<PAGE> 1
Commission File No. 1-1098
As filed with the United States Securities and Exchange Commission on February
23, 1996.
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
/ X / OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended DECEMBER 31, 1995
-----------------
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
/ / OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _____ to _____
T H E C O L U M B I A G A S S Y S T E M, I N C.
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(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 13-1594808
------------------------------------------------------------ ------------------------------------
(State or other Jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
20 Montchanin Road, Wilmington, Delaware 19807-0020
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(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (302) 429-5000
--------------
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
Name of Each Exchange
Title of Each Class on Which Registered
------------------- --------------------
Common Stock, $10 Par Value . . . . . . . . . . . . . . . . . . . . . . . . . . New York Stock Exchange
7.89% Redeemable Preferred Stock, Series A
5.22% Convertible Preferred Stock, Series B
Debentures
- -----------
6.39% Series A due November 28, 2000
6.61% Series B due November 28, 2002
6.80% Series C due November 28, 2005
7.05% Series D due November 28, 2007
7.32% Series E due November 28, 2010
7.42% Series F due November 28, 2015
7.62% Series G due November 28, 2025
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the proceeding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes X or No .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. / /
The aggregate market value of the outstanding common shares of the Registrant
held by nonaffiliates as of January 31, 1996, was $2,132,925,000. For purposes
of the foregoing calculation, all directors and/or officers have been deemed to
be affiliates, but the registrant disclaims that any of such directors and/or
officers is an affiliate.
The number of shares outstanding of each class of common stock as of January
31, 1996, was : Common Stock $10 Par Value: 49,208,385 shares outstanding.
Documents Incorporated by Reference
-----------------------------------
Part III of this report incorporates by reference the Registrant's Proxy
Statement relating to the 1996 Annual Meeting of Stockholders and the Quarterly
Form 10-Q for the period ended September 30, 1995.
<PAGE> 2
CONTENTS
<TABLE>
<CAPTION>
Page
Part I No.
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<S> <C>
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . 14
Part II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters 14
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . 15
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . 17
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . 42
Item 9. Change In and Disagreements with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . 77
Part III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . 77
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . 78
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . 78
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . 78
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . 78
Undertaking made in Connection with 1933 Act Compliance on Form S-8 . . . . . 79
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
</TABLE>
<PAGE> 3
PART I
ITEM 1. BUSINESS
General
The Columbia Gas System, Inc. (Columbia) and its subsidiaries comprise one of
the nation's largest integrated natural gas systems engaged in natural gas
transmission, natural gas distribution, and exploration for and production of
oil and natural gas. Columbia is also engaged in related energy businesses
including the marketing of natural gas, the generation of electricity,
primarily fueled by natural gas; and the distribution of propane. Columbia was
organized under the laws of the State of Delaware on September 30, 1926, is a
registered holding company under the Public Utility Holding Company Act of
1935, as amended, (1935 Act) and derives substantially all its revenues and
earnings from the operating results of its 18 direct subsidiaries. Columbia
owns all of the securities of its subsidiaries except for approximately 8
percent of the stock in Columbia LNG Corporation. Columbia and its
subsidiaries are sometimes collectively referred to herein as the System.
Columbia and its principal pipeline subsidiary, Columbia Gas Transmission
Corporation (Columbia Transmission), emerged from bankruptcy on November 28,
1995, after filing separate petitions for protection under Chapter 11 of the
Federal Bankruptcy Code on July 31, 1991. During the bankruptcy period both
Columbia and Columbia Transmission were debtors-in-possession under the
Bankruptcy Code and continued to operate their businesses in the normal course
subject to the jurisdiction of the United States Bankruptcy Court for the
District of Delaware.
Transmission Operations
Columbia's two interstate pipeline subsidiaries, Columbia Transmission and
Columbia Gulf Transmission Company (Columbia Gulf), operate a 23,200-mile
pipeline network extending from offshore in the Gulf of Mexico to Lake Erie,
New York and the eastern seaboard. In addition, Columbia Transmission
operates one of the nation's largest underground natural gas storage systems.
The transmission subsidiaries serve directly or indirectly eight million
customers in fifteen northeastern, midatlantic, midwestern, and southern
states and the District of Columbia. Columbia Gulf's pipeline system, extends
from offshore Louisiana to West Virginia, and transports a major portion of the
gas delivered by Columbia Transmission. It also transports gas for third
parties within the production areas of the Gulf Coast.
Since November 1, 1993, following a fundamental restructuring of the gas
industry that was brought about by new federal regulations, Columbia
Transmission has eliminated its merchant function. It now provides an array of
competitively priced natural gas transportation and storage services for local
distribution companies and industrial and commercial customers who contract
directly with producers or marketers for their gas supplies.
Distribution Operations
Columbia's five distribution subsidiaries provide natural gas service to nearly
2 million residential, commercial and industrial customers in Ohio,
Pennsylvania, Virginia, Kentucky and Maryland. The distribution subsidiaries
purchase gas for and sell gas to high priority (mostly residential) customers
and transport gas for certain industrial and commercial customers who purchase
gas from other sources. More than 30,600 miles of distribution pipelines serve
these major markets.
Oil and Gas Operations
Columbia's oil and gas exploration and production subsidiaries, Commonwealth
Natural Resources, Inc. (CNR) and Columbia Gas Development Corporation
(Columbia Development), explore for, develop and produce oil and natural gas in
the United States. In an effort to strategically focus its resources, Columbia
recently announced its intent to sell Columbia Development, its Southwest oil
and gas subsidiary. Columbia believes that the strategic value to the System
of drilling for oil and gas in the Southwest has diminished. Columbia
Development accounts for approximately 196 Bcf equivalent of proved oil and
natural gas reserves.
Columbia plans to retain its larger and more strategically placed Appalachian
oil and gas subsidiary, CNR, which is closer to Columbia's customer base and
pipeline service territory. As of December 31, 1995, CNR held interest in more
than 2.2 million net acres of gas and oil leases and had proved gas and oil
reserves in excess of 609 Bcf equivalent.
3
<PAGE> 4
ITEM 1. BUSINESS (Continued)
Other Energy Operations
Columbia Energy Services Corporation (CES), Columbia's nonregulated natural gas
marketing company, provides an array of supply and fuel management services to
distribution companies, independent power producers and other large end users
both on and off Columbia's transmission and distribution pipeline systems. CES
opened the Columbia Energy Market Center in 1994 to provide one-stop shopping
for natural gas supply and transportation services to help customers better
manage their energy costs and in 1995 added electronic trading to its list of
services, making real-time trading of natural gas supplies and pipeline
capacity easier and more efficient.
TriStar Ventures is involved in four cogeneration projects that produce both
electricity and useful thermal energy. These projects are fueled principally by
natural gas. TriStar Ventures holds various interests in these facilities that
have a total capacity of nearly 300 megawatts.
Columbia Propane Corporation and Commonwealth Propane, Inc., sell propane at
wholesale and retail to approximately 74,300 customers in eight states.
Columbia Coal Gasification has in excess of 500 million tons of coal reserves
in the Appalachian area, much of which contains less than 1% sulfur.
Approximately 50% of these reserves are leased to other companies for
development.
Columbia LNG Corporation is a partner with Potomac Electric Power Company in
the Cove Point LNG Limited Partnership which recently began commercial
operation of one of the largest natural gas peaking and storage facilities in
the United States located at Cove Point, Maryland. The facility enables
liquefied natural gas to be stored until needed for the winter peak-day
requirements of utilities and other large gas users. The facility has the
capacity to liquefy natural gas at a rate of 15,000 mcf of natural gas per day.
Columbia Gas System Service Corporation provides centralized, cost-efficient
data processing, financial, accounting, legal and other services to the System.
For additional discussion of the System's business segments, including
financial information for the last three fiscal years, see Item 7, pages 17
through 42 and Note 16 on pages 68 through 70 of Item 8.
Recent Management Changes
Oliver G. Richard III joined Columbia April 28, 1995 as Chairman, Chief
Executive Officer and President. Prior to joining Columbia, Mr. Richard served
as Chairman, Chief Executive Officer and President of New Jersey Resources
Corporation (NJR). He joined NJR in 1991 after three years as President and
Chief Executive Officer of Northern Natural Gas Company, the major pipeline
subsidiary of Enron Corporation. Prior to that, Mr. Richard also served as
Senior Vice President and, subsequently, Executive Vice President of Enron Gas
Pipeline Group and Vice President and General Counsel of Tenngasco, an
unregulated gas trading subsidiary of Tenneco, Inc. From 1982 to 1985 Mr.
Richard served as a Commissioner of the Federal Energy Regulatory Commission
(FERC) where he was instrumental in promulgating initiatives aimed at
increasing competition and efficiencies among federally regulated energy
providers. From 1978 to 1981 he served as a legislative assistant for energy
issues to the Honorable Bennett Johnston, U.S. Senator from Louisiana.
In September 1995, Peter M. Schwolsky was appointed Senior Vice President and
Chief Legal Officer of Columbia. He had previously been Executive Vice
President for Law and Corporate Development for NJR. Other recent appointments
include the election of Robert C. Skaggs, Jr., as President and Chief Executive
Officer of Columbia Gas of Ohio, Inc. and Columbia Gas of Kentucky, Inc., and
Catherine Good Abbott as Chief Executive Officer of Columbia Transmission and
Columbia Gulf. Mr. Skaggs was previously Executive Vice President and Chief
Financial Officer of Columbia's distribution subsidiaries. Ms. Abbott was a
Principal at Gem Energy Consulting, Inc., (Gem) and prior to that was a vice
president at various business units within Enron Corporation. Also from Gem,
Stephen J. Harvey was recently appointed as the Vice President of Strategic
Planning for Columbia Gas System Service Corporation, and Terrance L. McGill
was elected President of Columbia Gulf. Prior to Gem, Mr. Harvey was
President of NJR Energy and Mr. McGill held an executive position with various
Enron pipelines. W. Henry Harmon, the former Treasurer and Controller of
Columbia Natural Resources, one of the two exploration and production
subsidiaries, was selected as the new President of Columbia Natural Resources
and Columbia Coal Gasification. Dr. Michael J. Gluckman, formerly President of
Paradigm Power, a subsidiary of NJR, was selected as the new Chief Executive
Officer of TriStar Ventures.
4
<PAGE> 5
ITEM 1. BUSINESS (Continued)
Competition and Business Strategies
The natural gas and energy markets are undergoing tremendous change. Over the
past ten years open access over interstate pipelines to natural gas supplies
has developed and the commodity price of gas has been deregulated. During this
period, distribution companies, larger industrial and commercial customers and
marketers began to purchase gas directly from producers and marketers; and an
open competitive market for gas supplies emerged. This separation or
"unbundling" of the transportation and other services offered by pipelines
allows customers to select the services they want independent from the purchase
of the commodity. Many believe that this "unbundling" of services and
deregulation of the commodity price will occur at the distribution company
level as well, and that the distribution companies will face competition in the
sale of gas, or largely confine their activities to the transportation of the
commodity and related services. At the same time that the natural gas markets
are evolving, the markets for competing energy sources are also changing. Open
access to interstate transmission of electricity is under investigation by the
FERC and, if introduced, could result in increased competition in the market
for electricity. The energy market of the future may be characterized by open
competition not only in the market for supply of a particular commodity but
also open competition between interchangeable fuels. This change in the energy
markets will not happen overnight and perhaps not within the next five to ten
years, if at all.
In order to capitalize on the opportunities presented by this increasingly
competitive environment, Columbia's management is intent on developing a more
agile, customer-focused organization which will utilize Columbia's core asset
strengths, its expansive customer base and its knowledge and experience in the
energy markets to remake Columbia into a "total energy company" - a leading
provider of energy and energy services. To achieve this goal, Columbia has
developed the following strategic initiatives:
Capitalize on Core Asset Strengths. Management intends to capitalize
on its core asset strengths in order to compete more effectively in an
increasingly competitive energy marketplace. Columbia will focus on and expand
its core businesses, allocating approximately 90% of planned 1996 capital
investment to the transmission and distribution segments. Consistent with this
focus Columbia has announced a $400 million expansion of Columbia
Transmission's storage and transportation systems which is expected to be
substantially completed in the period from 1997 to 1999. The recent
announcement of Columbia's intention to sell Columbia Development is consistent
with this new strategy, following the determination that the strategic value to
Columbia of drilling for gas in the Southwest had diminished. In contrast, the
reserves held by Columbia's Appalachian oil and gas subsidiary, CNR, have
greater strategic value due to their location.
Exploit Synergies. Unlike the structure of many of its peers,
Columbia's distribution, storage and Appalachian oil and gas production
operations form a grid connected from within by Columbia Transmission. Columbia
intends to embark on a system-wide marketing strategy that will provide
customers with a variety of unbundled gas supply services - gathering,
processing, transportation, storage, distribution and other energy delivery
services. Columbia is also seeking to capitalize on the efficiencies of its
integrated system through initiatives with regulators designed to promote rate
structures that will reward Columbia's transmission and distribution
subsidiaries for enhanced productivity and efficiency.
Develop Non-Regulated Energy Business. Columbia's extensive presence
in the northeast, mid-atlantic and midwestern regions of the country provides
significant opportunities to offer customers a wide variety of non-regulated
energy-related products and services. Currently CES, Columbia's non-regulated
marketing subsidiary, actively markets natural gas and a broad range of natural
gas-related products and services. In order to expand the scope of energy
services and products offered by CES, or another subsidiary, Columbia has filed
an application under the 1935 Act seeking authority to offer a wide array of
products and services to energy consumers. These non-regulated energy-related
products and services would be offered to all energy consumers within its
wholesale and retail market area. In addition, Columbia has filed an
application with the U.S. Securities and Exchange Commission (SEC) under the
1935 Act for authority to market all forms of energy. Columbia's gas marketing
subsidiary already operates an electronic system for the trading of natural gas
supplies and transportation-related services, The Fast Lane(TM), that could be
expanded to allow instantaneous trading of any energy commodity. Columbia
expects that the SEC will approve the concept of electricity marketing by
natural gas registered holding company systems in the near future and that an
appropriate order will be issued for Columbia on a timely basis. Columbia
anticipates the expansion of energy-related and power marketing services over
time so that ultimately Columbia will be able to provide its customers with
one- stop shopping for all their energy needs.
5
<PAGE> 6
ITEM 1. BUSINESS (Continued)
Streamline Organizational Structure. In February 1996, Columbia's
transmission and distribution subsidiaries commenced a top-down review of their
management structure and operations in an effort to streamline their
organizational structure and improve customer service. The studies will
examine all aspects of Columbia's operations including the configuration and
location of its management. No decisions have been made as yet and it is
premature to estimate the potential costs and/or savings, if any, which might
result from implementation of any recommendations resulting from the studies.
This review parallels a similar effort involving the Columbia Gas System
Service Corporation which was previously initiated. Columbia anticipates that
changes in organizational structure and operation will occur over a period of
time. For example, the recently announced management changes for the
distribution subsidiaries, which provide for the president and chief executive
officers to report directly to Mr. Richard, are the beginning of an effort to
flatten Columbia's organizational structure. Columbia also recently
implemented various operational and maintenance cost reductions in its
Appalachian exploration and production subsidiary and believes that similar
cost reductions are likely in other business segments.
Implement CVA. Underpinning Columbia's financial strategy is the
recent application of a value added approach (CVA), to all of its businesses.
CVA is a financial process as well as a financial measure that determines
whether the anticipated return on a business activity or project exceeds its
risk adjusted capital cost. The CVA process was initiated to encourage
Columbia's employees to think in terms of value enhancement. All material,
discretionary capital expenditures will be subject to the CVA process.
Columbia believes the effects of CVA are beginning to materialize, reflecting
net planned investment reductions in a number of Columbia's business segments.
This new management tool aided Columbia in its decisions to allocate capital to
Columbia Transmission's planned expansion and to divest Columbia Development.
CVA is also being employed in Columbia's strategic planning process and in the
setting of management compensation levels.
Maintain Financial Flexibility. As a result of its bankruptcy
recapitalization, Columbia achieved one of the lowest average costs of debt in
the natural gas industry (7.03%) with an average maturity of 14 years and, as
of year- end 1995, had a 57% ratio of long-term debt to total capital.
Columbia's debentures are currently rated Baa3/BBB/BBB by Moody's/S&P/Fitch,
respectively. One of management's objectives is to improve the credit quality
and debt ratings of Columbia over time, to better position Columbia to take
advantage of business opportunities as they arise. However, there can be no
assurance that Columbia will be successful at improving or maintaining its
credit quality or debt ratios.
The foregoing discussion includes forward looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Although Columbia believes that its
expectations are based on reasonable assumptions, it can give no assurance that
its goals or strategies will be achieved. Important factors that could cause
actual results to differ materially from those in the forward looking
statements or projections included herein include regulatory actions, the pace
of deregulation of domestic retail natural gas and electricity markets, the
timing and extent of change in commodity prices for all forms of energy and the
timing and extent of Columbia's efforts to implement changes planned by
management.
Other Relevant Business Information
The System's customer base is broadly diversified, with no single customer
accounting for a significant portion of revenues.
Certain subsidiaries file reports with various federal agencies containing
estimates of company-owned oil and gas reserves. These estimates are generally
consistent, but not always comparable, to those reported in the 1995 Annual
Report to Shareholders.
As of January 31, 1996, the System had 9,981 full-time employees of which 2,073
are subject to collective bargaining agreements.
Information relating to environmental matters is detailed in Item 7 pages 24
through 25, page 31 and page 37 and in Item 8, Note 13G on pages 66 through 68.
For a listing of the subsidiaries of Columbia and their lines of business refer
to Exhibit 21.
6
<PAGE> 7
ITEM 2. PROPERTIES
Information relating to properties of subsidiary companies is detailed below
and on page 8 and pages 72 through 75 of Item 8 under Note 18. The System also
owns coal interests in the Appalachian area. Assets under lien and other
guarantees are described on page 65 in Note 13D of Item 8.
Neither Columbia nor any subsidiary knows of material defects in the title to
any real properties of the subsidiaries of Columbia or of any material adverse
claim of any right, title, or interest therein, pending or contemplated.
Substantially all of Columbia Transmission's property has been pledged to
Columbia as security for First Mortgage Bonds issued by Columbia Transmission
to Columbia.
OIL AND GAS DATA
Acreage - At December 31, 1995
<TABLE>
<CAPTION>
Developed Acreage Undeveloped Acreage
---------------------------- -------------------------------
Gross Net Gross Net
--------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Appalachian . . . . . . . . . . . 1,642,183 1,551,157 812,414 671,788
Southwest - Onshore . . . . . . . 70,567 34,459 155,560 80,917
Southwest - Offshore . . . . . . 162,951 53,858 80,555 54,415
Rocky Mountain . . . . . . . . . 22,111 10,885 181,621 106,634
Other Areas . . . . . . . . . . . 114 57 - -
----------- ---------- ----------- -----------
Total . . . . . . . . . . . 1,897,926 1,650,416 1,230,150 913,754
=========== ========== =========== ===========
</TABLE>
Net Wells Completed - 12 Months Ended December 31
<TABLE>
<CAPTION>
Exploratory Development Total
-------------------- -------------------- --------------------
Productive Dry Productive Dry Productive Dry
---------- --- ---------- --- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
1995 . . . . 4 4 64 21 68(a) 25
1994 . . . . 3 9 78 14 81(a) 23
1993 . . . . 2 10 91 18 93(a) 28
</TABLE>
Productive and Drilling Wells - At December 31, 1995
<TABLE>
<CAPTION>
Production Wells
------------------------------------
Gross(b) Net Wells Drilling
-------------- ------------------ ---------------
Gas Oil Gas Oil Gross Net
------ ----- ------ ------ ------ ---
<S> <C> <C> <C> <C> <C>
6,419 693 5,765 375 34 22
</TABLE>
(a) Includes 18 net horizontal wells in 1995, 17 net horizontal wells in 1994
and 17 net horizontal wells in 1993.
(b) Includes 791 multiple completion gas wells and 14 multiple completion oil
wells, all of which are included as single wells in the table. Also
includes 52 gross productive horizontal wells.
7
<PAGE> 8
GAS PROPERTIES OF SUBSIDIARIES - AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
Miles of Pipeline Compressor Stations
Underground ------------------------- -------------------
Storage Gathering Installed
--------------- and Trans- Distri- Capacity
Subsidiaries State Acreage Wells Storage mission bution Number (hp)
- --------------------------------------- ----- ------- ----- ------- ------- ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Columbia Gas of Kentucky, Inc. . . . . . KY - - - - 2,272 - -
Columbia Gas of Maryland, Inc. . . . . . MD - - - - 589 - -
Columbia Gas of Ohio, Inc. . . . . . . . OH - - - - 17,374 - -
Columbia Gas of Pennsylvania, Inc. . . . PA 3,364 8 4 - 6,758 1 825
Commonwealth Gas Services, Inc.. . . . . VA - - - - 3,610 - -
Columbia Gas Transmission Corporation. . DE - - - 3 - - -
KY - - 947 770 - 9 19,420
MD 945 - 23 182 - 1 12,000
NJ - - - 78 - - -
NY 26,083 143 67 496 - 4 6,280
NC - - - 1 - 1 1,356
OH 485,164 2,463 2,753 4,112 - 28 101,685
PA 63,848 270 627 2,064 - 29 67,884
VA - - 128 1,117 - 11 56,720
WV 289,621 816 3,030 2,571 - 51 304,837
Columbia Gulf Transmission Company . . . AR - - - 8 - - -
KY - - - 716 - 2 70,290
LA - - - 2,055 - 6 201,200
MS - - - 659 - 3 118,800
TN - - - 556 - 2 83,000
TX - - - 202 - - -
WY - - - 10 - - -
Columbia Natural Resources, Inc. . . . . KY - - 432 - - - -
MI - - 6 - - - -
NY - - 2 - - - -
OH - - 99 - - - -
PA - - 8 - - - -
VA - - 25 - - - -
WV - - 171 - - - -
------- ----- ------- ------ ------- ------- ---------
Total . . . . . . . . . . . . . . . . . 869,025 3,700 8,322 15,600 30,603 148 1,044,297
======= ===== ======= ====== ======= ======= =========
</TABLE>
NOTE: This table excludes minor gas properties and all construction work in
progress. The titles to the real properties of the subsidiaries of Columbia
have not been examined for the purpose of this document. Neither Columbia nor
any subsidiary knows of material defects in the title to any of the real
properties of the subsidiaries of Columbia or of any material adverse claim of
any right, title, or interest therein, pending or contemplated. Substantially
all of Columbia Transmission's property has been pledged to Columbia as
security for First Mortgage Bonds issued by Columbia Transmission to Columbia.
8
<PAGE> 9
ITEM 3. LEGAL PROCEEDINGS
I. Shareholder Class Actions and Derivative Suits
After the June 19, 1991 announcement of Columbia's proposed charge to
second quarter earnings and suspension of its dividend, seventeen complaints
including suits purporting to be class actions, or alleging claims common to
the purported class actions, were filed in the U.S. District Court for the
District of Delaware. These actions were consolidated under the style In re
Columbia Gas Securities Litigation, Consol. C.A. No. 91-357. The complaints
named as defendants Columbia, members of Columbia's Board of Directors as of
June 1991, certain officers, Columbia's independent public accountants and
Columbia's underwriters for its 1990 common stock offering (the Defendants). A
class was certified and a negotiated settlement was approved as fair and
reasonable by the District Court of Delaware, following notice to the class and
a hearing. The order approving the settlement became final and non-appealable
on December 6, 1995. While a small number of potential class members, holding
less than 15,000 shares timely completed the appropriate forms in order to
elect to "opt out" of the class, as of the date hereof no such opt-outs have
commenced an action. In addition, persons holding approximately 450 shares
elected to assert their opt-out claims directly against Columbia in the
bankruptcy proceedings, with the Bankruptcy Court retaining post-confirmation
jurisdiction to address such claims. Columbia is in the process of determining
the most efficient procedure to resolve such claims. As part of the settlement
and related agreements among the defendants in this action, Columbia agreed to
indemnify the officers and directors and the underwriter defendants with
respect to any claims that may be asserted against them by the opt-out holders.
Also in 1991, three derivative actions were filed in the Court of
Chancery in and for New Castle County (Delaware) alleging that Columbia's
directors breached their fiduciary duties at that time. Consistent with the
recommendation of the Special Litigation Committee of Columbia's Board of
Directors, the derivative action, In re Columbia Gas Derivative Litigation,
Consol. C.A. 12159 (Del. Chan. Ct.), was dismissed with prejudice pursuant to
Columbia's Plan of Reorganization.
II. Purchase and Production Matters
A. Matters that have been resolved.
1. CNG Producing Co. v. Columbia Gas Transmission Corporation, C.A.
No. 95-491 (U.S. Dist. Ct. of Del. 1995). On August 11, 1995 CNG Producing Co.
filed an appeal of the Bankruptcy Court's order approving the Producer
Settlement. CNG settled its claims with Columbia Transmission and withdrew its
appeal by stipulation of dismissal entered on November 7, 1995.
2. The following matters were resolved upon confirmation of Columbia
Transmission's Plan of Reorganization or by a settlement with Producers which
was approved by the Bankruptcy Court on June 16, 1995 and became effective upon
confirmation of Columbia Transmission's Plan of Reorganization:
a. Phillips Production Co. v. Columbia Gas Transmission Corp.,
C.A. No. 89-0269, (U.S. Dist. Ct., W.D. Pa. filed February 7, 1989).
b. Wagner & Brown v. Columbia Gas Transmission Corp., C.A. No.
83-15091 (Orleans Parish (La.) C.V. Dist. Ct. filed September 6, 1983).
c. Koch Industries Inc. v. Columbia Gas Transmission Corp.,
C.A. No. 89-2156 (U.S. Dist. Ct., E.D. La., filed May 12, 1989); Columbia Gas
Transmission Corp. v. Koch Industries, Inc., C.A. No. 91-0174, (U.S. Dist. Ct.,
E.D. La. 1991); Koch Industries, Inc. v. Columbia Gas Transmission Corp., C.A.
No. 91-0177 (U.S. Dist. Ct. E.D. La. 1991).
d. Energy Development Corp. v. Columbia Gas Transmission Corp.,
C.A. No. CV91-0960 (U.S. Dist. Ct., W. D., La., division Lafayette/Opelousas,
filed May 13, 1991).
e. Columbia Gas Transmission Corp. v. Alamco, Inc., C.A. No.
88-C-38-2 (Harrison (W.Va) Cir. Ct. filed January 15, 1988).
9
<PAGE> 10
ITEM 3. LEGAL PROCEEDINGS (Continued)
f. Vescorp Industrial 81V and Clinton Development 81-A and
Clinton Oil Co. v. Columbia Gas Transmission Corp., C.A. No. CV 0791 (N.D.
Ohio).
g. Certain Royalty Owners Litigation:
Moore-Sams Field:
A. Tidewater Land Co. Ltd. v. Amoco Production Co., No.
88-594, (U.S. Dist. Ct., N.D. La. 1988).
B. Fulmer v. Amoco Production Co., No. 88-23304, (U.S. Dist.
Ct., E.D. La. 1988).
C. Hurst v. Amoco Production Co., No. 88-23305, (U.S. Dist.
Ct., E.D. La. 1988).
These suits involved prepetition claims by royalty owners of
gas production from the Moore-Sams Field in Louisiana seeking
damages for alleged underpayment of royalties by producers
with whom Columbia Transmission may have had an
indemnification obligation regarding underpayment of
royalties. These claims have been resolved in Columbia
Transmission's Plan of Reorganization.
B. Pending Producer Matters
1. Estimation Proceedings. Claims by certain producers for
damages resulting from the rejection of gas purchase contracts remain unresolved
as discussed in the Management's Discussion and Analysis of Financial Condition
and Results of Operations.
2. Daniel Garshman v. Columbia Gas Transmission Corporation,
No. ATL-L-000172-88, (Sup. Ct. of N.J. 1993). On February 17, 1993,
plaintiffs, who are investors in an Appalachian producer and claim to be third
party beneficiaries of the contracts between Columbia Transmission and the
producer, filed a motion seeking to have their status as third party
beneficiaries recognized and seeking to have their claims against Columbia
Transmission liquidated separately from the estimation procedure established by
the Bankruptcy Court to deal with producer claims. By order dated April 5,
1993, the Bankruptcy Court lifted the stay in order to allow the New Jersey
State Court to determine whether plaintiffs enjoyed third party beneficiary
status in the pending State Court action. On November 9, 1994, the New Jersey
State Court denied cross-motions for summary judgment on the question of third
party liability. However, the Bankruptcy Court held that movants' claims, to
the extent liability of Columbia Transmission to such investors might be
established, would be quantified pursuant to the estimation procedure. A
plenary non-jury trial was held in early 1995 and at the conclusion of
plaintiffs' case, the Court granted Columbia Transmission's motion for directed
verdict and dismissed the complaint with prejudice. The Court found that
plaintiffs were not third party beneficiaries under the contracts between
Columbia Transmission and the Appalachian producers with which the plaintiffs
had invested. On March 23, 1995, Plaintiffs filed a notice of appeal in the
New Jersey Superior Court, Appellate Division (No. A-3714-94T3). On April 6,
1995, Columbia Transmission filed a notice of cross appeal based on the State
Court's failure to grant its motion for summary judgment. Briefing has been
complete since October 25, 1995.
3. New Ulm and Fox v. Mobil Oil Corporation, Columbia Gas
Transmission Corp. and Columbia Gulf Transmission Co., C.A. No. 88-V-655 (155th
Judicial Dist. Ct. of Austin County, TX). New Ulm alleged Columbia Transmission
incorrectly paid for gas on the basis of Columbia Transmission's market-out
price rather than the higher price New Ulm claimed was available to it under
the contracts.
After the Bankruptcy Court entered an order modifying the
automatic stay provisions of the Bankruptcy Code, jury trial began on June 22,
1992, and concluded with a verdict against Columbia Transmission on July 2,
1992, in the amount of approximately $5.6 million, including interest. On July
30, 1992, the Court denied Columbia Transmission's motion for summary judgment
notwithstanding the jury's verdict and entered judgment against Columbia
Transmission in such amount for actual damages, prejudgment interest and
attorneys' fees. On July 28, 1994, the Court of Appeals for the First District
of Texas found that evidence proferred by Columbia Transmission was improperly
excluded from trial. Consequently, the Court reversed the trial court's
judgment and remanded the matter to the trial
10
<PAGE> 11
ITEM 3. LEGAL PROCEEDINGS (Continued)
court for proceedings not inconsistent with the Court of Appeals opinion.
Motion for rehearing by Columbia Transmission and New Ulm were denied in
October, 1994. On December 5, 1994, both parties filed applications for writ
of error with the Supreme Court of Texas. On January 11, 1996, the Supreme
Court of Texas granted Columbia Transmission's application for writ of error on
three of its four points of error and granted New Ulm's application for writ of
error with a "because" notation indicating it was granted because of the
court's action on Columbia Transmission's application.
4. New Bremen Corp. v. Columbia Gas Transmission Corp. and Columbia
Gulf Transmission Co., No. 88V-631 (Dist. Ct. Austin County, TX). On November
16, 1988, New Bremen filed a complaint alleging it is entitled to a higher
price under the contract than the market-out price Columbia Transmission paid
for past periods. On January 10, 1989 Columbia Transmission removed the case
to United States District Court for the Southern District of Texas (No.
H-89-0072).
While the parties' motions for partial summary judgments were
pending with the court, Columbia Transmission filed a petition in Bankruptcy
Court automatically staying any action thereon. By order entered December 7,
1992, the Bankruptcy Court modified the automatic stay to allow the Texas Court
to decide the pending motions for summary judgment. On August 11, 1995, an
order was entered granting Columbia Transmission's motion for partial summary
judgment and denying New Bremen's motion for partial summary judgment on the
issue of contract interpretation. On August 29, 1995, the U.S. District Court
denied New Bremen's motion to withdraw and set aside the Texas Court's August
11, 1995 order granting Columbia Transmission's motion for partial summary
judgment because of bankruptcy stay, but stated that it would withdraw and
vacate its order if the Bankruptcy Court determined that it was in violation of
the automatic stay. On November 2, 1995, the Bankruptcy Court denied New
Bremen's motion for an order that the August 11, 1995 order granting partial
summary judgment in favor of Columbia Transmission was a violation of the
automatic stay provision of the U.S. Bankruptcy Code.
III. Regulatory Matters
A. The following matters were resolved by the Customer Settlement
which was approved by FERC on June 15, 1995 and became effective and was
implemented on November 28, 1995 as a result of final Bankruptcy Court approval
of Columbia Transmission's plan of reorganization.
1. Columbia Gas Transmission Corp., FERC Docket Nos. RP91-41.
2. Columbia Gas Transmission Corp., FERC Docket No. GP94-2.
3. Tennessee Gas Pipeline Co., Docket Nos. RP94-113.
4. Columbia Gas Transmission Corp., Docket Nos. RP94-157 and
RP95-196. (Except as to the issue discussed in item (D)(1)
below.)
5. Columbia Gas Transmission Corp., FERC Docket Nos. TA91-1-21,
and RP94-158.
6. Columbia Gulf Transmission Co., Docket Nos. RS92-5.
B. Tennessee Gas Pipeline Take-or-Pay Transition Cost Recovery
Filing, Docket No. RP96-61. On November 30, 1995, Tennessee Gas Pipeline
Company (Tennessee) made a filing to direct bill Columbia Transmission for
$115,303 of costs it incurred as defined under FERC Order No. 528. Columbia
Transmission is protesting the direct bill on the bases that a FERC-approved
settlement Tennessee reached with its current and former customers allows for
collection of such costs based on current (at the time of filing) firm
entitlements only and that the FERC-approved settlement between Columbia
Transmission and Tennessee provided for the payment of an exit fee in
consideration for Tennessee's termination of its transportation contracts with
Columbia Transmission. As a result of these settlements, Columbia Transmission
had no current firm entitlements on Tennessee at the time of the filing and
therefore believes that it no longer has an obligation with respect to such
costs.
11
<PAGE> 12
ITEM 3. LEGAL PROCEEDINGS (Continued)
On December 29, 1995, FERC issued an order accepting the filing,
subject to refund, but ordered Columbia Transmission and parties which support
Columbia Transmission to submit briefs by January 29, 1996 on the issues raised
by Columbia Transmission.
Considering Tennessee's method of calculating the direct bill,
Columbia Transmission's total exposure could be as high as $5 million.
Columbia Transmission's management believes that the likelihood of Columbia
Transmission incurring a liability is remote.
C. Direct Billing of Past Period Production and
Production-Related Costs
1. Columbia Gas Transmission Corp. v. FERC, C.A. No. 94-1727
(U.S. Ct. of App., D.C. Circuit). On February 9, 1990, the Court issued its
opinion finding that the FERC's orders authorizing five of Columbia
Transmission's upstream pipeline suppliers to directly bill past period
production related costs (Order Nos. 94 and 473) to customers allocated based
upon past period purchases violates the filed rate doctrine and the rule
against retroactive ratemaking. Therefore, the Court struck the orders
authorizing direct billing and remanded the issue to the FERC for further
proceedings. On October 9, 1990, the U.S. Supreme Court denied certiorari.
Columbia Transmission agreed to settlements with four of its
pipeline suppliers, which were initially approved by FERC orders issued
February 11, 1993. However, by orders issued January 12, 1994, the FERC
granted requests for rehearing by Columbia Transmission's customers and
rejected the settlements because they provided for rate recovery of the
settlement payments to its pipeline suppliers. The FERC held that such rate
recovery was barred by Columbia Transmission's 1985 PGA Settlement. The same
orders directed the pipeline suppliers to refund all principal Order Nos.
94/473 direct billed amounts collected from Columbia Transmission, but provided
that no interest would be required on such refunds. FERC issued a similar
ruling with regard to the fifth pipeline supplier on February 13, 1995.
Columbia Transmission and its pipeline suppliers filed petitions
for review of the FERC's orders with the United States Court of Appeals for the
District of Columbia Circuit. A briefing schedule has been established leading
to oral argument on March 19, 1996.
On November 21, 1995, Columbia Transmission and Texas Eastern
reached an agreement to resolve the issues in Docket No. RP85-170 and related
appeals. The agreement provided for Texas Eastern to refund to Columbia
Transmission a principal amount of $11,948,555.73, interest in the amount of
$1,440,000 for the period prior to October 1, 1994, and additional interest on
the principal amount for the period October 1, 1994, to the date of the refund.
A refund report was filed with FERC by Texas Eastern, which was approved on
February 2, 1996. An order dismissing the related appeals was issued on
December 7, 1995.
On December 21, 1995, Columbia Transmission entered into an
agreement with Texas Gas to resolve the issues in Docket No. RP85-181. Under
the settlement, Texas Gas refunded a principal amount of $9,582,552.50,
post-February 11, 1994 interest of $1,468,424.44 and additional pre-February
11, 1994 interest of $850,000. A refund report was filed with FERC by Texas
Gas asking for an order accepting the refund report and terminating
proceedings. An order dismissing the related appeals was issued on January 22,
1996.
D. Transportation Costs Recovery Adjustment (TCRA)
1. Columbia Gas Transmission Corp., Docket No. RP95-196 and UGI
Utilities, Inc. v. Columbia Gulf Transmission Co. and Columbia Gas Transmission
Corp., Docket No. RP95-392. On March 1, 1995, Columbia Transmission filed its
semi-annual TCRA filing in Docket No. RP95-196 to recover operational and
stranded Account No. 858 costs (including exit fees) paid to upstream
pipelines. Numerous protests to the filing were made, particularly with regard
to Columbia Transmission's recovery of certain costs paid to Columbia Gulf.
On March 30, 1995, FERC accepted the annual filing, subject to
refund and conditions. Columbia Transmission was required to further document
and support why it is appropriate to recover an additional $39 million of costs
paid to Columbia Gulf.
12
<PAGE> 13
ITEM 3. LEGAL PROCEEDINGS (Continued)
The April 17, 1995 settlement approved by FERC on June 15, 1995,
in Docket No. GP94-2, resolved all issues in this docket except Columbia
Transmission's recovery of cost paid to Columbia Gulf under the T-1 Rate
schedule.
On August 2, 1995, the FERC issued an order in Docket Nos.
RP94-157 and RP95-196 (1) requiring Staff to convene a Technical Conference and
to file a report with the FERC within 120 days, at which Columbia Transmission
must support the payments to Columbia Gulf, and (2) creating Docket No.
RP95-392 for the complaint filed by UGI and making Columbia Gulf a party to the
proceeding. On September 27, 1995, the Technical Conference was held.
Columbia Transmission's and Columbia Gulf's initial comments on the technical
conference were filed on October 19, 1995. Initial comments were filed by
other parties on November 2, 1995, and reply comments by all parties were filed
on November 16, 1995. This matter is pending FERC action.
IV. Insurance Coverage Litigation
A. Columbia Gas Transmission Corp. v. Aetna Casualty & Surety
Co., C.A. No. 94-C-454 (Kanawha (W.Va.) Cir. Ct. filed March 14, 1994).
Columbia Transmission filed a complaint in West Virginia State Court seeking
coverage from various insurers and under various insurance policies for
environmental cleanup costs. All insurers have responded to the complaint.
The case is currently stayed until March 1, 1996 under an agreed scheduling
order entered by the Court on November 29, 1995, in order to allow informal
discussions among the parties to the litigation. The parties have also entered
into an agreed order concerning a special discovery master which was also
entered by the Court.
B. Columbia Gulf Transmission Co. v. Aetna Casualty & Surety
Co., C.A. No. 95-C-177 (Kanawha (W.Va.) Cir. Ct. filed January 19, 1995).
Columbia Gulf filed a complaint in West Virginia State Court seeking coverage
from various insurers and under various insurance policies for environmental
cleanup costs. The case is currently stayed until March 1, 1996 under an
agreed scheduling order entered by the Court on December 1, 1995, in order to
allow informal discussions among the parties to the litigation. The parties
have also entered into an agreed order concerning a special discovery master
which was also entered by the Court.
V. Other
A. In re Marcor Environmental, Inc. v. Columbia Gas Transmission
Corp. On September 30, 1994, EPA Region III issued a complaint and notice of
opportunity for hearing against Marcor Environmental, Inc. (Marcor) and
Columbia Transmission for alleged violations of the Clean Air Act Amendments of
1990 arising from Marcor's removal of asbestos at Lanham Compressor Station at
Lanham, West Virginia in 1993. The complaint which seeks a penalty of $162,500
alleges failure by Marcor and Columbia Transmission, as owner of the facility,
to adequately wet the asbestos material and to ensure it remained wet pending
disposal. On November 4, 1994, Columbia Transmission filed an answer and a
motion to dismiss. A settlement conference among EPA Region III, Marcor and
Columbia Transmission was held on January 12, 1995. Marcor has subsequently
agreed to indemnify Columbia Transmission for all liabilities arising from the
complaint.
B. On January 9, 1996, Columbia Transmission and Columbia Gulf
each entered into a one year tolling agreement with Monsanto Company. The
possible claims by the Columbia Companies against Monsanto Company covered by
the tolling agreement relate to polychlorinated biphenyls (PCBs) manufactured
by Monsanto that have contaminated Columbia Transmission's and Columbia Gulf's
pipeline system, including pipelines, associated buildings and equipment,
on-site and off-site soils, groundwater, surface water, or other media. The
tolling agreement permits Columbia Transmission and Columbia Gulf more time to
assess the applicable issues with Monsanto while still preserving the right as
plaintiffs to file suit in the jurisdiction of its choice.
C. Canada Southern Petroleum Ltd. v. Columbia Gas Development of
Canada Ltd. (C.A. No. 9001-03466, Court of Queen's Bench, Alberta, Canada,
filed March 7, 1990). The plaintiff asserts, among other things, that the
defendant working interest owners, including Columbia Gas Development of Canada
Ltd. (Columbia Canada) and various Amoco affiliates, breached an alleged
fiduciary duty to ensure the earliest feasible marketing of gas from the
Kotaneelee field (Yukon Territory, Canada). The plaintiff seeks, among other
remedies, the return of the defendants'
13
<PAGE> 14
ITEM 3. LEGAL PROCEEDINGS (Continued)
interests in the Kotaneelee field to the plaintiff, a declaration that such
interests are held in trust for the plaintiff, and an order requiring the
defendants to promptly market Kotaneelee gas or assessing damages.
