that the
successor to Grantor's interests in the Collateral shall have executed and
delivered to the Collateral Agent an assumption agreement in respect of
this Agreement or a replacement security agreement in substantially the
same form as this Agreement, in any event in form and substance
satisfactory to the Collateral Agent and granting to the Collateral Agent a
first priority perfected lien and security interest in all of the
Collateral (subject to any Permitted Liens) without prejudice to the
Collateral Agent's rights and remedies hereunder); or
(iii) the institution by Grantor or against Grantor of a proceeding
seeking a judgment of insolvency or bankruptcy or any other relief under
any bankruptcy or insolvency law or similar law affecting creditors'
rights, or the presentation of a petition for the winding up or liquidation
of Grantor, and, in the case of any such proceeding or petition instituted
against Grantor, such proceeding or petition remains undismissed for a
period longer than sixty days, or otherwise results in a judgment of
insolvency or bankruptcy or the entry of an order for Grantor's winding up
or liquidation; or
(iv) the Gas Sales Agreement has been terminated and the Payment
Obligations at the time of such termination or at any time thereafter
exceed the Additional Security held by the Collateral Agent at such time;
or
(v) a Cash Collateral Event or other event shall have occurred and
shall have become a Triggering Event as provided in Section 6.1; PROVIDED,
HOWEVER, that if any such Cash Collateral Event giving rise to a Triggering
Event shall no longer be deemed continuing pursuant to the terms of Section
6.1(a), and so long as the Gas Sales Agreement has not been terminated and
the Collateral Agent has not commenced action
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pursuant to Section 6.2 to foreclose on, sell or otherwise realize on the
Collateral (excluding any actions taken pursuant to Section 6.1 or 6.4),
such Triggering Event shall no longer be deemed to be continuing hereunder;
and PROVIDED, FURTHER, that any such cessation of such Triggering Event
shall not limit or otherwise affect in any manner (A) the exercise by the
Collateral Agent of any rights or remedies during the continuation of such
Triggering Event, or (B) the right of the Collateral Agent to continuing
control of the Designated Gas Account during the 30-day period immediately
succeeding such cessation as provided in Section 6.4(c).
"UCC" shall mean the Uniform Commercial Code in effect in the State of
Texas as of the date hereof.
SECTION 1.2 RULES OF INTERPRETATION. Unless the context of this Agreement
otherwise requires, the following rules of interpretation shall apply to this
Agreement:
(a) the singular shall include the plural, and the plural shall include
the singular;
(b) words of any gender shall include the other gender;
(c) the words "hereof," "herein," "hereby," "hereto," and similar words
refer to this entire Agreement and not to any particular Section or any other
subdivision of this Agreement;
(d) the words "include," "includes," and "including" will be deemed to be
followed by "without limitation";
(e) unless otherwise specified, a reference to any "Section", "Schedule,"
"Annex" or "Exhibit" is a reference to a specific Section of, or Schedule or
Exhibit to, this Agreement;
(f) a reference to any law, statute, regulation, notification or statutory
provision shall include any amendment, modification or re-enactment thereof, any
regulations promulgated thereunder from time to time, and any interpretations
thereof from time to time by any regulatory or administrative authority;
(g) a reference to any agreement, instrument, contract or other document
shall include any amendment, amendment and restatement, supplement or other
modification thereto;
(h) a reference to any Person shall include such Person's successors and
permitted assigns under any agreement, instrument, contract or other document;
and
(i) all accounting terms not specifically defined herein shall be
construed in accordance with generally accepted accounting principles in effect
from time to time in the United States of America, consistently applied.
ARTICLE II
APPOINTMENT OF COLLATERAL AGENT; SECURITY INTEREST
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SECTION 2.1 APPOINTMENT OF COLLATERAL AGENT. Each of the Producers hereby
appoints the Collateral Agent to act as collateral agent on their behalf and, in
such capacity and not in its capacity as a Producer, (i) to receive, deposit and
distribute funds in accordance with this Agreement, and (ii) to accept the grant
of the Security Interest in the Collateral under Section 2.2 and to take all
actions it deems necessary and appropriate to enforce its rights with respect
thereto. The Collateral Agent hereby accepts such appointment. In performing its
functions and duties under this Agreement, the Collateral Agent shall act solely
as agent of the Producers and does not assume and shall not be deemed to have
assumed any obligations towards or relationship of agency or trust with or for
Grantor or any other Person.
SECTION 2.2 SECURITY INTEREST. As security for the prompt payment in full
of the Obligations, Grantor hereby grants to the Collateral Agent, for the
benefit of the Secured Parties, a security interest in all of Grantor's rights,
title and interests in, to and under the Collateral, in each case whether now
existing or hereafter arising or acquired (the "SECURITY INTEREST"). The
Collateral Agent is hereby authorized to file one or more financing statements,
continuation statements or other documents for the purpose of perfecting,
confirming, continuing, enforcing or protecting the Security Interest, without
the signature of Grantor, and naming Grantor as debtor and the Collateral Agent
as secured party.
SECTION 2.3 NO ASSUMPTION OF LIABILITY. The Security Interest is granted as
security only and shall not subject any Secured Party to, or in any way alter or
modify, any obligation or liability of Grantor with respect to or arising out of
the Collateral. Grantor acknowledges and agrees, subject to Section 7.16(c),
that it will perform in all respects all obligations of Grantor, and will
satisfy and discharge any liabilities of Grantor, with respect to or arising out
of the Collateral.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Grantor represents and warrants to each Secured Party as of the date of
this Agreement and as of each Report Date as follows:
SECTION 3.1 AUTHORITY; VALIDITY OF SECURITY INTEREST. Grantor has full
power and authority to grant the Security Interest pursuant hereto and to
execute, deliver and perform its obligations in accordance with the terms of
this Agreement, without the consent or approval of any other Person other than
any consent or approval which has been obtained. The Security Interest is, as of
the date of this Agreement, a legal and valid security interest in the
Collateral securing the payment and performance of the Obligations.
SECTION 3.2 FILINGS. The Perfection Certificate has been duly prepared,
completed and executed and the information set forth therein was correct and
complete in all respects as of the date of this Agreement. Fully completed UCC
financing statements or other appropriate filings, recordings or registrations
containing a description of the Collateral have been delivered to the Collateral
Agent for filing in each governmental, municipal or other office specified in
Schedule 5 to the Perfection Certificate, which are all the filings, recordings
and registrations that were necessary as of the date of this Agreement under the
UCC to publish notice of and to
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establish a legal, valid and perfected security interest in favor of each
Secured Party in respect of all Collateral in which the Security Interest may be
perfected by filing pursuant to the UCC.
SECTION 3.3 PERFECTION OF SECURITY INTEREST. The Security Interest
constitutes, subject to the filings described in Section 3.2 above, a perfected
security interest in the Gas Receivables, Gas Receivables Rights, Gas Accounts
and all other Collateral, in each case in which a security interest may be
perfected by filing pursuant to the UCC.