In November, 1993 the plaintiffs amended their Amended Statement
of Claim to include allegations that the balance in the Carried Interest
Account (an account for operating costs which are recoverable by working
interest owners) which is in excess of the balance as of November 1988 should
be reduced to zero. Columbia, on behalf of Columbia Canada, consented to the
amendment in consideration of the plaintiff's acknowledgment that some $63
million was properly charged to the account. However, Columbia and Columbia
Canada continue to dispute the claim to the extent that the claim challenges
expenditures incurred since November 1988, including expenditures made after
Columbia Canada was sold to Anderson Exploration Ltd. effective December 31,
1991, and the company name was subsequently changed to Anderson Oil & Gas, Inc.
During the week of October 2, 1995, the Court of Queen's Bench
denied Columbia's motion for summary judgment which was premised on the absence
of an obligation on the part of Columbia Gas of Canada to market gas.
A trial is scheduled to commence in September 1996 by the Court
of Queens Bench.
Note: Pursuant to an Indemnification Agreement re Kotaneelee
Litigation, Columbia agreed to indemnify and hold Anderson harmless from losses
due to this litigation due to actions occurring prior to December 31, 1991. An
escrow account now funded by a letter of credit in the amount of approximately
$67,000,000 (Cdn) provides security for the indemnification obligation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Information required by this item is contained in Columbia's quarterly report
on Form 10-Q for the quarter ended September 30, 1995, filed on November 9,
1995.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The common stock of Columbia is traded on the New York Stock Exchange under the
ticker symbol CG and abbreviated as either ColumGas or ColGs in trading
reports. The number of shareholders of record on January 31,1996, was
approximately 55,000 and the stock closed at $43.375. On June 19, 1991,
Columbia suspended the dividend on its common stock. On February 21, 1996,
Columbia declared a quarterly dividend of $0.15 per share for the first quarter
of 1996, payable on or about March 15, 1996, to holders of record on March 1,
1996.
See Item 7 on page 21 for additional information regarding Columbia's common
stock prices and dividends.
14
<PAGE> 15
ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
The Columbia Gas System, Inc. and Subsidiaries
<TABLE>
<CAPTION>
($ in millions except per share amounts) 1995* 1994* 1993* 1992* 1991* 1990
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA ($)
Total operating revenues 2,635.2 2,747.1 3,313.8 2,859.2 2,463.7 2,346.7
Products purchased 820.6 984.2 1,577.7 1,236.9 1,056.5 846.8
Earnings (Loss) on common stock before
extraordinary item and accounting changes (432.3) 246.2 152.2 90.9 (794.8) 104.7
Earnings (Loss) on common stock (360.7) 240.6 152.2 51.2 (694.4) 104.7
- --------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
Earnings (Loss) per common share ($):
Before extraordinary item and
accounting changes (8.57) 4.87 3.01 1.79 (15.72) 2.21
Earnings (Loss) on common stock (7.15) 4.76 3.01 1.01 (13.74) 2.21
Dividends:
Per share ($) - - - - 1.16 2.20
Payout ratio (%) N/A N/A N/A N/A N/A 99.5
Average common shares outstanding (000) 50,468 50,560 50,559 50,559 50,537 47,316
- --------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA ($)
Capitalization including debt subject to Chapter 11:
Common stock equity 1,114.0 1,468.0 1,227.3 1,075.1 1,006.9 1,757.8
Preferred stock 399.9 - - - - -
Long-term debt 2,004.5 4.3 4.8 5.4 6.1 1,428.7
Short-term debt N/A - - - 136.0 735.5
Current maturities of long-term debt .5 1.2 1.3 1.4 2.9 35.2
Debt subject to Chapter 11 - 2,317.1 2,317.1 2,317.1 2,317.1 -
Total 3,518.9 3,790.6 3,550.5 3,399.0 3,469.0 3,957.2
Total assets 6,057.0 7,164.9 6,957.9 6,505.9 6,332.2 6,196.3
- --------------------------------------------------------------------------------------------------------------------------
OTHER FINANCIAL DATA
Capitalization ratio (%) (including short-term
debt and current maturities**):
Common stock equity 31.7 38.7 34.6 31.6 29.0 44.4
Preferred stock 11.4 - - - - -
Debt 56.9 61.3 65.4 68.4 71.0 55.6
Capital expenditures ($) 421.8 447.2 361.3 299.7 381.9 629.6
Net cash from operations ($) (807.4) 572.8 850.4 765.4 531.6 420.1
Book value per common share ($) 22.07 29.03 24.27 21.26 19.92 34.83
Return on average common equity before extra-
ordinary item and accounting changes (%) (33.5) 18.3 13.2 8.7 N/A 6.2
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
N/A - Not applicable
*Reference is made to Note 2 of Notes to Consolidated Financial Statements.
Due to the bankruptcy filings, interest expense of approximately $230 million,
$210 million, $204 million and $86 million was not recorded in 1994, 1993, 1992
and 1991, respectively. Interest expense of $982.9 million including write-off
of unamortized discounts on debentures, was recorded in 1995.
**Prior to its Chapter 11 filing, Columbia made extensive use of variable rate
debt since the associated cost was normally less than senior long-term debt.
Inclusion of the short-term debt in years prior to 1991 makes those historical
ratios more meaningful.
15
<PAGE> 16
ITEM 6. SELECTED FINANCIAL DATA (Continued)
SELECTED FINANCIAL DATA
The Columbia Gas System, Inc. and Subsidiaries
<TABLE>
<CAPTION>
($ in millions except per share amounts) 1989 1988 1987 1986 1985
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA ($)
Total operating revenues 3,189.3 3,157.5 2,855.7 3,407.7 4,097.6
Products purchased 1,669.0 1,822.3 1,534.2 2,002.9 2,733.5
Earnings (Loss) on common stock before
extraordinary item and accounting changes 145.8 119.0 111.3 99.4 (93.8)
Earnings (Loss) on common stock 145.8 111.1 100.5 75.3 (107.0)
- -------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
Earnings (Loss) per common share ($):
Before extraordinary item and
accounting changes 3.21 2.46 2.30 2.12 (2.67)
Earnings (Loss) on common stock 3.21 2.46 2.30 1.82 (2.67)
Dividends:
Per share ($) 2.00 2.29 3.18 3.18 3.18
Payout ratio (%) 62.3 93.3 138.3 174.7 N/A
Average common shares outstanding (000) 45,494 45,190 43,763 41,436 40,134
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA ($)
Capitalization including debt subject to Chapter 11:
Common stock equity 1,620.3 1,552.6 1,523.7 1,448.7 1,422.7
Preferred stock - - 110.0 115.0 120.0
Long-term debt 1.196.0 1,038.4 1,438.0 1,378.5 1,659.6
Short-term debt 634.2 697.1 327.5 393.4 418.0
Current maturities of long-term debt 47.2 52.7 69.6 432.5 336.1
Debt subject to Chapter 11 - - - - -
Total 3,497.7 3,340.8 3,468.8 3,768.1 3,956.4
Total assets 5,878.4 5,641.0 5,440.9 5,590.2 5,835.2
- ------------------------------------------------------------------------------------------------------------------------------
OTHER FINANCIAL DATA
Capitalization ratio (%) (including short-term
debt and current maturities**):
Common stock equity 46.3 46.5 43.9 38.4 36.0
Preferred stock - - 3.2 3.1 3.0
Debt 53.7 53.5 52.9 58.5 61.0
Capital expenditures ($) 473.5 307.9 298.8 232.3 220.0
Net cash from operations ($) 400.5 429.4 702.0 550.5 81.7
Book value per common share ($) 35.50 34.18 34.08 34.06 35.10
Return on average common equity before extra-
ordinary item and accounting changes (%) 9.2 7.7 7.5 6.9 (6.1)
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
N/A - Not meaningful
*Reference is made to Note 2 of Notes to Consolidated Financial Statements.
Due to the bankruptcy filings, interest expense of approximately $230 million,
$210 million, $204 million and $86 million was not recorded in 1994, 1993, 1992
and 1991, respectively. Interest expense of $982.9 million including write-off
of unamortized discounts on debentures, was recorded in 1995.
**Prior to its Chapter 11 filing, Columbia made extensive use of variable
rate debt since the associated cost was normally less than senior long-term
debt. Inclusion of the short-term debt in years prior to 1991 makes those
historical ratios more meaningful.
16
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Index Page
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Consolidated Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Transmission Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Distribution Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Oil and Gas Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Other Energy Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Bankruptcy Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CONSOLIDATED REVIEW
Net Income (Loss)
After adjusting for items related to emergence from bankruptcy in November 1995
and other bankruptcy-related and unusual items, as listed below, Columbia had
net income for 1995 of $153.3 million, a decrease of $11.6 million from the
prior year. This decrease was largely due to higher operating costs for
Columbia Gas Transmission Corporation (Columbia Transmission) that are not
being recovered in current rates, higher interest expense, lower prices
received for natural gas produced and reduced oil and gas production volumes.
These factors more than offset the beneficial effect of higher rates and
increased transportation deliveries for the distribution subsidiaries. For
1995 on an unadjusted basis, Columbia reported a net loss of $360.7 million, or
$7.15 per share, versus net income of $240.6 million, or $4.76 per share in the
prior year. The decrease was primarily caused by the $676 million after-tax
effect of bankruptcy- related charges.
Bankruptcy-related and Unusual Items
After-tax effect on Net Income
------------------------------
(in millions)
<TABLE>
<CAPTION>
Twelve Months
Ended December 31
-------------------
1995 1994
-------- --------
<S> <C> <C>
Reported Net Income (Loss) $(360.7) $240.6
Less:
Bankruptcy related items
- Interest and customer settlements (649.4) (22.8)
- Estimated interest costs not recorded on prepetition debt
prior to emergence 158.0 149.2
- Professional fees and related expenses (26.8) (30.1)
- Producer claim adjustment - (35.4)
Reapplication of SFAS No. 71 for transmission subsidiaries 71.6 -
Estimated loss on the proposed sale of Southwest oil and gas subsidiary (54.8) -
Transmission regulatory items - 28.0
IRS settlement - 10.3
Miscellaneous unusual items (12.6) (23.5)
-------- ------
Total adjustments (514.0) 75.7
--------- ------
Net Income after adjusting for bankruptcy and unusual items $ 153.3 $164.9
========== =======
</TABLE>
Revenues
For 1995, operating revenues of $2,635.2 million were down $111.9 million from
the prior year due to lower natural gas prices that reduced that portion of the
sales rate that recovers the cost of gas for the distribution segment and
decreased the price received for gas produced by the oil and gas segment.
Mitigating these decreases were higher operating revenues related to additional
retail sales volumes and higher rates in effect for the non-gas portion of the
sales
17
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
rate for the distribution segment resulting from recent regulatory settlements
which provided $56.3 million higher revenues in 1995. Also improving the
current period was $12.2 million of exit fee payments received by Columbia Gulf
Transmission Company (Columbia Gulf) and $10.3 million of surcharges that were
offset in expense and had no effect on operating income. Revenues in 1994 were
reduced $35 million for a customer settlement reserve addition partially offset
by $22.1 million of revenues Columbia Transmission recorded because its average
cost of gas from an earlier period met certain competitive tests as well as
higher revenues in 1994 for the recovery of certain transportation costs.
Operating revenues for 1994 decreased $566.7 million, to $2,747.1 million from
1993 primarily due to the elimination of Columbia Transmission's merchant
function in November 1993 under Federal Energy Regulatory Commission (FERC)
Order No. 636 (Order 636). The reduced revenues also reflected pipeline exit
fees of $130 million recorded in 1993 that were offset in products purchased
expense and had no effect on income. Also contributing to lower revenues in
1994 was the customer settlement reserve addition mentioned above, warmer
weather for the distribution segment and the effect of lower prices and reduced
gas production. Improving revenues was the $22.1 million increase for
Columbia Transmission's recovery of prior period gas costs, discussed
previously.
Expenses
Operating expenses of $2,245 million for 1995 decreased $118 million from the
prior year. Product purchases were down $163.6 million due to lower gas prices
that reduced the cost of gas purchased for resale offset by additional
purchases necessary to meet increased sales requirements. Operation and
maintenance expense increased $35.2 million in 1995. Partially offsetting
this increase was the effect of a $19.1 million environmental reserve addition
in 1994. Increasing current period expenses was $8.3 million higher
depreciation and depletion expense primarily reflecting additional plant in
service. Depletion expense for 1995 was essentially unchanged from 1994 as the
impact on depletion expense from lower depletable revenues, caused by lower
natural gas prices and reduced production, was offset by a higher depletion
rate. Also included in operating expense was $10.3 million of expense that was
offset by revenue surcharges and had no effect on operating income, as
mentioned above.
In 1994, operating expenses of $2,363 million were $577.8 million lower than
1993 primarily reflecting a $593.5 million reduction for products purchased due
to the elimination of Columbia Transmission's merchant function and the 1993
expense associated with pipeline exit fees, mentioned above. The total expense
for 1994 was also lower by comparison due to the effect of certain 1993 items;
namely a $57.5 million writedown for Columbia's investment in Columbia LNG
Corporation (Columbia LNG) and environmental accruals of $66.8 million. The
effect of these items was more than offset by a $140 million increase in
operating and maintenance expense, depreciation expense and other taxes in
1994.
Other Income (Deductions)
<TABLE>
<CAPTION>
Twelve Months Ended December 31,
---------------------------------------
(in millions) 1995 1994 1993
---------- ----------- -----------
<S> <C> <C> <C>
Interest income and other, net $ (58.2) $ 35.2 $ 7.7
Interest expense and related charges (988.4) (14.8) (101.5)
Reorganization items, net 13.4 (12.3) 8.9
---------- ---------- ---------
Total Other Income (Deductions) $(1,033.2) $ 8.1 $ (84.9)
========== =========== ==========
</TABLE>
Other Income (Deductions) reduced income $1,033.2 million in 1995, whereas in
1994 income was improved $8.1 million. Interest expense and related charges
for 1995 was $973.6 million higher than the prior year due primarily to
recording at emergence approximately $982 million of bankruptcy-related
interest costs on prepetition debt obligations. In 1994, a reserve reduction
in interest charges of $15.8 million was recorded for an IRS settlement,
largely offset by $14.7 million of interest expense based on an initial
interpretation of the claims mediator's report on producer claims against
Columbia Transmission (see Note 2 of Notes to Consolidated Financial Statements
for additional information). The remaining decrease in interest expense
primarily reflects other emergence adjustments partially offset by higher
interest costs on contingent taxes and rate refunds. Included in the $93.4
million decrease for Interest income and other, net was $77.8 million in 1995
for the estimated loss on the proposed sale of Columbia's Southwest oil and gas
subsidiary, Columbia Gas Development Corporation (Columbia Development), and an
income improvement in 1994 for a $21 million reserve reversal for carrying
charges on exchange gas. Reorganization items, net increased $25.7 million
over 1994 due to $40 million recorded in 1994 for the principal portion of the
producer claim reserve, mentioned previously, and $30.1 million higher interest
earned in 1995 on cash accumulated during the Chapter 11 proceedings.
18
<PAGE> 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Tempering these improvements were $44 million for bankruptcy-related emergence
adjustments and additional expense for professional fees and related charges.
Other Income (Deductions) increased income in 1994 by $8.1 million compared to
a decrease to income of $84.9 million in 1993. The $86.7 million change in
Interest expense and related charges primarily reflected $74.5 million of
interest expense recorded in 1993 for the IRS settlement and the subsequent
$15.8 million reduction in this reserve in 1994. The $14.7 million of interest
expense associated with the producer claims also contributed to the change.
Interest income and other, net increased $27.5 million between 1994 and 1993
primarily for the $21 million reserve adjustment recorded in 1994 for carrying
charges, mentioned previously, as well as a $5.4 million reduction to income in
1993 for a pipeline partnership reserve. The 1994 reserve for producer claims
of $40 million and higher professional fees and related charges led to the
$21.2 million higher expense for Reorganization items, net that was only
partially offset by increased interest earned on accumulated cash.
Income Taxes
Income tax expense in 1995 decreased $356.7 million when compared to the prior
year and increased $10.1 million when comparing 1994 to the year earlier.
These changes were caused principally by changes in pre-tax book income.
Extraordinary Items
Columbia recorded an extraordinary after-tax gain of $71.6 million for the
cumulative adjustment for the reapplication of Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of Certain Types of
Regulation" (SFAS No. 71) for Columbia Transmission and Columbia Gulf. The
impact of the reapplication results in the recognition of regulatory assets for
certain costs previously expensed which are expected to be recovered in rates,
mainly environmental and postemployment benefit costs, and recording revenues
and expenses in a manner to reflect the ratemaking process. Management
believes that cost of service rate concepts will continue to be applicable to
Columbia's FERC-regulated transmission subsidiaries for the foreseeable future.
LIQUIDITY AND CAPITAL RESOURCES
Cash From Operations
Cash paid to producers and creditors on emergence from bankruptcy resulted in a
deficit of $807.4 million in net cash from operations for 1995. Included in
cash from operations, was approximately $1.45 billion of cash paid on emergence
to satisfy claims against Columbia and Columbia Transmission (see Note 2 in
Notes to Consolidated Financial Statements for additional information). After
adjusting for emergence payments, net cash from operations was $73.1 million
higher than 1994 primarily reflecting a 1994 payment for Order 500/528 (Order
500) refunds to nonaffiliated customers of $84.6 million, higher rates in
effect for the distribution segment and increased throughput. Overrecovery of
gas costs in 1994 for the distribution segment and lower prices received for
oil and gas production in 1995 partially offset this improvement as well as the
effect in both periods of supplier refunds and payments made by Columbia
Transmission.
In 1994 net cash from operations of $572.8 million decreased $277.6 million
from the year earlier. The decrease was largely due to the 1994 Order 500
refunds made by Columbia Transmission, mentioned above, exit fee payments made
in 1994, lower oil and gas prices and gas production, and warmer weather in
late 1994. Cash from operations was higher in 1993 due to refunds received
from certain pipelines and the sale of Columbia Transmission's gas in
underground storage, resulting from the elimination of the merchant function.
A significant portion of Columbia's operations are subject to seasonal
fluctuations in cash flow. During the heating season, which is essentially
from November through March, cash receipts from sales and transportation
services typically exceed cash requirements. Conversely during the remainder
of the year this excess cash, together with external financing as needed, is
typically used to purchase gas to place in storage for heating season
deliveries, make capital improvements in plant, perform necessary maintenance
of the facilities and expand service into new areas.
19
<PAGE> 20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Financing Activities
Prior to the emergence date, Columbia and its subsidiaries satisfied their
liquidity requirements through internally generated funds, since payments were
not made on Columbia's outstanding indebtedness. Columbia and Columbia
Transmission each maintained a debtor-in-possession facility of up to $25
million strictly for the issuance of letters of credit. Upon emergence from
bankruptcy, Columbia issued $2 billion of debentures and approximately $200
million each of 5.22% Convertible Preferred Stock, Series B (Series B - DECS)
and 7.89% Redeemable Preferred Stock, Series A (Series A - Preferred Stock) to
holders of Columbia's pre-bankruptcy debt securities. The $2.4 billion
distribution of securities, bank borrowings under a new $1 billion credit
facility (Credit Facility) as discussed below, and cash on hand were used to
settle claims in accordance with approved plans of reorganization. Maturities
of the new debentures range from 5 to 30 years with an average cost of
approximately 7.03%. In early February 1996, Columbia issued a notice of
redemption to redeem the Series B - DECS and Series A - Preferred Stock on
February 26, 1996, (See Note 9 in Notes to Consolidated Financial Statements
for additional information). Temporary funding for the redemption will be
provided by borrowings under the Credit Facility. It is anticipated that
permanent funding will be provided with funds generated from the planned sale
of Columbia Development and from the issuance of new common stock under the
shelf registration statement, as more fully described below. In addition,
Columbia will receive an income tax refund of about $270 million expected to be
received in the second quarter of 1996.
Columbia maintains a five-year unsecured bank revolving Credit Facility
totaling $1 billion. Scheduled quarterly reductions of $25 million of the
committed amount start December 31, 1997 and will reduce the Credit Facility to
$700 million by September 30, 2000. The Credit Facility provides for the
issuance of up to $100 million of letters of credit. As of December 31, 1995,
Columbia had $339 million of borrowings and $59 million of letters of credit
outstanding under the Credit Facility. It is expected that borrowings under
the Credit Facility will temporarily increase to approximately $600 million in
order to effect the above-mentioned redemption of the Series B - DECS and
Series A - Preferred Stock.
On November 22, 1995, Columbia filed a shelf registration with the U.S.
Securities and Exchange Commission requesting authorization to issue up to $1
billion in aggregate of debentures, common stock or preferred stock in one or
more series. In February 1996, Columbia announced its intention to use a
combination of treasury stock and the issuance of new common stock, totaling
approximately 5 million shares or $214 million, to reduce the borrowings
incurred under the Credit Facility for the redemption of Series B - DECS and
Series A - Preferred Stock. Columbia believes that future ongoing cash
requirements will be met with internally generated funds, amounts available
under the Credit Facility and additional potential drawdowns under the shelf
registration, although only the common stock sale discussed above is currently
planned.
Capital Expenditures
The table below reflects actual capital expenditures by segment for 1994 and
1995 and an estimate for 1996.
<TABLE>
<CAPTION>
(in millions) 1996 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Transmission $133 $169 $179
Distribution 160 152 151
Oil and Gas 21 87 102
Other Energy 13 14 15
- ----------------------------------------------------------------------------------
Total $327 $422 $447
- ----------------------------------------------------------------------------------
</TABLE>
For 1995 Columbia's capital expenditures were $422 million, a decrease of $25
million from 1994. The largest portion of the transmission subsidiaries'
investments was made to assure the safety and reliability of the pipelines.
Distribution subsidiaries' program included investments to extend service to
new areas and develop future markets, as well as expenditures required to
ensure safe and reliable service and improved service where warranted. The
capital expenditures for the oil and gas segment decreased $15 million from the
1994 level reflecting curtailments due in large part to depressed energy
prices.
20
<PAGE> 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Capital expenditures for 1996 are expected to decrease $95 million to $327
million. This reflects $66 million of lower expenditures for the oil and gas
segment as a result of the proposed sale in 1996 of Columbia Development and
reduced exploration in the Appalachian area. Ongoing replacement and upgrading
of the distribution and pipeline facilities of approximately $175 million will
represent the largest portion of the 1996 program. Columbia Transmission also
anticipates expenditures of approximately $9 million in 1996 for its expansion
project, as discussed in the Transmission Segment.
COMMON STOCK PRICES AND DIVIDENDS
<TABLE>
<CAPTION>
Market Price
--------------------------------------------
Quarterly
Quarter Ended High Low Close Dividends Paid
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ $ $ c
1995
December 31 44 1/8 36 43 7/8 -
September 30 39 3/4 31 3/8 38 5/8 -
June 30 32 7/8 28 3/4 31 3/4 -
March 31 29 3/4 23 1/8 29 5/8 -
- ---------------------------------------------------------------------------------------------------------------
1994
December 31 29 22 1/4 23 1/2 -
September 30 28 7/8 26 26 7/8 -
June 30 30 3/4 24 7/8 27 -
March 31 29 7/8 21 1/2 26 1/8 -
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
TRANSMISSION OPERATIONS
Marketing Initiatives
Early in 1995, Columbia Transmission announced plans to expand its pipeline and
storage capacity to serve the increasing needs of customers in its eastern
market area. Columbia Transmission has signed 15-year agreements with 23
customers for approximately 500,000 Mcf per day (Mcf/d) of additional firm
service to be phased in over a three-year period commencing November 1, 1997.
Approximately 82% of the increased firm agreements are for storage service and
related transportation from storage to customers during the winter periods.
The company will make a filing with the FERC in February 1996 seeking
authorization for this project. This additional capacity, once fully phased
in, is projected to increase total firm service for the transmission segment by
approximately 7.5%. The cost to construct the facilities is estimated at
approximately $400 million. Other significant marketing developments during
1995 include:
- Columbia Gulf began transporting approximately 10,000 Mcf/d to a natural
gas distribution company near Nashville, Tennessee in November 1995.
- Columbia Transmission filed for FERC authorization to provide
approximately 23,000 Mcf/d of firm transportation service to a
cogeneration facility in Brandywine, Maryland. Approval is expected in
March 1996 and service is anticipated to commence in the fall of 1996.
- In November 1995, Columbia Transmission initiated 3,100 Mcf/d of firm
transportation service to a plant in Covington, Virginia, and
approximately 500 Mcf/d to a facility in Alderson, West Virginia.
- Columbia Transmission constructed additional facilities at its
Chesapeake, Virginia, LNG facility to provide an additional 33,650 Mcf/d
of peak deliveries commencing November 1, 1995.
Capital Expenditure Program
The transmission segment's 1995 capital expenditure program of approximately
$169 million and anticipated 1996 capital expenditures of $133 million, which
includes $9 million for the major expansion project mentioned above, reflect
the segment's continued commitment to maintaining its competitive position by
modernizing and upgrading facilities. The commitment will contribute to a
safe, reliable and efficient pipeline system, which conforms to all pipeline
safety regulations. Total expenditures in this area are expected to
approximate $125 million a year.
Regulatory Matters
Customer Settlement
Incorporated in the approved plan of reorganization (Plan) for Columbia
Transmission was a settlement by Columbia Transmission and Columbia Gulf with
firm customers, state regulatory agencies and consumer groups (Customer
Settlement) that resolved virtually all outstanding Order 636 transition costs
and rate and bankruptcy related matters that were pending before the FERC. The
FERC approved the settlement on June 15, 1995 and it was implemented upon
Columbia Transmission's emergence from bankruptcy. Generally, the settlement
defined Columbia Transmission's and Columbia Gulf's refund obligations to their
customers in certain pending regulatory proceedings and established Columbia
Transmission's ability to recover certain costs associated with the
restructuring of its services under Order 636. The Customer Settlement
provided for payment to Columbia Transmission's customers of an estimated $170
million in refunds and recovery of $250 million in costs from Columbia
Transmission's customers. The refunds paid under the Customer Settlement
resolved all issues relating to the flowthrough of customer refunds involved in
the bankruptcy reorganization, Columbia Transmission's collection of gas
purchase costs, its own FERC Order 500 costs and gas inventory charges,
Columbia Transmission's ability to flowthrough upstream Order 500 amounts,
including a settlement regarding the Baltimore Gas & Electric vs. FERC
litigation, implementation of a previous rate case settlement of Columbia
Transmission and Columbia Gulf, and Columbia Transmission's collection of
payments made to terminate contracts with certain upstream pipelines.
Upstream Pipeline Contracts
In early 1995, Columbia Transmission made its annual filing with the FERC to
recover costs it continues to incur under transportation contracts with
upstream pipelines. The filing provided for recovery of costs that Columbia
Transmission projected it would incur under contracts it continues to utilize
in system operations, costs associated with contracts for which exit fees had
not yet been implemented, and continued amortization of exit fees paid to an
upstream pipeline. In addition, the filing proposed to implement a surcharge
to recover an undercollection of transportation costs incurred during 1994.
This underrecovery related, in part, to $39 million paid by Columbia
Transmission to Columbia Gulf under the provisions of the cost-of-service
contract between the two companies for the period through October 31, 1994, the
date on which the agreement was terminated. Various parties protested Columbia
Transmission's filing and challenged,
22
<PAGE> 23
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
among other things, Columbia Transmission's ability to recover the costs
attributable to Columbia Gulf. A technical conference among the parties was
held at the FERC in December 1995, and Columbia Transmission, Columbia Gulf and
intervenors filed comments and reply comments with the FERC in support of their
positions.
Columbia Transmission's General Rate Filing
On August 1, 1995, Columbia Transmission filed with the FERC its first general
rate case since 1991, requesting an increase in annual revenues of
approximately $147 million. In addition to seeking a reasonable return on
additional plant investment and recovering general increases in expenses, the
filing also requested:
- - recovery over a five-year period of Columbia Transmission's net
investment in gathering facilities and substantially all of its net
investment in gas processing facilities (approximately $60 million)
that were "stranded" as a result of the implementation of Order 636
(see discussion of Gathering Facilities on page 34 for more
information);
- - an increase in certain depreciation rates;
- - recovery of environmental expenses that are anticipated to be incurred
as a result of recent settlements with the U.S. Environmental
Protection Agency (EPA) and certain state environmental regulatory
agencies; and
- - certain tariff changes relating to operational and service issues.
Numerous customers and other interested parties protested the filing, and
certain parties proposed that Columbia Transmission should be required to adopt
zone rates or mileage-based rates. On August 30, 1995, the FERC accepted the
filing subject to refund, directed that certain operational and tariff changes
be considered at a technical conference, suspended implementation of the
increased rates until February 1, 1996, and directed that certain revisions be
made to Columbia Transmission's requested rates. In an effort to reach a
timely resolution of the issues, Columbia Transmission agreed that it would not
implement 25% of the rate increase for a three month period beginning February
1996, because settlement negotiations currently underway were continuing at a
satisfactory pace at year-end 1995. On January 11, 1996, a procedural schedule
was approved which established a hearing date of November 12, 1996.
Environmental issues were removed from the normal procedural schedule and will
be pursued separately from the other rate case issues.
Columbia Gulf's Rate Filing
In 1994, Columbia Gulf filed a general rate case with the FERC that was placed
into effect, subject to refund, on November 1, 1994. The rate case reflected
the termination of Columbia Gulf's long-standing transportation contract with
Columbia Transmission and sought the recovery of increased costs since its last
rate case. A unanimous settlement providing for $8.4 million of additional
annual revenues was reached and approved by the FERC on July 18, 1995.
Columbia Gulf Show Cause Proceeding
In its September 1993 order on Columbia Transmission's and Columbia Gulf's
Order 636 compliance filings, the FERC initiated a proceeding concerning
Columbia Gulf's transportation service to Columbia Transmission. It directed
Columbia Gulf to show cause as to why it had not filed for the FERC's
abandonment authorization to reduce capacity on its mainline facilities. In a
response to the FERC in late 1993, Columbia Gulf asserted that no abandonment
filing was required. During 1994 and early 1995, Columbia Transmission and
Columbia Gulf responded to information requests from the FERC's staff.
Management continues to believe that an abandonment filing was not necessary;
however, the ultimate outcome of this issue is uncertain at this time.
Restructuring Proceedings
Numerous parties filed with the United States Court of Appeals for the District
of Columbia (Circuit Court) for review of Columbia Transmission's and Columbia
Gulf's restructuring proceedings under Order 636. Under the terms of the
Customer Settlement, the transmission subsidiaries will have no refund
obligations in the event the appeals of the FERC order approving the
restructuring are successful. As discussed above, the Customer Settlement
became effective as a result of the United States Bankruptcy Court for the
District of Delaware (Bankruptcy Court) approving Columbia Transmission's Plan.
On December 18, 1995, Columbia Transmission filed a motion with the Circuit
Court to dismiss certain of the petitions for review and to sever certain
issues as moot in accordance with the terms of the Customer Settlement.
Appeals of Order 636
Numerous parties have filed petitions for review of Order 636 with the Circuit
Court. Upon review, Order 636 may be modified or reversed in whole or in part;
however, at this time it is impossible to predict the outcome. On June 12,
1995, the FERC filed its brief in support of Order 636 with the Court. Oral
argument is currently scheduled for February 1996.
23
<PAGE> 24
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Under the terms of the FERC-approved Customer Settlement, Columbia Transmission
and Columbia Gulf will have no refund obligation in the event the appeals are
successful. Further, the Customer Settlement states that the transmission
subsidiaries can adjust rates prospectively to take into account any change or
modifications as a result of a court remand of Order 636.
Environmental Matters
Columbia's transmission subsidiaries continue their reviews of compliance with
existing environmental standards, including reviews of past operational
activities, identification of potential problems through site reviews and the
formulation of remediation programs where necessary. The progress of Columbia
Transmission's efforts in the last year was limited by a 1995 EPA
Administrative Order by Consent (AOC) that requires Columbia Transmission to
obtain prior EPA approval of its investigation, characterization and
remediation efforts. Progress was further limited because of the more than
19,000 miles of pipeline that Columbia Transmission operates, the exceptionally
large number of sites at which it conducts or has conducted operations, and the
long time period over which operations have been conducted.
Management had previously estimated, based on studies conducted since 1990 by
independent consultants, that site investigation, characterization and
remediation costs might range between $135 million and $280 million. The
primary focus of these prior studies was to analyze discrete issues to assist
management in its on-going environmental evaluations. In 1994, in anticipation
of implementation of the AOC, Columbia Transmission commissioned a new study
(1995 Study) to reflect costs that might arise from the EPA's recommendations
with respect to site assessment and remediation under the AOC and to reflect
information gathered since the previous studies. The 1995 Study was structured
to be a comprehensive review of all environmental issues currently known to
management. The 1995 Study estimated that the cost of Columbia Transmission's
environmental program under the AOC may range between $204 million and $319
million over the life of the program. This estimate was based on a limited
amount of actual data available and utilized a variety of assumptions,
including: the number of sites to be investigated, characterized and
remediated; the location, nature and levels of wastes that will be treated at
or disposed of from each site; the amount of time and nature of equipment
required for such activities; the appropriate remediation levels and the
technology to be utilized; and the frequency with which groundwater
contamination might be discovered at sites requiring remediation. The 1995
Study did not include previously identified costs, aggregating approximately
$50 million, for which Columbia Transmission already had reasonable estimates.
Following an extensive review of bases utilized and assumptions contained in
the 1995 Study, management has concluded that only those site investigation,
characterization and remediation costs currently known and determinable can be
considered "probable and reasonably estimable" under Statement of Financial
Accounting Standards No. 5, "Accounting for Contingencies" (SFAS No. 5). This
conclusion was based upon the fact that the actual characterization and
remediation experience of Columbia Transmission was extremely limited and
information on environmental conditions at many of the sites or former sites of
operations is not yet available. The nature and condition of such sites varies
greatly, and any change in any of the numerous assumptions used in the 1995
Study may materially alter the estimated range of costs, with no assurance that
actual costs will not exceed amounts specified in the range. Columbia
Transmission is unable, at this time, to accurately estimate the timeframe and
potential costs of all site screening, characterization and remediation. As
Columbia Transmission continues its program pursuant to the AOC, additional
costs will become probable and reasonably estimable and will be recorded.
Moreover, in time, management expects that, as additional work is performed and
more facts become available, it will then be able to develop a probable and
reasonable estimate for the entire program or a major portion thereof
consistent with U. S. Securities and Exchange Commission's Staff Accounting
Bulletin No. 92 and SFAS No. 5.
Based upon its current review, Columbia Transmission estimates the future costs
of investigating, characterizing, and remediating sites upon which it has
adequate information will be approximately $136.6 million. This resulted in
the recognition of an additional liability of approximately $21 million in the
fourth quarter of 1995. As contemplated by the AOC, Columbia Transmission's
environmental expenditures are expected to approximate $20 million in 1996 and
to continue at that level for the foreseeable future. These expenditures will
be charged against Columbia's previously recorded liability. Management does
not believe that Columbia Transmission's environmental expenditures will have a
material adverse effect on Columbia's operations, liquidity or financial
position, based on known facts and existing laws and regulations and the long
period over which expenditures will be made. In addition, as a result of
reapplying SFAS No. 71, Columbia Transmission has recorded a regulatory asset
to the extent environmental expenditures are expected
24
<PAGE> 25
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
to be recovered through rates, and therefore, environmental expenditures will
have less potential impact upon Columbia's financial results.
In addition, predecessor companies of Columbia Transmission may have been
involved in the operation of manufactured gas plants. When such plants were
abandoned, material used and created in the process was sometimes buried at the
site. Columbia Transmission is unable at this time to determine if it will
become liable for any characterization or remediation costs at such sites.
Clean Air Act Amendments of 1990
In 1995, Columbia Transmission completed the majority of the equipment
installations required by Title I of the Clean Air Act Amendments of 1990
(CAA-90). Until regulations are finalized, the capital expenditures necessary
to comply fully with CAA-90 cannot be estimated. Management anticipates that
capital expenditures made in compliance with CAA-90 will be recoverable through
the rate-making process.
Adoption of SFAS No. 71
As a result of emergence from bankruptcy and significant industry changes
culminating with Order 636, the operating experience gained since
implementation of Order 636, a new Columbia Transmission rate case that was
filed on August 1, 1995, and the resolution of gas contract difficulties and
various customer issues, Columbia Transmission and Columbia Gulf reapplied SFAS
No. 71 upon Columbia Transmission's emergence from bankruptcy. Management
believes that cost of service rate concepts will continue to be applicable to
Columbia's FERC-regulated transmission subsidiaries for the foreseeable future.
The reapplication of SFAS No. 71 results in the recognition of regulatory
assets for certain costs previously expensed, which are expected to be
recovered in rates, mainly environmental and postemployment benefit costs, and
recording revenues and expenses in a manner to reflect the ratemaking process.
As a result of reapplying SFAS No.71, an extraordinary gain of $71.6 million
was recorded in 1995.
Volumes
Throughput for Columbia Transmission consists of transportation for local
distribution companies and other customers in its market area and for storage
services. Columbia Gulf's mainline transportation service extends from
Louisiana to West Virginia. Short-haul transportation service is primarily
from the Gulf of Mexico to Rayne, Louisiana. Total 1995 throughput for the
transmission subsidiaries of 1,336.2 Bcf, increased 64.2 Bcf over the prior
year, due largely to increased demand stemming from the colder weather during
the last quarter of 1995 and increased summer-related requirements from
cogeneration facilities. Total throughput for 1994 was 1,272 Bcf, a decrease
of 83.9 Bcf from 1993. This decrease reflected a timing change for the
recognition of transportation for storage activity and reduced short-haul
transportation needed by customers for spot purchases.
In 1995, market area transportation increased 67.5 Bcf over 1994 largely due to
colder weather and increased deliveries to cogeneration facilities attributable
to unseasonably warm weather during the summer. Market area transportation
increased 142.7 Bcf in 1994 over 1993 due to customers switching from sales to
transportation services as a result of the implementation of Order 636,
partially offset by a timing change in the recognition of market area
transportation for storage activity.
Mainline transportation service of 605 Bcf, up 14.7 Bcf over 1994, reflected
the impact of colder weather in 1995 causing customers to increase their
utilization of Columbia Gulf 's transportation services. Columbia Gulf's
mainline transportation service increased in 1994 by 10.4 Bcf over 1993
primarily reflecting additional transportation service for customers to move
gas to Columbia Transmission's storage fields and to meet their supply
requirements.
Short-haul transportation of 221.4 Bcf in 1995 was essentially unchanged from
1994 as the impact of customers using facilities other than Columbia Gulf's to
transport their gas requirements was offset by colder weather together with
additional natural gas supplies available for transportation and increased
marketing efforts. In 1994, short-haul transportation decreased from 1993 by
32.7 Bcf due to reduced customer requirements.
Under Order 636, a significant portion of the transmission segment's fixed
costs are being recovered through a monthly demand charge. As a result,
variations in throughput have little effect on income.
25
<PAGE> 26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Operating Revenues
The transmission segment's 1995 operating revenues of $756.7 million were
relatively unchanged from 1994. After adjusting for unusual items, operating
revenues increased $3.1 million reflecting higher demand revenues attributable
to additional short-term transportation agreements and the impact of higher
throughput. The unusual items include Columbia Gulf in 1995 recording exit fee
revenues of $12.2 million, most of which were associated with its pipeline
partnerships. Revenues in 1994 were higher for the recovery of certain
transportation and other costs, and $22.1 million of additional revenues were
recorded by Columbia Transmission because its sales rate from an earlier period
met certain competitive tests. Reducing revenues in 1994 was a customer
settlement reserve addition of $35 million.
Operating revenues in 1994 of $758.7 million were $940 million lower than 1993
due largely to eliminating the merchant function. This decrease also included
the effect of a $35 million reserve established in 1994 for various customer
and regulatory settlements and a lower cost-of-service recovery level for
Columbia Transmission reflecting its restructuring under Order 636.
Operating Income
Operating income for 1995 of $214.1 million, increased $4.4 million, primarily
reflecting $6.4 million in lower operating expenses. Included in operating
expense in 1994 were environmental accruals of approximately $19.1 million for
Columbia Gulf and $8 million of severance and relocation expense. Partially
offsetting 1994's higher expenses is the impact of rising operating costs in
1995 that exceed recovery through current rates. In August 1995, Columbia
Transmission made its first rate filing since 1991 to recover, among other
things, these increasing costs.
Operating income for 1994 of $209.7 million increased $32.8 million over 1993.
The $940 million decrease in revenues was offset by a $972.8 million decrease
in operating expenses. A significant portion of this decrease was attributable
to reduced gas purchases due to the elimination of Columbia Transmission's
merchant function in 1994. Also contributing to this decrease was a $57.5
million writedown in the investment in the Cove Point LNG facility in 1993
along with a $66.8 million 1993 environmental reserve addition.
26
<PAGE> 27
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
STATEMENTS OF OPERATING INCOME FROM TRANSMISSION OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Year Ended December 31 (in millions) 1995 1994 1993
================================================================================================================================
<S> <C> <C> <C>
OPERATING REVENUES
Transportation revenues $612.7 $650.7 $549.7
Storage revenues 139.3 141.7 125.3
Other revenues 4.7 (33.7) 1,023.7
- --------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 756.7 758.7 1,698.7
- --------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Operation and maintenance 388.0 391.1 1,310.3
Depreciation 103.8 103.9 97.8
Other taxes 50.8 54.0 56.2
Writedown of investment in Columbia LNG Corporation - - 57.5
- --------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 542.6 549.0 1,521.8
- --------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME $214.1 $209.7 $ 176.9
<CAPTION>
TRANSMISSION OPERATING HIGHLIGHTS
1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CAPITAL EXPENDITURES ($ in millions) 169.1 179.1 137.2 114.2 152.9
- ----------------------------------------------------------------------------------------------------------------
THROUGHPUT (Bcf)
Transportation
Columbia Transmission
Market area 1,106.1 1,038.6 895.9 909.0 849.9
Columbia Gulf
Main-line 605.0 590.3 579.9 574.3 535.4
Short-haul 221.4 225.4 258.1 258.3 267.0
Intrasegment eliminations (596.3) (583.2) (561.7) (563.3) (535.4)
- -----------------------------------------------------------------------------------------------------------------
Total Transportation 1,336.2 1,271.1 1,172.2 1,178.3 1,116.9
Sales - 0.9 183.7 196.0 112.6
- -----------------------------------------------------------------------------------------------------------------
Total Throughput 1,336.2 1,272.0 1,355.9 1,374.3 1,229.5
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 28
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
DISTRIBUTION OPERATIONS
Market Conditions
The continued strong economy in the distribution subsidiaries' (Distribution)
service area and the success of its industrial marketing efforts resulted in a
6 percent increase in industrial throughput during 1995. Increased production
at manufacturing facilities (specifically, steel, paper, oil and chemicals) and
increased demand from power generation facilities all contributed to the
increase. Similar to previous years, Distribution experienced nominal customer
growth and added approximately 34,900 net residential and commercial customers
in 1995, a 1.8 percent increase. Also in 1995, a large industrial customer
in Virginia signed an agreement with Commonwealth Gas Services, Inc.
(Commonwealth Services) to service a new 50 megawatt gas-fired cogeneration
plant. Estimated gas load from the facility is expected to exceed 3 Bcf per
year.
As a result of a continuing market assessment, Distribution concluded that the
future demand for natural gas vehicles (NGVs) will not be as great as
previously thought and therefore reduced its previously announced five-year
commitment to invest $38 million in its NGV program to $10 million.
Distribution has decided to eliminate future capital expenditures, except for
NGV fueling stations currently under construction, and is now focusing its NGV
efforts on opportunities within its own fleet and more fully developing NGV
fueling stations that are currently operational. Distribution participated in
the completion of 28 new NGV fueling stations during 1995.
Growing efforts by the electric industry to make additional inroads into
Distribution's traditional residential and commercial markets are being
countered through aggressive marketing and innovative financing programs that
show the many benefits of choosing natural gas for both new and replacement
appliances.
Beginning in 1995, Columbia Gas of Ohio, Inc. (Columbia of Ohio) initiated a
commercial water heater financing program designed to assist food service
operators in purchasing supplemental gas water heaters. The program supports
Distribution's entry into a market that has predominantly been served by
electricity. Financing is provided by third parties and the program is being
promoted through contractors. This complements the residential water heater
replacement program that was introduced in Ohio in 1994. Both programs are
being expanded to other Distribution affiliates in 1996.
Distribution continues to promote the use of environmentally friendly and
cost-efficient natural gas cooling equipment by commercial and industrial
customers. In 1995, new sales of gas cooling equipment in Distribution's
territory totaled 4,500 refrigerant tons which added 60,000 Mcf of annual gas
load. In addition, Distribution continues its support of the "Triathlon" heat
pump, for residential natural gas heating and cooling. Distribution is one of
the leading gas utilities in the nation in number of installations.
The Clean Air Act Amendments of 1990 (CAA-90), which require many electric
power generating facilities to reduce emissions by installing expensive exhaust
scrubbers or using cleaner burning fuels, also has created new marketing
opportunities for natural gas.
Competition
Industrial customers have been able to buy natural gas on the spot market and
transport it through transmission and distribution facilities for more than a
decade and third party sales to commercial users are becoming common as gas
brokering reaches smaller users. Market and regulatory forces are causing
Distribution to evaluate the extent to which it will unbundle the commodity gas
sales portion of its service from the transportation portion of such service to
all customers. This unbundling would increase competition among gas providers
and offer choices to customers. Distribution's primary role in this evolving
environment will be to transport gas and provide related services while the
regulatory approvals needed to compete with marketers in brokering gas for
profit are yet to be determined. The current bundled sales service margins are
similar to transportation service margins; therefore, discontinuing the current
sales service is not expected to significantly impact earnings.
Approximately 40 percent of Distribution's industrial and commercial
throughput, or 125 Bcf, is susceptible to bypass as these customers are
geographically located close to natural gas pipelines. With the use of
innovative rate and capacity release strategies and the negotiation of unique
customer arrangements, substantial inroads by other natural gas pipelines
28
<PAGE> 29
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
have been avoided to date. As a result of these actions, the current estimated
throughput exposure has been reduced to approximately 40 Bcf, representing $10
to $15 million in annual net revenues.
Distribution competes with 17 investor-owned electric utilities throughout its
five state service area as well as numerous municipal and cooperative electric
utilities. Competition is generally strong in the residential and commercial
markets of Kentucky, southern Ohio and southwest Pennsylvania where electric
rates are driven by low-cost coal-fired generation. Areas such as northern
Ohio and Pittsburgh, Pennsylvania have less competitive electric rates due to
the use of higher-cost nuclear-generated power.
Federal and state regulators are currently moving the electric industry toward
a more competitive environment. Customers may ultimately be able to purchase
electricity from sources other than their local utility, which would be
required to transport the electricity purchased. In response to the forces of
competition, these electric utilities are positioning themselves to be lower
cost suppliers than they have been in the past. Although the timing and
overall financial impact of these initiatives are uncertain at this time, they
will undoubtedly increase price competition for the gas industry.
Regulatory Matters
Rate Case Activity
Rate changes during 1995 and early 1996 resulted in $22.8 million of annual
revenue increases to recover higher operating costs. In all jurisdictions,
Distribution also continued its pursuit of regulatory initiatives in order to
more effectively participate in today's competitive energy market. In each of
its service areas, Distribution has formed a regulatory collaborative process
(Collaborative) that provides for a more cooperative environment among the many
diverse and interested parties in its rate cases, thereby possibly avoiding
lengthy and costly litigation.
In late 1995, Columbia Gas of Pennsylvania, Inc. (Columbia of Pennsylvania)
reached a settlement on a general rate case filed in September 1995. The
settlement includes an annual revenue increase of $12.5 million as well as a
number of changes that allow Columbia of Pennsylvania to provide additional
services to its customers. Columbia of Pennsylvania received regulatory
approval of the settlement on January 12, 1996, with new rates effective the
same day, over five months sooner than originally anticipated.
Columbia Gas of Maryland, Inc. (Columbia of Maryland) filed a rate case in
March 1995. The Maryland Public Service Commission approved an annual revenue
increase of $900,000, effective October 23, 1995.
As provided in its 1994 general rate case settlement, Columbia Gas of Kentucky,
Inc. (Columbia of Kentucky) increased annual revenues $2.25 million, effective
October 1, 1995, through the implementation of the second phase of a three-
step increase. The third step, which is expected to increase revenues by $1.5
million, will go into effect October 1, 1996.
In Virginia, Commonwealth Services filed a general rate case in May 1995, with
new rates effective October 13, 1995. A settlement of the issues in this case
was reached with all parties on January 17, 1996. The settlement includes an
annual revenue increase of approximately $7.1 million and provides for a
separate proceeding to consider gas supply and other incentive proposals. The
settlement was presented to the Hearing Examiner on January 18, 1996, and
Commonwealth Services expects State Corporation Commission approval by
mid-1996.
Columbia of Maryland currently plans to file for an increase in base rates in
November 1996 with new rates effective June 1997. Columbia of Ohio's 1994 rate
case settlement provided for a re-opener, to provide the opportunity to recover
higher operating costs and additional plant investments, with new rates
effective May 1996. Columbia of Ohio has initiated discussions with its Ohio
Collaborative regarding an increase.
Regulatory Initiatives
Distribution continues to pursue regulatory initiatives designed to bring about
improvements to shareholders and customers. These initiatives focus on
maximizing efficiencies and customer choice and releasing temporarily unused
supply and pipeline capacity by continually monitoring current market demand.
Some of the incentive rate mechanisms Distribution is pursuing include:
- off-system sales where Distribution shares income with its
customers;
29
<PAGE> 30
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
- supply management incentive programs that compensate Distribution
for purchasing gas at a cost that is lower than set prices reported
in major indices; and
- programs that allow Distribution to share income obtained by
releasing temporarily unused pipeline capacity with its customers.
Distribution continues to support pilot transportation programs that provide
small customers, including residential, the opportunity to arrange their own
gas purchases from marketers or producers while using Distribution's facilities
for the transportation. It is also working with legislatures and regulatory
commissions to streamline the related regulatory process.
In Distribution's various service areas, some of these activities have received
regulatory approval and are being implemented. In other jurisdictions
Distribution is still in the process of negotiating the various proposals with
the regulatory commissions and other interested parties.
In Ohio, a 1994 settlement allowed Columbia of Ohio to test a weather
normalization adjustment (WNA) to alleviate the impact of unusual weather on
customers' bills. As a result of some customer concerns with the program,
Columbia of Ohio agreed to several modifications in February 1995. During the
second quarter, Columbia of Ohio met with interested parties to review the
results of the WNA program, and it was jointly determined that the pilot
program should be suspended. Although it was generally agreed that WNA refunds
were not appropriate, certain local governments and consumer groups continue to
press for the refund of WNA revenues collected during the 1994-1995 winter.
Columbia of Ohio did not pursue a WNA for the 1995-1996 winter.
Columbia of Ohio is permitted to include in its plant investment
post-in-service carrying charges on those eligible plant investments which are
placed in service between December 31, 1990, and December 31, 1994. Columbia
of Ohio is currently recovering plant investment post-in-service carrying
charges for 1991, 1992 and 1993 in rates. Subject to regulatory approval, the
carrying charges are also authorized to be included in base rates in subsequent
rate filings. These carrying charges are subject to a net income limitation, as
determined by the regulatory commission, through 1997.
Project Customer Initiatives
Distribution is continuing to implement phases of its comprehensive initiative
termed "Project Customer", which is designed to reshape, streamline, and
enhance processes involved in delivering customer service. Columbia of Ohio
recently announced the establishment of three centralized customer service
centers, eliminating 26 smaller offices. The centers are designed to make
quality service more accessible and reliable for customers. As a result of
this initiative, Columbia of Ohio recorded a liability of $3.8 million in the
fourth quarter, representing salary and related severance benefit costs for 136
employees. A similar reorganization is expected in early 1996 for Columbia of
Pennsylvania and Columbia of Maryland with an estimated liability of $1.6
million, representing salary and related severance benefit costs for 71
employees. Efforts to restructure corporate services and other Project
Customer initiatives, that began in late 1993 and 1994, are continuing to be
implemented.
Capital Expenditures
In addition to maintaining and upgrading facilities to assure safe, reliable
and efficient operation, Distribution's 1995 capital expenditure program of
$152 million, essentially the same as 1994, included expenditures for extending
service to new areas. The 1996 capital expenditure program amounts to
approximately $160 million, including $60 million for new business development
and $79 million for replacement and betterment projects.
Gas Supply
To ensure a reliable supply of gas to its customers, Distribution contracts for
both the purchase of gas and the interstate pipeline and storage capacity
necessary to transport and store the commodity. Since natural gas is readily
available and in ample supply, Distribution enters into primarily short-term
contracts for natural gas requirements. In 1995, Distribution purchased about
80 percent of its supply under contracts with term lengths of one year or less.
Also, Distribution maintains long-term contracts for firm transportation
capacity to serve its core market requirements.
To meet its customers' needs during the heating season, Distribution has
developed a delivery system consisting of storage services, 50 percent; firm
transportation capacity on interstate pipelines, 49 percent; and peaking
service for the
30
<PAGE> 31
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
coldest days, 1 percent. This favorable mix of storage and transportation
permits efficient annual utilization of Distribution's firm transportation
capacity and provides a high level of reliability.
In 1995, Distribution contracted for additional interstate pipeline capacity to
serve growing areas that have become capacity constrained. In addition,
Distribution has added peaking contracts that provide nearly 230,000 Mcf/day of
additional capacity to serve heavy customer demand on the coldest winter days.
Environmental Matters
Distribution's primary environmental issues relate to 14 former manufactured
gas plant sites. Investigations or remedial activities are currently underway
at five sites and additional site investigations may be required at some of the
remaining sites. To the extent Distribution's site investigations have been
conducted, remediation plans developed and any responsibility for remediation
action established, the appropriate liabilities have been recorded. Regulatory
assets have also been recorded for a majority of these costs as rate recovery
has been allowed or is anticipated.
On October 18, 1995, Columbia of Pennsylvania was served in a Comprehensive
Environmental Response Compensation and Liability Act cost recovery action
related to the Keystone Sanitation Company Landfill/Superfund site. Columbia
of Pennsylvania may be named as a Potentially Responsible Party (PRP) by virtue
of trash hauling services provided to Columbia of Pennsylvania's service center
by the city of Hanover, Pennsylvania. Columbia of Pennsylvania believes, based
on a preliminary investigation of the facts, that involvement at this site, if
any, will not have a material impact on Columbia.
Volumes
Distribution's 1995 throughput of 546.6 Bcf reflects an increase of 33.6 Bcf
over 1994. Higher transportation deliveries, off-system sales, continued
customer growth and colder weather contributed to the increase. Transportation
deliveries were 23.4 Bcf higher due to strong economic conditions in
Distribution's service area while the 7.2 Bcf increase in off- system sales
reflects recent changes in natural gas industry regulations which have
generated opportunities to buy and sell gas in the open market. Under current
regulatory treatment traditional customers are given the benefit of most of the
income derived from off-system sales.
Distribution's 1994 throughput of 513 Bcf reflected a 3.2 Bcf increase over
1993. Transportation deliveries of 232.5 Bcf were 15 Bcf higher largely due to
increased industrial demand in Ohio, Virginia and Kentucky as well as
industrial customers shifting from tariff sales to transportation services in
order to reduce their overall energy costs. The transportation improvement was
largely offset by an 11.8 Bcf sales decline due to nearly 3% warmer weather.
Net Revenues
Net revenues for 1995 of $821.5 million were up $86.7 million due to higher
rates that generated additional revenues of $56.3 million and improved
transportation deliveries that provided $14.3 million. Weather that was 3%
colder than 1994 resulted in a $4 million increase in net revenues. Surcharges
were $10.3 million higher in 1995 but they offset an equivalent expense and
have no impact on income.
Net revenues of $734.8 million in 1994 were up $8.8 million from 1993 primarily
due to higher rates and increased transportation deliveries.
Operating Income
Operating income for 1995 of $163.6 million reflected an increase of $35.3
million over 1994 as the higher net revenues were partially offset by increased
operating expenses of $51.4 million. Included in the higher operating expenses
was an expense equal to the revenue surcharges, discussed above, and previously
capitalized benefit costs that are expensed as they are included in rates.
After eliminating the effect of these issues, operating expenses were up
approximately $34.5 million. This increase reflects generally higher costs
including costs for computer applications, labor and expenses associated with
ongoing marketing and customer service activities as well as ongoing pipeline
maintenance. Increases in plant additions contributed to higher depreciation
expense and higher property taxes.
Operating income for 1994 decreased $18.1 million from 1993 to $128.3 million
as the increase in net revenues was more than offset by a $26.9 million
increase in operating expenses. Operation and maintenance expense increased
$12.5 million due to higher labor and benefits expense as well as the effect of
employee severance accruals associated with
31
<PAGE> 32
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
implementing productivity and customer service initiatives. Other taxes
increased $12.2 million due to higher gross receipts taxes and property taxes
while the $2.2 million increase in depreciation expense primarily reflected
plant additions.
STATEMENTS OF OPERATING INCOME FROM DISTRIBUTION OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Year Ended December 31 (in millions) 1995 1994 1993
=============================================================================
<S> <C> <C> <C>
NET REVENUES
Sales revenues $1,677.8 $1,741.9 $1,754.0
Less: Cost of gas sold 952.2 1,088.6 1,098.6
- -----------------------------------------------------------------------------
Net Sales Revenues 725.6 653.3 655.4
- -----------------------------------------------------------------------------
Transportation revenues 105.3 88.8 76.7
Less: Associated gas costs 9.4 7.3 6.1
- ----------------------------------------------------------------------------
Net Transportation Revenues 95.9 81.5 70.6
- ----------------------------------------------------------------------------
Net Revenues 821.5 734.8 726.0
- ----------------------------------------------------------------------------
OPERATING EXPENSES
Operation and maintenance 443.0 404.0 391.5
Depreciation 70.9 64.5 62.3
Other taxes 144.0 138.0 125.8
- ----------------------------------------------------------------------------
Total Operating Expenses 657.9 606.5 579.6
- ----------------------------------------------------------------------------
OPERATING INCOME $ 163.6 $ 128.3 $ 146.4
- ----------------------------------------------------------------------------
</TABLE>
32
<PAGE> 33
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
DISTRIBUTION OPERATING HIGHLIGHTS*
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
==============================================================================================================
<S> <C> <C> <C> <C> <C>
CAPITAL EXPENDITURES ($ in millions) 151.8 151.4 117.8 99.7 98.0
- --------------------------------------------------------------------------------------------------------------
THROUGHPUT (Bcf)
Sales
Residential 196.6 189.7 194.7 186.2 178.4
Commercial 79.5 80.8 83.4 81.8 78.3
Industrial and Other 7.1 9.7 14.2 15.0 11.0
- --------------------------------------------------------------------------------------------------------------
Total Sales 283.2 280.2 292.3 283.0 267.7
Transportation 255.9 232.5 217.5 203.7 194.7
- --------------------------------------------------------------------------------------------------------------
Total Throughput 539.1 512.7 509.8 486.7 462.4
Off-System Sales 7.5 0.3 - - -
- --------------------------------------------------------------------------------------------------------------
Total Sold or Transported 546.6 513.0 509.8 486.7 462.4
- --------------------------------------------------------------------------------------------------------------
SOURCES OF GAS FOR THROUGHPUT (Bcf)
Sources of Gas Sold
Spot market** 210.4 235.3 142.3 169.9 113.9
Producers 70.9 67.5 56.9 57.1 64.4
Pipelines - - 118.4 84.0 68.2
Storage withdrawals (injections) 23.6 (14.0) (6.7) (10.7) 11.4
Company use and other (14.2) (8.3) (18.6) (17.3) 9.8
- ---------------------------------------------------------------------------------------------------------------
Total Sources of Gas Sold 290.7 280.5 292.3 283.0 267.7
Gas received for delivery
to customers 255.9 232.5 217.5 203.7 194.7
- ---------------------------------------------------------------------------------------------------------------
Total Sources 546.6 513.0 509.8 486.7 462.4
- ---------------------------------------------------------------------------------------------------------------
CUSTOMERS
Residential 1,794,800 1,764,968 1,737,609 1,711,946 1,686,918
Commercial 172,114 167,067 164,037 161,937 160,378
Industrial and Other 2,265 2,312 2,302 2,382 2,366
- ---------------------------------------------------------------------------------------------------------------
Total 1,969,179 1,934,347 1,903,948 1,876,265 1,849,662
- ---------------------------------------------------------------------------------------------------------------
DEGREE DAYS 5,692 5,530 5,677 5,507 4,998
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* Includes Columbia Gas of New York, Inc. through March 31, 1991.
** Reflects volumes under purchase contracts of less than one year.
33
<PAGE> 34
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
OIL AND GAS OPERATIONS
Proposed Sale of Columbia Development
On October 23, 1995, Columbia announced its intention to sell Columbia
Development, its wholly-owned southwest oil and gas exploration and production
subsidiary, which has approximately 196 billion cubic feet equivalent (Bcfe) of
proved oil and natural gas reserves located in the Gulf of Mexico and on-shore
continental United States. Based on the proposed sale of this subsidiary in
early 1996, an estimated loss of $54.8 million after-tax was recorded in the
fourth quarter of 1995. It is expected that the proposed sale of Columbia
Development may take several months to complete and the financial impact of the
sale may be different once finalized. Management has determined that the
strategic value to Columbia of drilling for oil and gas in the Southwest has
diminished and that Columbia's investment in Columbia Development would be
better devoted to assets focused on meeting customer needs. Columbia is not
exiting the exploration and production business, and will retain its larger and
more strategically placed Appalachian oil and gas subsidiary, Columbia Natural
Resources, Inc. (CNR), which is closer to Columbia's customer base and pipeline
service territory. As of December 31, 1995, CNR held interests in more than
2.2 million net acres of gas and oil leases and had proved oil and gas reserves
in excess of 609 Bcfe.
Market Conditions
Despite a rise in gas prices in late 1995, average prices for the year were
lower than the year earlier and had an adverse impact on results from
operations of the oil and gas segment. Columbia's natural gas prices averaged
$1.96 per Mcf in 1995 compared to $2.18 in 1994. Oil prices improved to $16.17
per barrel for 1995 from a 1994 level of $15.09 per barrel. The decline in gas
prices throughout most of 1995 has been attributed to a number of factors
including warm weather in the first quarter of 1995, increased imports from
Canada, greater pipeline and storage flexibility, and general excess supply
deliverability as a result of federal deregulation. In December 1995, gas
prices rebounded as storage levels fell due to unseasonably colder weather.
Fluctuations in oil and gas prices can cause significant variations in revenues
for the oil and gas segment. To dampen the impact of these price swings and
help stabilize revenues, the oil and gas segment uses futures and option
contracts and price swap agreements to lessen the price risk for a portion of
its production. (See Note 4 - Commodity Hedging in Notes to Consolidated
Financial Statements for additional information.)
Capital Expenditures
In the Appalachian area, CNR participated in the drilling of 96 gross (61 net)
development wells in 1995, with a success rate of 74%. The primary focus of
CNR's 1995 drilling activity was in the Rose Run formation in southeast Ohio
and shale formations in West Virginia. CNR's $21 million capital and
exploration budget for 1996 is anticipated to focus on joint venture prospects
in Ohio, which have higher reserve and deliverability potential.
In the southwest, Columbia Development drilled 67 gross (24 net) wells in 1995,
with an 82 percent success rate. In the Austin Chalk drilling program, 45 out
of 48 Austin Chalk wells drilled in 1995 were successful.
Gathering Facilities
Under Order 636, the natural gas pipeline industry is required to eventually
unbundle gathering services from other transportation services. Columbia
Transmission provides transportation services, including gathering services,
for a significant portion of gas produced from CNR's reserves. In its August
1, 1995 general rate filing, Columbia Transmission requested an increase in its
gathering rate to reflect partial unbundling of this service.
Columbia Transmission is currently preparing the regulatory filings necessary
for abandonment of selected gathering facilities and transfer of those assets
to CNR. Capital expenditures needed to purchase these intercompany assets are
estimated at $22 million, the book value of the facilities, with additional
costs to be incurred for compression and measurement. Operation and
maintenance costs associated with these facilities will be partially offset by
the absence of Columbia Transmission's gathering charges on wells located in
southern West Virginia coupled with additional revenue generated from
transportation of third party gas.
Reserves
Net proved gas reserves at the end of 1995 totaled approximately 737 Bcf,
compared to 684 Bcf at the end of 1994. The determination that an increasing
number of CNR's wells are economical to produce at year-end 1995 gas prices is
34
<PAGE> 35
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
reflected in a 116 Bcf upward revision in recoverable gas reserves in the
Appalachian area. Without this revision, CNR's reserve base declined as
production exceeded newly discovered Appalachian reserves and extensions of 14
Bcf . Drilling activity in the Appalachian area was curtailed during 1995 due
to low natural gas prices. In the Southwest, net proved reserves declined
slightly as production during 1995 and an 8 Bcf downward revision in
recoverable gas reserves exceeded new discoveries and extensions of 39 Bcf by
approximately one Bcf.
Proved reserves for oil, condensate and natural gas liquids decreased from 12.3
million barrels at the end of 1994 to 11.6 million barrels for 1995. While
production of 2.8 million barrels was largely replaced through extensions and
discoveries of 2.7 million barrels during 1995, net reserves were revised
downward by 0.5 million barrels.
Volumes
Gas production decreased 1.9% in 1995 to 65.4 Bcf primarily due to normal
production declines from onshore wells in the Southwest. Gas production
in the Appalachian area was essentially unchanged at 33.3 Bcf as production
from new wells offset normal production declines from older wells combined with
production curtailments resulting from replacement and repair of Columbia
Transmission's gathering lines and compressor facilities. In 1994, gas
production decreased 6.7% to 66.7 Bcf as production declined in both the
Southwest and Appalachian areas. The decline was primarily attributable to the
same factors impacting 1995 production.
Oil and liquids production declined in 1995 by 21.1% to 2.8 million barrels.
The decrease was primarily due to production declines in onshore wells,
especially horizontal wells in the Austin Chalk field, and decreased gas
processing from the West Cameron 485 block at the Blue Water Gas Processing
Plant. In 1994, oil and liquids production was essentially unchanged from 1993
as an increase in Appalachian production offset the decrease in the Southwest
program due to offshore well production problems.
Operating Revenues
In 1995, operating revenues were $180.6 million, a decrease of $24.7 million
from 1994. The decrease is primarily attributable to lower gas prices and
significantly lower oil and liquids production in the southwest. In 1994,
operating revenues declined $16.9 million or 7.6% from 1993 as the impact of
lower oil and gas prices and the decrease in gas production was only partially
offset by the combined effect of recording a reserve of $5.4 million in 1993
for a royalty dispute and the subsequent reversal of most of this reserve in
1994.
Operating Income
Operating income in 1995 declined by $26.9 million to $3.7 million primarily
due to the lower operating revenues. In 1994, operating income declined by $23
million due to lower operating revenues and an increase in depletion expense of
$12.4 million as a result of depressed energy prices.
35
<PAGE> 36
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
OIL AND GAS OPERATIONS
STATEMENTS OF OPERATING INCOME FROM OIL AND GAS OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Year Ended December 31 (in millions) 1995 1994 1993
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES
Gas $134.4 $150.7 $ 163.8
Oil and liquids 46.2 54.6 58.4
- ---------------------------------------------------------------------------------------
Total Operating Revenues 180.6 205.3 222.2
- ---------------------------------------------------------------------------------------
OPERATING EXPENSES
Operation and maintenance 79.6 76.9 83.7
Depreciation and depletion 86.9 86.2 73.8
Other taxes 10.4 11.6 11.1
- ---------------------------------------------------------------------------------------
Total Operating Expenses 176.9 174.7 168.6
- ---------------------------------------------------------------------------------------
OPERATING INCOME $ 3.7 $ 30.6 $ 53.6
- ---------------------------------------------------------------------------------------
</TABLE>
OIL AND GAS OPERATING HIGHLIGHTS*
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CAPITAL EXPENDITURES ($ in millions) 86.8 101.6 95.1 70.8 120.8
- --------------------------------------------------------------------------------------------------------------
PROVED RESERVES
Gas (Bcf)(a) 736.5 683.8 697.0 779.5 808.1
Oil and Liquids (000 barrels)(b) 11,552 12,255 12,792 14,650 15,568
- --------------------------------------------------------------------------------------------------------------
PRODUCTION
Gas (Bcf) 65.4 66.7 71.5 69.2 76.3
Oil and Liquids (000 barrels) 2,849 3,611 3,603 3,061 3,411
- --------------------------------------------------------------------------------------------------------------
AVERAGE PRICES
Gas ($ per Mcf) 1.96 2.18 2.28 2.02 1.81
Oil and Liquids ($ per barrel) 16.17 15.09 16.17 18.20 21.10
- --------------------------------------------------------------------------------------------------------------
</TABLE>
* Year 1991 include results from Canadian operations that were sold effective
December 31, 1991.
(a) Includes reserves held for sale of 137.0 Bcf in 1995.
(b) Includes reserves held for sale of 9.9 million barrels in 1995.
36
<PAGE> 37
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
OTHER ENERGY OPERATIONS
Energy Services
Columbia Energy Services Corporation (Columbia Energy Services) oversees
Columbia's nonregulated natural gas marketing efforts and provides an array of
services to distribution companies, independent power producers and other large
end users both on and off Columbia's transmission and distribution pipeline
system. Columbia Energy Services offers one-stop shopping for natural gas
supply, transportation-related services, and fuel management services to help
customers better manage their energy costs. In 1995, electronic trading, The
Fast Lane(TM), was added to its services making real-time trading of natural
gas supplies and pipeline capacity easier and more efficient.
Propane
During 1995, propane sales by Columbia Propane Corporation and Commonwealth
Propane, Inc. (Commonwealth Propane) totaled 68.9 million gallons, a small
increase over 1994. The propane companies serve approximately 74,300 customers
in parts of Kentucky, Maryland, New York, North Carolina, Ohio, Pennsylvania,
Virginia and West Virginia.
Cogeneration
Columbia is part owner in four cogeneration projects through its subsidiary,
TriStar Ventures Corporation (TriStar). These facilities produce both
electricity and useful thermal energy and are fueled principally by natural
gas. TriStar holds various interests in these facilities that have a total
capacity of nearly 300 megawatts. In 1995, TriStar expanded its business to
include facility energy management services. This includes providing
operations, maintenance, and technical advisory services for power generation
projects. TriStar plans to utilize the extensive Columbia presence in the
Mid-Atlantic region to market its services and develop additional opportunities
with customers of Columbia's distribution subsidiaries.
Cove Point Facility
Columbia LNG is a partner with subsidiaries of the Potomac Electric Power
Company in Cove Point LNG Limited Partnership (Cove Point LNG). Cove Point LNG
recently began commercial operations of one of the largest natural gas peaking
and storage facilities in the United States located at Cove Point, Maryland.
The facility has a capacity to liquefy natural gas at a rate of 15,000 Mcf per
day and stores the resulting liquefied natural gas until needed for winter peak
day requirements of utilities and other large gas users.
Commodity Hedging
Columbia Energy Services and Commonwealth Propane use commodity futures from
time to time to hedge prices on commitments for natural gas purchases and sales
and propane inventories. Under internal guidelines, speculative positions are
prohibited.
Columbia Energy Services uses commodity futures contracts to assure acceptable
margins on the purchase and resale of natural gas in future months. When
Columbia Energy Services makes a sale for future delivery without having
natural gas committed to that sale, it purchases commodity futures to reduce
the risk of increasing prices prior to purchasing the natural gas to fulfill
the sales obligation.
Commonwealth Propane purchases propane and places it in inventory for future
sale. Commonwealth Propane sells commodity futures on a portion of its
inventory at the time of purchase to protect it from decreasing prices.
Environmental Matters
Columbia Gas System Service Corporation (Service Corporation) received a
"General Notice of Potential Liability and Section 104(2) Request for
Information" from the EPA concerning a process site to which the Service
Corporation sent certain solvents. Service Corporation joined a group for the
purpose of sharing the costs of the cleanup. Management does not believe this
Superfund matter will have a material adverse effect on future income or
Columbia's financial position.
Net Revenues
Net revenues for gas marketing in 1995 were essentially unchanged at $7.1
million after increasing by $3.8 million in 1994. In the prior year the
demand for gas marketing services surged as a result of the new environment
created by
37
<PAGE> 38
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Order 636. Net revenues from propane operations in 1995 were also relatively
unchanged at $29.6 million from the prior year. Net revenues increased in
1994 due primarily to cold weather in the first quarter of 1994.
Other revenues increased $10.2 million in 1995, to $86.4 million, due to an
increase in revenues for professional services provided to affiliates, revenues
from Columbia LNG and an increase for cogeneration activities. In 1994, other
revenues increased $1.4 million as the impact of increased cogeneration
activities was mostly offset by a decline in revenues for service provided to
affiliated companies due to restructuring certain processes.
Operating Income
The $4.8 million decrease in operating income in 1995 to $19.3 million reflects
higher costs for services provided to affiliates, higher operating expenses for
propane operations and an operating loss associated with Columbia LNG. The $21
million increase in operating income in 1994 was due to the $12.8 million
decrease in operating expenses reflecting the impact of a reserve recorded in
1993 for employee severance costs and the overall increase of $8.2 million in
net revenues.
38
<PAGE> 39
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
STATEMENTS OF OPERATING INCOME FROM OTHER ENERGY OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Year Ended December 31 (in millions) 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET REVENUES
Gas marketing revenues $237.9 $232.1 $176.5
Less: Products purchased 230.8 225.3 173.5
- ------------------------------------------------------------------------------------------
Net Gas Marketing Revenues 7.1 6.8 3.0
- ------------------------------------------------------------------------------------------
Propane revenues 65.1 63.2 56.5
Less: Products purchased 35.5 33.4 29.7
- ------------------------------------------------------------------------------------------
Net Propane Revenues 29.6 29.8 26.8
- ------------------------------------------------------------------------------------------
Other revenues 86.4 76.2 74.8
- ------------------------------------------------------------------------------------------
Net Revenues 123.1 112.8 104.6
- ------------------------------------------------------------------------------------------
OPERATING EXPENSES
Operation and maintenance 90.4 76.3 90.8
Depreciation and depletion 7.9 7.1 5.9
Other taxes 5.5 5.3 4.8
- ------------------------------------------------------------------------------------------
Total Operating Expenses 103.8 88.7 101.5
- ------------------------------------------------------------------------------------------
OPERATING INCOME $ 19.3 $ 24.1 $ 3.1
- ------------------------------------------------------------------------------------------
</TABLE>
OTHER ENERGY OPERATING HIGHLIGHTS
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CAPITAL EXPENDITURES ($ in millions) 14.1 15.1 11.2 15.0 10.2
- --------------------------------------------------------------------------------------------------------------
PROPANE
Gallons sold (millions) 68.9 68.5 58.1 63.3 70.5
Customers 74,308 68,218 67,895 65,899 64,618
- --------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE> 40
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
BANKRUPTCY MATTERS
On November 28, 1995, Columbia and its wholly-owned subsidiary, Columbia
Transmission, emerged from Chapter 11 protection of the Federal Bankruptcy
Code. Both Columbia and Columbia Transmission operated under Chapter 11 since
filing for protection on July 31, 1991. The companies were granted
debtor-in-possession status under the Bankruptcy Code, allowing them to conduct
normal business operations subject to the jurisdiction of the United States
Bankruptcy Court for the District of Delaware (Bankruptcy Court).
Events that Led to Bankruptcy Filings
Both Columbia's and Columbia Transmission's Chapter 11 filings were
precipitated by a combination of events that adversely affected Columbia
Transmission's financial viability. Most notable were federal legislative and
regulatory actions, instituted years after Columbia Transmission signed gas
purchase contracts that significantly impacted Columbia Transmission's ability
to sell gas at a price which would allow it to recover the contracted purchase
price. These problems were compounded by record-setting warm weather in 1990
and 1991, that caused spot market prices for gas to plunge and created excess
transportation capacity, thus making an unexpected and persistent oversupply of
bargain-priced gas available to Columbia Transmission's customers. As a
result, Columbia Transmission's ability to market its gas was severely
undercut, substantially reducing both sales volumes and revenues.
Settlement of Prepetition Obligations
In settlement of its prepetition obligations, Columbia distributed
approximately $3.6 billion to its creditors, which included $2.3 billion for
Columbia's prepetition debt and approximately $1 billion for interest on that
debt. The amounts represented full payment of creditors' prepetition claims.
This distribution was funded by:
- $2 billion in new long-term debt securities, with maturities ranging
from 5 to 30 years;
- $1 billion in cash, funded by cash on hand and approximately $370
million of new bank debt; and
- $200 million in Series A - Preferred Stock and $200 million in Series
B - DECS.
The interest rates on the new debt securities and the dividend rates and other
financial terms of the new equity securities were based on market levels at the
time of emergence. Columbia's new long-term debt obligations were rated as
investment grade by three major rating agencies. (See Liquidity and Capital
Resources discussion on page 19 for more information.)
The provisions of Columbia Transmission's Plan provided for a total
distribution at or after emergence of approximately $3.9 billion to its
creditors, including:
- 100% of all priority and administrative claims, which together
amounted to $255 million;
- 100% of Columbia's secured claim of approximately $2 billion,
including interest, which was funded with approximately $900 million
of secured debt securities of reorganized Columbia Transmission and
all of its equity;
- 100% of all unsecured claims of $25,000 or less, which amounted to $8
million;
- 72.5% of all miscellaneous unsecured creditor claims in excess of
$25,000, which amounted to $40 million;
- approximately $130 million in customer refunds as provided under terms
of a customer settlement agreement. 68.875 to 72.5% of the $351
million unsecured claim of Columbia, that will be ultimately
determined by the final distribution percentage received by unsecured
producers; and
- an estimated $1.2 billion to unsecured producers (based on 100%
acceptance by producers of the settlement amounts proposed in the
Plan). Columbia Transmission's Plan included a producer settlement
that provided for a total proposed allowed amount of producer claims
of $1.6 billion and for distributions of 72.5% to those creditors who
had claims under those contracts in excess of $25,000.
Columbia Transmission's Plan provides that producers who rejected settlement
offers contained in Columbia Transmission's Plan may continue to litigate their
claims under the Bankruptcy Court-approved estimation procedures, described
below, and will receive the same percentage payout on their claims, when and if
ultimately allowed, as received by the settling producers. Columbia
Transmission's Plan further provided that the actual distribution percentage
for producer claims, which would not be less than 68.875% or greater than
72.5%, would not be determined
40
<PAGE> 41
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
until the total amount of contested producer claims is established, and that
until such time, 5% of the amount to be distributed to producer claimants and
Columbia for unsecured debt will be withheld.
The 5% holdback from settling producers and a matching contribution by
reorganized Columbia Transmission, to the extent necessary, will be used to
fund any distributions on producer claims ultimately liquidated in an aggregate
amount in excess of those proposed by Columbia Transmission's Plan. If the
holdback and matching contributions are exhausted, any further distribution
would be funded entirely by Columbia Transmission. Columbia has guaranteed the
payment of the remaining distributions to producers, either in cash or, to the
extent that a nonsettling producer's finally allowed claim exceeds its proposed
settlement value, in Columbia's common stock.
Producer Claims Estimation Process
In 1992, the Bankruptcy Court approved the appointment of a Claims Mediator and
the implementation of a claims estimation procedure for the quantification of
claims arising from the rejection of above-market gas purchase contracts and
other claims by producers related to gas purchase contracts with Columbia
Transmission. In late 1994 and early 1995, the Claims Mediator issued the
Initial Report and Recommendations of the Claims Mediator on generic issues for
Natural Gas Contract Claims and a Supplement to Initial Report and
Recommendations of the Claims Mediator (Report) and directed producer claimants
to submit to him recalculated claims prepared pursuant to the instructions
contained in the Report. The recommendations and instructions set out in the
Report have not been considered by the Bankruptcy Court. In mid-1995,
producers with which Columbia Transmission had not yet negotiated settlements
liquidating their claims submitted recalculated claims to the Claims Mediator.
As submitted, those recalculated claims initially amounted to over $2 billion.
Since mid-1995, numerous additional producers settled their claims and those
settlements became final with the confirmation of Columbia Transmission's Plan.
In addition, several recalculated claims have been amended by producer
claimants.
The estimation procedures remain in place under the Plan for use in the
post-confirmation liquidation of producer claims that were not resolved with
the confirmation of the Plan. The recalculated claims still subject to the
estimation process total about $490 million, as submitted and amended. The
estimation process is now proceeding with discovery, motions for dismissal or
summary judgement and evidentiary hearings before the Claims Mediator to
address individual producer claims, including specific issues not addressed by
the Report. The recommendations of the Claims Mediator concerning the amounts
at which particular claims should be allowed, as issued, are being submitted to
the Bankruptcy Court for consideration. The parties have rights of appellate
review with respect to the resulting orders of the Bankruptcy Court. When
claims are allowed by the Bankruptcy Court and the allowances become final,
Columbia Transmission will make additional distributions pursuant to the Plan.
The timing of the completion of this litigation process is impossible to
predict.
Based on the information received and evaluated to date, Columbia Transmission
believes that most of the remaining claims will be settled at amounts
approximating the settlement values, but expects that some claims may be
settled or resolved through litigation at amounts higher or lower than the
proposed settlement values. Although Columbia Transmission does not have
sufficient information to fully evaluate all claims and the outcome of
litigation is subject to uncertainty, it currently estimates that the ultimate
payment to producers, after litigation and after giving effect to the producer
holdback, is likely to exceed the $1.2 billion distribution projected in the
Plan (which is based on 100% producer acceptance of amounts proposed in the
Plan) but is unlikely to exceed $1.3 billion. The foregoing estimation is
based on the information currently available, and there can be no assurance as
to the timing or amounts of settlements with producers or as to the amount
ultimately allowed or paid with respect to the remaining claims.
Intercompany Complaint
Columbia Transmission's Plan provided for the withdrawal of a complaint filed
by the Official Committee of Unsecured Creditors of Columbia Transmission with
the Bankruptcy Court. The complaint alleged, among other items, that the $1.7
billion of Columbia Transmission's secured and unsecured debt securities held
by Columbia should be recharacterized as capital contributions (rather than
loans) and equitably subordinated to the claims of Columbia Transmission's
other creditors.
41
<PAGE> 42
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Internal Revenue Service Matters
Columbia received a favorable ruling from the Internal Revenue Service (IRS) in
October 1995, stating that payments made by Columbia Transmission pursuant to
its Plan to producers in connection with their contract rejection claims were
deductible for tax purposes in the year in which the payments were made.
Because of the magnitude of the payments, obtaining a favorable ruling from the
IRS was a condition of both Plans.
Security Holder and Derivative Litigation
On July 18, 1995, Columbia reached a settlement that resolved a consolidated
class action complaint filed in the District Court in 1991 against Columbia and
its directors and certain officers of the debtor companies. Under the terms of
the settlement Columbia paid approximately $16.5 million of the total $36.5
million settlement. The remainder was shared among the insurance carrier for
the director and officer defendants and the other defendants to the litigation.