SECTION 3.4 TITLE; ABSENCE OF OTHER LIENS. The Collateral is owned by
Grantor free and clear of any Lien, except for Permitted Liens and the Liens
granted hereunder. Except with respect to the Liens granted hereunder, Grantor
has not filed or consented to the filing of (a) any financing statement or
analogous document under the UCC or any other applicable laws covering the
Collateral, or (b) any assignment in which Grantor assigns the Collateral or any
security agreement or similar instrument covering the Collateral with any
foreign governmental, municipal or other office, which financing statement or
analogous document, assignment, security agreement or similar instrument is
still in effect.
SECTION 3.5 GAS RECEIVABLES. Except as may be specifically disclosed on any
Gas Receivables Report delivered to the Collateral Agent pursuant to Section
4.10, with respect to all Eligible Gas Receivables (or, as to clause (d), all
Gas Receivables) shown on such Gas Receivables Report, as of the effective date
of such Gas Receivables Report:
(a) Such Eligible Gas Receivables represent bona fide sales of natural gas
or related products or services to Account Debtors in the ordinary course of
Grantor's business and are not evidenced by a judgment, chattel paper, or
instrument of any kind (unless such chattel paper or instrument has been
delivered duly endorsed "without recourse or warranty" to the Collateral Agent
and accepted by the Collateral Agent as an Eligible Gas Receivable pursuant to
clause (iv) of the definition thereof);
(b) (i) With respect to the net amount of such Eligible Gas Receivables
shown on such Gas Receivables Report, there are no additional setoffs, claims or
disputes existing or asserted with respect thereto, (ii) Grantor has not made
any agreement with any Account Debtor for any extension of time for the payment
of such Eligible Gas Receivable beyond the period set forth in clause (i) of the
definition of Eligible Gas Receivables; and (iii) with respect to the net amount
of such Eligible Gas Receivables shown on such Gas Receivables Report, Grantor
has not made any agreement with any Account Debtor for any additional compromise
or settlement for less than such net amount, any further release of any Account
Debtor from liability therefor or any additional deduction therefrom;
(c) The net amounts shown on such Gas Receivables Report are actually and
absolutely owing (or, as a result of natural gas that has actually been
delivered at such time but which has not been invoiced, will thereafter become
owing) to Grantor as indicated thereon with respect to such Eligible Gas
Receivables and are not in any way contingent (other than for the passage of
time, as to any such delivered but uninvoiced gas);
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(d) No payments have been directed to be made in respect of such Gas
Receivables other than through the lockbox designated in the Lockbox Agreement
or the Designated Gas Account;
(e) Grantor has no actual knowledge that (x) any such Eligible Gas
Receivables are invalid or unenforceable in whole or in part, or (y) there has
occurred any material adverse change in the financial condition or
creditworthiness of any Account Debtors such that Grantor has determined in its
reasonable credit judgment that collection thereof is insecure or that payment
thereof is doubtful or will be delayed or that the prospect of payment has been
impaired; and
(f) Such Eligible Gas Receivables shown on such Gas Receivables Report
otherwise satisfy the requirements for "Eligible Gas Receivables" as provided
herein.
SECTION 3.6 NO CONFLICT. Neither the execution, delivery and performance of
this Agreement or any other Security Document by Grantor nor the grant by
Grantor of the Security Interest in the Collateral as provided herein will
violate any law, rule, regulation, order, writ, judgment, injunction, decree or
award binding on the Grantor, or conflict with any organizational document or
any contract or agreement binding on the Grantor or its assets which is material
to the consolidated financial condition or operations of the Grantor and its
subsidiaries, taken as a whole, or require any government approval except where
such violation, conflict or lack of approval would not have a material adverse
effect on (i) the business, property, financial condition or results of
operations of the Grantor and its subsidiaries, taken as a whole, or (ii) the
ability of the Grantor to perform its payment obligations under any of the
Security Documents or result in the creation or imposition of any Lien in, of or
on the property of the Grantor or any subsidiary pursuant to the terms of any
such contract or agreement binding on the Grantor or any subsidiary which is
material to the consolidated financial condition or operations of the Grantor
and its subsidiaries, taken as a whole.
ARTICLE IV
COVENANTS
SECTION 4.1 CHANGE OF NAME OR LOCATION OF GRANTOR; RECORDS.
(a) Grantor agrees to give the Collateral Agent not less than 30 days
prior written notice of any change in (i) its partnership name, (ii) the
jurisdiction of its organization or location of its principal place of business
or chief executive office, (iii) its identity or organizational structure, or
(iv) its Federal Taxpayer Identification Number; PROVIDED, HOWEVER, that so long
as Grantor has complied with the immediately following sentence, Grantor's
failure to give timely notice as aforesaid shall not be deemed to result in a
Material Covenant Breach hereunder. Grantor agrees not to effect or permit any
change referred to in the preceding sentence unless all filings have been made
under the UCC or otherwise that are required in order for the Collateral Agent
to continue at all times following such change to have a valid, legal and
perfected first priority security interest in all the Collateral to the extent
provided in Sections 3.3 and 3.4.
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(b) Grantor agrees to maintain, at its own cost and expense, such complete
and accurate records with respect to the Collateral owned by it as are
consistent with its current practices and in accordance with prudent and
standard practices used in industries in which Grantor is engaged, but in any
event to include complete accounting records indicating all payments and
proceeds received with respect to any part of the Collateral.
SECTION 4.2 PROTECTION OF SECURITY. Grantor shall, at its own cost and
expense, take any and all actions necessary to defend title to the Collateral
against all Persons other than holders of Permitted Liens and to defend the
Security Interest of the Collateral Agent in the Collateral and the priority
thereof against any Lien other than Permitted Liens.
SECTION 4.3 PAYMENTS TO GAS ACCOUNT.
(a) To the extent Grantor has not already done so, Grantor shall direct
all Account Debtors to remit all Collections in respect of a Gas Receivable
Right to the Designated Gas Account or through the lockbox designated in the
Lockbox Agreement.
(b) Grantor shall not modify any payment or other instructions with
respect to Gas Receivables that would cause an Account Debtor to remit
Collections other than to the Designated Gas Account or through the lockbox
designated in the Lockbox Agreement.
SECTION 4.4 USE AND DISPOSITION OF COLLATERAL. Grantor shall not make or
permit to be made any sale, transfer, assignment, pledge or hypothecation of the
Collateral, and shall not grant any other Lien in respect of the Collateral,
except for the Lien granted hereunder and in connection with Permitted Liens.
SECTION 4.5 FURTHER ASSURANCES. Grantor agrees, at its own expense, to
execute, acknowledge, deliver and cause to be duly filed all such further
instruments and documents and take all such actions as the Collateral Agent may
from time to time reasonably request to better assure, preserve, protect and
perfect the Security Interest and the rights and remedies created hereby,
including the payment of any fees and taxes payable to any Governmental Entity
required in connection with the execution and delivery of this Agreement, the
granting of the Security Interest and the filing of any financing statements or
other documents in connection herewith or therewith. If any amount payable to
Grantor under or in connection with any of the Collateral shall be or become
evidenced by any promissory note or other instrument, such note or instrument
shall be promptly pledged and delivered to the Collateral Agent, duly endorsed
"without recourse or warranty" to the Collateral Agent.
SECTION 4.6 INSPECTION AND VERIFICATION. The Collateral Agent shall be
entitled to exercise the rights to audit Grantor's books and records (including
the records described in Section 4.1(b) above) in the same manner and at the
same times as granted to the Producers under Section 7.5 of the Gas Sales
Agreement, all to the extent necessary to determine compliance by Grantor with
the terms of this Agreement.
SECTION 4.7 COLLATERAL ASSIGNMENT OF SECURITY INTEREST. If at any time
Grantor shall take a security interest in any property of an Account Debtor or
any other Person to secure payment and performance of a Gas Receivable Right
(other than cash deposits or advance payments for future gas sales), Grantor
shall promptly collaterally assign such security interest to
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the Collateral Agent (except to the extent constituting a "supporting
obligation" already included as a portion of the Collateral as provided herein).
Unless otherwise requested in writing by the Collateral Agent, such collateral
assignment need not be delivered to the Collateral Agent or filed of public
record unless necessary to continue the perfected status of the security
interest against creditors of and transferees from the Account Debtor or other
Person granting the security interest.
SECTION 4.8 CONTINUING OBLIGATIONS OF GRANTOR. Grantor agrees to indemnify
and hold harmless each Secured Party from and against any and all liabilities or
damages arising from claims of third parties with respect to any of the
Collateral or the obligations of Grantor with respect thereto and any costs and
expenses (including reasonable attorneys' fees) with respect thereto, other than
any liabilities, damages, costs or expenses sustained through the Collateral
Agent's gross negligence or willful misconduct (as determined by a final
non-appealable judgment rendered by a court of competent jurisdiction).
SECTION 4.9 LEGEND. Upon receipt of a written request by the Collateral
Agent, to the extent (but only to the extent) required to perfect the Security
Interest of the Collateral Agent in any Gas Receivable Rights, Grantor shall
legend, in form and manner reasonably satisfactory to the Collateral Agent, its
books, records and documents evidencing or pertaining to such Gas Receivable
Rights with an appropriate reference to the fact that the Collateral Agent has a
security interest therein.
SECTION 4.10 GAS RECEIVABLES REPORT.
(a) Grantor shall deliver to the Collateral Agent each Month a gas
receivables report, effective as of the 13th day of such Month (the "SCHEDULED
REPORT DATE"), in the form attached as Exhibit A (the "GAS RECEIVABLES REPORT")
not later than 5 Business Days after the Scheduled Report Date. Grantor shall
also be entitled to deliver to the Collateral Agent, at Grantor's option at any
time, (i) an amended Gas Receivables Report in respect of a Gas Receivables
Report previously delivered to the Collateral Agent, and (ii) an additional Gas
Receivables Report with an effective date as indicated thereon (but not more
than 5 Business Days prior to the date of delivery). Each such Gas Receivables
Report shall be complete and accurate in all material respects and shall
include, without limitation, a calculation in reasonable detail as to the
Receivables Ratio as of the effective date of such Gas Receivables Report.
(b) Upon written request by the Collateral Agent, but not more often than
once a Month, Grantor shall also produce and deliver to the Collateral Agent a
special Gas Receivables Report effective as of the date specified by the
Collateral Agent in such request (such effective date (the "SPECIAL REPORT
DATE") to be not earlier than the next Business Day immediately following the
date such request is delivered to Grantor, or, if such request is not delivered
to Grantor on a Business Day, the first Business Day following such delivery to
Grantor). Such Gas Receivables Report shall be delivered to the Collateral Agent
not later than the fifth Business Day following the Special Report Date.
(c) Grantor shall provide promptly such additional information as the
Collateral Agent may reasonably request in order to verify the information set
forth on any Gas Receivables Report delivered pursuant to this Section 4.10.
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ARTICLE V
POWER OF ATTORNEY
Grantor hereby makes, constitutes and appoints the Collateral Agent (and
all officers, employees or agents designated by the Collateral Agent) as
Grantor's true and lawful agent and attorney-in-fact, and in such capacity the
Collateral Agent shall have the right, with power of substitution for Grantor
and in Grantor's name or otherwise, for the use and benefit of the Collateral
Agent, to take any or all of the following actions, all as the Collateral Agent
may determine in its sole discretion, but in any event with such actions to be
taken only upon the occurrence and during the continuance of a Triggering Event:
(a) to receive, endorse, assign and/or deliver any and all notes, acceptances,
checks, drafts, money orders or other evidences of payment relating to the
Collateral or any part thereof; (b) to demand, collect, receive payment of, give
receipt for and give discharges and releases of all or any of the Collateral;
(c) to sign the name of Grantor on any invoice or xxxx of lading relating to any
of the Collateral; (d) to send verifications of Gas Receivable Rights to any
Account Debtor; (e) to commence and prosecute any and all suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect or otherwise realize on all or any of the Collateral or to enforce any
rights in respect of any Collateral; (f) to settle, compromise, compound, adjust
or defend any actions, suits or proceedings relating to all or any of the
Collateral; and (g) to notify, or to require Grantor to notify, Account Debtors
to make payment directly to the Collateral Agent in such manner as the
Collateral Agent may direct. It is understood and agreed that the appointment of
the Collateral Agent as the agent and attorney-in-fact of Grantor for the
purposes set forth above is coupled with an interest and is irrevocable. Grantor
hereby ratifies all that said attorneys shall lawfully do or cause to be done by
virtue hereof. The powers conferred hereunder are solely to protect the
interests of the Secured Parties in the Collateral and shall not impose any duty
on any of them to exercise any such powers. The Collateral Agent shall be
accountable only for amounts actually received by it as a result of the exercise
of such powers, and neither it nor any of its officers, directors, employees or
agents shall be responsible to Grantor for any act or failure to act, except for
its own gross negligence or willful misconduct as determined by a final
non-appealable judgment of a court of competent jurisdiction.
ARTICLE VI
REMEDIES
SECTION 6.1 REMEDIES UPON CASH COLLATERAL EVENTS, OTHER EVENTS.
(a) Upon the occurrence of and during the continuation of any event
described in paragraphs (1) through (5) below (each a "Cash Collateral Event"),
but at no other time (unless a Triggering Event shall have occurred and be
continuing at such time), the Collateral Agent shall be entitled to deliver to
Bank a notice contemplated by Section 2 of the Account Agreement and to direct
Bank to transfer to the Cash Collateral Account all funds in the Designated Gas
Account at any time during such period. Following such notice, Grantor shall not
withdraw any funds from, or instruct Bank to transfer (other than to the Cash
Collateral Account) any funds in, the Designated Gas Account during the period
such Cash Collateral Event is continuing.
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(1) Failure by Grantor to deliver a duly completed Gas Receivables
Report on the date required by Section 4.10. Such Cash Collateral
Event shall be deemed not to be continuing on the first date
thereafter that Grantor has submitted the duly completed Gas
Receivables Report for the required Report Date. If such Cash
Collateral Event continues for a period longer than 15 days, a
Triggering Event shall be deemed to have occurred hereunder.