The settlement was implemented upon Columbia's emergence from Chapter 11. Also
in 1991, three derivative actions were filed in the Court of Chancery in and
for New Castle County (Delaware) alleging that directors had breached their
fiduciary duties to Columbia. Consistent with the recommendation of a special
committee of Columbia's Board of Directors it was determined that it was in the
best interest of Columbia to dispose of the litigation. The derivative
litigation was released and dismissed pursuant to Columbia's Plan.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Index Page
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Statements of Consolidated Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Statements of Consolidated Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Statements of Consolidated Common Stock Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Schedule II - Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
42
<PAGE> 43
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of The Columbia Gas System, Inc.:
We have audited the accompanying consolidated balance sheets of The Columbia
Gas System, Inc. (a Delaware corporation, the "Corporation") and subsidiaries
as of December 31, 1995 and 1994, and the related statements of consolidated
income, cash flows and common stock equity for each of the three years in the
period ended December 31, 1995. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Corporation and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
As discussed in Note 5B, effective January 1, 1994, the Corporation changed its
method of accounting for postemployment benefits pursuant to standards
promulgated by the Financial Accounting Standards Board.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedule listed in the
Index to Item 8, Financial Statements and Supplementary Data, is presented for
purposes of complying with the Securities and Exchange Commission's rules and
is not part of the basic consolidated financial statements. This schedule has
been subjected to the auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
New York, New York
February 5, 1996
43
<PAGE> 44
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
STATEMENTS OF CONSOLIDATED INCOME
The Columbia Gas System, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Year Ended December 31 (in millions except per share amounts) 1995* 1994* 1993*
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES
Gas sales $1,929.0 $2,031.3 $2,574.3
Transportation 487.7 505.7 518.4
Other 218.5 210.1 221.1
- --------------------------------------------------------------------------------------------------------------------------------
Total Operating Revenues 2,635.2 2,747.1 3,313.8
- --------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Products purchased 820.6 984.2 1,577.7
Operation 826.7 774.4 702.3
Maintenance 116.6 133.7 165.5
Depreciation and depletion 270.0 261.7 239.8
Other taxes 211.1 209.0 198.0
Writedown of investment in CLG - - 57.5
- --------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 2,245.0 2,363.0 2,940.8
- --------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 390.2 384.1 373.0
- --------------------------------------------------------------------------------------------------------------------------------
OTHER INCOME (DEDUCTIONS)
Interest income and other, net (Note 14) (58.2) 35.2 7.7
Interest expense and related charges** (Note 15) (988.4) (14.8) (101.5)
Reorganization items, net (Note 2) 13.4 (12.3) 8.9
- --------------------------------------------------------------------------------------------------------------------------------
Total Other Income (Deductions) (1,033.2) 8.1 (84.9)
- --------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES, EXTRAORDINARY
ITEM AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE (643.0) 392.2 288.1
Income taxes (Note 6) (210.7) 146.0 135.9
- --------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (432.3) 246.2 152.2
Extraordinary item (Note 5A) 71.6 - -
Cumulative effect of change in accounting
for postemployment benefits (Note 5B) - (5.6) -
- --------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $(360.7) $ 240.6 $ 152.2
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) PER SHARE OF COMMON STOCK
(based on average shares outstanding)
Before extraordinary item and accounting change $(8.57) $ 4.87 $ 3.01
Extraordinary item 1.42 - -
Change in accounting for postemployment benefits - (0.11) -
- --------------------------------------------------------------------------------------------------------------------------------
Earnings (Loss) on Common Stock $(7.15) $ 4.76 $ 3.01
- --------------------------------------------------------------------------------------------------------------------------------
AVERAGE COMMON SHARES OUTSTANDING (thousands) 50,468 50,560 50,559
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Reference is made to Note 2 of Notes to Consolidated Financial Statements.
**Due to the bankruptcy filings, interest expense of approximately $230 million
and $210 million was not recorded in 1994 and 1993, respectively (see Note 2
of Notes to Consolidated Financial Statements). Interest expense of $982.9
million including write-off of unamortized discounts on debentures, was
recorded in the fourth quarter of 1995.
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
44
<PAGE> 45
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
CONSOLIDATED BALANCE SHEETS
The Columbia Gas System, Inc. and Subsidiaries
<TABLE>
<CAPTION>
ASSETS as of December 31 (in millions) 1995* 1994*
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT
Gas utility and other plant, at original cost $6,903.2 $6,637.5
Accumulated depreciation and depletion (3,322.0) (3,180.8)
- --------------------------------------------------------------------------------------------------------------------------------
Net Gas Utility and Other Plant 3,581.2 3,456.7
- --------------------------------------------------------------------------------------------------------------------------------
Oil and gas producing properties, full cost method 516.3 1,261.9
Accumulated depletion (141.1) (637.6)
- --------------------------------------------------------------------------------------------------------------------------------
Net Oil and Gas Producing Properties 375.2 624.3
- --------------------------------------------------------------------------------------------------------------------------------
Net Property, Plant and Equipment 3,956.4 4,081.0
- --------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS AND OTHER ASSETS
Accounts receivable - noncurrent 91.2 211.2
Unconsolidated affiliates 78.2 80.7
Assets held for sale (Note 13B) 182.8 -
Other 2.4 14.5
- --------------------------------------------------------------------------------------------------------------------------------
Total Investments and Other Assets 354.6 306.4
- --------------------------------------------------------------------------------------------------------------------------------
CURRENT ASSETS
Cash and temporary cash investments 8.0 1,481.8
Accounts receivable
Customers (less allowance for doubtful accounts
of $12.3 and $11.6, respectively) 429.2 425.5
Other 81.8 122.3
Income tax refund 271.5 -
Gas inventory 172.3 230.3
Other inventories - at average cost 41.5 42.0
Prepayments 56.9 63.3
Regulatory assets 76.5 39.9
Other 138.2 117.3
- --------------------------------------------------------------------------------------------------------------------------------
Total Current Assets 1,275.9 2,522.4
- --------------------------------------------------------------------------------------------------------------------------------
REGULATORY ASSETS 422.0 212.1
DEFERRED CHARGES 48.1 43.0
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $6,057.0 $7,164.9
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Reference is made to Note 2 of Notes to Consolidated Financial Statements.
**Due to the bankruptcy filings, accrued interest of approximately $730 million
was not recorded as of December 31, 1994.
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
45
<PAGE> 46
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
<TABLE>
<CAPTION>
CAPITALIZATION AND LIABILITIES as of December 31 (in millions) 1995* 1994*
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK EQUITY
Common stock, par value $10 per share - outstanding 49,204,025
and 50,563,335 shares, respectively $506.2 $505.6
Additional paid in capital 595.8 601.9
Retained earnings 69.8 430.5
Less: Cost of treasury stock (1,416,155 shares) 57.8 -
Unearned employee compensation - (70.0)
- --------------------------------------------------------------------------------------------------------------------------------
Total Common Stock Equity 1,114.0 1,468.0
PREFERRED STOCK (Note 9) 399.9 -
LONG-TERM DEBT (Note 10) 2,004.5 4.3
- --------------------------------------------------------------------------------------------------------------------------------
Total Capitalization 3,518.4 1,472.3
- --------------------------------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Short-term debt (Note 11) 338.9 -
Accounts and drafts payable 215.7 153.2
Accrued taxes 271.3 175.2
Accrued interest** 94.3 -
Estimated rate refunds 96.1 92.2
Estimated supplier obligations 178.3 69.7
Overrecovered gas costs 41.7 59.5
Transportation and exchange gas payable 46.7 35.1
Other 295.6 275.0
- --------------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 1,578.6 859.9
- --------------------------------------------------------------------------------------------------------------------------------
LIABILITIES SUBJECT TO CHAPTER 11 PROCEEDINGS (Note 2) - 3,977.7
- --------------------------------------------------------------------------------------------------------------------------------
OTHER LIABILITIES AND DEFERRED CREDITS
Deferred income taxes - noncurrent 468.6 344.1
Investment tax credits 38.6 38.6
Postretirement benefits other than pensions 208.2 236.3
Regulatory liabilities 44.9 26.2
Other 199.7 209.8
- --------------------------------------------------------------------------------------------------------------------------------
Total Other Liabilities and Deferred Credits 960.0 855.0
- --------------------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Notes 2, 3 and 13) - -
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL CAPITALIZATION AND LIABILITIES $6,057.0 $7,164.9
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
46
<PAGE> 47
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
STATEMENTS OF CONSOLIDATED CASH FLOWS
The Columbia Gas System, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Year Ended December 31 (in millions) 1995* 1994* 1993*
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $(360.7) $240.6 $152.2
Adjustments for items not requiring (providing) cash:
Depreciation and depletion 270.0 261.7 239.8
Deferred income taxes 66.1 72.2 19.1
Reapplication of SFAS 71 (71.6) - -
Estimated loss on sale of Columbia Gas Development
Corporation 77.8 - -
Change in accounting for postemployment benefits - 5.6 -
Interest expense settled at emergence 702.9 - -
Payment of Chapter 11 liabilities (1,169.1) - -
Other - net** (94.0) (25.0) 239.8
Changes in components of working capital:
Accounts receivable 99.7 135.9 (1.4)
Gas inventory 58.0 (32.5) 115.7
Prepayments 12.3 (8.0) 2.4
Accounts payable 38.3 (35.5) (59.3)
Accrued taxes (314.9) 45.7 5.5
Estimated rate refunds (56.6) (133.3) (59.4)
Estimated supplier obligations (44.0) (49.7) 131.2
Under/Overrecovered gas costs (18.0) 106.7 (23.2)
Exchange gas payable 10.4 (31.7) (10.1)
Other working capital (14.0) 20.1 98.1
- --------------------------------------------------------------------------------------------------------------------------------
Net Cash From Operations (807.4) 572.8 850.4
- --------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Capital expenditures (411.0) (433.6) (345.7)
Sale of partnership interest 10.9 - -
Other investments - net 25.2 (1.3) 3.9
- --------------------------------------------------------------------------------------------------------------------------------
Net Investment Activities (374.9) (434.9) (341.8)
- --------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Retirement of prepetition debt obligations (637.3) - -
Retirement of long-term debt (0.8) (0.9) (0.8)
Issuance of common stock 1.8 - -
Increase in short-term debt and other financing activities 344.8 4.4 12.0
- --------------------------------------------------------------------------------------------------------------------------------
Net Financing Activities (291.5) 3.5 11.2
- --------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in cash and temporary cash investments (1,473.8) 141.4 519.8
Cash and temporary cash investments
at beginning of year 1,481.8 1,340.4 820.6
- --------------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of year $ 8.0 $ 1,481.8 $ 1,340.4
- --------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest 284.9 0.8 0.5
Cash paid for income taxes (net of refunds) 42.3 37.4 88.7
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Reference is made to Note 2 of Notes to Consolidated Financial Statements.
**Includes changes in Liabilities Subject to Chapter 11 Proceedings of
($2,842.0) in 1995, $61.1 million in 1994, and ($39.4) million in 1993.
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
47
<PAGE> 48
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
STATEMENTS OF CONSOLIDATED COMMON STOCK EQUITY
The Columbia Gas System, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Common Stock*
----------------------------------- Additional Unearned
(In millions except Shares Par Treasury Paid In Retained Employee
for share amounts) Outstanding(000) Value Stock Capital Earnings Compensation Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 50,559 $505.6 $ - $601.8 $ 37.7 $(70.0) $1,075.1
Net Income 152.2 152.2
- --------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 50,559 505.6 - 601.8 189.9 (70.0) 1,227.3
Net Income 240.6 240.6
Common stock issued:
Long-Term Incentive Plan 4 0.1 0.1
- --------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 50,563 505.6 - 601.9 430.5 (70.0) 1,468.0
Net Loss (360.7) (360.7)
Termination of LESOP (1,416) (57.8) (7.9) 70.0 4.3
Common stock issued:
Long-Term Incentive Plan 57 0.6 1.8 2.4
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995 49,204 $506.2 $(57.8) $595.8 $ 69.8 $ - $1,114.0
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*100 million shares authorized at December 31, 1995, 1994, 1993 and 1992 - $10
par value.
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
48
<PAGE> 49
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. PRINCIPLES OF CONSOLIDATION. The consolidated financial statements
include the accounts of Columbia and all subsidiaries. All
intercompany accounts and transactions have been eliminated.
Certain reclassifications have been made to the 1994 and 1993
financial statements to conform to the 1995 presentation.
B. CASH AND CASH EQUIVALENTS. Columbia considers all highly liquid debt
instruments to be cash equivalents.
In settlement of its prepetition obligations, Columbia distributed
approximately $3.6 billion to its creditors, which included $2.3
billion for Columbia's prepetition debt and approximately $1.0 billion
for interest on that debt. This distribution was funded by $2.0
billion in new long-term debt securities, $0.9 billion in cash, which
included cash on hand and $0.4 billion of new bank debt, and $0.2
billion in Series A - Preferred Stock and $0.2 billion in Series
B-DECS. The issuance of these securities represents non-cash
financing activities.
C. BASIS OF ACCOUNTING FOR RATE-REGULATED SUBSIDIARIES. Statement of
Financial Accounting Standards No. 71, "Accounting for the Effects of
Certain Types of Regulation," (SFAS No. 71) provides that
rate-regulated public utilities account for and report assets and
liabilities consistent with the economic effect of the way in which
regulators establish rates, if the rates established are designed to
recover the costs of providing the regulated service and if the
competitive environment makes it reasonable to assume that such rates
can be charged and collected. As more fully discussed in Note 5A,
Columbia's transmission subsidiaries reapplied the provisions of SFAS
No. 71 concurrent with the emergence from Chapter 11 protection.
Columbia's gas distribution subsidiaries continue to follow the
accounting and reporting requirements of SFAS No. 71.
Certain expenses and credits subject to utility regulation or rate
determination normally reflected in income are deferred on the balance
sheet and are recognized in income as the related amounts are included
in service rates and recovered from or refunded to customers.
Condensed information for assets and liabilities subject to utility
regulation and rate determination are as follows:
<TABLE>
<CAPTION>
Transmission Distribution
Subsidiaries Subsidiaries
At December 31 ($ in millions) 1995 1994 1995 1994
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Environmental costs 132.5 - 8.2 8.4
Postemployment and postretirement benefits 75.9 - 137.7 138.0
Percent of income plan - - 16.5 20.4
Retirement income plan 10.3 - 17.2 11.0
Regulatory effects of accounting for income taxes, net - - 50.9 51.5
Post in service carrying charges - - 24.4 -
Other 14.1 - 10.8 22.7
---------------------------------------------------------------------------------------------------
Total regulatory assets 232.8 - 265.7 252.0
===================================================================================================
LIABILITIES
Rate refunds and reserves 36.0 - 60.1 80.1
Overrecovered gas costs - - 41.7 60.3
Regulatory effects of accounting for income taxes, net 23.4 - 25.5 26.2
Other 5.2 - - -
---------------------------------------------------------------------------------------------------
Total regulatory liabilities 64.6 - 127.3 166.6
===================================================================================================
</TABLE>
D. GAS UTILITY AND OTHER PLANT AND RELATED DEPRECIATION. Property, plant
and equipment (principally utility plant) are stated at original cost.
The cost of gas utility and other plant of the rate regulated
companies includes an allowance for funds used during construction
(AFUDC). Property, plant and equipment of other subsidiaries includes
interest during construction (IDC). The 1995, 1994 and 1993
before-tax rates for AFUDC and IDC were 8.0 percent and 9.6 percent,
respectively.
49
<PAGE> 50
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
Improvements and replacements of retirement units are capitalized at
cost. When units of property are retired, the accumulated provision
for depreciation is charged with the cost of the units and the cost of
removal, net of salvage. Maintenance, repairs and minor replacements
of property are charged to expense. Columbia's subsidiaries provide
for annual depreciation on a composite straight-line basis.
The average annual depreciation rate for the transmission
subsidiaries' property was 2.6 percent in 1995, 2.7 percent in 1994
and 2.6 percent in 1993. The average annual depreciation rate for the
distribution subsidiaries' property was 3.3 percent in 1995, 1994 and
1993.
E. OIL AND GAS PRODUCING PROPERTIES. Columbia's subsidiaries engaged in
exploring for and developing oil and gas reserves follow the full cost
method of accounting. Under this method of accounting, all productive
and nonproductive costs directly identified with acquisition,
exploration and development activities including certain payroll and
other internal costs are capitalized in a countrywide cost center. If
costs exceed the sum of the estimated present value of the cost
center's net future oil and gas revenues and the lower of cost or
estimated value of unproved properties, an amount equivalent to the
excess is charged to current depletion expense. Gains or losses on
the sale or other disposition of oil and gas properties are normally
recorded as adjustments to capitalized costs, except in the case of a
sale of a significant amount of properties, which could be reflected
in the income statement.
Depletion for subsidiaries is based upon the ratio of current-year
revenues to expected total revenues, utilizing current prices, over
the life of production.
On October 23, 1995 Columbia announced its intent to sell Columbia Gas
Development Corporation, (Columbia Development) the southwest
exploration and production company (see Note 13B).
F. COMMODITY HEDGING. Premiums paid for option and swap agreements are
included as current assets in the consolidated balance sheet until
they are exercised or expire. Margin requirements for natural gas,
crude oil and propane futures are also recorded as current assets.
Unrealized gains and losses on all futures contracts are deferred on
the consolidated balance sheet as either current assets or other
deferred credits. Realized gains and losses from the settlement of
natural gas and crude oil futures, options and swaps are included in
revenues or products purchased as appropriate. Realized gains and
losses from the settlement of propane futures contracts are included
in products purchased.
G. GAS INVENTORY. The distribution companies gas inventory is carried at
cost on a last-in, first-out (LIFO) basis. The excess of replacement
cost of gas inventory at December 31, 1995, over the carrying value is
approximately $89 million. Liquidation of LIFO layers related to gas
delivered by the distribution companies does not affect income since
the effect is passed through to customers as part of purchased gas
adjustment tariffs.
H. INCOME TAXES AND INVESTMENT TAX CREDITS. Columbia and its
subsidiaries record income taxes to recognize full interperiod tax
allocations. Under the liability method of income tax accounting,
deferred income taxes are recognized for the tax consequences of
temporary differences by applying enacted statutory tax rates
applicable to future years to differences between the financial
statement carrying amounts and the tax basis of existing assets and
liabilities.
Previously recorded investment tax credits of the regulated
subsidiaries were deferred and are being amortized over the life of
the related properties to conform with regulatory policy.
I. ESTIMATED RATE REFUNDS. Certain rate-regulated subsidiaries collect
revenues subject to refund pending final determination in rate
proceedings. In connection with such revenues, estimated rate refund
liabilities are recorded which reflect management's current judgment
of the ultimate outcome of the proceedings. No provisions are made
when, in the opinion of management, the facts and circumstances
preclude a reasonable estimate of the outcome.
J. DEFERRED GAS PURCHASE COSTS. Columbia's gas distribution subsidiaries
defer differences between gas purchase costs and the recovery of such
costs in revenues, and adjust future billings for such deferrals on a
basis consistent with applicable tariff provisions.
50
<PAGE> 51
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
K. REVENUE RECOGNITION. Columbia's gas distribution subsidiaries bill
customers on a monthly cycle billing basis. Revenues are recorded on
the accrual basis including an estimate for gas delivered but unbilled
at the end of each accounting period.
L. ENVIRONMENTAL EXPENDITURES. Columbia accrues for costs associated
with environmental remediation obligations when such costs are
probable and can be reasonably estimated, regardless of when
expenditures are made. The undiscounted estimated future expenditures
are based on currently enacted laws and regulations, existing
technology and, when possible, site-specific costs. The reserve is
adjusted as further information is developed or circumstances change.
Rate-regulated subsidiaries applying SFAS No. 71 establish a
regulatory asset on the balance sheet to the extent future recovery of
environmental remediation costs is expected through the regulatory
process.
M. USE OF ESTIMATES. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
N. STOCK OPTIONS AND AWARDS. When stock options are exercised, common
stock is credited for the par value of shares issued and additional
paid in capital is credited with the consideration in excess of par.
For stock appreciation rights, compensation expense is recognized on
the aggregate difference between the market price of Columbia's stock
and the option price. Compensation expense related to contingent
stock awards is recognized over the vesting period. Columbia sets
the grant price of the options at one cent below the market price of
the stock on the grant date. In accordance with Accounting Principles
Board Opinion No. 25 expense is measured by the difference between the
grant price and Columbia's stock price on the measurement date (grant
date). Since the difference between the grant price and Columbia's
stock price on the measurement date is de minimus, no compensation
expense is recognized.
2. EMERGENCE FROM CHAPTER 11 OF THE BANKRUPTCY CODE
A. GENERAL. On November 28, 1995, both Columbia and Columbia
Transmission emerged from Bankruptcy Court protection under Chapter 11
of the Federal Bankruptcy Code. While under Chapter 11 protection,
actions by creditors to collect prepetition indebtedness were stayed
and other contractual obligations could not be enforced against either
Columbia or Columbia Transmission. Both Columbia and Columbia
Transmission had the right, subject to Bankruptcy Court approval and
certain other limitations, to assume or reject executory contracts and
unexpired leases. Any claims for damages resulting from rejection
were treated as general unsecured claims in the reorganization. The
parties affected by these rejections had the right to file claims with
the Bankruptcy Court in accordance with bankruptcy procedures.
Prepetition claims which were contingent or unliquidated at the
commencement of the Chapter 11 proceeding were generally allowable
against the debtor companies in amounts fixed by the Bankruptcy Court.
Substantially all liabilities as of the petition date were subject to
resolution under plans of reorganization approved by the Bankruptcy
Court. Columbia's reorganization plan was also approved by the
Securities and Exchange Commission (SEC) under the Public Utility
Holding Company Act of 1935.
B. SETTLEMENT OF PREPETITION OBLIGATIONS. In settlement of its
prepetition obligations, Columbia distributed approximately $3.6
billion to its creditors, which included $2.3 billion in payment of
Columbia's prepetition debt and approximately $1 billion of interest
on that debt. Columbia's approved plan of reorganization (Plan)
provided for payment to its creditors of the full amount of their
principal balances and accrued prepetition and postpetition interest
and interest on overdue interest through distribution of:
- $2 billion in new debt securities, with maturities ranging
from 5 to 30 years;
- $1 billion in cash, funded by cash on hand and new bank debt;
and
- $200 million in Redeemable Preferred Stock, Series A and $200
million in Convertible Preferred Stock, Series B.
The interest rates on the new debt securities and the dividend rates
and other financial terms of the new equity securities were based on
market levels at the time of emergence. Columbia's new long-term debt
obligations were rated as investment grade by three major rating
agencies.
51
<PAGE> 52
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
Columbia Transmission's Plan is guaranteed financially by Columbia,
and provided a total distribution of approximately $3.9 billion to its
creditors, including:
- 100% of all priority and administrative claims, which together
amounted to $255 million;
- 100% of Columbia's secured claim of approximately $2 billion,
including interest, which was funded with approximately $900
million secured debt securities of reorganized Columbia
Transmission and all of its equity;
- 100% of all unsecured claims of $25,000 or less, which
amounted to $8 million;
- 72.5% of all miscellaneous unsecured creditor claims in excess
of $25,000, which amounted to $40 million;
- Approximately $130 million in customer refunds as provided
under terms of a Customer Settlement Agreement;
- 68.875% to 72.5% of the $351 million unsecured claim of
Columbia, that will be ultimately determined by the final
distribution percentage received by unsecured producers; and
- $1.2 billion to producers (based on a 100% acceptance of the
claim amounts proposed in the Plan). Columbia Transmission's
Plan provided a total proposed allowed amount of producer
claims of $1.6 billion and for distributions of 72.5% to those
creditors who had claims under those contracts in excess of
$25,000.
Columbia Transmission's Plan provides that producers who rejected
settlement offers contained in Columbia Transmission's Plan may
continue to litigate their claims under the Bankruptcy Court-approved
estimation procedure, described below, and will receive the same
percentage payout on their claims, when and if ultimately allowed, as
received by the settling producers. Columbia Transmission's Plan
further provided that the actual distribution percentage for producer
claims, which would not be less than 68.875% or greater than 72.5%,
would not be determined until the total amount of contested producer
claims is established, and that until such time, 5% of the amount to
be distributed to producer claimants and Columbia for unsecured debt
will be withheld.
The 5% holdback from settling producers and a matching contribution by
reorganized Columbia Transmission, to the extent necessary, will be
used to fund any distributions on producer claims ultimately
liquidated in an aggregate amount in excess of those proposed by
Columbia Transmission's Plan. If the holdback and matching
contributions are exhausted, any further distribution would be funded
entirely by Columbia Transmission. Columbia has guaranteed the payment
of the remaining distributions to producers, either in cash or, to the
extent that a nonsettling producer's finally allowed claim exceeds its
proposed settlement value, in Columbia's common stock.
PRODUCER CLAIMS ESTIMATION PROCESS
In 1992, the Bankruptcy Court approved the appointment of a Claims
Mediator and the implementation of a claims estimation procedure for
the quantification of claims arising from the rejection of
above-market gas purchase contracts and other claims by producers
related to gas purchase contracts with Columbia Transmission. In late
1994 and early 1995, the Claims Mediator issued the Initial Report and
Recommendations of the Claims Mediator on generic issues for Natural
Gas Contract Claims and a Supplement to Initial Report and
Recommendations of the Claims Mediator (Report) and directed producer
claimants to submit to him recalculated claims prepared pursuant to
the instructions contained in the Report. The recommendations and
instructions set out in the Report have not been considered by the
Bankruptcy Court. In mid-1995, producers with which Columbia
Transmission had not yet negotiated settlements liquidating their
claims submitted recalculated claims to the Claims Mediator. As
submitted, those recalculated claims initially amounted to over $2
billion. Since mid-1995, numerous additional producers settled their
claims and those settlements became final with the confirmation of
Columbia Transmission's Plan. In addition, several recalculated
claims have been amended by producer claimants.
The estimation procedures remain in place under the Plan for use in
the post-confirmation liquidation of producer claims that were not
resolved with the confirmation of the Plan. As of early 1996, the
recalculated claims still subject to the estimation process total
about $490 million, as submitted and amended. The estimation process
is now proceeding with discovery, motions for dismissal or summary
judgement and evidentiary hearings before the Claims Mediator to
address individual producer claims, including specific issues not
addressed by the Report. The recommendations of the Claims Mediator
concerning the amounts at which particular claims should be allowed,
as issued, are being submitted to the Bankruptcy Court for
52
<PAGE> 53
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
consideration. The parties have rights of appellate review with
respect to the resulting orders of the Bankruptcy Court. When claims
are allowed by the Bankruptcy Court and the allowances become final,
Columbia Transmission will make additional distributions pursuant to
the Plan. The timing of the completion of this litigation process is
impossible to predict.
Based on the information received and evaluated to date, Columbia
Transmission believes that most of the remaining claims will be
settled at amounts approximating the settlement values, but expects
that some claims may be settled or resolved through litigation at
amounts higher or lower than the proposed settlement values. Although
Columbia Transmission does not have sufficient information to fully
evaluate all claims and the outcome of litigation is subject to
uncertainty, it currently estimates that the ultimate payment to
producers, after litigation and after giving effect to the producer
holdback, is likely to exceed the $1.2 billion distribution projected
in the Plan (which is based on 100% producer acceptance) but is
unlikely to exceed $1.3 billion. The foregoing estimation is based on
the information currently available, and there can be no assurance as
to the timing or amounts of settlements with producers or as to the
amount ultimately allowed or paid with respect to the remaining
claims.
INTERCOMPANY COMPLAINT
Columbia Transmission's Plan provided for the withdrawal of a
complaint filed by the Official Committee of Unsecured Creditors of
Columbia Transmission with the Bankruptcy Court. The complaint
alleged, among other items, that the $1.7 billion of Columbia
Transmission's secured and unsecured debt securities held by Columbia
should be recharacterized as capital contributions (rather than loans)
and equitably subordinated to the claims of Columbia Transmission's
other creditors.
INTERNAL REVENUE SERVICE MATTERS
Columbia received a favorable ruling from the Internal Revenue Service
(IRS) in October 1995, stating that payments made by Columbia
Transmission pursuant to its Plan, to producers in connection with
their contract rejection claims were deductible for tax purposes in
the year in which the payments were made. Because of the magnitude of
the payments, obtaining a favorable ruling from the IRS was a
condition of both Plans.
SECURITY HOLDER AND DERIVATIVE LITIGATION
On July 18, 1995, Columbia reached a settlement that resolved a
consolidated class action complaint filed in the District Court in
1991 against Columbia and its directors and certain officers of the
debtor companies. Under the terms of the settlement Columbia paid
approximately $16.5 million of the total $36.5 million settlement.
The remainder was shared among the insurance carrier for the director
and officer defendants and the other defendants to the litigation.
The settlement was implemented upon Columbia's emergence from Chapter
11.
Also in 1991, three derivative actions were filed in the Court of
Chancery in and for New Castle County (Delaware) alleging that
directors had breached their fiduciary duties to Columbia. Consistent
with the recommendation of a special committee of Columbia's Board of
Directors, the derivative litigation was released and dismissed
pursuant to Columbia's Plan.
REORGANIZATION ITEMS
During 1995, 1994 and 1993 Columbia and Columbia Transmission have
earned interest income on cash accumulated from the suspension of
payments related to prepetition liabilities and incurred expenses
associated with professional fees and other related services.
Included in 1995 is approximately $47.7 million of expense for items
related to emergence from bankruptcy and 1994 reflected additional
expense of $40 million for adjustments to reserves for producer claim
levels based on the Claims Mediator's Report.
<TABLE>
<CAPTION>
($ in millions) 1995 1994 1993
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income on accumulated cash 93.5 63.4 39.9
Professional fees and related expenses (28.2) (35.4) (29.9)
Other reorganization items, net (51.9) (40.3) (1.1)
-------------------------------------------------------------------------------------------------------
REORGANIZATION ITEMS, NET 13.4 (12.3) 8.9
-------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE> 54
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
3. REGULATORY MATTERS
A. On June 15, 1995, the FERC issued an order approving a settlement
(Customer Settlement) between Columbia Transmission, Columbia Gulf,
their firm customers, state regulatory agencies, customer
representatives, and other parties. The Customer Settlement was
incorporated in Columbia Transmission's approved reorganization plan
(Plan) and resolves virtually all of the transmission segment's
outstanding regulatory proceedings before the FERC. Generally, the
Customer Settlement defined Columbia Transmission's and Columbia
Gulf's refund obligations to their customers in certain pending
regulatory proceedings, and established Columbia Transmission's
ability to recover certain costs associated with the restructuring of
its services under FERC Order No. 636 (Order 636).
The Customer Settlement was implemented on November 28, 1995,
following approval of Columbia Transmission's Plan by the Bankruptcy
Court. The Customer Settlement provided for payment to Columbia
Transmission's customers of an estimated $170 million in refunds and
recovery of $250 million in costs from Columbia Transmission's
customers.
B. Columbia Transmission owns and operates natural gas gathering and
processing facilities in various production areas. In its orders
addressing the company's restructuring proposals under Order 636, the
FERC allowed Columbia Transmission to maintain its existing rate
structure and recover costs associated with these facilities until it
filed its next general rate case with the FERC which occurred in
August 1995. Columbia Transmission proposed in its August 1995 FERC
rate filing to recover over a five year period its net investment in
gathering facilities and substantially all of its net investment in
gas processing facilities that were "stranded" as a result of the
implementation of Order 636. The total level of such stranded
facilities amounted to approximately $60 million.
C. In its September 1993 order on Columbia Transmission's and Columbia
Gulf's Order 636 compliance filings, the FERC initiated a proceeding
concerning Columbia Gulf's transportation service to Columbia
Transmission. It directed Columbia Gulf to show cause as to why it had
not filed for the FERC's abandonment authorization to reduce capacity
on its mainline facilities. In a response to the FERC in late 1993,
Columbia Gulf asserted that no abandonment filing was required.
During 1994 and early 1995, Columbia Transmission and Columbia Gulf
responded to information requests from the FERC's staff. Management
continues to believe that an abandonment filing was not necessary;
however, the ultimate outcome of this issue is uncertain at this time.
D. In early 1995, Columbia Transmission made its annual filing to recover
costs it continues to incur under transportation contracts with
upstream pipelines. The filing provided for recovery of costs
Columbia Transmission projected it would incur under contracts it
continues to utilize in system operations, costs associated with
contracts for which exit fees had not yet been implemented, and
continued amortization of exit fees paid to an upstream pipeline. In
addition, the filing proposed to implement a surcharge to recover an
undercollection of transportation costs incurred during 1994. This
underrecovery related, in part, to amounts paid by Columbia
Transmission to Columbia Gulf under the provisions of the
cost-of-service contract between the two companies prior to October
31, 1994, the date on which the agreement was terminated. Under the
Customer Settlement, customers and others retain the right to
challenge Columbia Transmission's recovery of approximately $39
million of Columbia Gulf costs it incurred between November 1, 1993
and October 31, 1994. Various parties protested Columbia
Transmission's filing, and challenged among other things Columbia
Transmission's ability to recover costs attributable to Columbia Gulf.
A technical conference among the parties was held at the FERC and
written comments were filed with the FERC by Columbia Transmission,
Columbia Gulf and intervenors in support of their position.
4. COMMODITY HEDGING ACTIVITIES
Subsidiaries in Columbia's oil and gas and other energy operations engage
in commodity hedging activities to minimize the risk of market fluctuations
associated with the price of crude oil and natural gas production, propane
inventories and commitments for natural gas purchases and sales. The
hedging objectives include assurance of stable and known minimum cash
flows, fixing favorable prices and margins when they become available and
participation in any long-term increases in value. Under internal
guidelines, speculative positions are prohibited.
54
<PAGE> 55
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
Columbia's oil and gas production companies utilize futures, options and
swaps on futures as well as commodity price swaps and basis swaps. Futures
help manage commodity price risk by fixing prices for future production
volumes. The options provide a price floor for future production volumes
and the opportunity to benefit from any increases in prices. Swaps are
negotiated and executed over-the-counter and are structured to provide the
same risk protection as futures and options. Basis swaps are used to
manage risk by fixing the basis or differential that exists between a
delivery location index and the commodity futures prices. At December 31,
1995 there were a total of 285 open contracts representing a notional
quantity amounting to 2.9 Bcf of natural gas production through March of
1996. A total of $0.5 million of unrealized losses have been deferred on
the consolidated balance sheet with respect to these open contracts. At
December 31, 1994 there were a total of 1,700 open contracts representing a
notional quantity amounting to 17.0 Bcf of natural gas production through
September of 1995. A total of $0.5 million in option premium costs as well
as $1.7 million of unrealized gains were deferred on the consolidated
balance sheet with respect to these open contracts at December 31, 1994.
During the years ended December 31, 1995 and 1994, a total of $6.8 million
and $3.6 million, respectively, were recognized in operating income as
realized gains on the settlement of crude oil and natural gas option and
swap contracts.
Columbia's gas marketing and propane operations utilize futures contracts
and basis swaps to assure adequate margins on the purchase and resale of
natural gas as well as protecting the value and margins of its propane
inventories. At December 31, 1995 there were a total of 482 open contracts
through January 1997, representing a notional quantity amounting to 4.8 Bcf
of natural gas. At December 31, 1994 there were a total 773 open contracts
through December 1995, representing a notional quantity amounting to 7.8
Bcf of natural gas. A total of $0.8 million and $3.1 million of unrealized
losses have been deferred on the consolidated balance sheet with respect to
these open contracts at December 31, 1995 and December 31, 1994,
respectively. These unrealized losses are offset by gains which take place
when the products are sold.
During the years ended December 31, 1995 and 1994, respectively, a total of
$4.9 million and $2.7 million of losses were recognized in operating income
on the settlement of natural gas futures and basis swaps. Gains and losses
on propane and gas marketing hedging activities were offset by amounts
realized from the sale of the underlying products.
Columbia and its subsidiaries are exposed to credit losses in the event of
nonperformance by the counterparties to its various hedging contracts.
Management has evaluated such risk and believes that overall business risk
is minimized as a result of these hedging contracts which are primarily
with major investment grade financial institutions.
5. ACCOUNTING STANDARDS
A. As a result of emergence from bankruptcy and significant industry
changes culminating with Order 636, the operating experience gained
since implementation of Order 636, a new Columbia Transmission rate
case that was filed on August 1, 1995, and the resolution of gas
contract difficulties and various customer issues, Columbia
Transmission and Columbia Gulf reapplied SFAS No. 71 upon Columbia
Transmission's emergence from bankruptcy. Management believes that
cost of service rate concepts will continue to be applicable to
Columbia's FERC-regulated transmission subsidiaries for the
foreseeable future. The reapplication of SFAS No. 71 results in the
recognition of regulatory assets for certain costs previously
expensed, which are expected to be recovered in rates, mainly
environmental and postemployment benefit costs, and recording revenues
and expenses in a manner to reflect the ratemaking process. As a
result of reapplying SFAS No.71, an extraordinary gain of $71.6
million was recorded in 1995.
B. Effective January 1, 1994, Columbia adopted the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits." This statement
requires employers to recognize obligations to provide benefits to
former or inactive employees after employment, but before retirement.
Such benefits include, but are not limited to, salary continuation,
supplemental unemployment, severance, disability, job training,
counseling, and continuation of benefits such as health care and life
insurance coverage.
55
<PAGE> 56
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
The adoption of this statement resulted in an accrual of $14.4 million
of which $5.6 million was deferred by certain of the distribution
subsidiaries as a regulatory asset pending rate recovery authorization
from their respective state commissions. The after-tax effect of the
remainder reduced net income by $5.6 million.
C. In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" (SFAS No. 121). This statement establishes accounting
standards for the impairment of long-lived assets, certain
identifiable intangibles, and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable
intangibles to be disposed of. SFAS No. 121 requires these assets be
reviewed for possible impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. This statement will be effective for fiscal years
beginning after December 15, 1995, and Columbia plans to adopt the
statement on January 1, 1996. Based on the facts and circumstances
known today, Columbia does not expect the adoption of SFAS No. 121 to
have a material impact on its financial statements.
D. In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS No. 123). This statement establishes
a fair value based method of accounting for stock based compensation
plans. Under the fair value based method, compensation cost is
measured at the grant date based on the value of the award and is
recognized over the service period, which is usually the vesting
period. SFAS No. 123 encourages entities to adopt that method in
place of the provisions of Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB Opinion No. 25)
for all arrangements under which employees receive shares of stock or
other equity instruments of the employer or the employer incurs
liabilities to employees in amounts based on the price of the stock.
Entities that continue to apply APB Opinion No. 25 must comply with
the disclosure requirements of SFAS No. 123, including the pro forma
effects on earnings. The statement's disclosure requirements will be
effective for fiscal years beginning after December 15, 1995.
Columbia expects to continue to apply APB Opinion No. 25.
6. INCOME TAXES
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
Year Ended December 31 ($ in millions) 1995 1994 1993
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME TAXES
Current
Federal (284.8) 63.8 107.2
State 8.1 10.0 9.6
------------------------------------------------------------------------------------------------------
Total Current (276.7) 73.8 116.8
------------------------------------------------------------------------------------------------------
Deferred
Federal 69.7 78.9 17.6
State (2.2) (5.3) 2.3
------------------------------------------------------------------------------------------------------
Total Deferred 67.5 73.6 19.9
------------------------------------------------------------------------------------------------------
Deferred Investment Credits (1.5) (1.4) (0.8)
------------------------------------------------------------------------------------------------------
Income taxes included in income before extraordinary item and
cumulative effect of accounting change (210.7) 146.0 135.9
Deferred taxes related to extraordinary item and cumulative
effect of accounting change 36.9 (3.3) -
------------------------------------------------------------------------------------------------------
TOTAL INCOME TAXES (173.8) 142.7 135.9
------------------------------------------------------------------------------------------------------
</TABLE>
56
<PAGE> 57
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
Total income taxes are different than the amount which would be
computed by applying the statutory Federal income tax rate to book
income before income tax. The major reasons for this difference are
as follows:
<TABLE>
<CAPTION>
Year Ended December 31 ($ in millions) 1995 1994 1993
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Book income (loss) before income taxes,
extraordinary item and cumulative effect (643.0) 392.2 288.1
of accounting change
Tax expense (benefit) at statutory Federal
income tax rate (225.0) 35.0% 137.3 35.0% 100.8 35.0%
Increases (reductions) in taxes resulting from:
State income taxes, net of Federal
income tax benefit 4.7 (0.7) 2.6 0.6 7.6 2.7
Estimated non-deductible expenses 9.0 (1.4) 6.4 1.6 8.1 2.8
Effect of change in tax rates on deferred taxes
previously provided - - - - 8.7 3.0
Adjustment to prior years' tax provision due to
pending settlement - - - - 9.2 3.2
Other 0.6 (0.1) (0.3) - 1.5 0.5
-------------------------------------------------------------------------------------------------------
INCOME TAXES BEFORE EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (210.7) 32.8% 146.0 37.2% 135.9 47.2%
-------------------------------------------------------------------------------------------------------
</TABLE>
57
<PAGE> 58
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
Deferred tax balances are as follows:
<TABLE>
<CAPTION>
At December 31 ($ in millions) 1995 1994
---------------------------------------------------------------------------------------
<S> <C> <C>
Net current liabilities (assets)
Federal (30.9) (23.8)
State (6.2) (3.7)
---------------------------------------------------------------------------------------
Total (37.1) (27.5)
---------------------------------------------------------------------------------------
Net noncurrent liabilities
Federal 401.6 280.6
State 67.0 63.5
---------------------------------------------------------------------------------------
Total 468.6 344.1
---------------------------------------------------------------------------------------
TOTAL DEFERRED INCOME TAXES 431.5 316.6
---------------------------------------------------------------------------------------
</TABLE>
Deferred income taxes result from temporary differences between the
financial statement carrying amounts and the tax basis of existing
assets and liabilities. The source of these differences and tax
effect of each is as follows:
<TABLE>
<CAPTION>
At December 31 ($ in millions) 1995 1994
---------------------------------------------------------------------------------------
<S> <C> <C>
Property basis differences 610.5 627.8
Accrued interest on debt - 230.5
Gas purchase costs 15.1 (7.9)
Transportation costs 2.0 20.8
Partnership deferrals 26.0 27.0
Deferred revenue (0.9) 11.4
Estimated supplier obligations (59.6) (345.3)
Estimated rate refunds (13.1) (69.9)
Postretirement benefits (17.0) (49.4)
Environmental liabilities (17.2) (49.6)
Capitalized inventory overheads (25.5) (41.5)
Unbilled utility revenue (12.5) (11.1)
Net operating loss carryforward (19.9) -
Alternative minimum tax (91.0) -
Debt forgiveness 50.7 -
Other (16.1) (26.2)
---------------------------------------------------------------------------------------
TOTAL DEFERRED INCOME TAXES 431.5 316.6
---------------------------------------------------------------------------------------
</TABLE>
58
<PAGE> 59
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
7. PENSION AND OTHER POSTRETIREMENT BENEFITS
A. PENSION PLANS. Columbia has a noncontributory, qualified defined
pension plan covering essentially all employees. Benefits are based
primarily on years of credited service and employees' highest three-year
average annual compensation in the final five years of service.
Columbia's funding policy complies with Federal law and tax regulations.
Columbia also has a nonqualified pension plan that provides benefits to
some employees in excess of the qualified plan's Federal tax limits.