(2) Delivery to the Collateral Agent of a duly completed Gas
Receivables Report indicating that the Receivables Ratio as of
the applicable Report Date for such Receivables Report is less
than the Required Ratio for such Report Date, and the total
Additional Security held by the Collateral Agent at the time of
such delivery is less than the Required Amount as of such Report
Date. Such Cash Collateral Event shall be deemed not to be
continuing (x) on the first date thereafter that the total
Additional Security then held by the Collateral Agent shall equal
or exceed the Required Amount (based on a Required Ratio of 2.00
to 1.00) as of the then-most recent Report Date, or (y) on the
first Report Date thereafter that the Receivables Ratio shall be
equal to or greater than 2.00 to 1.00. If such Cash Collateral
Event continues for a period longer than 30 days, a Triggering
Event shall be deemed to have occurred hereunder.
(3) The occurrence of any Material Representation Breach. Such Cash
Collateral Event shall be deemed not to be continuing on the
first Report Date thereafter on which, based on the duly
completed Gas Receivables Report for such Report Date, no
Material Representation Breach then exists. If such Cash
Collateral Event continues for a period longer than 30 days, a
Triggering Event shall be deemed to have occurred hereunder.
(4) The occurrence of any Material Covenant Breach. Such Cash
Collateral Event shall be deemed not to be continuing (x) on the
first date thereafter that any breach or failure described in
clause (i) of the definition of Material Covenant Breach has been
cured by Grantor, or (y) on the first Report Date thereafter on
which, based on the duly completed Gas Receivables Report for
such Report Date, no Material Covenant Breach then exists, as the
case may be. If such Cash Collateral Event continues for a period
longer than 30 days, a Triggering Event shall be deemed to have
occurred hereunder.
(5) Termination of the Gas Sales Agreement by the Producers pursuant
to Section 7.3 or 10.2 thereof. Such Cash Collateral Event shall
be deemed not to be continuing on the first date thereafter that
(i) the Gas Sales Agreement has been reinstated, (ii) the
Outstanding Obligations as then determined shall have been paid
in full, or (iii) the total Additional Security then held by the
Collateral Agent equals or exceeds the Payment Obligations as
then determined; PROVIDED, HOWEVER, that if at any time following
the discontinuation of a Cash Collateral Event pursuant to this
17
clause (iii), the Additional Security held by the Collateral
Agent is less than the Payment Obligations at such time, a
Triggering Event shall be deemed to have occurred hereunder.
(b) The Cash Collateral Account and all funds therein shall be under the
sole dominion and control of the Collateral Agent. The Collateral Agent shall
not apply such funds in payment of any Obligations except (i) as specified in
this Article VI upon and during the continuation of a Triggering Event, or (ii)
pursuant to written direction from Grantor for application against outstanding
Payment Obligations.
(c) At such time as any Cash Collateral Event shall cease to continue and
written notice of such cessation shall have been given by Grantor to the
Collateral Agent, then so long as (I) no other Cash Collateral Event shall have
occurred and then be continuing, and (II) no Triggering Event shall then exist
or be continuing or shall have existed at any time during the 30-day period
immediately preceding such time, the Collateral Agent shall take the following
actions within 2 Business Days after such cessation (and, in addition, (x) in
the case of a Cash Collateral Event referred to in clause (2)(A) below after
each subsequent delivery of a Gas Receivables Report, and (y) in the case of a
Cash Collateral Event referred to in clause (2)(B) below after each subsequent
payment of any Payment Obligations):
(1) deliver to Bank a notice contemplated by Section 2 of the Account
Agreement to the effect that Bank may thereafter comply in
accordance with instructions from Grantor as to disposition of
funds then and thereafter in the Designated Gas Account (subject,
however, to any subsequent notices to Bank pursuant to this
Section 6.1 in respect of any other Cash Collateral Event or
pursuant to Section 6.2 or 6.4 in respect of any Triggering
Event); and
(2) (A) if such Cash Collateral Event is one described in paragraph
(2) of Section 6.1(a), and if the Additional Security then held
by the Collateral Agent exceeds the Required Amount (based on a
Required Ratio of 2.00 to 1.00) as of the Report Date for such
Gas Receivables Report, the Collateral Agent shall release a
portion of such Additional Security equal to such excess (such
release to be effected first by transferring funds from the Cash
Collateral Account to the Other Grantor Account and then, if
necessary, by releasing a portion of the Qualifying Posted
Security in any remaining excess amount; at Grantor's request,
the Collateral Agent shall permit Grantor to substitute like
Qualifying Posted Security having an undrawn and available amount
equal to the Required Amount so as to accommodate such release);
(B) if such Cash Collateral Event is one described in paragraph
(5) of Section 6.1(a) that has ceased to continue pursuant to
clause (iii) of the second sentence thereof, and if the
Additional Security then held by the Collateral Agent exceeds the
outstanding Payment Obligations (after giving effect to any
payment thereof at such time), the Collateral Agent shall release
a portion of such Additional Security equal to such excess
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(such release to be effected first by transferring funds from the
Cash Collateral Account to the Other Grantor Account and then, if
necessary, by releasing a portion of the Qualifying Posted
Security in any remaining excess amount; at Grantor's request,
the Collateral Agent shall permit Grantor to substitute like
Qualifying Posted Security having an undrawn and available amount
equal to the outstanding Payment Obligations so as to accommodate
such release); or
(C) in the case of any other Cash Collateral Event, the
Collateral Agent shall transfer all funds in the Cash Collateral
Account to the Other Grantor Account and return to Grantor all
Qualifying Posted Security then held by the Collateral Agent.
(d) If (i) any representation or warranty made by Grantor herein shall
prove to be false or misleading in any material respect, but does not constitute
a Material Representation Breach hereunder, or (ii) Grantor shall fail to
perform or observe any covenant or agreement herein for a period longer than 10
days after receipt of written notice thereof from the Collateral Agent, but such
failure does not constitute a Material Covenant Breach hereunder, then and in
any such case as described in clause (i) or (ii), a breach shall be deemed to
have occurred under the Gas Sale Agreement and any related dispute, controversy
or claim shall be subject to the dispute resolution procedures set forth in
Section 11.8 of the Gas Sales Agreement. If pursuant to such procedures Grantor
agrees or is ordered by the panel of arbitrators to take any action in
consequence of such breach, and fails to take such action as so agreed or so
ordered, a Triggering Event shall be deemed to have occurred hereunder.
(e) The Collateral Agent and Grantor acknowledge and agree that funds on
deposit from time to time in the Cash Collateral Account will be subject to
overnight investment as specified in the Sweep Agreement, and that the
Collateral Agent has, pursuant to the Cash Collateral Account Agreement, sole
right and authority to modify, terminate, or otherwise direct any actions in
respect of the services under the Sweep Agreement. Notwithstanding the
foregoing, the Collateral Agent agrees that it will not take any such actions
without Grantor's prior written consent, except (i) in connection with the
Collateral Agent's application of funds in satisfaction of the Outstanding
Obligations or a transfer of funds from the Cash Collateral Account, in either
case pursuant to Section 6.3 or 6.4, or (ii) to the extent the Collateral Agent
may determine that modification of investment instructions is advisable (x) in
order to assure continued perfection of the Security Interest therein or (y) due
to concern regarding the security of the principal of such investment in light
of the financial condition of Bank or other counterparty to such investment or
other risks inherent in such investment. The Collateral Agent shall give Grantor
prompt written notice of any such actions taken as described in clause (ii) of
the immediately preceding sentence. Grantor and the Collateral Agent acknowledge
and agree that all interest and other investment return accruing thereon or
resulting therefrom shall be for the account of Grantor, that Grantor shall be
solely responsible for all taxes in respect thereof, and that all such interest
and investment return shall be held by the Collateral Agent as additional
Collateral hereunder.
SECTION 6.2 REMEDIES UPON TRIGGERING EVENT.
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(a) During the continuance of a Triggering Event, Grantor agrees to
deliver each item of Collateral to the Collateral Agent on demand, and it is
agreed that the Collateral Agent shall have the right, with or without legal
process and with or without prior notice or demand for performance, to take
possession of the Collateral and without liability for trespass to enter any
premises where the Collateral may be located for the purpose of taking
possession of or removing the Collateral and, generally, to exercise any and all
rights afforded to a secured party under the UCC or other applicable law,
including without limitation, Section 9.602 of the UCC. Without limiting the
generality of the foregoing, Grantor agrees that, during the continuance of a
Triggering Event, the Collateral Agent shall have the right, subject to the
mandatory requirements of applicable law, to sell or otherwise dispose of all or
any part of the Collateral, at public or private sale or at any broker's board
or on any securities exchange, for cash, upon credit or for future delivery as
the Collateral Agent shall deem appropriate. Each such purchaser at any such
sale shall hold the property sold absolutely, free from any claim or right on
the part of Grantor, and Grantor hereby waives (to the extent permitted by law)
all rights of redemption, stay and appraisal which Grantor now has or may at any
time in the future have under any rule of law or statute now existing or
hereafter enacted.
(b) The Collateral Agent shall give Grantor 10 days' written notice (which
Grantor agrees is notice within a reasonable time before the disposition under
Section 9.612 of the UCC) of the Collateral Agent's intention to make any sale
of Collateral. Such notice, in the case of a public sale, shall state the time
and place for such sale and, in the case of a sale at a broker's board or on a
securities exchange, shall state the board or exchange at which such sale is to
be made and the day on which the Collateral, or portion thereof, will first be
offered for sale at such board or exchange. Any such public sale shall be held
at such time or times within ordinary business hours and at such place or places
as the Collateral Agent may fix and state in the notice (if any) of such sale.
At any such sale, the Collateral, or portion thereof, to be sold may be sold in
one lot as an entirety or in separate parcels, as the Collateral Agent may (in
its sole and absolute discretion) determine. The Collateral Agent shall not be
obligated to make any sale of any Collateral if it shall determine not to do so,
regardless of the fact that notice of sale of such Collateral shall have been
given. The Collateral Agent may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Collateral Agent until the sale price is paid by the purchaser or purchasers
thereof, but the Collateral Agent shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may be sold again upon like
notice. At any public (or, to the extent permitted by law, private) sale made
pursuant to this Section, the Collateral Agent may bid for or purchase, free (to
the extent permitted by law) from any right of redemption, stay, valuation or
appraisal on the part of Grantor (all said rights being also hereby waived and
released to the extent permitted by law), the Collateral or any part thereof
offered for sale and may make payment on account thereof by using any claim then
due and payable to any Secured Party from Grantor as a credit against the
purchase price, and the Collateral Agent may, upon compliance with the terms of
sale, hold, retain and dispose of such property without further accountability
to Grantor therefor. As an alternative to exercising the power of sale herein
conferred upon it, the Collateral Agent may proceed by a suit or suits at law or
in equity to foreclose this Agreement and to sell the
20
Collateral or any portion thereof pursuant to a judgment or decree of a court or
courts having competent jurisdiction or pursuant to a proceeding by a
court-appointed receiver.
(c) During the continuance of a Triggering Event, at the Collateral
Agent's written request, Grantor shall deliver to the Collateral Agent (i)
copies of all documents (including print-outs of electronic documents and
information) evidencing the agreements and transactions which gave rise to the
Gas Receivables and other Gas Receivable Rights, including all orders, invoices
and shipping receipts (and to the extent any such documents also relate to other
assets of Grantor, such copies may be redacted as to any information not
relating to the Collateral), and (ii) if the Collateral Agent has given the
notice referred to in Section 6.2(d), originals (to the extent available to
Grantor) of all documents described in the preceding clause (i). Upon payment in
full of all Obligations and termination of this Agreement, the Collateral Agent
shall return such documents to Grantor.
(d) At any time during the continuance of a Triggering Event, the
Collateral Agent may, upon written notice to Grantor, limit or terminate the
authority of Grantor to collect the Gas Receivables.
(e) At any time during the continuance of a Triggering Event, the
Collateral Agent in its own name or in the name of others may communicate with
Account Debtors to verify with them to the Collateral Agent's satisfaction the
existence, amount and terms of any Gas Receivable.
(f) At any time during the continuance of a Triggering Event, except for
(x) offsets in the ordinary course of business of accounts payable of Grantor or
an Affiliate of Grantor (regardless of whether arising from sales of natural
gas) against any Gas Receivable, and (y) other transactions in the ordinary
course of business consistent with Grantor's past practice, Grantor will not (i)
grant any extension of the time of payment of any Gas Receivable beyond the
period set forth in clause (i) of the definition of Eligible Gas Receivable,
(ii) compromise or settle any Gas Receivable for less than the full amount
thereof, (iii) release, wholly or partially, any Person liable for the payment
of any Gas Receivable, (iv) allow any credit or discount on any Gas Receivable,
or (v) amend, supplement or modify any Gas Receivable in any manner that could
adversely affect the value thereof.
SECTION 6.3 APPLICATION OF PROCEEDS. During the continuance of a Triggering
Event, the Collateral Agent shall apply the proceeds of any collection or sale
of the Collateral, as well as any Collateral consisting of cash (including any
funds then on deposit in the Cash Collateral Account or the Designated Gas
Account), as follows:
FIRST, to the payment of all reasonable costs and expenses incurred by
the Collateral Agent during the continuance of any Cash Collateral Event or
Triggering Event in connection with such collection or sale or otherwise in
connection with this Agreement or any of the Obligations, including all
court costs and the reasonable fees and expenses of its agents and legal
counsel and any other reasonable costs or expenses incurred during the
continuance of any Cash Collateral Event or Triggering Event in connection
with the exercise of any right or remedy hereunder or under the Account
Agreement;
21
SECOND, to the payment of all Outstanding Obligations; and
THIRD, to Grantor, its successors or assigns or, to such other Person
lawfully entitled thereto.
Upon any sale of the Collateral by the Collateral Agent (including pursuant to a
power of sale granted by statute or under a judicial proceeding), the receipt of
the Collateral Agent or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the application of any
part of the purchase money paid over to the Collateral Agent or any other
Secured Party or such officer or be answerable in any way for the misapplication
thereof.
SECTION 6.4 NOTICES UNDER ACCOUNT AGREEMENT.