The following table shows the components of net pension expense for the
qualified and nonqualified plans and the annual contributions for each of
the three years ended December 31:
<TABLE>
<CAPTION>
PENSION COSTS ($ in millions) 1995 1994 1993
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost 26.7 34.2 31.7
Interest cost 69.9 68.8 68.8
Actual return on assets (202.5) (11.3) (126.9)
Net amortization (deferral) 124.8 (66.1) 56.5
------------------------------------------------------------------------------------------------------------------------
NET PENSION EXPENSE 18.9 25.6 30.1
------------------------------------------------------------------------------------------------------------------------
CONTRIBUTION 1.2 7.0 18.0
------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table provides a reconciliation of the plans' funded status
and amounts reflected in Columbia's balance sheet at December 31:
<TABLE>
<CAPTION>
PLAN ASSETS AND OBLIGATIONS ($ in millions) 1995 1994
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Plan assets at fair value 1,034.6 893.6
------------------------------------------------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Vested benefits 760.2 628.5
Nonvested benefits 56.1 45.8
------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation 816.3 674.3
Effect of projected future salary increases 190.8 153.5
------------------------------------------------------------------------------------------------------------------------
PROJECTED BENEFIT OBLIGATION 1,007.1 827.8
------------------------------------------------------------------------------------------------------------------------
Plan assets in excess of projected benefit obligation 27.5 65.8
Unrecognized net gain (131.8) (158.2)
Unrecognized prior service cost 56.5 60.7
Unrecognized transition obligation 8.1 9.3
------------------------------------------------------------------------------------------------------------------------
ACCRUED PENSION COST (39.7) (22.4)
------------------------------------------------------------------------------------------------------------------------
DISCOUNT RATE ASSUMPTION 7.0% 8.5%
------------------------------------------------------------------------------------------------------------------------
COMPENSATION GROWTH RATE ASSUMPTION 5.0% 5.5%
------------------------------------------------------------------------------------------------------------------------
ASSET EARNINGS RATE ASSUMPTION 9.0% 9.0%
------------------------------------------------------------------------------------------------------------------------
</TABLE>
Plan assets consist of primarily equity (international and domestic) and
fixed income securities.
As of December 31, 1995, the discount rate assumption and the average
compensation growth rate were revised downward to 7.0% and 5.0%
respectively. The net effect of these changes was to increase the
accumulated benefit obligation and the projected benefit obligation by
$121.4 million and $158.5 million, respectively.
B. OTHER POSTRETIREMENT BENEFITS. Columbia also provides medical coverage
and life insurance to retirees. Essentially all active employees are
eligible for these benefits upon retirement after completing ten
consecutive years of service after age 45. Normally, spouses and
dependents of retirees are also eligible for medical benefits.
59
<PAGE> 60
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
The following table shows components of other postretirement costs for each
of the three years ended December 31:
<TABLE>
<CAPTION>
OTHER POSTRETIREMENT COSTS ($ in millions) 1995 1994 1993
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost 11.3 15.3 16.2
Interest cost 24.1 24.6 25.9
Actual return on assets (30.0) (2.1) (12.6)
Other, net amortization (deferral) 16.0 (4.9) 7.8
--------------------------------------------------------------------------------------------------------------------------
OTHER POSTRETIREMENT COSTS 21.4 32.9 37.3
--------------------------------------------------------------------------------------------------------------------------
CONTRIBUTIONS 41.8 20.7 16.9
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table provides a reconciliation of other postretirement
plans' funded status and amounts reflected on Columbia's balance sheet at
December 31:
<TABLE>
<CAPTION>
PLAN ASSETS AND OBLIGATIONS ($ in millions) 1995 1994
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retiree 172.1 168.2
Fully eligible active plan participants 60.5 73.9
Other participants 83.2 61.9
--------------------------------------------------------------------------------------------------------------------------
Total 315.8 304.0
Plan assets at fair value (149.1) (91.2)
Unrecognized actuarial net gain 72.8 52.1
--------------------------------------------------------------------------------------------------------------------------
ACCRUED POSTRETIREMENT BENEFIT COST 239.5 264.9
--------------------------------------------------------------------------------------------------------------------------
DISCOUNT RATE ASSUMPTION 7.0% 8.5%
--------------------------------------------------------------------------------------------------------------------------
MEDICAL COST TREND 8.0-5.5% 9.0-6.0%
--------------------------------------------------------------------------------------------------------------------------
COMPENSATION GROWTH RATE ASSUMPTION 5.0% 5.5%
--------------------------------------------------------------------------------------------------------------------------
ASSET EARNINGS RATE ASSUMPTION* 9.0% 9.0%
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
*One of the several established medical trusts is subject to taxation which
results in an after-tax asset earnings rate that is less than 9%.
Plan assets consist of shares in various equity (international and
domestic) and fixed income mutual funds and represent assets held in three
trust accounts and one 401(h) account used to fund the plans.
As of December 31, 1995, the discount rate assumption was revised downward
to 7.0% from 8.5% and the compensation growth rate was revised downward to
5.0% from 5.5%. The medical accumulated postretirement benefit obligation
(APBO) at December 31, 1995 and 1994 also reflects medical inflation trend
rates, starting at 8% and 9.0% and decreasing to 5.5% and 6.0% after six
years. The net effect of these changes was a $33.4 million increase in the
accumulated postretirement benefit obligation. A one percent increase in
medical inflation trend rates for each future year would have increased the
APBO by another $16.6 million and other postretirement costs by $2.8
million in 1995.
All of Columbia's subsidiaries participate in funding for retiree life
insurance benefits, using a voluntary employee beneficiary association
(VEBA) trust. Columbia's funding policy is to make annual contributions to
this trust, subject to the maximum tax-deductible limit. Contributions of
approximately $3.8 million, and $3.8 million were made to the retiree life
insurance VEBA trust in 1995 and 1994, respectively.
8. LONG-TERM INCENTIVE PLAN
The Columbia Long-Term Incentive Plan (Plan), in effect from 1985 through
1995, provided for the granting of nonqualified stock options, stock
appreciation rights and contingent stock awards as determined by the
Compensation Committee of the Board of Directors. That committee also had
the right to modify any outstanding award. A total of 1,500,000 shares of
Columbia's authorized common stock was initially reserved for issuance
under the Plan's provisions.
Stock appreciation rights, which were granted in connection with certain
nonqualified stock options, entitle the holders to receive stock, cash or a
combination thereof equal to the excess market value over the grant price.
60
<PAGE> 61
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
Transactions for the three years ended December 31, 1995, are as follows:
<TABLE>
<CAPTION>
Options
---------------------------
Without Stock With Stock Option
Appreciation Appreciation Price
Rights Rights Range
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding 12/31/92 529,350 163,650 $34.30-$46.68
----------------------------------------------------------------------------------------------------------------------------
1993
Granted - - -
Exercised - - -
Cancelled (23,730) (7,500) $34.30-$46.68
Converted - - -
Outstanding 12/31/93 505,620 156,150 $34.30-$46.68
----------------------------------------------------------------------------------------------------------------------------
1994
Granted - - -
Exercised - - -
Cancelled (20,655) - $34.30-$46.68
Converted - - -
Outstanding 12/31/94 484,965 156,150 $34.30-$46.68
----------------------------------------------------------------------------------------------------------------------------
1995
Granted 93,000 - $28.99-$31.05
Exercised (33,245) (6,100) $28.99-$38.30
Cancelled (20,400) - $34.30-$46.68
Converted - - -
----------------------------------------------------------------------------------------------------------------------------
OUTSTANDING (ALL EXERCISABLE) 12/31/95 524,320 150,050 $28.99-$46.68
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
In addition to the options, contingent stock awards totaling 27,500 shares
were issued to two key executives in 1995. As of December 31, 1995, 17,500
of these shares have vested and been issued and 10,000 shares remain
outstanding.
During 1995, $1.1 million was expensed for the Long-Term Incentive Plan.
There were de minimus amounts expensed for the Long-Term Incentive Plan in
1994 and 1993.
The Board of Directors has approved the adoption of a new Long-Term
Incentive Plan (New Plan) subject to shareholder approval at the April 26,
1996 annual meeting of Columbia's shareholders. The New Plan, to be
effective for ten years, beginning February 21, 1996, provides for the
granting of nonqualified stock options, stock appreciation rights,
contingent stock awards and restricted stock awards to officers, key
employees and outside directors. A total of 3,000,000 shares of Columbia's
authorized common stock will be made available under the New Plan's
provisions.
The Board of Directors has also approved an incentive compensation plan for
outside directors, also subject to shareholder approval at the April 26,
1996 annual meeting, under which they may receive benefits in lieu of a
retirement plan and defer current compensation in the form of phantom stock
units, which equates the amounts granted to the directors with the
performance of Columbia's stock.
61
<PAGE> 62
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
9. PREFERRED STOCK
As of December 31, 1995, Columbia has authorized 40,000,000 shares of
preferred stock, par value $10 per share, and had outstanding 7,999,494
shares of 7.89% Redeemable Preferred Stock, Series A (Series A - Preferred
Stock) and 4,898,946 shares of 5.22% Convertible Preferred Stock, Series B
(Series B - DECS).
In early February 1996, Columbia gave an irrevocable notice to holders of
Series A - Preferred Stock and Series B - DECS that all outstanding shares
of preferred stock would be redeemed for cash on February 26, 1996. Series
A - Preferred Stock will be redeemed at $25 per share for an aggregate
amount of $199,987,350 (7,999,494 shares outstanding). Series B - DECS
will be redeemed at $40.82 per share for an aggregate amount of
$199,974,975 (4,898,946 shares outstanding). Holders of Series A -
Preferred Stock and Series B - DECS will not be entitled to receive
dividends in connection with the redemption.
The Series A - Preferred Stock was issued at $25 per share and has an
aggregate liquidation value of $199,987,350. Series A - Preferred Stock is
redeemable by Columbia, in whole or in part, at any time on or prior to
March 27, 1996 and on or after November 28, 2000, payable in cash at a rate
of $25 per share, plus unpaid accumulated dividends, if any. Series A -
Preferred Stock is not subject to mandatory redemption by Columbia and is
not convertible into or exchangeable for any other securities.
The Series B - DECS was issued at $40.82 per share with an aggregate
liquidation value of $199,974,975. Each share of Series B - DECS
mandatorily converts into shares of common stock on the mandatory
conversion date of November 28, 2000, including an amount in cash equal to
unpaid accumulated dividends, if any. Columbia has the option to redeem
Series B - DECS on or prior to March 27, 1996, payable in cash, at $40.82
per share (plus accrued dividends of $0.5325 per share if redeemed after
February 26, 1996 but before March 27, 1996). Columbia also has the option
to redeem Series B - DECS on or after the regular redemption date of
November 28, 1999 and prior to November 28, 2000, payable in shares of
common stock plus any accrued dividends. Each share of Series B - DECS is
convertible at the option of the holder after March 27, 1996 and before
November 28, 1999 into common stock.
Dividends for preferred stock outstanding are cumulative and are payable
quarterly at an annual rate of $1.97 per share for Series A - Preferred
Stock and $2.13 per share for Series B - DECS. Holders of preferred stock
have no voting rights. However, if dividends are in arrears and unpaid for
six quarterly dividend periods, the holders of preferred stock, voting as a
separate class, will be entitled to vote for the election of two directors
of Columbia. (Such directors to be in addition to the existing Board of
Directors). Preferred stock ranks prior to common stock both as to payment
of dividends and distribution of assets upon liquidation. As a result of
the February 1996 notice, no dividends on preferred stock have been
accrued.
62
<PAGE> 63
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
10. LONG-TERM DEBT
The long-term debt (exclusive of current maturities) of Columbia and its
subsidiaries is as follows:
<TABLE>
<CAPTION>
At December 31 ($ in millions) 1995 1994
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
The Columbia Gas System, Inc.
Debentures
6.39% Series A due November 28, 2000 311.0 -
6.61% Series B due November 28, 2002 281.5 -
6.80% Series C due November 28, 2005 281.5 -
7.05% Series D due November 28, 2007 281.5 -
7.32% Series E due November 28, 2010 281.5 -
7.42% Series F due November 28, 2015 281.5 -
7.62% Series G due November 28, 2025 281.5 -
------------------------------------------------------------------------------------------------------------------
Total Debentures 2,000.0 -
Subsidiary Debt:
Capitalized lease obligations 2.9 2.5
Other 1.6 1.8
------------------------------------------------------------------------------------------------------------------
TOTAL LONG-TERM DEBT 2,004.5 4.3
------------------------------------------------------------------------------------------------------------------
</TABLE>
The aggregate maturities of long-term debt and capitalized lease
obligations during the next five years are as follows:
<TABLE>
<CAPTION>
($ in millions)
------------------------------------------------------------------------------------------------------------------
<S> <C>
1996 0.5
1997 0.4
1998 0.4
1999 0.5
2000 311.3
------------------------------------------------------------------------------------------------------------------
</TABLE>
11. SHORT-TERM DEBT AND CREDIT FACILITIES
Effective November 1995, Columbia entered into an unsecured Revolving
Credit Agreement (Credit Facility). The Credit Facility consists of a five
year revolving credit agreement maturing November 2000. The Credit
Facility has an initial commitment amount of $1 billion with scheduled
quarterly commitment reductions of $25 million beginning on December 31,
1997. Interest rates on borrowing are based upon the London Interbank
Offered Rate, Certificate of Deposit rates or other short-term interest
rates. Compensating balances are not required. Columbia is required to
pay a facility fee on the commitment amount at a rate which is based on
Columbia's public debt rating. The facility fee rate as of December 31,
1995 is 0.14%. The Credit Facility contains certain covenants that must be
met to borrow funds including; restrictions on the incurrence of liens, a
maximum leverage ratio, and a minimum consolidated net worth. Columbia had
outstanding $338.9 million under the Credit Facility at December 31, 1995
at an average rate of 6.46%. The maximum amount outstanding during the
year occurred on November 28, 1995 in the amount of $370 million at an
interest rate of 8.75%.
The Credit Facility provides for the issuance of up to $100 million of
standby letters of credit. As of December 31, 1995, Columbia had $58.8
million of letters of credit outstanding under the Credit Facility. Fees
for letters of credit issued are calculated at rates that are based on
Columbia's public debt rating plus a commission of
63
<PAGE> 64
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
0.125% to the issuing bank. At December 31, 1995, fees for letters of
credit issued in connection with certain financial obligations were at a
rate of 0.2775%.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments" extends existing fair value disclosure
practices by requiring all entities to disclose the fair value of financial
instruments, both assets and liabilities, recognized and not recognized in
the consolidated balance sheets, for which it is practicable to estimate a
fair value. For purposes of this disclosure, the fair value of a financial
instrument is the amount at which the instrument could be exchanged in a
current transaction between willing parties, other than in a forced or
liquidation sale. Fair value may be based on quoted market prices for the
same or similar financial instruments or on valuation techniques, such as
the present value of estimated future cash flows using a discount rate
commensurate with the risks involved.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to
estimate that value:
As cash and temporary cash investments, current receivables, current
payables, and certain other short-term financial instruments are all
short-term in nature, their carrying amount approximates fair value. The
estimated fair values of Columbia's other financial instruments are
reflected in the accompanying table.
Long-term investments
Long-term investments include an income tax refund receivable with
associated interest ($80.1 million and $30.3 million for 1995 and 1994,
respectively) whose carrying amount approximates fair value. Also included
are loans receivable ($3.9 million for 1995 and $4.0 million for 1994)
whose estimated fair values are based on the present value of estimated
future cash flows using an estimated rate for similar loans extended
currently. The financial instruments included in long-term investments are
primarily reflected in Investments and Other Assets in the consolidated
balance sheets.
Long-term Debt
The estimated fair value of Columbia's debentures, including accrued
interest, is based on estimates provided by brokers.
Liabilities subject to Chapter 11 proceedings
At December 31, 1994, the estimated fair value of Columbia's debentures and
medium-term notes was based on quoted market prices for those issues traded
on an exchange, and estimates provided by brokers for other issues. The
quoted market prices and broker estimates inherently included judgments
concerning the ultimate outcome of Columbia's and Columbia Transmission's
Chapter 11 proceedings.
It was not practicable to estimate fair value of the remaining long-term
debt that included the Subordinated Guarantee of the Leveraged Employee
Stock Ownership Plan debt ($87 million) and miscellaneous debt of Columbia
Transmission ($1.4 million), because no reliable measurement methodology
existed. It was also not practicable to determine the fair value for the
bank loans and commercial paper and the other liabilities subject to the
Chapter 11 proceedings since these items were subject to determination or
adjustment by the Bankruptcy Court and there was no assurance as to the
amount or the timing of the ultimate payments of these obligations.
64
<PAGE> 65
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
<TABLE>
<CAPTION>
1995 1994
---------------- -----------------
Carrying Fair Carrying Fair
At December 31 ($ in millions) Amount Value Amount Value
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-term investments for which it is:
Practicable to estimate fair value 84.0 83.6 60.1 59.7
Not practicable to estimate fair value 6.6 - 146.7 -
Long-Term Debt 2,012.9 2,044.7 - -
Liabilities subject to Chapter 11 proceedings for which it is:
Practicable to estimate fair value
Long-term debt - - 1,390.8 1,664.8
Not practicable to estimate fair value
Long-term debt - - 88.4 -
Bank loans and commercial paper - - 892.6 -
Other - - 1,617.1 -
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
13. OTHER COMMITMENTS AND CONTINGENCIES
A. CAPITAL EXPENDITURES. Capital expenditures for 1996 are currently
estimated at $327 million. Of this amount, $133 million is for
transmission operations, $160 million for distribution operations, $21
million for oil and gas operations, and $13 million for other energy
operations.
B. PROPOSED SALE OF COLUMBIA GAS DEVELOPMENT CORPORATION. On October
23, 1995, Columbia announced its intention to sell Columbia
Development which has approximately 196 billion cubic feet equivalent
of proved oil and natural gas reserves located in the Gulf of Mexico
and on-shore continental United States. Based on the proposed sale of
this subsidiary in early 1996, an estimated loss of $54.8 million
after-tax was recorded in the fourth quarter of 1995. It is expected
that any sale of Columbia Development may take several months to
complete and the financial impact of the sale may be different once
finalized. At this time there are no plans to sell Columbia's
Appalachian oil and gas subsidiary, Columbia Natural Resources, Inc.
(CNR).
C. OTHER LEGAL PROCEEDINGS. Columbia and its subsidiaries have been
named as defendants in various legal proceedings. In the opinion of
management, the ultimate disposition of these currently asserted
claims will not have a material adverse impact on Columbia's
consolidated financial position or results of operations.
D. ASSETS UNDER LIEN. Substantially all of Columbia Transmission's
properties have been pledged to Columbia as security for debt owed by
Columbia Transmission to Columbia.
TriStar Ventures Corporation (TriStar), a wholly-owned subsidiary of
Columbia, is a general partner in the Binghamton, Pedericktown, and
Vineland Cogeneration partnerships. All moneys paid and to be paid by
the partners are assigned as collateral for loans to various banks (or
in the case of Vineland, to the Indenture Trustee). TriStar's
investment in the partnerships, as of December 31, 1995, amounted to
$31.4 million.
E. INTERNAL REVENUE SERVICE (IRS) AUDIT. A review by the IRS of
Columbia's 1991 and 1992 federal income tax returns have been
concluded. The major unresolved issues are included in the Revenue
Agents Report, the resolution of which are currently being pursued
with the Appeals Division of the IRS. Management believes that these
same items will also be issues in the 1993 through 1995 tax returns.
Based on the facts known at this time, adequate reserves have been
established for these issues.
F. OPERATING LEASES. Payments made in connection with operating leases
are charged to operation and maintenance expense as incurred. Such
amounts were $61.6 million in 1995, $56.6 million in 1994 and $55.5
million in 1993.
65
<PAGE> 66
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
Future minimum rental payments required under operating leases that have
initial or remaining noncancelable lease terms in excess of one year are:
<TABLE>
<CAPTION>
($ in millions)
-----------------------------------------------------------------------------------------------------------------
<S> <C>
1996 18.9
-----------------------------------------------------------------------------------------------------------------
1997 15.0
-----------------------------------------------------------------------------------------------------------------
1998 14.6
-----------------------------------------------------------------------------------------------------------------
1999 12.0
-----------------------------------------------------------------------------------------------------------------
2000 6.7
-----------------------------------------------------------------------------------------------------------------
After 69.9
-----------------------------------------------------------------------------------------------------------------
</TABLE>
G. ENVIRONMENTAL MATTERS. Columbia's subsidiaries are subject to
extensive federal, state and local laws and regulations relating to
environmental matters. These laws and regulations, which are
constantly changing, require expenditures for corrective action at
various operating facilities, waste disposal sites and former gas
manufacturing sites for conditions resulting from past practices that
have subsequently become subject to environmental regulation.
Certain subsidiaries have received notice from the United States
Environmental Protection Agency (EPA) that they are among several
parties responsible under federal law for placing wastes at Superfund
sites and may be required to share in the cost for remediation of
these sites. However, considering known facts, existing laws and
possible insurance and rate recoveries, management does not believe
the identified Superfund matters will have a material adverse effect
on future annual income or on Columbia's financial position.
Columbia's transmission subsidiaries continue their reviews of
compliance with existing environmental standards, including reviews of
past operational activities, identification of potential problems
through site reviews and the formulation of remediation programs where
necessary. The progress of Columbia Transmission's efforts in the
last year, was limited by a 1995 EPA Administrative Order by Consent
(AOC) that requires Columbia Transmission to obtain prior EPA approval
of its investigation, characterization and remediation efforts.
Progress was further limited because of the more than 19,000 miles of
pipeline that Columbia Transmission operates, the exceptionally large
number of sites at which it conducts or has conducted operations, and
the long time period over which operations have been conducted.
Management had previously estimated, based on studies conducted since
1990 by independent consultants, that site investigation,
characterization and remediation costs might range between $135
million and $280 million. The primary focus of these prior studies was
to analyze discrete issues to assist management in its on-going
environmental evaluations. In 1994, in anticipation of implementation
of the AOC, Columbia Transmission commissioned a new study (1995
Study) to reflect costs that might arise from the EPA's
recommendations with respect to site assessment and remediation under
the AOC and to reflect information gathered since the previous
studies. The 1995 Study was structured to be a comprehensive review
of all environmental issues currently known to management. The 1995
Study estimated that the cost of Columbia Transmission's environmental
program under the AOC may range between $204 million and $319 million
over the life of the program. This estimate was based on a limited
amount of actual data available and utilized a variety of assumptions,
including: the number of sites to be investigated, characterized and
remediated; the location, nature and levels of wastes that will be
treated at or disposed of from each site; the amount of time and
nature of equipment required for such activities; the appropriate
remediation levels and the technology to be utilized; and the
frequency with which groundwater contamination might be discovered at
sites requiring remediation. The 1995 Study did not include
previously identified costs, aggregating approximately $50 million,
for which Columbia Transmission already had reasonable estimates.
66
<PAGE> 67
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
Following an extensive review of bases utilized and assumptions
contained in the 1995 Study, management has concluded that only those
site investigation, characterization and remediation costs currently
known and determinable can be considered "probable and reasonably
estimable" under Statement of Financial Accounting Standards No. 5,
"Accounting for Contingencies" (SFAS No. 5). This conclusion was
based upon the fact that the actual characterization and remediation
experience of Columbia Transmission was extremely limited and
information on environmental conditions at many of the sites or former
sites of operations is not yet available. The nature and condition of
such sites varies greatly, and any change in any of the numerous
assumptions used in the 1995 Study may materially alter the estimated
range of costs, with no assurance that actual costs will not exceed
amounts specified in the range. Columbia Transmission is unable, at
this time, to accurately estimate the timeframe and potential costs of
all site screening, characterization and remediation. As Columbia
Transmission continues its program pursuant to the AOC, additional
costs will become probable and reasonably estimable and will be
recorded. Moreover, in time, management expects that, as additional
work is performed and more facts become available, it will then be
able to develop a probable and reasonable estimate for the entire
program or a major portion thereof consistent with U. S. Securities
and Exchange Commission's Staff Accounting Bulletin No. 92 and SFAS
No. 5.
Based upon its current review, Columbia Transmission estimates the
future costs of investigating, characterizing, and remediating sites
upon which it has adequate information will be approximately $136.6
million. This resulted in the recognition of an additional liability
of approximately $21 million in the fourth quarter of 1995. As
contemplated by the AOC, Columbia Transmission's environmental
expenditures are expected to approximate $20 million in 1996 and to
continue at that level for the foreseeable future. These expenditures
will be charged against Columbia's previously recorded liability.
Management does not believe that Columbia Transmission's environmental
expenditures will have a material adverse effect on Columbia's
operations, liquidity or financial position, based on known facts and
existing laws and regulations and the long period over which
expenditures will be made. In addition, as a result of reapplying
SFAS No. 71, Columbia Transmission has recorded a regulatory asset to
the extent environmental expenditures are expected to be recovered
through rates, and therefore, environmental expenditures will have
less potential impact upon Columbia's financial results.
Predecessor companies of Columbia Transmission may have been involved
in the operation of manufactured gas plants. When such plants were
abandoned, material used and created in the process was sometimes
buried at the site. Columbia Transmission is unable at this time to
determine if it will become liable for any characterization or
remediation costs at such sites.
The distribution subsidiaries' (Distribution) primary environmental
issues relate to 14 former manufactured gas plant sites.
Investigations or remedial activities are currently underway at five
sites and additional site investigations may be required at some of
the remaining sites. To the extent Distribution site investigations
have been conducted, remediation plans developed and any
responsibility for remediation action established, the appropriate
liabilities have been recorded. Regulatory assets have also been
recorded for a majority of these costs as rate recovery has been
allowed or is anticipated.
On October 18, 1995, Columbia of Pennsylvania was served in a
Comprehensive Environmental Response Compensation and Liability Act
cost recovery action related to the Keystone Sanitation Company
Landfill/Superfund site. Columbia of Pennsylvania may be named as a
Potentially Responsible Party (PRP) by virtue of trash hauling
services provided to Columbia of Pennsylvania's service center by the
city of Hanover, Pennsylvania. Columbia of Pennsylvania believes
based on a preliminary investigation of the facts, that involvement at
this site, if any, will not have a material impact on Columbia.
The eventual total cost of full future environmental compliance for
Columbia is difficult to estimate due to, among other things: (1) the
possibility of as yet unknown contamination, (2) the possible effect
of future legislation and new environmental agency rules, (3) the
possibility of future litigation, (4) the possibility of future
designations as a potential responsible party by the EPA and the
difficulty of determining liability, if any, in proportion to other
responsible parties, (5) possible insurance and rate recoveries, and
(6) the effect of possible technological changes relating to future
remediation. However, reserves have been established based
67
<PAGE> 68
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
on information currently available which resulted in a total recorded
net liability of approximately $142 million for Columbia at December
31, 1995. As new issues are identified, additional liabilities will
be recorded.
It is management's continued intent to address environmental issues in
cooperation with regulatory authorities in such a manner as to achieve
mutually acceptable compliance plans. However, there can be no
assurance that fines and penalties will not be incurred. Management
expects most environmental assessment and remediation costs to be
recoverable through rates.
14. INTEREST INCOME AND OTHER, NET
<TABLE>
<CAPTION>
Year Ended December 31 ($ in millions) 1995 1994 1993
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income 22.8 31.8 9.8
Estimated loss on the proposed sale of Columbia
Gas Development Corporation (77.8) - -
Miscellaneous (3.2) 3.4 (2.1)
----------------------------------------------------------------------------------------------------------------------
TOTAL (58.2) 35.2 7.7
----------------------------------------------------------------------------------------------------------------------
</TABLE>
15. INTEREST EXPENSE AND RELATED CHARGES
<TABLE>
<CAPTION>
Year Ended December 31 ($ in millions) 1995 1994 1993
<S> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------
Interest on emergence, including amortization of
discounts on long-term debt 982.9 - -
Interest on debt 15.1 0.2 0.2
Interest on rate refunds 17.7 9.0 8.4
Interest on prior years' taxes 17.6 (8.8) 74.5
Allowance for borrowed funds used and interest during
construction (52.4) - -
Other interest charges 7.5 14.4 18.4
----------------------------------------------------------------------------------------------------------------------
TOTAL 988.4 14.8 101.5
----------------------------------------------------------------------------------------------------------------------
</TABLE>
16. BUSINESS SEGMENT INFORMATION
Columbia is a registered holding company under the Public Utility
Holding Act of 1935, as amended, and derives substantially all of its
revenues and earnings from the operating results of its 18 direct
subsidiaries. Columbia's subsidiaries are divided into four primary
business segments. The transmission segment offers transportation and
storage services for local distribution companies and industrial and
commercial customers located in northeastern, middle Atlantic,
midwestern and southern states and the District of Columbia. The
distribution segment provides natural gas service for residential,
commercial and industrial customers in Ohio, Pennsylvania, Virginia,
Kentucky and Maryland. The oil and gas segment explores for,
develops, produces, and markets oil and natural gas in the United
States. Columbia has announced the proposed sale of its wholly-owned
southwest exploration and production subsidiary (see Note 13B). Other
energy operations include the sale of propane at wholesale and retail
to customers in eight states, participation in natural gas fueled
cogeneration projects, the leasing of coal reserves located in the
Appalachian area, the marketing of natural gas to distribution
companies, independent power producers and other large end users and
gas peaking services. In addition, other energy includes a company
that provides centralized data processing, financial, accounting,
legal and other services to Columbia and other subsidiaries.
The following tables provide information concerning Columbia's major
business segments. Revenues include intersegment sales to affiliated
subsidiaries, which are eliminated when consolidated. Affiliated
sales are recognized on the basis of prevailing market or regulated
prices. Operating income is derived from revenues
68
<PAGE> 69
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
and expenses directly associated with each segment. Identifiable
assets include only those attributable to the operations of each
segment.
<TABLE>
<CAPTION>
($ in millions) 1995 1994 1993
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Transmission -Unaffiliated 432.4 475.9 1,055.8
-Intersegment 324.3 282.8 642.9
---------------------------------------------------------------------------------------------------------------------
TOTAL 756.7 758.7 1,698.7
---------------------------------------------------------------------------------------------------------------------
Distribution -Unaffiliated 1,780.6 1,830.7 1,830.7
-Intersegment 2.5 - -
---------------------------------------------------------------------------------------------------------------------
TOTAL 1,783.1 1,830.7 1,830.7
---------------------------------------------------------------------------------------------------------------------
Oil and Gas -Unaffiliated 111.5 121.7 181.2
-Intersegment 69.1 83.6 41.0
---------------------------------------------------------------------------------------------------------------------
TOTAL 180.6 205.3 222.2
---------------------------------------------------------------------------------------------------------------------
Other energy -Unaffiliated 310.7 304.1 237.9
-Intersegment 78.7 67.4 69.9
---------------------------------------------------------------------------------------------------------------------
TOTAL 389.4 371.5 307.8
---------------------------------------------------------------------------------------------------------------------
Adjustments -Unaffiliated - 14.7 8.2
and eliminations -Intersegment (474.6) (433.8) (753.8)
---------------------------------------------------------------------------------------------------------------------
TOTAL (474.6) (419.1) (745.6)
---------------------------------------------------------------------------------------------------------------------
CONSOLIDATED 2,635.2 2,747.1 3,313.8
---------------------------------------------------------------------------------------------------------------------
</TABLE>
69
<PAGE> 70
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
<TABLE>
<CAPTION>
($ in millions) 1995 1994 1993
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING INCOME (LOSS)
Transmission 214.1 209.7 176.9
Distribution 163.6 128.3 146.4
Oil and gas 3.7 30.6 53.6
Other energy 19.3 24.1 3.1
Corporate (10.5) (8.6) (7.0)
--------------------------------------------------------------------------------------------------------------
CONSOLIDATED 390.2 384.1 373.0
--------------------------------------------------------------------------------------------------------------
DEPRECIATION & DEPLETION
Transmission 103.8 103.9 97.8
Distribution 70.9 64.5 62.3
Oil and gas 86.9 86.2 73.8
Other energy 7.9 7.1 5.9
Adjustments and eliminations 0.5 - -
--------------------------------------------------------------------------------------------------------------
CONSOLIDATED 270.0 261.7 239.8
--------------------------------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS
Transmission 2,962.9 4,138.1 4,156.6
Distribution 2,295.7 2,168.9 2,065.5
Oil and gas 412.4 746.4 732.0
Other energy 192.5 128.3 128.6
Adjustments and eliminations (352.4) (387.1) (376.3)
Corporate and unallocated 545.9 370.3 251.5
--------------------------------------------------------------------------------------------------------------
CONSOLIDATED 6,057.0 7,164.9 6,957.9
--------------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES
Transmission 169.1 179.1 137.2
Distribution 151.8 151.4 117.8
Oil and gas 86.8 101.6 95.1
Other energy 14.1 15.1 11.2
--------------------------------------------------------------------------------------------------------------
CONSOLIDATED 421.8 447.2 361.3
--------------------------------------------------------------------------------------------------------------
</TABLE>
70
<PAGE> 71
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
17. QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial data does not always reveal the trend of
the System's business operations due to bankruptcy matters,
nonrecurring items and seasonal weather patterns which affect
earnings and related components of operating revenues and
expenses.
<TABLE>
<CAPTION>
First Second Third Fourth
($ in millions except per share data) Quarter Quarter Quarter Quarter
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
Operating Revenues 1,030.7 454.6 366.3 783.6
Operating Income 199.9 26.9 14.3 149.1
Income (Loss) before
Extraordinary Item 128.8 30.9 19.3 (611.3)
Extraordinary Item - - - 71.6
Net Income (Loss) 128.8 (a) 30.9 (b) 19.3 (c) (539.7) (d)
Per Share Amounts
Earnings (Loss) before Extraordinary item 2.55 0.61 0.38 (12.17)
Extraordinary Item - - - 1.43
Earnings (Loss) on Common Stock 2.55 0.61 0.38 (10.74)
---------------------------------------------------------------------------------------------------------
1994
Operating Revenues 1,117.2 509.6 372.1 748.2
Operating Income 222.2 39.6 20.8 101.5
Income (Loss) before Cumulative
Effect of Accounting Change 140.2 47.8 (15.0) 73.2
Cumulative Effect of
Accounting Change (5.6) - - -
Net Income (Loss) 134.6 (e) 47.8 (f) (15.0) (g) 73.2 (h)
Per Share Amounts
Earnings (Loss) before
Accounting Change 2.77 0.95 (0.30) 1.45
Change in Accounting (0.11) - - -
Earnings (Loss) on Common Stock 2.66 0.95 (0.30) 1.45
---------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes a decrease in net income of $5.3 million for
professional fees and related expenses resulting
from bankruptcy. Net income benefited $42.1 million
from not recording estimated interest expense on
prepetition debt.
(b) Includes a decrease in net income of $6.1 million
for professional fees and related expenses resulting
from bankruptcy. Net income benefited $43.7 million
from not recording estimated interest expense on
prepetition debt.
(c) Includes a decrease in net income of $6.7 million
for professional fees and related expenses resulting
from bankruptcy. Net income benefited $43.7 million
from not recording estimated interest expense on
prepetition debt.
(d) Includes a decrease for the impact of emergence from
bankruptcy and customer settlement of $649.4, the
estimated loss on the proposed sale of Columbia Gas
Development Corp. of $54.8 and an improvement of
$71.6 for the reapplication of SFAS No. 71.
(e) Includes an increase in net income of $10.3 million
for an adjustment to the reserve for the IRS
settlement and an increase in net income of $8.3
million for surcharge collections of certain prior
period gas costs. Net income benefited $35.2
million from not recording estimated interest
expense on prepetition debt.
(f) Includes a decrease in net income of $4.3 million
for a weather normalization adjustment resulting
from a regulatory settlement and a decrease in net
income of $2.1 million associated with employee
relocation costs, partially offset by an increase in
net income of $3.2 million for an adjustment to a
reserve for a resolution of a royalty dispute. Net
income benefited $35.7 million from not recording
estimated interest expense on prepetition debt.
(g) Includes a decrease in net income of $35.4 million
resulting from an increase to a reserve for
take-or-pay and other miscellaneous producer claims.
Net income benefited $38.4 million from not
recording estimated interest expense on prepetition
debt.
(h) Includes a decrease in net income of $22.8 million
for a reserve established for regulatory issues.
Net income benefited $39.9 million from not
recording estimated interest expense on prepetition
debt.
71
<PAGE> 72
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
18. OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED)
INTRODUCTION. On October 23, 1995, Columbia announced its
intent to sell Columbia Development, its wholly-owned
Southwest oil and gas production subsidiary. The information
contained in the following tables includes amounts
attributable to the operations and reserves of Columbia
Development.
Reserve information contained in the following tables for the
U.S. properties is management's estimate, which was reviewed
by the independent consulting firm of Ryder Scott Company
Petroleum Engineers. Reserves are reported as net working
interest. Gross revenues are reported after deduction of
royalty interest payments.
<TABLE>
<CAPTION>
CAPITALIZED COSTS
--------------------------------------------------------------------------------------------------------------
($ in millions) 1995 1994 1993
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CAPITALIZED COSTS AT YEAR END
Proved properties 486.2 1,185.8 1,129.6
Unproved properties(a) 30.1 76.1 79.1
--------------------------------------------------------------------------------------------------------------
Total capitalized costs 516.3 1,261.9 1,208.7
Accumulated depletion (141.1) (637.6) (600.0)
--------------------------------------------------------------------------------------------------------------
NET CAPITALIZED COSTS 375.2 624.3 608.7
--------------------------------------------------------------------------------------------------------------
COSTS CAPITALIZED DURING YEAR(B)
Acquisition
Proved properties - - -
Unproved properties 1.1 7.5 7.1
Exploration 4.3 24.3 17.5
Development 15.5 69.0 70.1
--------------------------------------------------------------------------------------------------------------
COSTS CAPITALIZED 20.9(c) 100.8 94.7
--------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Represents expenditures associated with properties on which
evaluations have not been completed.
(b) Includes internal costs capitalized pursuant to the accounting
policy described in Note 1 to Consolidated Financial
Statements of $1.7 million in 1995, $6.4 million in 1994 and
$6.0 million in 1993.
(c) Excludes capital expenditures for properties held for sale.
<TABLE>
<CAPTION>
HISTORICAL RESULTS
OF OPERATIONS APPALACHIA SOUTHWEST TOTAL
-----------------------------------------------------------------------------------------------------------------------
($ in millions) 1995 1994 1993 1995 1994 1993 1995 1994 1993
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross revenues
Unaffiliated 46.6 56.6 78.7 60.1 74.3 103.0 106.7 130.9 181.7
Affiliated 32.8 29.5 17.2 35.9 39.2 23.7 68.7 68.7 40.9
Production costs 21.2 23.0 22.1 26.7 29.0 28.5 47.9 52.0 50.6
Depletion 39.5 37.4 31.6 47.0 48.4 41.9 86.5 85.8 73.5
Income tax expense 6.5 9.0 14.8 7.8 12.6 19.7 14.3 21.6 34.5
-----------------------------------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS 12.2 16.7 27.4 14.5 23.5 36.6 26.7 40.2 64.0
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
Results of operations for producing activities exclude administrative and
general costs, corporate overhead and interest expense. Income tax expense
is expressed at statutory rates less Section 29 credits.
72
<PAGE> 73
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
<TABLE>
<CAPTION>
OTHER OIL AND GAS PRODUCTION DATA
-----------------------------------------------------------------------------------------------------
1995 1994 1993
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Average sales price per Mcf of gas ($) 1.96 2.18 2.28
Average sales price per barrel of oil and
other liquids ($) 16.17 15.09 16.17
Production (lifting) cost per dollar of
gross revenue ($) 0.27 0.26 0.23
Depletion rate per dollar of
gross revenue ($) 0.49 0.43 0.33
-----------------------------------------------------------------------------------------------------
<CAPTION>
RESERVE QUANTITY INFORMATION
-----------------------------------------------------------------------------------------------------
Oil and Other
Gas Liquids
Proved Reserves (Bcf) (000 Bbls)
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
Reserves as of December 31, 1992 779.5 14,650
Revisions of previous estimate (60.1) (589)
Extensions, discoveries and other additions 52.4 2,334
Production (71.5) (3,603)
Sale of reserves-in-place (3.3) -
-----------------------------------------------------------------------------------------------------
Reserves as of December 31, 1993 697.0 12,792
Revisions of previous estimate (31.3) 1,650
Extensions, discoveries and other additions 81.7 1,386
Production (66.7) (3,611)
Purchase of reserves-in-place 3.6 38
Sale of reserves-in-place (0.5) -
-----------------------------------------------------------------------------------------------------
Reserves as of December 31, 1994 683.8 12,255
Revisions of previous estimate 72.4 (522)
Extensions, discoveries and other additions 53.6 2,668
Production (65.4) (2,849)
Sale of reserves-in-place (7.9) -
-----------------------------------------------------------------------------------------------------
RESERVES AS OF DECEMBER 31, 1995(a) 736.5 11,552
-----------------------------------------------------------------------------------------------------
Proved developed reserves as of December 31,
1993 573.7 10,793
1994 543.3 11,504
1995(b) 583.3 10,569
-----------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes reserves held for sale of 137.0 Bcf and 9,901,000 Bbls.
(b) Includes reserves held for sale of 111.7 Bcf and 8,961,000 Bbls.
73
<PAGE> 74
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
<TABLE>
<CAPTION>
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
---------------------------------------------------------------------------------------------------------------------------
APPALACHIA SOUTHWEST TOTAL
---------------------------------------------------------------------------------------------------------------------------
($ in millions) 1995 1994 1993 1995 1994 1993 1995 1994 1993
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Future cash inflows 1,793.8 1,274.8 1,756.3 462.8 392.5 450.1 2,256.6 1,667.3 2,206.4
Future production costs (606.7) (380.9) (387.0) (104.9) (111.1) (121.0) (711.6) (492.0) (508.0)
Future development costs (166.3) (124.5) (94.2) (51.4) (43.5) (77.8) (217.7) (168.0) (172.0)
Future income tax expense (327.1) (233.8) (413.1) (79.9) (46.8) (49.9) (407.0) (280.6) (463.0)
---------------------------------------------------------------------------------------------------------------------------
Future net cash flows 693.7 535.6 862.0 226.6 191.1 201.4 920.3 726.7 1,063.4
Less 10% discount 377.7 285.4 474.5 42.7 35.0 37.5 420.4 320.4 512.0
---------------------------------------------------------------------------------------------------------------------------
STANDARDIZED MEASURE OF
DISCOUNTED FUTURE
NET CASH FLOW 316.0 250.2 387.5 183.9 156.1 163.9 499.9 406.3 551.4
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Future cash inflows are computed by applying year-end prices to
estimated future production of proved oil and gas reserves. Future
expenditures (based on year-end costs) represent those costs to be
incurred in developing and producing the reserves. Discounted future
net cash flows are derived by applying a 10 percent discount rate, as
required by the Financial Accounting Standards Board, to the future
net cash flows. This data is not intended to reflect the actual
economic value of Columbia's oil and gas producing properties or the
true present value of estimated future cash flows since many arbitrary
assumptions are used. The data does provide a means of comparison
among companies through the use of standardized measurement
techniques.
74
<PAGE> 75
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
A reconciliation of the components resulting in changes in the
standardized measure of discounted cash flows attributable to proved
oil and gas reserves for the three years ending December 31 follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
($ in millions) 1995 1994 1993
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Beginning of year 406.3 551.4 661.1
------------------------------------------------------------------------------------------------------
Oil and gas sales,
net of production
costs (124.3) (147.6) (172.0)
Net changes in prices
and production costs 132.7 (236.5) (56.5)
Change in future
development costs (49.7) 4.1 (9.2)
Extensions, discoveries
and other additions,
net of related costs 106.5 68.2 66.9
Revisions of previous
estimates, net of
related costs 72.5 (17.3) (71.1)
Sales of reserves-in-place (11.7) (0.5) (4.4)
Purchases of reserves-in-place - 1.0 -
Accretion of discount 55.2 77.8 92.4
Net change in income taxes (64.9) 80.8 36.8
Timing of production
and other changes (22.7) 24.9 7.4
------------------------------------------------------------------------------------------------------
END OF YEAR 499.9 406.3 551.4
------------------------------------------------------------------------------------------------------
</TABLE>
The estimated discounted future net cash flows increased
during 1995 primarily due to net changes in prices and
production costs, extensions, discoveries and other additions,
as well as revisions to the economic feasibility of producing
certain wells.
Under Order 636, the natural gas pipeline industry is required
to eventually unbundle gathering services from other
transportation services. Columbia Transmission provides
transportation services, including gathering services, for a
significant portion of gas produced from CNR's reserves, and
in its August 1, 1995 general rate filing, Columbia
Transmission requested an increase in its gathering rate to
reflect partial unbundling of this service.
Columbia Transmission is currently preparing the regulatory
filings necessary for abandonment of selected gathering
facilities and transfer of those assets to CNR. Capital
expenditures may be incurred for compression and measurement.
Operation and maintenance costs associated with these
facilities will be partially offset by the absence of Columbia
Transmission's gathering charges on wells located in southern
West Virginia coupled with additional revenue generated from
transportation of third party gas. However, if the transfer
of properties does not occur and if there is a significant
increase in gathering rates as a result of unbundling, certain
reserves could be uneconomical to produce which could have a
material adverse effect on CNR's operating strategies and
financial results beginning in 1996.
75
<PAGE> 76
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
Schedule II
VALUATION AND QUALIFYING ACCOUNTS
The Columbia Gas System, Inc. and Subsidiaries
Year Ended December 31,
($ in Millions)
<TABLE>
<CAPTION>
Additions - Charged to
------------------------
Beginning Other Deductions Ending
Description Balance Income Accounts (a) (b) Balance
- ----------- --------- ------ ------------- ---------- -------
<S> <C> <C> <C> <C> <C>
Reserves deducted in the balance sheet
from the assets to which they apply:
Allowance for doubtful accounts
1995 11.6 31.6 11.3 42.2 12.3
1994 11.8 21.5 15.8 37.5 11.6
1993 11.8 17.9 12.6 30.5 11.8
</TABLE>
(a) Reflects reclassification to a regulatory asset of the uncollectible
accounts related to the Percent of Income Plan (PIP) of Columbia Gas of
Ohio, Inc.
(b) Principally reflects amounts charged off as uncollectible less amounts
recovered.
76
<PAGE> 77
ITEM 9.
CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There has not been a change of accountants nor any disagreements concerning
accounting and financial disclosure within the past two years.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this is contained in Columbia's Proxy Statement related
to the 1996 Annual Meeting of Stockholders, filed pursuant to Section 14 of the
Securities Exchange Act of 1934 and is incorporated herein by reference.
Information regarding Columbia's executive officers, is as follows:
OLIVER G. RICHARD III, 43, Chairman, Chief Executive Officer and President
of The Columbia Gas System, Inc. (effective April 28, 1995). Chairman of
New Jersey Resources Corporation from 1992 to 1995; President and Chief
Executive Officer from 1991 to 1995. President and Chief Executive Officer
of Northern Natural Gas Company from 1989 to 1991. Senior Vice President of
Enron Gas Pipeline Group from 1987 to 1989. Vice President and subsequently
Executive Vice President of Enron Gas Pipeline Group from 1987 to 1989.
Vice President and General Counsel of Tenngasco, a subsidiary of Tenneco
Corporation, from 1985 to 1987. Federal Energy Regulatory Commission
Commissioner from 1982 to 1985.
PETER M. SCHWOLSKY, 49, Senior Vice President and Chief Legal Officer of
Columbia and Columbia Gas System Service Corporation since August 1995.
Senior Vice President of Columbia and Columbia's Service Corporation from
June 1995 to August 1995. Executive Vice President, Law and Corporate
Development, for New Jersey Resources Corporation from 1991 to 1995. Of
counsel and then Partner with Steptoe & Johnson from 1986 to 1991.
MICHAEL W. O'DONNELL, 51, Senior Vice President and Chief Financial Officer
of Columbia since October 1993. Senior Vice President and Assistant Chief
Financial Officer of the Columbia Gas System Service Corporation since 1989.
LOGAN W. WALLINGFORD, 63, Senior Vice President of Columbia Gas System
Service Corporation since March 1989. Senior Vice President of Planning and
Storage for Columbia Transmission from July 1988 to February 1989. Senior
Vice President, Gas Acquisition from July 1987 to June 1988.
RICHARD E. LOWE, 55, Vice President of Columbia and Columbia Gas System
Service Corporation since September 1988. Vice President and General
Auditor of Columbia's Service Corporation from April 1987 to August 1988.
CATHERINE GOOD ABBOTT, 45, Chief Executive Officer of Columbia Transmission
and Columbia Gulf Transmission Company since January 1996. Principal with
Gem Energy Consulting, Inc. from 1995 to January 1996. Vice president for
various business units of Enron Corporation from 1985 to 1995.
C. RONALD TILLEY, 60, Chairman and Chief Executive Officer of Columbia
Distribution Companies from January 1987 to January 1996.
77
<PAGE> 78
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item is contained in Columbia's Proxy Statement
related to the 1996 Annual Meeting of Stockholders, filed pursuant to Section
14 of the Securities Exchange Act of 1934 and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is contained in Columbia's Proxy Statement
related to the 1996 Annual Meeting of Stockholders, filed pursuant to Section
14 of the Securities Exchange Act of 1934 and is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is contained in Columbia's Proxy Statement
related to the 1996 Annual Meeting of Stockholders, filed pursuant to Section
14 of the Securities Exchange Act of 1934 and is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Exhibits
Reference is made to pages 81 through 83 for the list of exhibits filed as a
part of this Annual Report on Form 10-K.
Pursuant to Item 601(b), paragraph (4)(iii)(A) of Regulation S-K, certain
instruments representing long-term debt of Columbia or its subsidiaries have
not been included as Exhibits because such debt does not exceed 10% of the
total assets of Columbia and its subsidiaries on a consolidated basis.
Columbia agrees to furnish a copy of any such instrument to the SEC upon
request.
Financial Statement Schedules
All of the financial statements and financial statement schedules filed as a
part of the Annual Report on Form 10-K are included in Item 8.
Reports on Form 8-K
A report on Form 8-K was filed on November 22, 1995, containing the Bankruptcy
Court's orders, dated November 15, 1995, confirming the reorganization plans of
Columbia and Columbia Transmission, a Press Release published on November 15,
1995 regarding the orders with a summary of the material features of the plans,
and an unaudited condensed consolidated balance sheet for Columbia giving the
effect of the plans as confirmed. The report on Form 8-K also contained
certain factors, as published by Columbia on November 20, 1995, which could be
used to estimate distributions upon emergence with respect to outstanding
prepetition debt of Columbia. The report on Form 8-K also contained a Press
Release published on November 21, 1995 regarding the projected interest and
dividend rates for debentures and preferred stock to be issued upon emergence
assuming that emergence occurs on November 28, 1995.
A report on Form 8-K was filed on November 30, 1995 discussing Columbia's and
Columbia Transmission's emergence from Chapter 11 on November 28, 1995.
A report on Form 8-K was filed on February 8, 1996, containing a Press Release
published on February 5, 1996, regarding the financial and operating results
for the year ended December 31, 1995. Also included in this Form 8-K
78
<PAGE> 79
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(Continued)
was a Press Release dated February 8, 1996, concerning Columbia's intention to
redeem its Series B - DECS and Series A - Preferred Stock.
Undertaking made in Connection with 1933 Act Compliance on Form S-8
For purposes of complying with the amendments to the rules governing Form S-8
under the Securities Act of 1933, Columbia undertakes the following, which is
incorporated by reference into the registration statements on Form S-8, Nos.
33-10004 (filed November 26, 1986) and 33-42776 (filed September 13, 1991):
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (Act) may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the questions whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
79
<PAGE> 80
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
THE COLUMBIA GAS SYSTEM, INC.
-----------------------------
(Registrant)
Dated: February 21, 1996
By: /s/ Michael W. O'Donnell
----------------------------
(Michael W. O'Donnell)
Senior Vice President and
Chief Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C> <C>
Feb. 21, 1996 /s/Oliver G. Richard III Feb. 21, 1996 /s/Richard E. Lowe
---------------------------------------- -----------------------------------
Director (Principal Vice President
Executive Officer) (Principal Accounting
Officer)
Feb. 21, 1996 /s/Richard F. Albosta Feb. 21, 1996 /s/Robert H. Beeby
--------------------------------------- -----------------------------------
Director Director
Feb. 21, 1996 /s/Wilson K. Cadman Feb. 21, 1996 /s/Malcolm T. Hopkins
------------------------------------- -----------------------------------
Director
Feb. 21, 1996 /s/Donald P. Hodel Feb. 21, 1996 /s/William E. Lavery
---------------------------------------- -----------------------------------
Director Director
Feb. 21, 1996 /s/Malcolm Jozoff Feb. 21, 1996 /s/Douglas E. Olesen
---------------------------------------- -----------------------------------
Director Director
Feb. 21, 1996 /s/Gerald E. Mayo Feb. 21, 1996 /s/James R. Thomas, II
---------------------------------------- -----------------------------------
Director Director
Feb. 21, 1996 /s/Ernesta G. Procope Feb. 21, 1996 /s/William R. Wilson
--------------------------------------- -----------------------------------
Director Director
</TABLE>
80
<PAGE> 81
EXHIBIT INDEX
Reference is made in the two right-hand columns below to those
exhibits which have heretofore been filed with the U.S. Securities and
Exchange Commission. Exhibits so referred to are incorporated herein by
reference.
<TABLE>
<CAPTION>
Reference
-----------------
File No. Exhibit
-------- -------
<S> <C> <C> <C> <C>
3-A* - Restated Certificate of Incorporation of The Columbia
Gas System, Inc., dated as of November 28, 1995.
3-B - By-Laws of The Columbia Gas System, Inc., as amended dated 1-1098 3-B
November 18, 1987.
4-A - Indenture between The Columbia Gas System, Inc. 33-64555 4-S
and Marine Midland Bank, N.A. Trustee, dated as of
November 28, 1995.
4-B - First Supplemental Indenture, between The Columbia Gas 33-64555 4-T
System, Inc. and Marine Midland Bank, N.A. Trustee,
dated as of November 28, 1995.
4-C - Second Supplemental Indenture, between The Columbia Gas 33-64555 4-U
System, Inc., and Marine Midland Bank, N.A. Trustee,
. dated as of November 28, 1995.
4-D - Third Supplemental Indenture, between The Columbia Gas 33-64555 4-V
System, Inc. and Marine Midland Bank, N.A. Trustee,
. dated as of November 28, 1995.
4-E - Fourth Supplemental Indenture, between The Columbia Gas 33-64555 4-W
System, Inc. and Marine Midland Bank, N.A. Trustee
4-F - Fifth Supplemental Indenture, between The Columbia Gas 33-64555 4-X
System, Inc. and Marine Midland Bank, N.A. Trustee,
dated as of November 28, 1995.
4-G - Sixth Supplemental Indenture, between The Columbia Gas 33-64555 4-Y
System, Inc. and Marine Midland Bank, N.A. Trustee, dated
as of November 28, 1995.
4-H - Seventh Supplemental Indenture, between The Columbia 33-64555 4-Z
Gas System, Inc. and Marine Midland Bank, N.A., Trustee,
dated as of November 28, 1995.
10-P(a) - Pension Restoration Plan of The Columbia Gas 1-1098 10-P
System, Inc., amended October 9, 1991.
10-Q(a) - Thrift Restoration Plan of The Columbia Gas 1-1098 10-Q
System, Inc. dated January 1, 1989.
10-T - Agreement and Bridge Agreement dated 1-1098 10-T
December 1, 1993, between Columbia Gas
Transmission Corporation and Consol
Pennsylvania Coal Company.
10-AE - U.S. Environmental Protection Agency Administrative 1-1098 10-AE
Order by Consent for Removal Actions for Columbia Gas
Transmission Corporation dated September 22,1994.
10-AF* - Amended and Restated Indenture of Mortgage and
Deed of Trust by Columbia Gas Transmission
Corporation to Wilmington Trust Company,
dated as of November 28, 1995
</TABLE>
- --------------
(a) Executive Compensation arrangements filed pursuant to Item 14 of Form 10-K.
* Filed herewith.
81
<PAGE> 82
ITEM 14. EXHIBIT INDEX (Continued)
<TABLE>
<CAPTION>
Reference
-----------------
File No. Exhibit
-------- -------
<S> <C> <C> <C>
10-BB(a) - Annual Incentive Compensation Plan of 1-1098 10-BB
The Columbia Gas System, Inc., dated
November 16, 1988.
10-BC(a) - Employment Agreement between Oliver G. Richard III 1-1098 10-BC
and The Columbia Gas System, Inc., dated March 15, 1995.
10-BE(a) - Employment Agreement between Peter M. Schwolsky 1-1098 10-BE
and The Columbia Gas System, Inc., dated May 30, 1995.
10-BF(a)*- Employment Agreement between Catherine Good Abbott
and The Columbia Gas System, Inc., dated January 17, 1996.
10-BU - Share Sale and Purchase Agreement between The 1-1098 10-BU
Columbia Gas System, Inc. and Anderson Exploration
Ltd. dated November 25, 1991.
10-BV - Security Agreement dated as of January 15, 1992, 1-1098 10-BV
between The Columbia Gas System, Inc. and
Anderson Exploration Ltd. and Montreal Trust
Company of Canada.
10-BW - Kotaneelee Litigation Indemnity Agreement dated 1-1098 10-BW
as of December 31, 1991, among The Columbia
Gas System, Inc. and Columbia Gas Development
of Canada Ltd. and Anderson Exploration Ltd.
10-BX - Specified Litigation Indemnity Agreement made 1-1098 10-BX
as of December 31, 1991, among The Columbia
Gas System, Inc. and Columbia Gas Development
of Canada Ltd. and Anderson Exploration Ltd.
10-BY(a) - Columbia Gas Restoration Security Trust 1-1098 10-BY
Agreement dated June 1, 1991 with Dauphin
Deposit Bank and Trust Company.
10-CA(a) - The Columbia Gas System, Inc. Retirement Plan 1-1098 10-CA
for Outside Directors, as amended, August 21, 1991.
10-CB* - Credit Agreement, dated as of
November 28, 1995, among The Columbia Gas System,
Inc., certain banks party thereto and Citibank, N.A.
10-CC* - First Amendment and Supplement to Credit
Agreement, dated December 6, 1995
10-CJ - Amended and Restated Agreement of Cove Point 1-1098 10-CJ
LNG Limited Partnership between Columbia LNG and
PEPCO Energy Company, Inc. dated January 27, 1994.
10-CM - Plan of Reorganization for Columbia Gas Transmission Corporation 1-1098 10-CM
as filed with the United States Bankruptcy Court for the District
of Delaware on January 18, 1994.
11* - Statements Re: Computation of Per Share Earnings.
12* - Statements of Ratio of Earnings to Fixed Charges
and Preferred Stock Dividends.
21* - Subsidiaries of The Columbia Gas System, Inc.
23-A* - Letter report, dated January 29, 1996, and the written
consent to the filing and use of information contained
in such letter report, Reports and Registration Statements
filed during 1996, of Ryder Scott Company Petroleum Engineers,
independent petroleum and natural gas consultants.
</TABLE>
- ------------------
(a) Executive Compensation arrangements filed pursuant to Item 14 of Form 10-K.
* Filed herewith.
82
<PAGE> 83
ITEM 14. EXHIBIT INDEX (Continued)
<TABLE>
<CAPTION>
Reference
-----------------
File No. Exhibit
-------- -------
<S> <C> <C>
23-B* - Written consent of Arthur Andersen LLP,
independent public accountants, to the
incorporation by reference of their report
included in the 1995 Annual Report on Form
10-K of The Columbia Gas System, Inc. and
their report included in The Columbia Gas
System, Inc.'s 1995 Annual Report to Shareholders
in the registration statements on Form S-8
(File No. 33-10004), and Form S-8
(File No. 33-42776).
27* - Financial Data Schedule for the period ended
December 31, 1995.
</TABLE>
- --------------------------
*Filed herewith.
83
<PAGE> 1
EXHIBIT 3-A
RESTATED
CERTIFICATE OF INCORPORATION
OF
THE COLUMBIA GAS SYSTEM, INC.
The Columbia Gas System, Inc., a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows: The name of the
corporation is The Columbia Gas System, Inc. The Columbia Gas System, Inc. was
originally incorporated under the name Columbia Gas & Electric Corporation and
the original Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on September 30, 1926. This
Restated Certificate of Incorporation was duly adopted pursuant to Sections
103, 242 and 245 of the General Corporation Law of the State of Delaware. Upon
filing with the Secretary of State, in accordance with Section 103, this
Restated Certificate of Incorporation amends and restates and shall henceforth
supersede the original Certificate of Incorporation and shall, as it may
thereafter be amended in accordance with its terms and applicable law, be the
Certificate of Incorporation of the Corporation. The text of the Certificate
of Incorporation as heretofore amended or supplemented is hereby amended and
restated to read in its entirety as follows:
ARTICLE I
Name
The name of this Corporation is THE COLUMBIA GAS SYSTEM, INC.
ARTICLE II
Registered Office
The registered office of the Corporation in the State of Delaware is
located at The Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent is The
Corporation Trust Company, and the address of said registered agent is
Corporation Trust Center, 1209 Orange Street, in said city.
ARTICLE III
Statement of Purpose
The nature of the business to be conducted and the purposes of the
Corporation are to engage in any lawful act or activity for which corporations
may be organized under the Delaware General
<PAGE> 2
Corporation Law, as amended.
ARTICLE IV
Classes of Capital Stock
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is One hundred forty million
(140,000,000), of which Forty million (40,000,000) shares of the par value of
Ten dollars ($10.00) each are to be of a class designated Preferred Stock and
One hundred million (100,000,000) shares of the par value of Ten dollars
($10.00) each are to be of a class designated Common Stock.
To the extent required by Section 1123(a)(6) of the U.S. Bankruptcy
Code (11 U.S.C Section 1123(a)(6)) no nonvoting equity securities of the
Corporation shall be issued. This provision shall have no further force and
effect beyond that required by Section 1123(a)(6) and is applicable only for so
long as such Section is in effect and applicable to the Corporation.
A. Common Stock
1. Subject to the powers, preferences and other special rights
afforded Preferred Stock by the provisions of this Article IV or resolutions
adopted pursuant hereto, the holders of the Common Stock shall be entitled to
receive to the extent permitted by Delaware law, such dividends as may from
time to time be declared by the Board of Directors.
2. Except as otherwise required by Delaware law and as otherwise
provided in this Article IV and resolutions adopted pursuant hereto with
respect to Preferred Stock, and subject to the provisions of the Bylaws of the
Corporation, as from time to time amended, with respect to the closing of the
transfer books and the fixing of a record date for the determination of
stockholders entitled to vote, the holders of the Common Stock shall
exclusively possess voting power for the election of directors and for all
other purposes, and the holders of the Preferred Stock shall have no voting
power and shall not be entitled to any notice of any meeting of stockholders.
3. At all elections of directors by stockholders of the Corporation,
each holder of Common Stock, and each holder of Preferred Stock, if entitled to
vote at such election, shall be entitled to as many votes as shall equal the
number of his shares of Common Stock or Preferred Stock, as the case may be,
multiplied by the number of directors for whom he as such holder shall then be
entitled to vote, and he may cast all of such votes for one of such directors
or may distribute them among any two or more of them as he may see fit.
4. Any action required or permitted to be taken by the stockholders
of the Corporation must be effected at an annual or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders. Except as otherwise required by law and subject
to the rights of the holders of any class or any series of Preferred Stock,
special meetings of stockholders of the Corporation may be called only by the
Board of Directors pursuant to a resolution adopted by a majority of the total
number of authorized directors (whether or not there
2
<PAGE> 3
exist any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board for adoption).
5. In the event of the voluntary or involuntary liquidation,
dissolution, distribution of assets or winding-up of the Corporation, after
distribution in full of the preferential amounts, if any, to be distributed to
the holders of shares of Preferred Stock, as set forth in the resolutions
adopted with respect to such series under this Article IV, holders of Common
Stock shall be entitled to receive all of the remaining assets of the
Corporation of whatever kind available for distribution to the stockholders
ratably and in proportion to the number of shares of Common Stock held by them
respectively. The Board of Directors may distribute in kind to the holders of
Common Stock such remaining assets of the Corporation or may sell, transfer,
otherwise dispose of all or any part of such remaining assets to any other
corporation, trust or other entity and receive payment therefor in cash, stock
or obligations of such other corporation, trust or other entity, or a
combination thereof, and may set all or make any part of the consideration so
received and distributed or any balance thereof in kind to holders of Common
Stock. The merger or consolidation of the Corporation into or with any other
corporation, or the merger of any other corporation into it, or any purchase or
redemption of shares of stock of the Corporation of any class, shall not be
deemed to be a dissolution, liquidation, or winding-up of the Corporation for
the purposes of this Article IV.
B. Preferred Stock
The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, of the classes of stock of
the Corporation which are fixed by the Certificate of Incorporation, and the
express grant of authority to the Board of Directors of the Corporation to fix
by resolution or resolutions the designations and the powers, preferences and
rights, and the qualifications, limitations or restrictions thereof, of the
shares of Preferred Stock, which are not fixed by the Certificate of
Incorporation, are as follows:
1. The Preferred Stock may be issued from time to time in any amount,
not exceeding in the aggregate the total number of shares of Preferred Stock
hereinabove authorized, as Preferred Stock of one or more series, as
hereinafter provided. All shares of any one series of Preferred Stock shall be
alike in every particular, each series thereof shall be distinctively
designated by letter or descriptive words, and all series of Preferred Stock
shall rank equally and be identical in all respects except as permitted by the
provisions of Subsection B.2 of this Article IV.
2. Authority is hereby expressly granted to and vested in the Board
of Directors from time to time to issue the Preferred Stock as Preferred Stock
of any series and in connection with the creation of each such series to fix,
by the resolution or resolutions providing for the issue of shares thereof, the
voting powers, designations, preferences and relative, participating, optional
or other special rights, and the qualifications, limitations or restrictions
thereof, if any, of such series, to the full extent now or hereafter permitted
by the laws of the State of Delaware. Pursuant to the foregoing general
authority vested in the Board of Directors, but not in limitation of the powers
conferred on the Board of Directors thereby and by the laws of the State of
Delaware, the Board of Directors is expressly authorized to determine with
respect to each series of Preferred Stock:
3
<PAGE> 4
(a) the designation of such series and number of shares
constituting such series;
(b) the dividend rate or amount of such series, the payment
dates for dividends on shares of such series, the status
of such dividends as cumulative or non-cumulative, the
date from which dividends on shares of such series, if
cumulative, shall be cumulative, and the status of such as
participating or non-participating after the payment of
dividends as to which such shares are entitled to any
preference;
(c) the price or prices (which amount may vary under different
conditions or at different dates) at which, and the times,
terms and conditions on which, the shares of such series
may be redeemed at the option of the Corporation;
(d) whether or not the shares of such series shall be made
optionally or mandatorily convertible into, or
exchangeable for, shares of any other class or classes or
of any other series of the same or any other class or
classes of stock of the Corporation or other securities
and, if made so convertible or exchangeable, the
conversion price or prices, or the rates of exchange, and
the adjustments thereof, if any, at which such conversion
or exchange may be made and any other terms and conditions
of such conversion or exchange;
(e) whether or not the shares of such series shall be entitled
to the benefit of a retirement or sinking fund to be
applied to the purchase or redemption of shares of such
series, and if so entitled, the amount of such fund and
the manner of its application, including the price or
prices at which shares of such series may be redeemed or
purchased through the application of such fund;
(f) whether or not the issue of any additional shares of such
series or any future series in addition to such series or
of any shares of any other class of stock of the
Corporation shall be subject to restrictions and, if so,
the nature thereof;
(g) the rights and preferences, if any, of the holders of such
series of Preferred Stock upon the voluntary or
involuntary liquidation, dissolution or winding-up of the
Corporation, and the status of the shares of such series
as participating or non-participating after the
satisfaction of any such rights and preferences;
(h) the full or limited voting rights, if any, to be provided
for shares of such series, in addition to the voting
rights provided by law; and
(i) any other relative powers, preferences and participating,
optional or other special rights and the qualifications,
limitations or restrictions thereof, of shares of such
series;
4
<PAGE> 5
in each case, so far as not inconsistent with the
provisions of this Certificate of Incorporation or the
Delaware General Corporation Law then in effect.
ARTICLE V
Board of Directors
A. Election and Removal of Directors
1. The Board of Directors shall consist of not less than thirteen
(13) or more than eighteen (18) persons, the exact number to be fixed from time
to time exclusively by the Board of Directors pursuant to a resolution adopted
by a majority of the total number of authorized directors (whether or not there
exist any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board for adoption), provided, however, this
provision shall not act to limit Board size in the event a class or classes of
Preferred Stock are entitled to elect directors to the exclusion of holders of
Common Stock. The directors shall be classified, with respect to the time for
which they severally hold office, into three classes, as nearly equal in number
as possible, as may be provided in the manner specified in the Bylaws, Class I
Directors to hold office initially for a term expiring at the annual meeting of
stockholders to be held in 1997, Class II Directors to hold office initially
for a term expiring at the annual meeting of stockholders to be held in 1998,
and Class III Directors to hold office initially for a term expiring at the
annual meeting of stockholders to be held in 1999, with the members of each
class to hold office until their successors are duly elected and qualified. At
each annual meeting of the stockholders of the Corporation, the successors to
the class of directors whose term expires at that meeting shall be elected to
hold office for a term expiring at the annual meeting of stockholders held in
the third year following the year of their election.
2. Notwithstanding the foregoing and except as otherwise provided by
law, whenever the holders of any series of the Preferred Stock shall have the
right (to the exclusion of holders of Common Stock) to elect directors of the
Corporation pursuant to the provisions of Article IV and any resolution adopted
pursuant thereto, the election of such directors of the Corporation shall be
governed by the terms and provisions of said resolutions and such directors so
elected shall not be divided into classes pursuant to this Subsection A.2 of
Article V and shall be elected to hold office for a term expiring at the annual
meeting of stockholders held in the first year following their election or, if
such right of the holders of the Preferred Stock is terminated, for a term
expiring in accordance with the provisions of such resolutions.
3. Newly-created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a majority vote of the directors
then in office, even though less than a quorum of the Board of Directors,
acting at a regular or special meeting. If any applicable provision of the
Delaware General Corporation Law or any
5
<PAGE> 6
resolution adopted pursuant to Article IV expressly confers power on
stockholders to fill such a directorship at a special meeting of stockholders,
such a directorship may be filled at such a meeting only by the affirmative
vote of at least 80 percent of the combined voting powers of the outstanding
shares of stock of the Corporation entitled to vote generally; provided,
however, that when (a) pursuant to the provisions of Article IV or any
resolutions adopted pursuant thereto, the holders of any series of Preferred
Stock have the right (to the exclusion of holders of the Common Stock), and
have exercised such right, to elect directors and (b) Delaware General
Corporation Law or any such resolution expressly confers on stockholders voting
rights as aforesaid, if the directorship to be filled had been occupied by a
director elected by the holders of Common Stock, then such directorship shall
be filled by an 80 percent vote as aforesaid, but if such directorship to be
filled had been elected by holders of Preferred Stock, then such directorship
shall be filled in accordance with the applicable resolutions adopted under
Article IV. Any director elected in accordance with the two preceding
sentences shall hold office for the remainder of the full term of the class of
directors in which the new directorship was created or the vacancy occurred and
until such director's successor shall have been elected and qualified unless
such director was elected by holders of Preferred Stock (acting to the
exclusion of the holders of Common Stock), in which case such director's term
shall expire in accordance with the applicable resolutions adopted pursuant to
Article IV. No decrease in the number of authorized directors constituting the
entire Board of Directors shall shorten the term of any incumbent director,
except, as otherwise provided in the applicable resolutions adopted pursuant to
Article IV, with respect to directorships created pursuant to one or more
series of Preferred Stock.
4. Subject to the rights of the holders of any class or series of
Preferred Stock to elect directors under specified circumstances, any director
or directors may be removed from office at any time, but only for cause and
only by the affirmative vote of the holders of at least 80 percent of the
combined voting power of all of the then-outstanding shares of stock of the
Corporation entitled to vote generally, voting together as a single class (it
being understood that for all purposes of this Article V, each share of
Preferred Stock shall have the number of votes, if any, granted to it pursuant
to this Certificate of Incorporation or any designation of terms of any class
or series of Preferred Stock made pursuant to this Certificate of
Incorporation).
5. Notwithstanding any other provision of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser
vote or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the stock of the Corporation required by law,
this Certificate of Incorporation or any Preferred Stock certificate of
designation, the affirmative vote of at least 80 percent of the total number of
authorized directors (whether or not there exist any vacancies in previously
authorized directorships at the time any such alteration, amendment or repeal
is presented to the Board for adoption), shall be required to alter, amend or
repeal this Article V, or any provision hereof.
B. Liability, Indemnification and Insurance
1. Limitation on Liability. To the fullest extent that the Delaware
General Corporation Law as it exists on the date hereof or as it may hereafter
be amended permits the limitation or elimination of the personal liability of
directors, no director of the Corporation shall be liable to the Corporation
6
<PAGE> 7
or its stockholders for monetary damages for breach of fiduciary duty as a
director. No amendment to or repeal of this Section B.1 shall apply to or have
any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
2. Right to Indemnification. The Corporation shall to the fullest
extent permitted by applicable law as then in effect indemnify any person (the
"Indemnitee") who was or is involved in any manner (including, without
limitation, as a party or a witness) or is threatened to be made so involved in
any threatened, pending or completed investigation, claim, action, suit or
proceeding, whether civil, criminal, administrative or investigative (including
without limitation, any action, suit or proceeding by or in the right of the
Corporation to procure a judgment in its favor) (a "Proceeding") by reason of
the fact that such person is or was a director, officer, employee or agent of
the Corporation, or of the Columbia Gas System Service Corporation or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise (including, without limitation, any employee benefit plan) against
all expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such Proceeding. Such indemnification shall be a contract right and shall
include the right to receive payment of any expenses incurred by the Indemnitee
in connection with such Proceeding in advance of its final disposition,
consistent with the provisions of applicable law as then in effect.
3. Insurance, Contracts and Funding. The Corporation may purchase and
maintain insurance to protect itself and any Indemnitee against any expenses,
judgments, fines and amounts paid in settlement as specified in Subsection B.2
of this Section B or incurred by any Indemnitee in connection with any
Proceeding referred to in Subsection B.1 of this Section B, to the fullest
extent permitted by applicable law as then in effect. The Corporation may
enter into contracts with any director, officer, employee or agent of the
Corporation in furtherance of the provisions of this Section B and may create a
trust fund, grant a security interest or use other means (including, without
limitation, a letter of credit) to ensure the payment of such amounts as may be
necessary to effect indemnification as provided in this Section B.
4. Indemnification; No Exclusive Right. The right of indemnification
provided in this Section B shall not be exclusive of any other rights to which
those seeking indemnification may otherwise be entitled, and the provisions of
this Section B shall inure to the benefit of the heirs and legal
representatives of any person entitled to indemnity under this Section B and
shall be applicable to Proceedings commenced or continuing after the adoption
of this Section B, whether arising from acts or omissions occurring before or
after such adoption.
5. Advancement of Expenses; Procedures; Presumptions and Effect of
Certain Proceedings; Remedies. In furtherance, but not in limitation of the
foregoing provisions, the following procedures, presumptions and remedies shall
apply with respect to advancement of expenses and the right to indemnification
under this Section B:
7
<PAGE> 8
(a) Advancement of Expenses. All reasonable expenses incurred by
or on behalf of the Indemnitee in connection with any Proceeding shall
be advanced to the Indemnitee by the Corporation within twenty (20) days
after the receipt by the Corporation of a statement or statements from
the Indemnitee requesting such advance or advances from time to time,
whether prior to or after final disposition of such Proceeding. Such
statement or statements shall reasonably evidence the expenses incurred
by the Indemnitee and, if required by law at the time of such advance,
shall include or be accompanied by an undertaking by or on behalf of the
Indemnitee to repay the amounts advanced if it should ultimately be
determined that the Indemnitee is not entitled to be indemnified against
such expenses pursuant to this Section B .
(b) Procedure for Determination of Entitlement to Indemnification.
(i) To obtain indemnification under this Section B, an
Indemnitee shall submit to the Secretary of the Corporation a
written request, including such documentation and information as is
reasonably available to the Indemnitee and reasonably necessary to
determine whether and to what extent the Indemnitee is entitled to
indemnification (the "Supporting Documentation"). The
determination of the Indemnitee's entitlement to indemnification
shall be made not later than sixty (60) days after receipt by the
Corporation of the written request for indemnification together
with the Supporting Documentation. The Secretary of the
Corporation shall, promptly upon receipt of such a request for
indemnification, advise the Board of Directors in writing that the
Indemnitee has requested indemnification.
(ii) The Indemnitee's entitlement to indemnification under this
Section B shall be determined in one of the following ways: (A) by
a majority vote of the Disinterested Directors (as hereinafter
defined), even if they constitute less than a quorum of the Board;
(B) by a written opinion of Independent Counsel (as hereinafter
defined) if (x) a Change of Control (as hereinafter defined) shall
have occurred and the Indemnitee so requests or (y) if there are no
Disinterested Directors or a majority of such Disinterested
Directors so directs; (C) by the stockholders of the Corporation
(but only if a majority of the Disinterested Directors presents the
issue of entitlement to indemnification to the stockholders for
their determination); or (D) as provided in Section B.5(c) .
(iii) In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to
Section B.5(b)(ii), a majority of the Disinterested Directors shall
select the Independent Counsel (except that if there are no
Disinterested Directors, the Corporation's Chief Legal Officer
shall select the Independent Counsel), but only an Independent
Counsel to which the Indemnitee does not reasonably object;
provided, however, that if a Change of Control shall have occurred,
the Indemnitee shall select such Independent Counsel, but only an
Independent Counsel to which the Board of Directors does not
reasonably object.
(iv) The only basis upon which a finding of no entitlement to
indemnification may be made is that indemnification is prohibited
by law.
8
<PAGE> 9
(c) Presumptions and Effect of Certain Proceedings. Except as
otherwise expressly provided in this Section B, if a Change of Control
shall have occurred, the Indemnitee shall be presumed to be entitled to
indemnification under this Section B upon submission of a request for
indemnification together with the Supporting Documentation in accordance
with Section B.5(b)(i), and thereafter the Corporation shall have the
burden of proof to overcome that presumption in reaching a contrary
determination. In any event, if the person or persons empowered under
Section B.5(b) to determine entitlement to indemnification shall not
have been appointed or shall not have made a determination within sixty
(60) days after receipt by the Corporation of the request therefor
together with the Supporting Documentation, the Indemnitee shall be
deemed to be entitled to indemnification and the Indemnitee shall be
entitled to such indemnification unless (A) the Indemnitee
misrepresented or failed to disclose a material fact in making the
request for indemnification or in the Supporting Documentation or (B)
such indemnification is prohibited by law. The termination of any
Proceeding described in Section B.2, or of any claim, issue or matter
therein, by judgment, order, settlement or conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, adversely
affect the right of the Indemnitee to indemnification or create a
presumption that the Indemnitee did not act in good faith and in a
manner which the Indemnitee reasonably believed to be in or not opposed
to the best interests of the Corporation or, with respect to any
criminal Proceeding, that the Indemnitee had reasonable cause to believe
that the Indemnitee's conduct was unlawful.
(d) Remedies of Indemnitee.
(i) In the event that a determination is made, pursuant to
Section B.5(b) that the Indemnitee is not entitled to
indemnification under this Section B, (A) the Indemnitee shall be
entitled to seek an adjudication of his entitlement to such
indemnification either, at the Indemnitee's sole option, in (x) an
appropriate court of the State of Delaware or any other court of
competent jurisdiction or (y) an arbitration to be conducted by a
single arbitrator pursuant to the rules of the American Arbitration
Association; (B) any such judicial Proceeding or arbitration shall
be de novo and the Indemnitee shall not be prejudiced by reason of
such adverse determination; and (C) in any such judicial Proceeding
or arbitration the Corporation shall have the burden of proving
that the Indemnitee is not entitled to indemnification under this
Section B.
(ii) If a determination shall have been made or deemed to have
been made, pursuant to Section B.5(b) or (c), that the Indemnitee
is entitled to indemnification, the Corporation shall be obligated
to pay the amounts constituting such indemnification within five
(5) days after such determination has been made or deemed to have
been made and shall be conclusively bound by such determination
unless (A) the Indemnitee misrepresented or failed to disclose a
material fact in making the request for indemnification or in the
Supporting Documentation or (B) such indemnification is prohibited
by law. In the event that (x) advancement of expenses is not
timely made pursuant to Section B.5(a) or (y) payment of
indemnification is not made within five (5) days after a
determination of
9
<PAGE> 10
entitlement to indemnification has been made or deemed to have been
made pursuant to Section B.5(b) or (c), the Indemnitee shall be
entitled to seek judicial enforcement of the Corporation's obligation
to pay to the Indemnitee such advancement of expenses or
indemnification. Notwithstanding the foregoing, the Corporation may
bring an action, in an appropriate court in the State of Delaware or
any other court of competent jurisdiction, contesting the right of
the Indemnitee to receive indemnification hereunder due to the
occurrence of an event described in subclause (A) or (B) of this
clause (ii) (a "Disqualifying Event"); provided, however, that in any
such action the Corporation shall have the burden of proving the
occurrence of such Disqualifying Event.
(iii) The Corporation shall be precluded from asserting in any
judicial Proceeding or arbitration commenced pursuant to this
Section B.5(d) that the procedures and presumptions of this Section
B are not valid, binding and enforceable and shall stipulate in any
such court or before any such arbitrator that the Corporation is
bound by all the provisions of this Section B.
(iv) In the event that the Indemnitee, pursuant to this Section
B.5(d), seeks a judicial adjudication of or an award in arbitration
to enforce his rights under, or to recover damages for breach of,
this Section B, the Indemnitee shall be entitled to recover from
the Corporation, and shall be indemnified by the Corporation
against, any expenses actually and reasonably incurred by the
Indemnitee if the Indemnitee prevails in such judicial adjudication
or arbitration. If it shall be determined in such judicial
adjudication or arbitration that the Indemnitee is entitled to
receive part but not all of the indemnification or advancement of
expenses sought, the expenses incurred by the Indemnitee in
connection with such judicial adjudication or arbitration shall be
prorated accordingly.
(e) Definitions. For purposes of this Section B.5:
(i) "Change in Control" means (A) so long as the Public Utility
Holding Company Act of 1935 is in effect, any "company" becoming a
"holding company" in respect to the Corporation or any
determination by the Securities and Exchange Commission that any
"person" should be subject to the obligations, duties, and
liabilities if imposed by said Act by virtue of his, hers or its
influence over the management or policies of the Corporation, or
(B) whether or not said Act is in effect a change in control of the
Corporation of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of 1934 (the "Act"), whether or
not the Corporation is then subject to such reporting requirement;
provided that, without limitation, such a change in control shall
be deemed to have occurred if (i) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Act),
directly or indirectly, of securities of the Corporation
representing ten percent or more of the combined voting power of
the Corporation's then outstanding securities without the prior
approval of at least two-thirds of the members of the Board of
Directors in office immediately prior to such acquisition; (ii) the
Corporation is a party to a merger, consolidation, sale of assets
10
<PAGE> 11
or other reorganization, or a proxy contest, as a consequence of
which members of the Board of Directors in office immediately prior
to such transaction or event constitute less than a majority of the
Board of Directors thereafter; or (iii) during any period of two
consecutive years, individuals who at the beginning of such period
constituted the Board of Directors (including for this purpose any
new director whose election or nomination for election by the
Corporation's stockholders was approved by a vote of at least two-
thirds of the directors then still in office who were directors at
the beginning of such period) cease for any reason to constitute at
least a majority of the Board of Directors.
(ii) "Disinterested Director" means a director of the
Corporation who is not or was not a party to the Proceeding in
respect of which indemnification is sought by the Indemnitee.
(iii) "Independent Counsel" means a law firm or a member of a
law firm that neither presently is, nor in the past five years has
been, retained to represent: (A) the Corporation or the Indemnitee
in any matter material to either such party or (B) any other party
to the Proceeding giving rise to a claim for indemnification under
this Section B. Notwithstanding the foregoing, the term
"Independent Counsel" shall not include any person who, under the
applicable standards of professional conduct then prevailing under
the Delaware law, would have a conflict of interest in representing
either the Corporation or the Indemnitee in an action to determine
the Indemnitee's rights under this Section B.
6. Severability. If any provision or provisions of this Section B
shall be held to be invalid, illegal or unenforceable for any reason
whatsoever: (i) the validity, legality and enforceability of the remaining
provision of this Section B (including, without limitation, all portions of any
paragraph of this Section B containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby; and (ii)
to the fullest extent possible, the provisions of this Section B (including,
without limitation, all portions of any paragraph of this Section B containing
any such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) shall be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable.
7. Successor Laws, Regulations and Agencies. Reference herein to laws,
regulations or agencies shall be deemed to include all amendments thereof,
substitutions therefor and successors thereto.
ARTICLE VI
General Powers of the Board of Directors
A. Bylaws
The Board of Directors shall have the power to make, alter, amend and
repeal the Bylaws of the Corporation in such form and with such terms as the
Board may determine, subject to the power
11
<PAGE> 12
granted to stockholders to alter or repeal the Bylaws provided under Delaware
law; provided, however, that, notwithstanding any other provision of this
Certificate of Incorporation or any provision of law which might otherwise
permit a lesser vote or no vote the affirmative vote of at least 80 percent of
the total number of authorized directors (whether or not there exist any
vacancies in previously authorized directorships at the time any such
alteration, amendment or repeal is presented to the Board for adoption), shall
be required to alter, amend or repeal any provision of the Bylaws which is to
the same effect as any one or more sections of this Article VI.