(a) During the continuance of a Triggering Event, the Collateral Agent
shall:
(i) have the right at any time to deliver to Bank a notice
contemplated by Section 2 of the Account Agreement to the effect that Bank
shall comply solely in accordance with instructions from the Collateral
Agent as to the disposition of all funds then and thereafter in the
Designated Gas Account;
(ii) at the time of delivery of the notice described in clause (i)
above, instruct Bank to transfer to the Collateral Agent as soon as
possible and on each Business Day thereafter any and all funds in the
Designated Gas Account (with such funds, upon each such transfer, to be
applied at such time against Outstanding Obligations or transferred by the
Collateral Agent to the Cash Collateral Account or a separate account as
provided in Section 6.4(c));
(iii) after receipt by the Collateral Agent of (A) funds as provided
in clause (ii) above, and/or (B) written notice from Grantor instructing
the Collateral Agent to take the actions specified in this clause (iii) as
to the funds then held in the Cash Collateral Account, then in any such
case upon the determination by the Collateral Agent as to the current
amount of Outstanding Obligations (which determination shall be made in a
manner consistent with the provisions of Section 7.1 of the Gas Sales
Agreement, and in any event not later than the third Business Day after
receipt of such funds as provided in clause (ii) above or receipt of
written notice from Grantor as provided in the preceding clause (B), as the
case may be), take the following actions in respect of all funds
transferred from the Designated Gas Account and all funds then in the Cash
Collateral Account (except where such actions would be in violation of or
contrary to any applicable legal prohibition or restriction, in which event
such actions shall be taken promptly after such prohibition or restriction
is no longer in effect):
(x) apply such funds in satisfaction of the Outstanding
Obligations; and
(y) upon application by the Collateral Agent of such funds in
satisfaction of all Outstanding Obligations, cause any remaining funds
not so applied to be transferred to the Other Grantor Account.
22
If the Collateral Agent is unable to take such actions as a result of any
applicable legal prohibition or restriction, then all such funds shall continue
to be held by the Collateral Agent without application until such time as such
prohibition or restriction is no longer in effect; PROVIDED, HOWEVER, that if
the total amount of such funds then held by the Collateral Agent, but not
applied in satisfaction of the Outstanding Obligations, exceeds an amount equal
to 120% of the Outstanding Obligations, the Collateral Agent shall cause funds
in excess of such amount to be transferred to the Other Grantor Account. Grantor
agrees that the Collateral Agent shall in no event have any liability to Grantor
or any other Person for complying with the instructions set forth in Grantor's
written request pursuant to clause (iii)(B) above, and Grantor hereby
indemnifies and holds the Collateral Agent harmless from and against any loss,
claim, damage, cost or expense that may be sustained or incurred by the
Collateral Agent as a result of complying with such instructions.
(b) After the first Business Day that any Triggering Event ceases to exist
or continue and Grantor has given the Collateral Agent written notice of such
cessation, the Collateral Agent shall direct Bank (unless such direction has
previously been given) to transfer to the Cash Collateral Account all funds then
or thereafter deposited in the Designated Gas Account, and the Collateral Agent
shall comply with Grantor's written directions for application of any such funds
in the Cash Collateral Account against the Payment Obligations. Not later than
30 days after such first Business Day, then so long as (I) no Cash Collateral
Event shall have occurred and then be continuing, (II) no other Triggering Event
shall then exist or be continuing or shall have existed at any time during such
30-day period, and (III) the Gas Sales Agreement has not been terminated and the
Collateral Agent has not commenced action pursuant to Section 6.2 to foreclose
on, sell or otherwise realize on the Collateral (excluding any actions taken
pursuant to Section 6.1 or this Section 6.4), the Collateral Agent shall take
the following actions:
(1) deliver to Bank a notice contemplated by Section 2 of the Account
Agreement to the effect that Bank may thereafter comply in
accordance with instructions from Grantor as to disposition of
funds then and thereafter in the Designated Gas Account (subject,
however, to any other notices to Bank pursuant to this Section
6.4 in respect of any Cash Collateral Event or pursuant to
Section 6.2 or this Section 6.4 in respect of any other
Triggering Event); and
(2) (A) if such Triggering Event has resulted from a Cash Collateral
Event described in paragraph (2) of Section 6.1(a), or from a
Cash Collateral Event described in paragraph (5) of Section
6.1(a) that has ceased to continue pursuant to clause (iii) of
the second sentence thereof, then Grantor shall be entitled to a
release of a portion of any Additional Security then held by the
Collateral Agent in the same amount and in the same manner as
provided upon cessation of the corresponding Cash Collateral
Event pursuant to the provisions of paragraph (2)(A) or (2)(B) of
Section 6.1(c), as the case may be; or
(B) in the case of any other Triggering Event, the Collateral
Agent shall transfer all funds in the Cash Collateral Account to
the Other Grantor
23
Account and return to Grantor all Qualifying Posted Security then
held by the Collateral Agent.
(c) If the Collateral Agent holds immediately available funds received
pursuant to its instructions to Bank as provided in Section 6.4(a)(ii), but is
unable at such time to apply all such funds in satisfaction of Outstanding
Obligations, the Collateral Agent shall (unless the Collateral Agent is unable
to do so by any applicable legal prohibition or restriction), transfer such
funds not so applied (other than any excess funds required to be transferred to
the Other Grantor Account pursuant to the penultimate sentence of Section
6.4(a), if applicable), at its sole option, either (i) to the Cash Collateral
Account, or (ii) to a separate account under the sole dominion and control of
the Collateral Agent. If the Collateral Agent makes such transfer to such a
separate account, the Collateral Agent shall use commercially reasonable efforts
to establish such separate account in a manner so as to provide interest or
other investment return on the funds therein reasonably comparable to the Sweep
Agreement. Prior to such time as the Collateral Agent applies such funds in
satisfaction of the Outstanding Obligations, all interest and investment return
accruing thereon or resulting therefrom shall be for the account of Grantor,
Grantor shall be solely responsible for all taxes in respect thereof and all
expenses of establishing and maintaining such account, and all such interest and
investment return shall be held by the Collateral Agent as additional Collateral
hereunder.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 NOTICES. All communications and notices hereunder, including
notices given under the Gas Sales Agreement that, by their terms, pertain to
this Agreement, shall (except as otherwise expressly permitted herein) be in
writing and given (a) to the Collateral Agent on its behalf and on behalf of any
other Secured Party, as provided with respect to "Producer" in Section 13.1 of
the Gas Sales Agreement, and (b) to Grantor as provided with respect to "Dynegy"
in Section 13.1 of the Gas Sales Agreement, and also to:
Dynegy Marketing and Trade
0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Assistant Treasurer, Operations
Facsimile: (000) 000-0000
and
Dynegy Marketing and Trade
0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: General Counsel - Finance
Facsimile: (000) 000-0000
SECTION 7.2 SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made by Grantor herein and in the certificates or
other instruments prepared or
24
delivered in connection with or pursuant to this Agreement shall be considered
to have been relied upon by each Secured Party and shall survive the date hereof
and shall continue in full force and effect until this Agreement shall
terminate.