12
<PAGE> 13
B. Charter Amendments
Subject to the provisions hereof, the Corporation, through its Board of
Directors, reserves the right at any time, and from time to time, to amend,
alter, repeal or rescind any provision contained in this Restated Certificate
of Incorporation in the manner now or hereinafter prescribed by law, and any
other provisions authorized by Delaware law at the time enforced may be added
or inserted, in the manner now or hereinafter prescribed by law; and any and
all rights, preferences and privileges of whatsoever nature conferred upon
stockholders, directors or any other persons whomsoever by and pursuant to this
Restated Certificate of Incorporation in its present form or as hereinafter
amended are granted subject to the rights reserved in this Article.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been
signed under the Seal of the Corporation this 28th day of November, 1995.
<TABLE>
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THE COLUMBIA GAS SYSTEM, INC.
Attest: \ s\ C. A. Afshar By: \s\ M. W. O'Donnell
------------------------------- ------------------------------------
Secretary Senior Vice President and Chief
Financial Officer
[SEAL]
</TABLE>
13
<PAGE> 1
EXHIBIT 10-AF
THE RECORDATION OF THIS INSTRUMENT IS
PURSUANT TO A PLAN CONFIRMED UNDER SECTION
1129 OF 11 U.S.C. SECTION 101 ET. SEQ., AND
PURSUANT TO 11 U.S.C. SECTION 1146 (c), MAY NOT BE
TAXED UNDER ANY LAW IMPOSING A STAMP OR
SIMILAR TAX
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
INDENTURE OF MORTGAGE
And
DEED OF TRUST
By
COLUMBIA GAS TRANSMISSION CORPORATION
To
WILMINGTON TRUST COMPANY, as Trustee
Dated
As Of November 28, 1995
-----------------------
First Mortgage Bonds
-----------------------
This Indenture Is a Mortgage of Both Real and
Personal Property, Including Chattels, and also
Constitutes, Among Other Things, a Security Agreement
Creating a Security Interest in Personal Property.
This Indenture Contains After-Acquired Property
Provisions.
A CREDIT LINE DEED OF TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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<PAGE> 2
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ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION . . . . . . . . . . . . . . . . . . . . . 7
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Accountant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Accounting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Board Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Bondholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
CGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Company Consent, Company Order and Company Request . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Excepted Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Interest Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Permitted Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Pledged Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Property Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Responsible Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Restated Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Series A Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Series A Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Series G Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Series G Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Trust Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Trust Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Vice President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
SECTION 1.02. Notices. etc.. to Trustee and Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
SECTION 1.03. Notices to Bondholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
SECTION 1.04. Effect of Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
SECTION 1.05. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
SECTION 1.06. Separability Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
SECTION 1.07. Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
</TABLE>
3
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<TABLE>
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SECTION 1.08. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
SECTION 1.09. One Instrument . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
ARTICLE TWO BOND FORMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
SECTION 2.01. Forms Generally. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
ARTICLE THREE THE BONDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
SECTION 3.01. General Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
SECTION 3.02. General Limitations; Issuable in Series . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
SECTION 3.03. Terms of Particular Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
SECTION 3.04. Execution. Authentication. Delivery and Dating . . . . . . . . . . . . . . . . . . . . . . . . .16
SECTION 3.05. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
ARTICLE FOUR TERMS AND ISSUE OF SERIES A BONDS AND SERIES G BONDS . . . . . . . . . . . . . . . . . . . . . .17
SECTION 4.01. Specific Title, Terms and Forms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
SECTION 4.02. Prepayment and Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
SECTION 4.03. Increase and Decrease of Principal Amount of Series A Bonds. . . . . . . . . . . . . . . . . . .17
SECTION 4.04. Default Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
ARTICLE FIVE AUTHENTICATION AND DELIVERY OF ADDITIONAL BONDS . . . . . . . . . . . . . . . . . . . . . . . . .18
SECTION 5.01. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
ARTICLE SIX POSSESSION. USE AND RELEASE OF THE TRUST ESTATE . . . . . . . . . . . . . . . . . . . . . . . . .20
SECTION 6.01. Possession by Company; Dispositions Without Release . . . . . . . . . . . . . . . . . . . . . .20
SECTION 6.02. Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
SECTION 6.03. Eminent Domain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
SECTION 6.04. Powers Exercisable Notwithstanding Event of Default . . . . . . . . . . . . . . . . . . . . . .23
SECTION 6.05. Powers Exercisable by Trustee or Receiver . . . . . . . . . . . . . . . . . . . . . . . . . . .23
SECTION 6.06. Purchaser Protected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
SECTION 6.07. Disposition of Obligations Received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
ARTICLE SEVEN APPLICATION OF TRUST MONEYS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
SECTION 7.01. "Trust Moneys" Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
SECTION 7.02. Withdrawal of Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
SECTION 7.03. Powers Exercisable Notwithstanding Event of Default . . . . . . . . . . . . . . . . . . . . . .25
SECTION 7.04. Powers Exercisable by Trustee or Receiver . . . . . . . . . . . . . . . . . . . . . . . . . . .26
ARTICLE EIGHT DISCHARGE OF RESTATED INDENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
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SECTION 8.01. Payment of Indebtedness; Satisfaction and Discharge of Restated Indenture. . . . . . . . . . .26
ARTICLE NINE REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
SECTION 9.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
SECTION 9.02. Acceleration of Maturity; Rescission and Annulment . . . . . . . . . . . . . . . . . . . . . . .28
SECTION 9.03. Entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
SECTION 9.04. Power of Sale; Suits for Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
SECTION 9.05. Incidents of Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
SECTION 9.06. Covenant To Pay Trustee Amounts Due on Bonds and Right of Trustee to
Judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
SECTION 9.07. Application of Money Collected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
SECTION 9.08. Receiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
SECTION 9.09. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
SECTION 9.10. Trustee May Enforce Claims Without Possession of Bonds . . . . . . . . . . . . . . . . . . . . .33
SECTION 9.11. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
SECTION 9.12. Unconditional Right of Bondholders To Receive Principal, Premium and
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
SECTION 9.13. Restoration of Positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
SECTION 9.14. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
SECTION 9.15. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
SECTION 9.16. Control by Bondholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
SECTION 9.17. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
SECTION 9.18. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
SECTION 9.19. Waiver of Appraisement and Other Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
SECTION 9.20. Suits To Protect the Trust Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
SECTION 9.21. Remedies Subject to Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
ARTICLE TEN THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
SECTION 10.01. Certain Duties and Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
SECTION 10.02. Notice of Events of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
SECTION 10.03. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
SECTION 10.04. Not Responsible for Recitals or Issuance of Bonds or Application of
Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
SECTION 10.05. May Hold Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
SECTION 10.06. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
SECTION 10.07. Compensation and Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
SECTION 10.08. Corporate Trustee Required; Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
SECTION 10.09. Resignation and Removal; Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . .40
SECTION 10.10. Acceptance of Appointment by Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
SECTION 10.11. Merger. Conversion. Consolidation or Succession to Business . . . . . . . . . . . . . . . . . .42
SECTION 10.12. Cotrustees and Separate Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
SECTION 10.13. Reports to Bondholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
SECTION 10.14. Limitations on Actions of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
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ARTICLE ELEVEN CONSOLIDATION. MERGER. CONVEYANCE. TRANSFER OR LEASE . . . . . . . . . . . . . . . . . . . . .44
SECTION 11.01. Consolidation. Merger. Conveyance or Transfer Only on Certain Terms . . . . . . . . . . . . . .44
SECTION 11.02. Successor Corporation Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
SECTION 11.03. Limitation on Lease of Trust Estate as Entirety . . . . . . . . . . . . . . . . . . . . . . . .46
ARTICLE TWELVE SUPPLEMENTAL INDENTURES AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
SECTION 12.01. Supplemental Indentures Without Consent of Bondholders . . . . . . . . . . . . . . . . . . . .46
SECTION 12.02. Supplemental Indentures with Consent of Bondholders . . . . . . . . . . . . . . . . . . . . . .47
SECTION 12.03. Execution of Supplemental Indentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
SECTION 12.04. Effect of Supplemental Indentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
SECTION 12.05. Reference in Bonds to Supplemental Indentures. . . . . . . . . . . . . . . . . . . . . . . . .49
ARTICLE THIRTEEN COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
SECTION 13.01. Payment of Principal, Premium and Interest . . . . . . . . . . . . . . . . . . . . . . . . . .49
SECTION 13.02. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
SECTION 13.03. Money for Bond Payments To Be Held in Trust; Repayment of Unclaimed
Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
SECTION 13.04. Warranty of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
SECTION 13.05. After-Acquired Property; Further Assurances; Recording . . . . . . . . . . . . . . . . . . . .50
SECTION 13.06. Limitations on Liens; Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
SECTION 13.07. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
SECTION 13.08. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
SECTION 13.09. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
SECTION 13.10. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
SECTION 13.11. Use of Trust Moneys and Advances by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . .53
SECTION 13.12. Statement as to Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
SECTION 13.13. Waiver of Provisions. Covenants and Conditions . . . . . . . . . . . . . . . . . . . . . . . .54
ARTICLE FOURTEEN REDEMPTION OF BONDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
SECTION 14.01. General Applicability of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
SECTION 14.02. Election to Redeem; Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
SECTION 14.03. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
SECTION 14.04. Bonds Payable on Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
SECTION 14.05. Bonds Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
ARTICLE FIFTEEN PLEDGED CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
SECTION 15.01. Performance of Pledged Contracts; No Assumption by Trustees; Notice of
Claimed Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
SECTION 15.02. Rights as to Pledged Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
SECTION 15.03. Amendment. etc. of Pledged Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
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SECTION 15.04. Third Parties Protected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
SECTION 15.05. Maintenance of Records Pertaining to Pledged Contracts; Company's Chief
Place of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
EXHIBIT A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
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THIS AMENDED AND RESTATED INDENTURE dated as of November , 1995
(the "Restated Indenture") between COLUMBIA GAS TRANSMISSION
CORPORATION, a Delaware corporation (the "Company"), and
WILMINGTON TRUST COMPANY, a Delaware corporation (in its
capacity hereunder, the "Trustee").
This Restated Indenture secures an obligation that may increase
and decrease from time to time.
Recitals of the Company
The Company and the Trustee heretofore have entered into an
Indenture of Mortgage and Deed of Trust dated August 30, 1985 (as supplemented,
the "Original Indenture") and wish by this instrument (the "Restated
Indenture") to amend and restate the same in its entirety.
Immediately prior to the date hereof, the only Bonds outstanding
under the Original Indenture were Series A, Series B, Series D, Series E and
Series F, all of which are owned by CGS and all of which are concurrently
herewith being surrendered by the Company for cancellation in consideration of
the issuance to CGS of the Bonds provided for in Article Four of this Restated
Indenture as more fully set forth therein.
The Company has duly authorized the execution and delivery of
this Restated Indenture and the creation, execution and delivery of the Bonds
provided for by Article Four hereof and the creation, execution and delivery
from time to time and at any time of additional Bonds of substantially the
tenor herein provided issuable in one or more series in an aggregate principal
amount not to exceed $3,000,000,000 at any time outstanding. To secure the
Bonds and to provide for their authentication and delivery by the Trustee, the
Company has duly authorized the authentication and delivery of this Restated
Indenture.
All things have been done which are necessary to make the Bonds,
when executed by the Company and authenticated and delivered by the Trustee
hereunder and duly issued by the Company, the valid obligations of the Company,
and to constitute this Restated Indenture a valid mortgage and deed of trust
and a security agreement and contract for the security of the Bonds, in
accordance with the terms of the Bonds and this Restated Indenture.
GRANTING CLAUSES
NOW, THEREFORE, THIS RESTATED INDENTURE WITNESSETH, that, to
secure the payment of the principal of, premium, if any, and interest on the
Bonds and the performance of the covenants therein and herein contained and to
declare the terms and
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<PAGE> 8
conditions on which the Bonds are secured, and in consideration of the
premises, of the purchase of the Bonds by the holders thereof of $100 in hand
paid and of other good and valuable consideration, and intending to be legally
bound hereby, the Company by these presents does grant, bargain, sell, alien,
remise, release, convey, assign, transfer, mortgage, hypothecate, pledge, set
over and confirm to the Trustee, all property, rights, privileges and
franchises of the Company of every kind and description, real, personal or
mixed, tangible and intangible, whether now owned or hereafter acquired by the
Company, wherever located, and grants a security interest therein for the
purposes herein expressed, except any Excepted Property hereinafter expressly
excepted from the lien hereof, and including the following:
GRANTING CLAUSE I
General Property
All premises, property, rights and franchises of the Company now
or hereafter owned, constructed or acquired, of every character whatever and
wherever situated, except as hereinafter expressly excepted in the Excepted
Property Clause, including, among other things, and without limitation, those
referred to in the following Granting Clauses (reference to or enumeration of
any particular kind, class or item of property shall not be deemed to exclude
from the operation and effect of this Restated Indenture any kind, class or
item not so referred to or enumerated).
GRANTING CLAUSE II
Property and Rights Specifically Described
All real property and interests therein, including, without
limitation, leaseholds, easements, gas or oil exploration leases and similar
interests, gas, oil or other mineral production leases, exploratory wells,
production wells, gas storage leases, gas storage reservoirs, gas storage
wells, rights-of-way and pipelines laid thereon and all franchises,
certificates of public convenience and necessity, immunities, privileges,
permits, licenses, consents, grants, ordinances and leaseholds, specifically
described in Schedule I annexed hereto, or which may be added to or included in
such Schedule I by supplemental indentures or Property Certificates, except as
expressly excepted therein.
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GRANTING CLAUSE III
Personal Property
All systems, facilities and plants for the manufacturing,
purchasing, gathering, treating, processing, transmitting, distributing,
liquefying, regasifying, extracting, storing, selling and supplying of gas or
liquid hydrocarbons; all plants, office and other buildings, structures,
erections and works, together with their fixtures and appurtenances; all pumps,
pumping stations, compressors, compressor stations, reservoirs, boilers, boiler
houses, tanks, gates, mains, pipelines (main, branch, lateral, extension, loop,
tap, plant, gathering and all other types), service laterals, pipes, tunnels,
sewerage lines, field lines, telephone and telegraph lines, microwave and other
communications systems and equipment, power lines, poles, wires, generators,
electrical and electronic equipment, conduits, fittings, casings, valves,
reducers, gauges, regulators, protection units, cathodic protection systems,
bypasses, scrubbers, service and other connections, meters, meter
installations, meter stations, regulating stations, measuring stations and all
other stations; all measuring, regulating and control equipment, and all other
equipment, machinery, facilities, materials, supplies and tools; all line pack
gas, all cushion gas; all gas storage well equipment; all other property, of
every character and wherever situated, now or hereafter owned or acquired by
the Company, which now or hereafter is or may be used or intended for use by
the Company; and all proceeds of any of the foregoing; but, as to all such
property, except as hereinafter expressly excepted in the Excepted Property
Clause.
GRANTING CLAUSE IV
Rights-of-Way. Easements. Franchises and Other Rights
All rights-of-way for pipeline and related purposes and all
other rights-of-way, easements, and franchises of every character whatever, and
all certificates of public convenience and necessity, immunities, privileges,
permits, licenses, easements, consents, grants, ordinances and leaseholds, of
every character whatever, and all renewals, extensions, additions, amendments,
modifications, proceeds and replacements of any of the foregoing; in each case
whether now owned, held or enjoyed or hereafter acquired, owned, held or
enjoyed by the Company; but, as to all such property, only to the extent
permitted by law and except as hereinafter expressly excepted in the Excepted
Property Clause.
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GRANTING CLAUSE V
Pledged Contracts
All right, title and interest of the Company in, to and under
all contracts and agreements for the purchase or other acquisition, sale or
other disposition, exchange or transportation of gas or arising out of (by way
of settlement or otherwise) any of the foregoing to which the Company is or may
become a party, and in, to and under all extensions, additions, amendments and
modifications thereof, together with all proceeds thereof, and all rights,
remedies and claims of the Company under or in respect thereof, whether now
existing or hereafter arising.
GRANTING CLAUSE VI
Further Property Conveyed to Trustee
All property, of every character whatever, which from time to
time after the date of this Restated Indenture may be delivered, or may by
writing of any kind be conveyed, mortgaged, pledged, assigned or transferred to
the Trustee by the Company or by any other Person with the consent of the
Company to be held as part of the Trust Estate, except as hereinafter expressly
excepted in the Excepted Property Clause, and the Trustee is hereby authorized
to receive any such property and any such conveyance, mortgage, pledge,
assignment or transfer, as and for additional security hereunder, and to hold
and apply such property subject to and in accordance with the terms of this
Restated Indenture.
GRANTING CLAUSE VII
Other and After-Acquired Property
All other property, of every character whatever, which the
Company now owns and which it may hereafter acquire, except as hereinafter
expressly excepted in the Excepted Property Clause, and the Trustee is hereby
authorized to receive any such property, as and for additional security
hereunder, and to hold and apply the same subject to and in accordance with the
terms of this Restated Indenture.
GRANTING CLAUSE VIII
Appurtenances and Income
All the tenements, hereditaments and appurtenances belonging or
in any way pertaining to the above-mentioned premises, property, franchises,
rights, contracts and agreements or any part thereof, with all reversions and
remainders thereof, and, to the extent permitted by law and subject to the
applicable terms of this Restated Indenture, all tolls, rents, revenues,
issues, income, products, proceeds and profits thereof, and all the estate,
right, title, interest and claim whatever at law or in equity which the Company
now has or may hereafter
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<PAGE> 11
acquire in and to the same, except as hereinafter expressly excepted in the
Excepted Property Clause.
EXCEPTED PROPERTY CLAUSE
EXCEPTING, HOWEVER, from the lien, operation and effect of this
Restated Indenture, all of the following property ("Excepted Property"),
whether now owned by the Company or hereafter acquired by it:
(a) all cash on hand or in banks, and all certificates of
deposit, bills, notes and accounts receivable, other than accounts
receivable and proceeds arising under the Pledged Contracts;
(b) all contracts (other than the Pledged Contracts);
(c) all office furniture and equipment, licensed
automobiles, trucks and trailers, tank cars, airplanes, mobile
transportation and work equipment, stores equipment, shop equipment,
laboratory equipment, tools and other work equipment and mobile
communications equipment;
(d) all materials, merchandise, appliances and supplies
acquired for the purpose of resale or for leasing to customers or for
promotional or educational use, in each case in the ordinary course of
business of the Company; all gas, oil, coal and fuel consumable in
their use in the ordinary course of the business of the Company and
all materials, stores and supplies not installed as part of the real
or fixed property of the Company and consumable in their use in the
ordinary operation of the business of the Company; provided, however,
that materials, equipment and supplies acquired to be installed as
part of the real or fixed property of the Company shall not constitute
Excepted Property;
(e) the last day of each lease to the Company which is
subject to the lien of this Restated Indenture;
(f) any property expressly excepted in the description of
real property and interests therein contained in Schedule I hereto;
other than any of the foregoing which at any time hereafter may be specifically
transferred or assigned to or pledged or deposited with the Trustee hereunder
or required by the terms of this Restated Indenture so to be; provided,
however, that:
(i) if, upon the occurrence of an Event of
Default, the Trustee, or any separate trustee or cotrustee
appointed under Section 10.12 or any receiver or similar
officer appointed pursuant to statutory provision or order of
court, shall have entered into possession of all or
substantially all of the Trust Estate, all the Excepted
Property described or referred to in the foregoing
Subdivisions (a) through (d) and in Subdivision (f), then
owned or thereafter acquired by the
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<PAGE> 12
Company shall immediately become subject to the lien hereof to
the extent permitted by law, and the Trustee or such other
trustee or receiver or similar officer may, to the extent
permitted by law, at the same time likewise take possession
thereof, and
(ii) whenever all Events of Default shall have
been cured and the possession of all or substantially all of
the Trust Estate shall have been restored to the Company, such
Excepted Property shall again be excepted and excluded from
the lien hereof to the extent and otherwise as hereinabove set
forth.
TO HAVE AND TO HOLD all such property, rights, privileges and
franchises of every kind and description, real, personal or mixed, hereby and
hereafter (by supplemental indenture, Property Certificate or otherwise)
granted, bargained, sold, aliened, remised, released, conveyed, assigned,
transferred, mortgaged, hypothecated, pledged, set over or confirmed as
aforesaid, or intended, agreed or covenanted so to be, together with all the
appurtenances thereto appertaining (such properties, rights, privileges and
franchises, including any cash and securities hereafter deposited or required
to be deposited with the Trustee (other than any such cash which is
specifically stated herein not to be deemed part of the Trust Estate), being
herein collectively called the "Trust Estate") unto the Trustee and its
successors and assigns forever.
SUBJECT, HOWEVER, to Permitted Encumbrances.
BUT IN TRUST, NEVERTHELESS, for the equal and proportionate
benefit and security of the Bondholders without any priority of any Bond over
any other Bond.
UPON CONDITION that, until the happening of an Event of
Default and subject to the provisions of Article Six, the Company shall be
permitted to possess and use the Trust Estate, except cash, securities and
other personal property deposited and pledged, or required to be deposited and
pledged, with the Trustee for any lawful purpose, and to receive and use the
rents, issues, profits, revenues and other income of the Trust Estate.
AND IT IS HEREBY COVENANTED AND DECLARED that all the Bonds
are to be authenticated and delivered, and the Trust Estate is to be held and
applied by the Trustee, subject to the further covenants, conditions and trusts
hereinafter set forth, and the Company does hereby covenant and agree to and
with the Trustee, for the equal and proportionate benefit of all Bondholders as
follows:
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ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 1.01. Definitions. For all purposes of this Restated
Indenture (including the recitals hereto), except as otherwise expressly
provided or unless the context otherwise requires:
(a) The terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the
singular.
(b) All accounting terms not otherwise defined herein
have the meanings assigned to them, and all computations herein
provided for shall be made, in accordance with generally accepted
accounting principles. In determining generally accepted accounting
principles, the Company may conform to any order, rule or regulation
of any regulatory authority having jurisdiction over the Company.
(c) All references herein to "generally accepted
accounting principles" refer to such principles as they exist at the
date of applicability thereof.
(d) All references in this instrument to designated
"Articles", "Sections" and other subdivisions are to the designated
Articles, Sections and other subdivisions of this instrument as
originally executed.
(e) The words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Restated Indenture as a
whole and not to any particular Article, Section or other subdivision.
"Accountant" means a Person engaged in the practice of
accounting who (except as otherwise expressly provided in this Restated
Indenture) may be employed by or affiliated with the Company.
"Accounting Requirements" means the Uniform System of Accounts
for major natural gas companies as prescribed by the Federal Energy Regulatory
Commission as at any time in effect or any substitute system of accounts
prescribed by such Commission or any successor commission. In the absence of
any system of accounts so provided, "Accounting Requirements" shall mean the
requirements of generally accepted accounting principles applicable to
corporations conducting businesses similar to that of the Company.
"Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person.
"Board of Directors" means either the board of directors of
the Company or any duly authorized committee or delegate of such board.
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<PAGE> 14
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly
adopted by the Board of Directors, and to be in full force and effect on the
date of such certification, and delivered to the Trustee.
"Bondholder" means a holder of a Bond.
"Bonds", except where the context indicates a reference to
Bonds issued under the Original Indenture, means any Bond issued, authenticated
and delivered hereunder.
"Business Day" means any day on which banks are open for
business in New York, New York and in Wilmington, Delaware.
"Bylaws" means the Bylaws of the Company as amended from time
to time.
"CGS" means The Columbia Gas System, Inc., a Delaware
corporation, and its successors and assigns.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions of this Restated Indenture, and,
thereafter, except to the extent otherwise contemplated by Section 11.02(c),
"Company" shall mean such successor corporation.
"Company Consent", "Company Order" and "Company Request" mean,
respectively, a written consent, order or request signed in the name and on
behalf of the Company by the Chairman of the Board, the President, a Vice
President, the Treasurer, any Assistant Treasurer, the Controller, any
Assistant Controller, the Secretary or any Assistant Secretary of the Company,
and delivered to the Trustee.
"Default" means an event which, after notice or lapse of time
or both, would become an Event of Default.
"Event of Default" has the meaning stated in Article Nine. An
Event of Default shall "exist" if an Event of Default shall have occurred and
be continuing.
"Excepted Property" has the meaning stated in the Granting
Clauses.
"Interest Payment Date" means, with respect to the Bonds of
any series, the date on which interest on such Bonds is payable.
"Officer" means the President, any Vice President, the
Treasurer, the Secretary, the Controller, any Assistant Treasurer, any
Assistant Secretary, and Assistant Controller, or any officers of the Company
designated by Board Resolution or the Bylaws.
"Officers' Certificate" means a certificate signed in the name
and on behalf of the Company by any two Officers of the Company and delivered
to the Trustee. Wherever this
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Restated Indenture requires that an Officers' Certificate be signed also by an
Accountant or other expert, such Accountant or other expert may (except as
otherwise expressly provided in this Restated Indenture) be in the employ of
the Company and shall be acceptable to the Trustee.
"Opinion of Counsel" means a written opinion of counsel who
may (except as otherwise expressly provided in this Restated Indenture) be
counsel for the Company and shall be acceptable to the Trustee. Any Opinion of
Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Company stating that the information with respect to such factual matters is in
the possession of the Company, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous. Any Opinion of Counsel may be
subject to qualification due to bankruptcy, insolvency or other similar laws
and due to limitations imposed by other applicable laws on the availability of
certain remedial provisions, so long as such laws do not materially impair the
practical realization of the benefits intended to be provided thereby. Any
Opinion of Counsel may be based on opinions of other counsel deemed by him to
be reliable.
"Permitted Encumbrances" means:
(i) as to the property specifically described in Granting
Clause II or any supplemental indenture or Property Certificate, the
restrictions, exceptions, reservations, conditions, limitations,
interests and other matters to which such property is stated to be
subject; provided, however, that such matters do not in the aggregate
materially detract from the value of the Trust Estate taken as a whole
and do not materially impair the use of such property for the purposes
for which it is held by the Company;
(ii) liens for taxes, assessments and other governmental
charges not delinquent;
(iii) liens for taxes, assessments and other governmental
charges already delinquent which are currently being contested in good
faith by appropriate proceedings and as to which the Company shall
have set aside on its books adequate reserves with respect thereto;
(iv) mechanics' and materialmen's liens not filed of
record and similar charges not delinquent that are incident to current
construction, and mechanics' and materialmen's liens incident to such
construction which are filed of record but which are being contested
in good faith and have not proceeded to judgment and as to which the
Company shall have set aside on its books adequate reserves with
respect thereto;
(v) mechanics', workmen's, repairmen's, materialmen's,
warehousemen's and carriers' liens and other similar liens arising in
the ordinary course of business for charges which are not delinquent,
or which are being contested in good faith and have not proceeded to
judgment and as to which the Company shall have set aside on its books
adequate reserves with respect thereto;
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(vi) liens in respect of judgments or awards (aa) with
respect to which the Company shall in good faith currently be
prosecuting an appeal or proceedings for review and with respect to
which the Company shall have secured a stay of execution pending such
appeal or proceedings for review and as to which the Company shall
have set aside on its books adequate reserves with respect thereto or
(bb) held by an Affiliate which has agreed in writing not to enforce
the same, so long as such agreement is in effect;
(vii) leases, easements and rights granted by the Company
under Section 6.01(b) (iv) and similar rights heretofore granted by
the Company or by any predecessor in title of the Company;
(viii) easements, leases, reservations or other rights of
others in any property of the Company for streets, roads, bridges,
pipes, pipelines, railroads, electric transmission and distribution
lines, telegraph and telephone lines, the removal of oil, gas, coal or
other minerals, grazing, logging and other similar purposes, flood
rights, river control and development rights, sewage and drainage
rights, restrictions against pollution and zoning laws and minor
defects and irregularities in the record evidence of title; provided,
however, that such easements, leases, reservations, rights,
restrictions, laws, defects and irregularities do not in the aggregate
materially impair the use of the Trust Estate taken as a whole for the
purposes for which it is held by the Company;
(ix) liens securing indebtedness neither created, assumed
nor guaranteed by the Company nor on account of which it customarily
pays interest, existing at the date of this instrument, or, as to
property hereafter acquired, at the time of acquisition by the
Company, which liens do not materially impair the use of such property
for the purposes for which they are held by the Company;
(x) leases existing at the date of this instrument
affecting property owned by the Company at such date and leases
affecting property acquired by the Company after such date, which
leases do not in the aggregate materially impair the use of the Trust
Estate taken as a whole for the purposes for which it is held by the
Company;
(xi) any lien or privilege vested in any lessor, licensor
or permittor for rent to become due or for other obligations or acts
to be performed, the payment of which rent or the performance of which
other obligations or acts is required under leases, subleases,
licenses or permits, so long as the payment of such rent or the
performance of such other obligations or acts is not delinquent or is
being contested in good faith and the Company shall have set aside on
its books adequate reserves with respect thereto;
(xii) liens or privileges of any employees of the Company
for salary or wages earned but not yet payable;
(xiii) the burdens of any law or governmental regulation or
permit requiring the Company to maintain certain facilities or perform
certain acts as a condition of its
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occupancy of or interference with any public lands or any river or
stream or navigable waters;
(xiv) any irregularities in or deficiencies of title to any
rights-of-way for pipelines, appurtenances thereto, or other
improvements thereon, to any real estate used or to be used primarily
for right-of-way purposes and to any gas production or storage leases;
provided, however, that (aa) the Company shall have obtained from the
apparent owner of the lands or estates therein covered by any such
right-of-way or leasehold a sufficient right, by the terms of the
instrument granting such right-of-way or leasehold, to the use thereof
for the construction, operation or maintenance of the lines,
appurtenances or improvements, or for the production or storage of
gas, as the case may be, for which the same are used or are to be
used, or (bb) the Company shall have power under eminent domain, or
similar statutes, to remove such irregularities or deficiencies;
(xv) rights reserved to, or vested in, any municipality or
governmental or other public authority to control or regulate any
property of the Company, or to use such property in any manner, which
rights do not materially impair the use of such property for the
purposes for which it is held by the Company;
(xvi) any obligations or duties, affecting the property of
the Company, to any municipality or governmental or other public
authority with respect to any franchise, grant, license or permit;
(xvii) any right which any municipal or governmental
authority may have by virtue of any franchise, license, contract or
statute to purchase, or designate a purchaser of or order the sale of,
any property of the Company upon payment of cash or reasonable
compensation therefor or to terminate any franchise, license or other
rights or to regulate the property and business of the Company;
(xviii) the rights of a common owner of any interest in real
estate held by the Company and such common owner as tenants in common
if (aa) such rights do not materially interfere with the proper use or
operation of the property so owned and (bb) the agreements, covenants
and restrictions in respect of such property do not expressly restrict
or limit any rights of the Trustee upon the occurrence or continuance
of a Default or Event of Default; and
(xix) any right which any Person may have by virtue of any
production lease, farm-in, farm-out or other arrangement (including
any arrangement providing for the acquisition by such Person of any
such right over time in consideration of services performed or to be
performed) to produce gas, oil or other minerals which the Company may
have the right to remove.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or other legal entity or government or any agency
or political subdivision thereof.
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"Pledged Contracts" means the contracts or agreements
described in Granting Clause V.
"Property Certificate" means any instrument and any amendments
thereto filed, recorded or registered in any jurisdiction describing property
of the Company to make effective the lien of this Restated Indenture on any
property required to be subjected to the lien hereof.
"Responsible Officer" when used with respect to the Trustee
means the chairman or vice chairman of the Board of Directors of the Trustee,
the chairman or vice chairman of the executive committee of said board, the
president, any vice president, the secretary, any assistant secretary, the
treasurer, any assistant treasurer, the cashier, any assistant cashier, any
trust officer or assistant trust officer, the controller, any assistant
controller or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other officer
of the Trustee to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Restated Indenture" means this instrument as originally
executed or as it may from time to time be supplemented, modified or amended by
one or more instruments supplemental hereto entered into pursuant to the
applicable provisions hereof.
"SEC" means the Securities and Exchange Commission of the
United States or any successor agency performing similar functions.
"Series A Bonds" means the First Mortgage Bonds, Series A,
created by Article Four of this Restated Indenture.
"Series A Rate" means, if no default has occurred and is
continuing, the interest rate charged on any credit facility entered into by
CGS to fund advances made by CGS under the Series A Bonds, if any, or if there
shall be no such facility, the composite weighted average daily cost or yield
to CGS for its external money market transactions, short-term borrowings or
short-term investments, or, if no such borrowings or investments shall be
outstanding, the daily rate published in The Wall Street Journal for 30-day
commercial paper notes sold through dealers by major corporations, all as from
time to time furnished by CGS to the Company and the Trustee;
"Series G Bonds" means the First Mortgage Bonds, Series G,
created by Article Four of this Restated Indenture:
"Series G Rate" means, if no default has occurred and is
continuing, the actual cost of money to CGS for its most recent sale of long
term debt for the calendar quarter preceding the first issuance of the Series
G Bonds, as furnished by CGS to the Company and the Trustee, or if no such
issuance occurred during the previous calendar quarter, a benchmark rate,
which shall be mutually agreed upon by the Company and CGS, and such mutually
agreed benchmark rate to be identified in the Board Resolutions adopted by the
Company authorizing the issuance of Series G Bonds.
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"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee, if any, shall have
become such pursuant to the applicable provisions of this Restated Indenture.
Thereafter "Trustee" shall mean such successor Trustee.
"Trust Estate" has the meaning stated in the habendum to the
Granting Clauses.
"Trust Moneys" has the meaning stated in Section 7.01.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word added to the title.
SECTION 1.02. Notices. etc.. to Trustee and Company Any
request, demand, authorization, direction, notice, consent, waiver or other
document provided or permitted by this Restated Indenture to be made upon,
given or furnished to, or filed with:
(a) the Trustee by any Bondholder or by the Company shall
be sufficient for every purpose hereunder if made, given, furnished or
filed in writing (which may be by means of confirmed telex or
facsimile transmission) to or with the Trustee addressed to it at
Rodney Square North
1100 North Market Street
Wilmington, New Castle County, Delaware 19890
Attention: Corporate Trust Administration
Telephone: (302) 651-1324
Telecopy: (302) 651-8882
(b) the Company by the Trustee or by any Bondholder shall
be sufficient for every purpose hereunder if made, given, furnished or
filed in writing (which may be by means of confirmed telex or
facsimile transmission) to the Company addressed to it at
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P.O. Box 1273
1700 MacCorkle Avenue SE
Charleston, Kanawha County,
West Virginia 25314
Attention: Treasurer
Telephone: (304) 357-2546
Telecopy: (304) 357-2000
or, except as otherwise provided by law, at any other address
previously furnished in writing to the Trustee by the Company.
SECTION 1.03. Notices to Bondholders. Where this Restated
Indenture provides for notice to Bondholders of any event, such notices shall
be sufficiently given (unless otherwise herein expressly provided) if in
writing and sent by confirmed telex, confirmed facsimile transmission or
confirmed telecopy or by mail, first-class postage prepaid, to the address
furnished by each Bondholder to the Company and the Trustee.
SECTION 1.04. Effect of Headings and Table of Contents. The
Article and Section headings herein and in the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 1.05. Successors and Assigns. All covenants and
agreements in this Restated Indenture by the Company shall, subject to Section
11.02(b), bind its successors and assigns, whether so expressed or not.
SECTION 1.06. Separability Clause. In case any provision in
this Restated Indenture or in the Bonds shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 1.07. Benefits of Indenture. Nothing in this
Restated Indenture or in the Bonds, express or implied, shall give to any
Person, other than the parties hereto and their successors hereunder, any
separate trustee or cotrustee appointed under Section 10.12 and the
Bondholders, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
SECTION 1.08. Governing Law. This Restated Indenture shall
be construed and applied in accordance with and governed by the laws of the
State of Delaware, except insofar as Delaware law requires the application of
the laws of another jurisdiction.
SECTION 1.09. One Instrument. This Restated Indenture,
including the cover page hereof, shall constitute but one instrument even
though, to comply with applicable laws and to facilitate recording, an original
counterpart hereof recorded or filed in any jurisdiction may contain additional
or different information on the cover page hereof to reflect the requirements
of such laws or may omit the portions of Schedule I hereto which describe
property situated in jurisdictions other than the jurisdiction in which such
counterpart is recorded or filed.
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ARTICLE TWO
Bond Forms
SECTION 2.01. Forms Generally. The Series A Bonds, the
Series G Bonds and the Trustee's certificate of authentication shall be
substantially in the forms set forth in Exhibit A annexed hereto. Any portion
of the text of any Bond may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Bond.
The Bonds of any subsequent series and the corresponding
Trustee's certificate of authentication shall be in the forms specified by the
Board Resolution creating such series.
The Bonds shall be typewritten, printed, lithographed,
engraved or produced by any combination of these methods, all as determined by
the officers executing such Bonds as evidenced by their execution thereof.
ARTICLE THREE
The Bonds
SECTION 3.01. General Title. The general title of the Bonds
of all series shall be "FIRST MORTGAGE BONDS".
SECTION 3.02. General Limitations; Issuable in Series. The
aggregate principal amount of Bonds which may be authenticated and delivered
under this Restated Indenture is not limited, except as provided in Articles
Four and Five and the Board Resolution creating any series of Bonds.
The Bonds may be issued in series as from time to time
authorized by the Board of Directors.
With respect to the Bonds of any particular series, the
Company may incorporate in or add to the general title of such Bonds any words,
letters or figures designed to distinguish that series.
SECTION 3.03. Terms of Particular Series. Each series of
Bonds, except the Series A Bonds and the Series G Bonds created by Article
Four, shall be created by Board Resolution establishing the terms and
provisions of such series of Bonds and the form of the Bonds of such series.
The several series of Bonds may differ as between series in any respect not in
conflict with the provisions of this Restated Indenture and as may be
prescribed in the Board Resolution creating such series.
All Bonds of the same series shall be substantially identical
except that any series may have serial maturities and different interest rates
for different maturities and except as to denomination.
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SECTION 3.04. Execution. Authentication. Delivery and Dating.
The Bonds shall be executed on behalf of the Company by one of its Officers.
The Company's seal shall be impressed, affixed, imprinted or reproduced on the
Bonds and attested by its Secretary or an Assistant Secretary. Bonds bearing
the manual signatures of individuals who were at any time the proper officers
of the Company shall bind the Company, notwithstanding that such individuals or
any of them shall have ceased to hold such offices prior to the authentication
and delivery of such Bonds or shall not have held such offices at the date of
such Bonds.
At any time and from time to time after the execution and
delivery of this Restated Indenture, the Company may, deliver Bonds executed
by the Company to the Trustee for authentication, and the Trustee shall
authenticate and deliver such Bonds as provided in this Restated Indenture.
No Bond shall be secured by, or be entitled to any lien, right
or benefit under, this Restated Indenture or be valid or obligatory for any
purpose, unless there appears on such Bond a certificate of authentication
substantially in the form provided for herein, executed by the Trustee by
manual signature, and such certificate upon any Bond shall be conclusive
evidence, and the only evidence, that such Bond has been duly authenticated and
delivered hereunder.
SECTION 3.05. Cancellation. All Bonds surrendered for
payment, redemption, transfer, exchange or conversion, if surrendered to the
Trustee, shall be promptly canceled by it, and, if surrendered to any Person
other than the Trustee, shall be delivered to the Trustee and, if not already
canceled, shall be promptly canceled by it. The Company may at any time
deliver to the Trustee for cancellation any Bonds previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and all Bonds so delivered shall be promptly canceled by the
Trustee. No Bond shall be authenticated in lieu of or in exchange for any Bond
canceled as provided in this Section, except as expressly provided by this
Restated Indenture. All canceled Bonds held by the Trustee shall be disposed
of as directed by a Company Request.
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ARTICLE FOUR
Terms and Issue of Series A Bonds and Series G Bonds
SECTION 4.01. Specific Title, Terms and Forms.
(a) The initial series of Bonds under this Restated
Indenture shall be the "First Mortgage Bonds, Series A" (the "Series A
Bonds") and the "First Mortgage Bonds, Series G" (the "Series G
Bonds"). Such Bonds shall be issued to CGS in consideration of its
surrender for cancellation of all Bonds outstanding under the Original
Indenture immediately prior to the date hereof, and to the extent that
the principal of and accrued interest (including interest on overdue
interest) of such surrendered Bonds exceed the principal of a Series A
and Series G Bonds issued to CGS in consideration of such surrender,
the Company and CGS have by separate agreement provided for the
treatment of such excess as a capital contribution by CGS to the
Company.
(b) The principal amount of the Series A Bonds may, by
endorsement thereon, be increased or decreased as provided herein to
reflect additional borrowing and payment of principal of such
borrowing. Each Series A Bond shall not have a stated maturity, but
all amounts borrowed thereunder from time to time shall be payable in
accordance with the terms of the Series A Bond. The Series A Bonds
shall bear interest, payable on the first Business Day of each month,
from the date of issue thereof and, as to each increase in principal
amount, from the date of such increase, at the Series A Rate until the
principal thereof shall be paid or duly provided for.
(c) The Series G Bonds shall mature on November 28, 2000.
The Series G Bonds shall bear interest, payable on May 28 and November
28, from the date of issuance thereof or from the most recent date to
which interest has been paid or duly provided for at the Series G Rate
until the principal thereof shall be paid or duly provided for. The
principal of the Series G Bonds shall be payable on November 28, 2000.
(d) All payments in respect of the Series A Bonds and the
Series G Bonds shall be payable at the office or agency of the
Bondholder in Wilmington, Delaware or such other place as provided in
the respective Bonds.
SECTION 4.02. Prepayment and Redemption. The Series A Bonds
and the Series G Bonds may be prepaid or redeemed, in whole or in part, at any
time at the election of the Company.
SECTION 4.03. Increase and Decrease of Principal Amount of
Series A Bonds.
(a) The date and amount of each advance or repayment of
principal pursuant to any Series A Bond shall be endorsed, and the
Company hereby authorizes the holder of such Bond to make such
endorsement, on a grid schedule attached to such Bond, but
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<PAGE> 24
failure by such holder to make such endorsement shall not affect the
Company's obligation to repay such advances. Such holder agrees to
furnish to the Trustee and the Company, promptly upon request, a
photocopy of such grid schedule as updated from time to time, and such
holder agrees to revise such schedule to correct any manifest error
thereon.