SECTION 7.3 BINDING EFFECT; SEVERAL AGREEMENT. This Agreement shall become
effective as to Grantor when a counterpart hereof executed on behalf of Grantor
shall have been delivered to each Secured Party and a counterpart hereof shall
have been executed on behalf of each Secured Party, and thereafter this
Agreement shall be binding upon Grantor and each Secured Party and shall inure
to the benefit of Grantor and each Secured Party. Neither this Agreement nor any
obligation of a party under this Agreement is assignable without the express
written consent of the other parties (which consent may be withheld in the
discretion of such other parties for any reason), except that no such consent
shall be required for an assignment by any Secured Party that is a Producer to
an Affiliate of such Secured Party; PROVIDED, HOWEVER, that any assignment shall
not relieve the assigning party of responsibility for any of its obligations
under this Agreement.
SECTION 7.4 SUCCESSORS AND ASSIGNS. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and permitted assigns of such party; and all covenants, promises and
agreements by or on behalf of Grantor or any Secured Party in this Agreement
shall bind and inure to the benefit of their respective successors and permitted
assigns.
SECTION 7.5 COLLATERAL AGENT'S FEES AND EXPENSES. Grantor agrees to pay
upon demand to the Collateral Agent the amount of any and all reasonable
expenses, including the reasonable fees, disbursements and other charges of its
counsel and of any experts or agents, which the Collateral Agent may incur upon
the occurrence and during the continuance of a Cash Collateral Event or a
Triggering Event in connection with the exercise, enforcement or protection of
any of the rights of any Secured Party hereunder. Any such amounts payable as
provided hereunder shall be additional Obligations secured hereby. The
provisions of this Section 7.5 shall remain operative and in full force and
effect regardless of the termination of this Agreement or the Gas Sales
Agreement, the repayment of any of the Obligations, the invalidity or
unenforceability of any term or provision of this Agreement or the Gas Sales
Agreement, or any investigation made by or on behalf of any Secured Party. All
amounts due under this Section 7.5 shall be payable on written demand therefor
and shall bear interest at the rate specified in Section 7.1 of the Gas Sales
Agreement.
SECTION 7.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
SECTION 7.7 WAIVERS; AMENDMENT.
(a) No waiver by either party of any default of the other under this
Agreement shall operate as a waiver of any future default, whether of like or
different character or nature. The rights and remedies of any Secured Party
hereunder and of any Secured Party under the Gas Sales Agreement are cumulative
and are not exclusive of any rights or remedies that Secured Party would
otherwise have. No waiver of any provisions of this Agreement or the Account
25
Agreement shall in any event be effective unless the same shall be permitted by
Section 7.7(b) below, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice to or
demand on Grantor in any case shall entitle Grantor to any other or further
notice or demand in similar or other circumstances.
(b) This Agreement supersedes all prior agreements, oral or written, with
respect to the subject matter hereof, and neither this Agreement, the Account
Agreement (notwithstanding any provision thereof), nor any provision hereof or
thereof may be waived, amended or modified except pursuant to an agreement or
agreements in writing entered into by each Secured Party and Grantor.
SECTION 7.8 LIMITATION OF DAMAGES. In no event shall either party be liable
for punitive, exemplary, consequential or incidental damages arising from any
breach or default under this Agreement or from any act or omission under or in
connection with this Agreement.
SECTION 7.9 ACKNOWLEDGMENT AND CONSENT TO OFFSETTING OF ACCOUNTS. Each
Secured Party hereby (a) acknowledges that during the term of this Agreement, in
the ordinary course of business, (i) Grantor will, and will take such action as
may be necessary to enable Grantor's Affiliates to, offset their respective
accounts payable (regardless of whether arising from sales of natural gas)
against Gas Receivables, and (ii) any Account Debtor may offset its accounts
payable owing to Grantor in respect of Gas Receivables against accounts
receivable (regardless of whether arising from sales of natural gas) owing to
such Account Debtor from Grantor or Grantor's Affiliates; and (b) consents to
any such offset; provided, however, that Grantor shall reflect the amounts of
all such setoffs in the current Gas Receivables Reports submitted to the
Collateral Agent by Grantor pursuant to the requirements of this Agreement.
SECTION 7.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY
HERETO HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.10.
SECTION 7.11 SEVERABILITY. If any provision of this Agreement is determined
to be invalid, illegal or otherwise unenforceable for any reason by a court of
competent jurisdiction, the remaining terms and conditions of this Agreement
shall remain in full force and effect to the fullest extent permitted by law. In
such an event, the parties agree to make a good faith effort to replace the
affected provisions.
SECTION 7.12 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall
26
constitute but one contract, and shall become effective as provided in Section
7.3. Delivery of an executed signature page to this Agreement by facsimile
transmission shall be effective as delivery of a manually executed counterpart
hereof.
SECTION 7.13 HEADINGS. Article and Section headings used herein are for the
purpose of reference only, are not part of this Agreement and are not to affect
the construction of, or to be taken into consideration in interpreting, this
Agreement.
SECTION 7.14 JURISDICTION; CONSENT TO SERVICE OF PROCESS.
(a) Each of the parties hereto hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of any
Texas State court or Federal court of the United States of America sitting in
Houston, Texas, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such Texas State court or, to the
extent permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.
(b) Each of the parties hereto hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in any Texas
State court or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 7.1. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 7.15 TERMINATION; REINSTATEMENT UPON CERTAIN EVENTS.
(a) By providing written notice to the Collateral Agent, Grantor may
provide for the termination of this Agreement at any time after (i) Grantor has
complied with all its obligations then applicable under Section 7.8.3 of the Gas
Sales Agreement with respect to implementation of the Alternate Security
Arrangement, and (ii) Grantor has paid in full all Payment Obligations in
respect of purchases of natural gas delivered prior to the Transition Date as
described in said Section 7.8.3 of the Gas Sales Agreement.
(b) Except as otherwise provided in this Section 7.15, this Agreement and
the Security Interest shall terminate when (i) all Outstanding Obligations have
been paid in full, and (ii) the Gas Sales Agreement has been terminated or
expires.
(c) The Collateral Agent shall execute and deliver to Grantor, at
Grantor's expense, all UCC termination statements and similar documents that
Grantor shall reasonably request to evidence such termination. Any execution and
delivery of termination statements or documents
27
pursuant to this Section 7.15 shall be without recourse to or warranty by any
Secured Party other than that the Collateral (other than any Collateral that
shall have been sold in accordance with Section 6.2) is not subject to any
interest granted by any Secured Party in favor of any other Person. Upon
termination of this Agreement, the Collateral Agent shall immediately (i)
deliver a notice to Bank terminating the Account Agreement and the Cash
Collateral Account Agreement in accordance with the terms thereof and (ii) cause
all funds in the Cash Collateral Account to be transferred to the Other Grantor
Account and return to the Grantor all Qualifying Posted Security then held by
the Collateral Agent. The Collateral Agent shall not deliver a notice to Bank
terminating the Account Agreement or the Cash Collateral Account Agreement
pursuant to the terms thereof except upon termination of this Agreement pursuant
to this Section 7.15 or otherwise with the prior written consent of Grantor.
(d) Notwithstanding the foregoing, this Agreement and the Security
Interests shall remain in full force and effect and continue to be effective
should any petition be filed by or against Grantor for liquidation or
reorganization, should Grantor become insolvent or make an assignment for the
benefit of any creditor or creditors, or should a receiver, trustee, custodian,
liquidator, or similar official be appointed for all or any substantial part of
Grantor's assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Obligations, or any
portion thereof, is, pursuant to applicable law, rescinded or reduced in amount,
or must otherwise be restored or returned, whether as a "voidable preference,"
"fraudulent conveyance," or otherwise, all as though such payment or performance
had not been made. In the event that any payment, or portion thereof, is so
rescinded, reduced, restored or returned, the Obligations shall be reinstated
and deemed reduced only by such amount paid and not so rescinded, reduced,
restored or returned.
SECTION 7.16 OBLIGATIONS OF GRANTOR. (a) Anything herein to the contrary
notwithstanding, (i) Grantor shall remain liable (subject to Section 7.16(c))
under each of the Gas Receivables to observe and perform all the conditions and
obligations to be observed and performed by it thereunder, all in accordance
with the terms of any agreement giving rise thereto; (ii) neither the Collateral
Agent nor any other Secured Party shall have any obligation or liability, and
Grantor shall not be released from any obligation or liability, under any
agreement giving rise to, or any instrument or document relating to, a Gas
Receivable by reason of or arising out of any provision of this Agreement or the
receipt by the Collateral Agent or any other Secured Party of payment relating
thereto or the exercise by the Collateral Agent of any rights assigned
hereunder; and (iii) neither the Collateral Agent nor any other Secured Party
shall be obligated in any manner to perform any of the obligations of Grantor
under or pursuant to any agreement giving rise to a Gas Receivable, to make any
payment, to make any commitment or inquiry as to the nature or the sufficiency
of any payment received by it or as to the sufficiency of any performance by any
party thereunder, to present or file any claim or notice, to take any action to
enforce any performance or to collect the payment of any amounts which may have
been assigned to it or to which it may be entitled at any time or times, and no
action taken or omitted to be taken by the Collateral Agent with respect to the
Collateral or any part thereof shall give rise to any defense, counterclaim or
offset in favor of Grantor or, other than for losses sustained through the
Collateral Agent's gross negligence or willful misconduct (as determined by a
final non-appealable judgment rendered by a court of competent jurisdiction), to
any claim or action against the Collateral Agent. The provisions of this Section
shall in no event relieve Grantor of any of its obligations hereunder with
respect to the Collateral or any part thereof or impose any
28
obligation on the Collateral Agent to proceed in any particular manner with
respect to the Collateral or any part thereof, or in any way limit the exercise
by the Collateral Agent of any other or further right which it may have on the
date of this Agreement or hereafter, whether hereunder, by law or otherwise.
(b) If Grantor fails to perform or comply with any of its agreements
contained herein within 30 days after written notice thereof to Grantor, the
Collateral Agent, at its option, but without any obligation so to do, may
perform or comply, or otherwise cause performance or compliance, with such
agreement. Any and all reasonable costs and expenses incurred by the Collateral
Agent in connection with the foregoing actions shall be for the account of
Grantor, shall be payable by Grantor on demand, and shall be included in the
Obligations as defined herein.
(c) Nothing herein shall impose any obligation on, or provide the
Collateral Agent any right to require, Grantor to sell any natural gas or to
observe or perform any condition or obligation under, or under any agreement
giving rise to, or any instrument or document relating to, any Gas Receivable,
any of which actions Grantor shall take or refrain from taking as Grantor shall
consider appropriate, based on Grantor's commercially reasonable business
judgment.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
29
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
DYNEGY MARKETING AND TRADE
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
CHEVRON U.S.A. INC.
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
TEXACO EXPLORATION AND PRODUCTION INC.
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
TEXACO NATURAL GAS INC.
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
CHEVRON U.S.A. INC., as the Collateral Agent
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
Annex I to the
Security Agreement
PERFECTION CERTIFICATE
Reference is made to the Security Agreement dated as of March 22, 2002 (as
amended, supplemented or otherwise modified from time to time, the "SECURITY
AGREEMENT"), among DYNEGY MARKETING AND TRADE, a Colorado general partnership
("GRANTOR"); CHEVRON U.S.A. INC., a Pennsylvania corporation ("CUSA"); TEXACO
EXPLORATION AND PRODUCTION INC., a Delaware corporation ("TEPI"); TEXACO NATURAL
GAS INC., a Delaware corporation ("TNGI"); and CUSA as collateral agent (in such
capacity, together with its successors in such capacity, the "COLLATERAL
AGENT"). CUSA, TEPI, TNGI and the Collateral Agent are hereinafter referred to
as the "SECURED PARTIES." Capitalized terms used herein and not defined herein
shall have the meanings assigned to such terms in the Security Agreement.
The undersigned, being a duly authorized officer of the managing partner of
Grantor, hereby certifies to each Secured Party as follows:
1. NAME.
(a) The exact name of Grantor is Dynegy Marketing and Trade, which name is
designated in Section 1.02 of Grantor's partnership agreement.
(b) Set forth below is each other name Grantor has had in the past five
years, together with the date of the relevant change:
Grantor was formerly known as Natural Gas Clearinghouse. The name change
was effected on July 7, 1998.
(c) The following is a list of all other names (including trade names or
similar appellations) used by Grantor or any of its divisions or other business
units in connection with the conduct of its business or the ownership of its
properties at any time during the past five years:
None
(d) Set forth below is the Federal Taxpayer Identification Number of
Grantor:
00-0000000
2. CURRENT LOCATIONS.
(a) The chief executive office of Grantor was at all times during the past
five years located in Xxxxxx County, Texas, at 0000 Xxxxxxxxx Xxxxxx, Xxxxxxx,
Xxxxx 00000.
(b) Set forth below are all the places of business of Grantor not
identified in paragraph (a) above:
Grantor Mailing Address County State
------- --------------- ------ -----
None
3. FILE SEARCH REPORTS. Attached hereto as Schedule 3 are (i) true copies
of file search reports for Grantor from the Uniform Commercial Code filing
offices where filings described in Section 3.2 of the
Security Agreement are to
be made, and (ii) a true copy of each financing statement or other filing
identified in such file search reports.
4. UCC FILINGS. Duly completed financing statements on Form UCC-1 in
substantially the form of Schedule 4 hereto have been prepared for filing in the
uniform commercial code filing office in the jurisdiction where Grantor is
located as identified in Section 2 hereof.
5. SCHEDULE OF FILINGS. Attached hereto as Schedule 5 is a schedule
setting forth, with respect to the filings described in Section 4 above, each
filing and the filing office in which such filing is to be made.
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.
2
IN WITNESS WHEREOF, the undersigned has duly executed this certificate as
of the day and year first above written.
DYNEGY MARKETING AND TRADE
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
3
SCHEDULE 5
UCC-1 FILING OFFICE
--------------------------------------------------------------------------------
Dynegy Marketing and Trade Texas Secretary of State
Colorado Secretary of State
4