(b) Upon endorsement of an increase or decrease in
principal amount on any Series A Bond pursuant to this Section, such
Bond as amended shall thereupon be entitled to the benefits of this
Restated Indenture as if such Bond had been originally issued for such
increased or decreased principal amount.
SECTION 4.04 Default Interest. (a) If the Company shall
default in the payment of the principal (and premium, if any) of or interest on
any Series A Bond or any other amount due thereunder, the Company shall on
demand (i) pay interest on overdue amounts of principal (including overdue
premium, if any) at a rate equal to 2% per annum in excess of the applicable
Series A Rate from time to time and (ii) pay interest on overdue amounts of
interest (including on post-default amounts of interest) up to the date of
actual payment (after as well as before judgment) payable daily at a rate equal
to 2% per annum in excess of the applicable Series A Rate from time to time.
(b) If the Company shall default in the payment of the
principal (and premium, if any) of or interest on any Series G Bond or
any other amount due thereunder, the Company shall on demand (i) pay
interest on overdue amounts of principal (including overdue premium,
if any) at a rate equal to 2% per annum in excess of the applicable
Series G Rate then in effect at the time of default and (ii) pay
interest on overdue amounts of interest (including on post-default
amounts of interest) up to the date of actual payment (after as well
as before judgment) payable daily at a rate equal to 2% per annum in
excess of the applicable Series G Rate then in effect at the time of
default.
(c) For any series of Bonds issued hereunder other than
Series A Bonds and Series G Bonds, the terms of default interest for
such series shall be provided in the Bonds of such series and shall
include a default interest rate equal to 2% per annum in excess of
such series' applicable, contractual interest rate from time to time.
ARTICLE FIVE
Authentication and Delivery of Additional Bonds
SECTION 5.01. General Provisions. Additional Bonds of any
one or more series (other than Series A Bonds or Series G Bonds) may from time
to time be approved or executed by the Company and delivered to the Trustee for
authentication, and thereupon the same shall be authenticated and delivered by
the Trustee upon Company Request upon receipt by the Trustee of the following:
(a) A Board Resolution authorizing the issuance of Bonds
of a designated Series, requesting the authentication and delivery
thereof, setting forth the terms and
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<PAGE> 25
provisions thereof and describing the consideration to be received
therefor, which consideration may consist of cash equal to the
principal amount of Bonds, the authentication and delivery of which is
requested, or property, including choses in action, or any other
consideration, including the relinquishment of any right, in which
case the principal amount of such Bonds which may be authenticated and
delivered shall be as mutually agreed by the Company and the purchaser
thereof.
(b) An Officers' Certificate, dated within 30 days of the
date of the relevant Company Request for authentication and delivery,
stating that no Event of Default exists that has not been cured and
that all conditions precedent provided for in this Restated Indenture
relating to the authentication and delivery of such Bonds have been
complied with.
(c) An Opinion of Counsel:
(i) specifying the certificate or other evidence
or cash deposit which will be sufficient to show or provide
for compliance with the requirements, if any, of any tax or
recording or filing law applicable to the issuance of the
Bonds then applied for, or stating that there is no such legal
requirement;
(ii) specifying the certificate or other evidence
which will be sufficient to show the authorization, approval
or consent of or to the issuance of the Bonds then applied for
by any federal, state or other governmental regulatory agency
at the time having jurisdiction in the premises, or stating
that no such authorization, approval or consent is required;
(iii) stating that all conditions precedent
provided for in this Restated Indenture relating to the
authentication and delivery of such Bonds have been complied
with; and
(iv) stating that such Bonds, when executed by the
Company and authenticated and delivered by the Trustee and
when issued by the Company, will be the legal, valid and
binding obligations of the Company enforceable in accordance
with their terms and the terms of this Restated Indenture and
entitled to the benefits of, and secured by, the lien of this
Restated Indenture equally and ratably with all other
then-outstanding Bonds.
(d) The documents and any cash deposit specified in such
Opinion of Counsel, which cash deposit, if any, shall be held by the
Trustee as part of the Trust Estate and applied by the Trustee for the
purpose specified therein and, to the extent that such cash deposit
ultimately proves to be excessive, returned to the Company upon
Company Request.
ARTICLE SIX
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Possession. Use and Release of the Trust Estate
SECTION 6.01. Possession by Company; Dispositions Without
Release. (a) So long as no Event of Default exists, the Company shall be
suffered and permitted, subject to the provisions of this Article, to possess,
use, manage, operate and enjoy the Trust Estate (other than any cash and
securities constituting part of the Trust Estate and deposited with the
Trustee) and to collect, receive, use, invest and dispose of the rents, issues,
tolls, profits, revenues and other income from the Trust Estate, with power, in
the ordinary course of business, freely and without let or hindrance on the
part of the Trustee or of the Bondholders:
(i) to alter, repair and change the position of
any of its plants, warehouses, buildings, works, structures,
machinery, equipment, pipes, pipelines, mains, conduits,
transmission system, distribution system, wells, pumps,
compressors and any other property so long as such
alterations, repairs or changes shall not diminish the value
thereof or impair or otherwise prejudice the lien of this
Restated Indenture thereon, and
(ii) to deal with, exercise any and all rights
under, receive and enforce performance under, and adjust and
settle all matters relating to current performance of, choses
in action, leases and contracts, including Pledged Contracts.
(b) The Company shall have the right, from time to time
if no Event of Default exists, without any release from or consent by
the Trustee:
(i) to sell or otherwise dispose of, free from
the lien of this Restated Indenture, property of any kind in
addition to property referred to in subdivision (b)(i) of this
Section, provided, however, (aa) that the amount of property
which may be sold pursuant to this Subsection shall be limited
to an aggregate fair market value of $20,000,000 in any one
calendar year, as certified by an Officers' Certificate
delivered within 90 days after the end of each calendar year,
and (bb) that such sales or other dispositions will not
materially impair the usefulness of the Trust Estate in the
conduct of the Company's business and will not be prejudicial
to the interests of the Bondholders;
(ii) to abandon, terminate, cancel, release or
make alterations in or substitutions of any leases, contracts
(including Pledged Contracts) or rights-of-way subject to the
lien of this Restated Indenture; provided, however, that (aa)
such action would not materially adversely affect the value
and utility of the Trust Estate as an entirety nor materially
impair or diminish the security for the Bonds and (bb) any
altered or substituted leases, contracts (including Pledged
Contracts) or rights-of-way shall forthwith, without further
action, become subject to the lien of this Restated Indenture
to the same extent as those previously existing;
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(iii) to surrender or modify any franchise, license
or permit subject to the lien of this Restated Indenture which
it may own or under which it may be operating and which is
material; provided, however, that such surrender or
modification shall not materially impair or diminish the
security for the Bonds and will not be prejudicial to the
interests of Bondholders;
(iv) to make any lease as lessor or grant
rights-of-way, easements or licenses and to enter into farmout
agreements, joint venture agreements, participation agreements
and other agreements in the ordinary course of business which
are customary in the gas transmission industry, in respect of
any property in the Trust Estate; provided, however, that such
lease, grant or other agreement will not impair the usefulness
of such property in the conduct of the Company's business and
will not be prejudicial to the interests of the Bondholders;
(v) to demolish, dismantle, tear down or use for
scrap any property in the Trust Estate, or abandon any
thereof, if such demolition, dismantling, tearing down, use or
abandonment is in the best interests of the Company and the
value and utility of the Trust Estate as an entirety and the
security for the Bonds will not thereby be impaired; and
(vi) to alter, repair, replace, change the
location or position of and add to its plants, structures,
machinery, systems, equipment, wells, fixtures and
appurtenances; provided, however, that no change shall be made
in the location of any such property subject to the lien of
this Restated Indenture which removes such property into a
jurisdiction in which this Restated Indenture and any required
financing or continuation statement covering security
interests in such property have not been recorded, registered
or filed in the manner required by law to preserve the lien of
this Restated Indenture on such property or which otherwise
impairs or materially diminishes the lien hereof or which is
prejudicial to the interests of Bondholders.
The Trustee shall, from time to time, execute and deliver to
the Bondholders a written instrument to confirm any action taken by the Company
under this Section, upon receipt by the Trustee of an Officers' Certificate
stating that no Event of Default exists and that such action was duly taken in
conformity with a designated Subsection of this Section.
SECTION 6.02. Releases. (a) The Company shall have the
right, from time to time, to sell or dispose of any part of the Trust Estate
(except cash and other personal property held by, or required to be deposited
or pledged with, the Trustee hereunder). The Trustee shall, from time to time,
release property so sold or disposed of from the lien of this Restated
Indenture on receipt of the following:
(i) A Board Resolution authorizing the transaction and a
Company Request requesting release from the lien hereunder of the
property (which shall be specifically
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identified and sufficiently described in such request) being sold or
otherwise disposed of in accordance herewith.
(ii) An Officers' Certificate, dated not more than 30 days
prior to the date of the Company Request requesting such release.
(aa) stating that no Event of Default exists;
(bb) describing the property to be released;
(cc) stating that all conditions precedent herein
provided for relating to such release have been complied with;
(dd) in the case of a sale, describing the
consideration to be received therefor by the Company, which
consideration may consist of cash or other property; and
(ee) stating that the fair value of the property
to be released is not greater than the amount or value, as the
case may be, of the consideration to be received therefor
(taking any purchase money obligation included therein and any
other property included therein at its fair value to the
Company) or, if such fair value is less than such amount or
value, stating the reason for its disposition at less than
fair value.
(iii) An Opinion of Counsel to the effect that:
(aa) the property so sold or disposed, or
contracted to be sold or disposed, may be lawfully released
from the lien of this Restated Indenture and all conditions
precedent provided for herein relating to such release have
been complied with; and
(bb) if any property other than cash or purchase
money obligations is included in the consideration, sufficient
instruments of assignment, transfer or conveyance have been or
are then delivered to the Trustee subject to all right, title
and interest of the Company in such property to the lien of
this Restated Indenture, subject only to Permitted
Encumbrances, or that no instruments of assignment, transfer
or conveyance are necessary for such purpose.
(iv) Any supplemental indenture, Property Certificate or
other instrument referred to in such Opinion of Counsel.
All cash in excess of $20,000,000 received by the Company in
consideration of property released pursuant to this Section 6.02 shall be paid
to the Trustee and held by the Trustee as Trust Moneys under Article Seven
subject to application as therein provided.
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SECTION 6.03. Eminent Domain. If any of the Trust Estate
shall be taken by eminent domain or be sold pursuant to or in
consequence of the exercise by a governmental authority of any right
to purchase or designate a purchaser or order the sale of any part of
the Trust Estate, the Trustee may release the property so taken and
shall be fully protected in so doing upon being furnished with:
(a) an Officers' Certificate requesting such release,
describing the property so to be released and stating that such
property has been taken by eminent domain or sold pursuant to or in
consequence of the exercise of such authority and that all conditions
precedent herein provided for relating to such release have been
complied with;
(b) an Opinion of Counsel to the effect that such
property has been lawfully taken by exercise of the right of eminent
domain or sold pursuant to or in consequence of the exercise of such
authority, that the compensation for such property so taken has become
final or an appeal therefrom is not advisable in the interests of the
Company or the Bondholders and that all conditions precedent herein
provided for relating to such release have been complied with; and
(c) all cash in excess of $20,000,000 received by the
Company in respect of such award or sale.
SECTION 6.04. Powers Exercisable Notwithstanding Event of
Default. While in possession of all or substantially all of the Trust Estate
(other than any cash and securities constituting part of the Trust Estate and
deposited with the Trustee), the Company may exercise the powers conferred upon
it in this Article even though it is prohibited from doing so while an Event of
Default exists as provided therein, if the Trustee in its discretion, or the
holders of not less than 66-2/3% in principal amount of the Bonds, consent to
such action, in which event none of the instruments required to be furnished to
the Trustee under this Article as a condition to the exercise of such powers
needs to state that no Event of Default exists as provided therein.
SECTION 6.05. Powers Exercisable by Trustee or Receiver. In
case all or substantially all of the Trust Estate (other than any cash and
securities constituting part of the Trust Estate and deposited with the
Trustee) shall be in the possession of a trustee or receiver lawfully
appointed, the powers hereinbefore in this Article conferred upon the Company
with respect to the sale or other disposition and release of the Trust Estate
may be exercised by such trustee or receiver (with consent of the Trustee or
Bondholders specified in Section 6.04), in which case a written request signed
by such receiver or trustee shall be deemed the equivalent of any Board
Resolution required by this Article and a certificate signed by such trustee or
receiver shall be deemed the equivalent of any Officers' Certificate required
by this Article and such certificate need not state that no Event of Default
exists. If the Trustee shall be in possession of the Trust Estate under
Section 9.03, such powers may be exercised by the Trustee in its discretion.
SECTION 6.06. Purchaser Protected. No purchaser in good
faith of property purporting to be released herefrom shall be bound to
ascertain the authority of the Trustee to
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execute the release or to inquire as to the existence of any conditions herein
prescribed for the exercise of such authority. No purchaser or grantee of any
property or rights permitted by this Article to be sold or otherwise disposed
of by the Company shall be under any obligation to ascertain or inquire into
the authority of the Company to make any such sale or other disposition nor see
to the application to the proceeds by the Company or the Trustee. Any release
executed by the Trustee under this Article shall be sufficient for the purpose
of this Restated Indenture and shall constitute a good and valid release of the
property therein described from the lien hereof.
SECTION 6.07. Disposition of Obligations Received. All
purchase money and governmental obligations received by the Trustee under this
Article shall be held by the Trustee as a part of the Trust Estate. Upon
payment by or on behalf of the Company to the Trustee of the entire unpaid
principal amount of any such obligation, the Trustee shall release and transfer
such obligation and any mortgage securing the same upon Company Request. The
Trustee shall receive any moneys paid in respect of the principal of any such
obligations and hold and dispose of such moneys as provided in Article Seven.
The Trustee shall not be responsible for the collection of the principal of or
interest on any such obligations. All interest and other income on any such
obligations, when received by the Trustee, shall be paid to the Company from
time to time upon Company Request, unless an Event of Default shall exist. If
an Event of Default shall exist, any interest and other income on any such
obligations not theretofore paid upon Company Request, when collected by the
Trustee, shall be applied by the Trustee in accordance with Section 9.07.
ARTICLE SEVEN
Application of Trust Moneys
SECTION 7.01. "Trust Moneys" Defined. All moneys (the "Trust
Moneys") received by the Trustee:
(a) upon the release of property from the lien of this
Restated Indenture, including all moneys received in respect of the
principal of all purchase money and governmental obligations;
(b) as compensation for, or proceeds of sale of, any part
of the Trust Estate taken by eminent domain or purchased by, or sold
pursuant to an order of, a governmental authority or otherwise
disposed of;
(c) as proceeds of insurance upon any part of the Trust
Estate; or
(d) for application under this Article as elsewhere
herein provided, or whose disposition is not elsewhere otherwise
specifically provided for,
shall be held by the Trustee, except as otherwise provided in this Article, as
a part of the Trust Estate. Upon any entry upon or sale of the Trust Estate or
any part thereof under Article Nine, Trust Moneys shall be applied in
accordance with Section 9.07. Prior to any such entry or sale,
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all or any part of the Trust Moneys may be withdrawn, and shall be paid or
applied by the Trustee, (i) from time to time upon Company Request and receipt
by the Trustee of an Officers' Certificate, dated not more than 30 days prior
to the date of such Company Request, specifying the amount to be withdrawn,
together with an instrument or instruments evidencing the consent of the
holders of not less than 66-2/3% in aggregate principal amount of Bonds or (ii)
as provided in Section 7.02.
SECTION 7.02. Withdrawal of Insurance Proceeds. To the extent
that any Trust Moneys consist of proceeds of insurance upon any part of the
Trust Estate, such proceeds may be withdrawn by the Company and shall be paid
by the Trustee upon Company Request to reimburse the Company for expenditures
made, or to pay costs incurred, by the Company to repair, rebuild or replace
the property destroyed or damaged, upon receipt by the Trustee of an Officers'
Certificate, dated not more than 30 days prior to the date of the Company
Request for the withdrawal and payment of such Trust Moneys, setting forth:
(i) that expenditures have been or will be made,
or costs have been or will be incurred, by the Company in a
specified amount for the purpose of making certain repairs,
rebuildings and replacements, which shall be briefly
described;
(ii) that no part of such expenditures or costs
has been paid out of the proceeds of insurance upon any part
of the Trust Estate not required to be paid to the Trustee
under Section 13.08;
(iii) that there is no outstanding indebtedness,
other than costs incurred for which payment is being
requested, known to the Company, after due inquiry, for the
purchase price or construction of such repairs, rebuildings or
replacements, or for labor, wages, materials or supplies in
connection with the making thereof, which, if unpaid, might
become the basis of a vendor's, mechanics', laborers',
materialmen's, statutory or other similar lien upon any of
such repairs, rebuildings or replacements, which lien might,
in the opinion of the signers of such Officers' Certificate,
materially impair the security afforded by such repairs,
rebuildings or replacements;
(iv) that no Event of Default exists; and
(v) that all conditions precedent herein provided
for relating to such withdrawal and payment have been complied
with.
Upon compliance with the foregoing provisions of this Section,
the Trustee shall pay on Company Request an amount of Trust Moneys of the
character aforesaid equal to the amount of the expenditures or costs stated in
such Officers' Certificate.
SECTION 7.03. Powers Exercisable Notwithstanding Event of
Default. While in possession of all or substantially all of the Trust Estate
(other than any cash and securities constituting part of the Trust Estate and
deposited with the Trustee), the Company may do any of
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the things enumerated in Section 7.02 which it is prohibited from doing while
an Event of Default exists as provided therein, if the Trustee in its
discretion, or the holders of not less than 66-2/3% in principal amount of the
Bonds, shall consent to such action, in which event any Officers' Certificate
filed thereunder shall omit any statement to the effect that no Event of
Default exists as provided thereunder.
SECTION 7.04. Powers Exercisable by Trustee or Receiver. In
case all or substantially all of the Trust Estate (other than any cash
constituting part of the Trust Estate and deposited with the Trustee) shall be
in the possession of a receiver or trustee lawfully appointed, the powers
conferred in this Article upon the Company with respect to the withdrawal or
application of Trust Moneys may be exercised by such receiver or trustee (with
the consent of the Trustee or Bondholders specified in Section 7.03), in which
case a written request signed by such receiver or trustee shall be deemed the
equivalent of any Board Resolution required by this Article and a certificate
signed by such receiver or trustee shall be deemed the equivalent of any
Officers' Certificate required by this Article and such certification need not
state that no Event of Default exists. If the Trustee shall be in possession
of the Trust Estate under Section 9.03, such powers may be exercised by the
Trustee in its discretion.
ARTICLE EIGHT
Discharge of Restated Indenture
SECTION 8.01. Payment of Indebtedness; Satisfaction and
Discharge of Restated Indenture. Whenever the following conditions shall
exist:
(a) all Bonds theretofore authenticated and delivered
have been canceled by the Trustee or delivered to the Trustee for
cancellation;
(b) the Company has paid or caused to be paid all other
sums payable hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each of which shall state that
all conditions precedent herein provided for relating to the
satisfaction and discharge of this Restated Indenture have been
complied with;
then, upon Company Request authorized by a Board Resolution, this Restated
Indenture and the lien, rights and interests created hereby shall cease,
determine and become null and void (except as to any surviving rights of
conversion, transfer or exchange of Bonds herein or therein provided for) and
the Trustee and each cotrustee and separate trustee, if any, then acting as
such hereunder shall, at the expense of the Company, execute and deliver a
termination statement and such instruments of satisfaction and discharge as may
be necessary and pay, assign, transfer and deliver to the Company or upon
Company Order all cash, securities and other personal property then held by it
hereunder as a part of the Trust Estate.
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In the absence of a Company Request authorized by a
Board Resolution as aforesaid, the payment of all Bonds shall not
render this Restated Indenture inoperative or prevent the Company from
issuing Bonds from time to time thereafter as herein provided.
ARTICLE NINE
Remedies
SECTION 9.01. Events of Default. "Event of Default",
wherever used herein, means any one of the following events (whatever the
reason for such event and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body):
(a) default in the payment of any interest upon any Bond
when such interest becomes due and payable and continuance of such
default for a period of 30 days;
(b) default in the payment of the principal of, or
premium, if any, on any Bond at its maturity or on any principal
installment date;
(c) default in the performance, or breach, of any
covenant or warranty of the Company in this Restated Indenture (other
than a covenant or warranty a default in the performance or breach of
which is specifically dealt with elsewhere in this Section), and
continuance of such default or breach for a period of 30 days after
there has been given, by registered or certified mail, to the Company
by the Trustee or to the Company and the Trustee by the holders of at
least 66-2/3% in principal amount of the Bonds, a written notice
specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder;
(d) the entry of a decree or order (other than an order
or decree issued on or before the date of this Restated Indenture in
or with respect to the Company's chapter 11 reorganization case
pursuant to the federal bankruptcy code (Case No. 91-804, filed July
31, 1991 before the U.S. Bankruptcy Court for the District of
Delaware; the "Chapter 11 Case") and any subsequent order or decree
upholding, or consistent with, the Company's Second Amended Plan of
Reorganization dated July 17, 1995) by a court having jurisdiction in
the premises for relief in respect of the Company or adjudging the
Company a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, adjustment or composition of or in
respect of the Company under the Federal Bankruptcy Code or any other
applicable Federal or state law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator (or other similar
official) of or for the Company or any substantial part of its
property, or ordering the winding up or liquidation of its affairs,
and the continuance of any such decree or order unstayed and in effect
for a period of 60 consecutive days; or
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(e) other than the Chapter 11 Case and its
proceedings, the commencement by the Company of a voluntary
case or the institution by it of proceedings to be adjudicated
a bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or insolvency proceedings against
it, or the filing by it of a petition or answer or consent
seeking reorganization, arrangement or relief under the
Federal Bankruptcy Code or any other applicable Federal or
state law, or the consent or acquiescence by it to the filing
of any such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the
Company or any substantial part of its property, or the making
by it of an assignment for the benefit of creditors, or its
failure to pay its debts generally as they become due, or the
taking of corporate action by the Company in furtherance of
any such action.
SECTION 9.02. Acceleration of Maturity; Rescission and
Annulment. If an Event of Default exists, the Trustee or the holders of not
less than 66-2/3% in principal amount of the Bonds may declare the principal of
all the Bonds to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee, if given by Bondholders), and upon any such
declaration, such principal shall become immediately due and payable.
At any time after such a declaration of acceleration has been
made, but before any sale of any of the Trust Estate has been made under this
Article or any judgment or decree for payment of money due on any Bonds has
been obtained by the Trustee as hereinafter provided in this Article, the
holders of not less than 66-2/3% in principal amount of the Bonds may, by
written notice to the Company and the Trustee, rescind and annul such
declaration and its consequences if:
(a) the Company has deposited with the Trustee a sum
sufficient to pay:
(i) all overdue installments of interest on all
Bonds, including default interest, thereon,
(ii) the principal of (and premium, if any, on)
any Bonds which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate
or rates prescribed therefor in such Bonds,
(iii) to the extent that payment of such interest
is lawful, interest upon overdue installments of interest at
the rate or rates prescribed therefor in the Bonds, and
(iv) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and
counsel; and
(b) all Events of Default, other than the nonpayment of
the principal of Bonds which have become due solely by such
declaration of acceleration, have been cured or have been waived as
provided in Section 9.17.
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No such rescission and annulment shall affect any subsequent default or impair
any right consequent thereon.
SECTION 9.03. Entry. The Company agrees that upon the
occurrence of an Event of Default the Company, upon demand of the Trustee
during the continuance thereof, shall forthwith surrender to the Trustee the
actual possession of, and it shall be lawful for the Trustee by such officers
or agents (including officers or employees of the Company) as it may appoint to
enter and take possession of, the Trust Estate (and the books, papers and
accounts of the Company), and to hold, operate and manage the Trust Estate
(including the making of all needful repairs, and such alterations, additions
and improvements as to the Trustee shall seem wise) and to receive the rents,
issues, tolls, profits, revenues and other income thereof, and, after deducting
the costs and expenses of entering, taking possession, holding, operating and
managing the Trust Estate, as well as payments for taxes, insurance and other
proper charges upon the Trust Estate and reasonable compensation to itself, its
agents and counsel, to apply the same as provided in Section 9.07. Whenever
all that is then due upon the Bonds and under any of the terms of this Restated
Indenture shall have been paid and all defaults hereunder shall have been made
good, the Trustee shall surrender possession to the Company.
SECTION 9.04. Power of Sale; Suits for Enforcement. In case
an Event of Default shall exist, the Trustee, with or without entry, in its
discretion may, subject to the provisions of Section 9.16:
(a) sell, after giving any notice or notices required by
applicable law and subject to any mandatory requirements of applicable
law and to Permitted Encumbrances, the Trust Estate as an entirety, or
in such parcels as the holders of a majority in principal amount of
the Bonds shall in writing request, or in the absence of such request,
as the Trustee may determine, to the highest bidder at public auction
at such place and at such time (which sale may be adjourned by the
Trustee from time to time in its discretion by announcement at the
time and place fixed for such sale, without further notice) and upon
such terms as the Trustee may fix; or
(b) proceed to protect and enforce its rights and the
rights of the Bondholders under this Restated Indenture by sale
pursuant to judicial proceedings or by a suit, action or proceeding in
equity or at law or otherwise, whether for the specific performance of
any covenant or agreement contained in this Restated Indenture or in
aid of the execution of any power granted in this Restated Indenture
or for the foreclosure of this Restated Indenture or for the
enforcement of any other legal, equitable or other remedy, as the
Trustee, being advised by counsel, shall deem most effectual to
protect and enforce any of the rights of the Trustee or the
Bondholders.
SECTION 9.05. Incidents of Sale. Upon any sale of any of the
Trust Estate pursuant to this Article, whether made under the power of sale
hereby given or pursuant to judicial proceedings, to the extent permitted by
law:
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(a) the principal of and accrued interest on all Bonds,
if not previously due, shall at once become and be immediately due and
payable;
(b) any Bondholder or Bondholders or the Trustee may bid
for and purchase the property offered for sale, and upon compliance
with the terms of sale may hold, retain and possess and dispose of
such property, without further accountability, and may, in paying the
purchase money therefor, deliver any Bonds or claims for interest
thereon in lieu of cash equal to the amount due thereon;
(c) the Trustee may make and deliver to the purchaser or
purchasers a good and sufficient deed, bill of sale and instrument of
assignment and transfer of the property sold;
(d) the Trustee is hereby irrevocably appointed the true
and lawful attorney of the Company, in its name and stead, to make all
necessary deeds, bills of sale and instruments of assignment and
transfer of the property thus sold; and for that purpose it may
execute all necessary deeds, bills of sale and instruments of
assignment and transfer, and may substitute one or more persons, firms
or corporations with like power, the Company hereby ratifying and
confirming all that its said attorney or such substitute or
substitutes shall lawfully do by virtue hereof; but if so requested by
the Trustee or by any purchaser, the Company shall ratify and confirm
any such sale or transfer by executing and delivering to the Trustee
or to such purchaser or purchasers all proper deeds, bills of sale,
instruments of assignment and transfer and releases as may be
designated in any such request;
(e) all right, title, interest, claim and demand
whatsoever, either at law or in equity or otherwise, of the Company
of, in and to the property so sold shall be divested and such sale
shall be a perpetual bar both at law and in equity against the
Company, its successors and assigns, and against any and all persons
claiming or who may claim the property sold or any part thereof from,
through or under the Company, its successors and assigns; and
(f) the receipt of the Trustee or of the officer making
such sale shall be a sufficient discharge to the purchaser or
purchasers at such sale for his or their purchase money, and such
purchaser or purchasers and his or their assigns or personal
representatives shall not, after paying such purchase money and
receiving such receipt, be obliged to see to the application of such
purchase money, or be in anywise answerable for any loss,
misapplication or nonapplication thereof.
SECTION 9.06. Covenant To Pay Trustee Amounts Due on Bonds
and Right of Trustee to Judgment. The Company covenants that if:
(a) default is made in the payment of any interest on any
Bond when such interest becomes due and payable and such default
continues for a period of 30 days, or
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(b) default is made in the payment of the principal of
(or premium, if any, on) any Bond at its maturity,
then upon demand of the Trustee, the Company will pay to the Trustee for the
benefit of the holders of such Bonds, the whole amount then due and payable on
such Bonds for principal (and premium, if any) and interest, with interest at
the respective rate or rates prescribed therefor in such Bonds on overdue
principal (and premium, if any) and, to the extent that payment on such
interest is legally enforceable, on overdue installments of interest and, in
addition thereto, such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel. If the
Company fails to pay such amounts forthwith upon such demand, the Trustee, in
its own name and as trustee of an express trust, shall be entitled to sue for
and recover judgment against the Company and any other obligor on the Bonds for
the whole amount so due and unpaid.
The Trustee shall be entitled to sue and recover judgment as
aforesaid either before, after or during the pendency of any proceedings for
the enforcement of the lien of this Restated Indenture, and in case of a sale
of the Trust Estate and the application of the proceeds of sale as aforesaid,
the Trustee, in its own name and as trustee of an express trust, shall be
entitled to enforce payment of, and to receive, all amounts then remaining due
and unpaid upon the Bonds, for the benefit of the holders thereof, and shall be
entitled to recover judgment for any portion of the same remaining unpaid, with
interest as aforesaid. No recovery of any such judgment upon any property of
the Company shall affect or impair the lien of this Restated Indenture upon the
Trust Estate or any rights, powers or remedies of the Trustee hereunder, or any
rights, powers or remedies of the Bondholders.
SECTION 9.07. Application of Money Collected. Any money
collected by the Trustee pursuant to this Article, including any rents, issues,
tolls, profits, revenues and other income collected pursuant to Section 9.03
(after the deductions therein provided) and any proceeds of any sale (after
deducting the costs and expenses of such sale, including a reasonable
compensation to the Trustee, its agents and counsel, and any taxes, assessments
or liens prior to the lien of this Restated Indenture, except any thereof
subject to which such sale shall have been made), whether made under any power
of sale herein granted or pursuant to judicial proceedings, and any money
collected by the Trustee under Section 6.07 to be applied under this Section,
together with, in the case of an entry or sale or as otherwise provided herein,
any other sums then held by the Trustee as part of the Trust Estate, shall,
except as otherwise provided by law, be applied in the following order, at the
date or dates fixed by the Trustee and, in case of the distribution of such
money on account of principal (or premium, if any) or interest, upon
presentation of the Bonds and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
(a) first: to the payment of all undeducted amounts due
the Trustee under Section 10.07;
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(b) second: to the payment of the whole amount then due
and unpaid upon the Bonds, for principal (and premium, if any) and
interest, in respect of which or for the benefit of which such money
has been collected, with interest (to the extent that such interest
has been collected by the Trustee or a sum sufficient therefor has
been so collected and payment thereof is legally enforceable) at the
respective rate or rates prescribed therefor in such Bonds on overdue
principal (and premium, if any) and on overdue installments of
interest; and in case such proceeds shall be insufficient to pay in
full the whole amount so due and unpaid upon such Bonds, then to the
payment of such principal and interest, without any preference or
priority, ratably according to the aggregate amount so due (except
that any money collected by the Trustee pursuant to Sections 6.07 and
9.03 in respect of interest or income shall first be applied to the
payment of interest so due); and
(c) third: to the payment of the remainder, if any, to
the Company or to whomsoever may be lawfully entitled to receive the
same or as a court of competent jurisdiction may direct.
SECTION 9.08. Receiver. Upon the occurrence of an Event of
Default and commencement of judicial proceedings by the Trustee to enforce any
right under this Restated Indenture, the Trustee shall be entitled, as against
the Company, without notice or demand and without regard to the adequacy of the
security for the Bonds or the solvency of the Company, to the appointment of a
receiver of the Trust Estate, and of the rents, issues, profits, revenues and
other income thereof, but, notwithstanding the appointment of any such
receiver, the Trustee shall be entitled to retain possession and control of,
and to collect and receive the income from, cash, securities and other personal
property held by, or required to be deposited or pledged with, the Trustee
hereunder.
SECTION 9.09. Trustee May File Proofs of Claim. In case of
the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company or any other obligor upon the Bonds or the
property of the Company or of such other obligor or their creditors, the
Trustee (irrespective of whether the principal of the Bonds shall then be due
and payable, as therein expressed or by declaration or otherwise, and
irrespective of whether the Trustee shall have made any demand on the Company
for the payment of overdue principal, premium or interest) shall be entitled
and empowered, by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest owing and unpaid in
respect of the Bonds and to file such other papers or documents as may
be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and
of the Bondholders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
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and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Bondholder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the
Bondholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 10.07.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Bondholder any plan of reorganization, arrangement, adjustment or composition
affecting the Bonds or the rights of any Bondholder or to authorize the Trustee
to vote in respect of the claim of any Bondholder in any such proceeding.
SECTION 9.10. Trustee May Enforce Claims Without Possession
of Bonds. All rights of action and claims under this Restated Indenture or the
Bonds may be prosecuted and enforced by the Trustee without the possession of
any of the Bonds or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust. Any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the holders of the Bonds in respect of which such judgment
has been recovered.
SECTION 9.11. Limitation on Suits. No holder of any Bond
shall have any right to institute any proceeding, judicial or otherwise, under
or with respect to this Restated Indenture, or for the appointment of a
receiver or trustee or for any other remedy hereunder, unless:
(a) such holder has previously given written notice to
the Trustee of a continuing Event of Default;
(b) the holders of not less than 66-2/3% in principal
amount of the Bonds shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(c) such holder or holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(d) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute any
such proceeding; and
(e) no direction inconsistent with such written request
has been given to the Trustee during such 60-day period by the holders
of a majority in principal amount of the Bonds.
No one or more holders of Bonds shall have any right in any manner whatever by
virtue of, or by availing of, any provision of this Restated Indenture to
affect, disturb or prejudice the lien of this Restated Indenture or the rights
of any other holders of Bonds or to obtain or to seek to obtain
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priority or preference over any other holders or to enforce any right under
this Restated Indenture, except in the manner herein provided and for the equal
and ratable benefit of all Bonds.
SECTION 9.12. Unconditional Right of Bondholders To Receive
Principal, Premium and Interest. Notwithstanding any other provision in this
Restated Indenture, the holder of any Bond shall have the absolute and
unconditional right to receive payment of the principal of (and premium, if
any) and interest on such Bond on the respective maturities expressed in such
Bond (or, in the case of redemption, on the redemption date) and to institute
suit for the enforcement of any such payment, and (in the case of Bonds of any
series convertible into other securities) the right to convert such Bond in
accordance with the provisions of this Restated Indenture creating such series
and to institute suit for its enforcement, and such rights shall not be
impaired without the consent of such holder.
SECTION 9.13. Restoration of Positions. If the Trustee or
any Bondholder has instituted any proceeding to enforce any right or remedy
under this Restated Indenture by foreclosure, entry or otherwise and such
proceeding has been discontinued or abandoned for any reason or has been
determined adversely to the Trustee or to such Bondholder, then and in every
such case the Company, the Trustee and the Bondholders shall, subject to any
determination in such proceeding, be restored to their former positions
hereunder, and thereafter all rights and remedies of the Trustee and the
Bondholders shall continue as though no such proceeding had been instituted.
SECTION 9.14. Rights and Remedies Cumulative. No right or
remedy herein conferred upon or reserved to the Trustee or to the Bondholders
is intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at
law or in equity or otherwise. The assertion or employment of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent or subsequent
assertion or employment of any other appropriate right or remedy.
SECTION 9.15. Delay or Omission Not Waiver. No delay or
omission of the Trustee or of any Bondholder to exercise any right or remedy
accruing upon an Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or to the
Bondholders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Bondholders, as the case may be.
SECTION 9.16. Control by Bondholders. Subject to the
Trustee's rights under Article 10, the holders of not less than 66-2/3% in
principal amount of the Bonds shall have the right during the continuance of an
Event of Default:
(a) to require the Trustee to proceed to enforce this
Restated Indenture, either by judicial proceedings for the enforcement
of the payment of the Bonds and the foreclosure of this Restated
Indenture, the sale of the Trust Estate or otherwise or, at the
election of the Trustee, by the exercise of the power of entry or sale
hereby conferred; and
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(b) to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee hereunder; provided,
however, that:
(i) such direction shall not be in conflict with
any rule of law or this Restated Indenture,
(ii) the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such
direction, and
(iii) the Trustee shall not determine that the
action so directed would be unjustly prejudicial to
the holders not taking part in such direction.
SECTION 9.17. Waiver of Past Defaults. Before any sale of
any of the Trust Estate has been made under this Article or any judgment or
decree for payment of money due has been obtained by the Trustee as provided in
this Article, the holders of not less than 66-2/3% in principal amount of the
Bonds may on behalf of the holders of all the Bonds waive any past default
hereunder and its consequences, except a default:
(a) in the payment of the principal of (or premium, if
any) or interest on any Bond, or
(b) in respect of a covenant or provision hereof which
under Article Twelve cannot be modified or amended without the consent
of the holder of each affected Bond.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Restated Indenture. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 9.18. Undertaking for Costs. All parties to this
Restated Indenture agree, and each holder of any Bond by his acceptance thereof
shall be deemed to have agreed, that any court may in its discretion require,
in any suit for the enforcement of any right or remedy under this Restated
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, the filing by any party litigant in such suit of an undertaking
to pay the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant. The provisions of this Section
shall not apply to any suit instituted by the Trustee, to any suit instituted
by any Bondholder or group of Bondholders holding in the aggregate more than
10% in principal amount of the Bonds, or to any suit instituted by any
Bondholder for the enforcement of the payment of the principal of (or premium,
if any) or interest on any Bond on or after the respective maturities expressed
in such Bond (or, in the case of redemption, on or after the redemption date).
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SECTION 9.19. Waiver of Appraisement and Other Laws. To the
full extent that it may lawfully so agree, the Company will not at any time
insist upon, plead, claim or take the benefit or advantage of, any
appraisement, valuation, stay, extension or redemption law, now or hereafter in
force, in order to prevent or hinder the enforcement of this Restated Indenture
or the absolute sale of the Trust Estate, or any part thereof, or the
possession thereof by any purchaser at any sale under this Article. The
Company, for itself and all who may claim under it, so far as it or they now or
hereafter may lawfully do so, hereby waives the benefit of all such laws. The
Company, for itself and all who may claim under it, waives, to the extent that
it may lawfully do so, all right to have the property in the Trust Estate
marshaled upon any foreclosure hereof, and agrees that any court having
jurisdiction to foreclose this Restated Indenture may order the sale of the
Trust Estate as an entirety.
If any law referred to in this Section and now in force, of
which the Company or its successor or successors might take advantage despite
this Section, shall hereafter be repealed or cease to be in force, such law
shall not thereafter be deemed to constitute any part of the contract herein
contained or to preclude the application of this Section.
SECTION 9.20. Suits To Protect the Trust Estate. The Trustee
shall have power to institute and to maintain such proceedings as it may deem
expedient to prevent any impairment of the Trust Estate by any acts which may
be unlawful or in violation of this Restated Indenture and to protect its
interests and the interests of the Bondholders in the Trust Estate and in the
rents, issues, profits, revenues and other income arising therefrom, including
power to institute and maintain proceedings to restrain the enforcement of or
compliance with any governmental enactment, rule or order that may be
unconstitutional or otherwise invalid, if the enforcement of or compliance with
such enactment, rule or order would impair the security hereunder or be
prejudicial to the interests of the Bondholders or the Trustee.
SECTION 9.21. Remedies Subject to Applicable Law. All rights,
remedies and powers provided by this Article may be exercised only to the
extent that the exercise thereof does not violate any applicable provision of
law in the premises, and all the provisions of this Article are intended to be
subject to all applicable mandatory provisions of law which may be controlling
in the premises and to be limited to the extent necessary so that they will not
render this Restated Indenture invalid, unenforceable or not entitled to be
recorded, registered, or filed under the provisions of any applicable law.
ARTICLE TEN
The Trustee
SECTION 10.01. Certain Duties and Responsibilities. (a)
Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties
and only such duties as are specifically set forth in this
Restated Indenture, and no implied covenants or obligations
shall be read into this Restated Indenture against the
Trustee; and
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(ii) in the absence of gross negligence or willful
misconduct on its part, the Trustee may conclusively rely, as
to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of
this Restated Indenture, but in the case of any such
certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this
Restated Indenture.
(b) No provision of this Restated Indenture shall be
construed to relieve the Trustee from liability for its own grossly
negligent action, its own grossly negligent failure to act, or its own
willful misconduct, except that:
(i) this Subsection (b) shall not be construed to
limit the effect of Subsection (a);
(ii) the Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer,
unless it shall be proved that the Trustee was grossly
negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in the
absence of gross negligence or willful misconduct in
accordance with the direction of the holders of 66-2/3% in
principal amount of the Bonds relating to the time, method and
place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred upon
the Trustee, under this Restated Indenture; and
(iv) no provision of this Restated Indenture shall
require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of
any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to
it.
(c) Whether or not therein expressly so provided, every
provision of this Restated Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Section.
SECTION 10.02. Notice of Events of Defaults. Within 10 days
after a Responsible Officer of the Trustee shall have actual knowledge of any
Event of Default hereunder, the Trustee shall transmit by mail to all
Bondholders at the addresses furnished as provided in Section 1.03, notice of
such Event of Default hereunder known to the Trustee, unless such Event of
Default shall have been cured or waived.
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SECTION 10.03. Certain Rights of Trustee. Except as
otherwise provided in Section 10.01:
(a) the Trustee may rely and shall be protected in acting
or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned
herein shall be sufficiently evidenced by a Company Request or Company
Order and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Restated
Indenture the Trustee shall deem it desirable that a matter be proved
or established prior to taking, suffering or omitting any action
hereunder, the Trustee (unless other evidence be herein specifically
prescribed) may, in the absence of gross negligence or willful
misconduct on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection to the extent of any action
taken, suffered or omitted by the Trustee hereunder in reliance
thereon in the absence of gross negligence or willful misconduct on
its part;
(e) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Restated Indenture at
the request or direction of any of the Bondholders pursuant to this
Restated Indenture, unless such Bondholders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses
and liabilities which might be incurred by it in compliance with such
request or direction;
(f) in the performance of its responsibilities hereunder,
the Trustee shall not be bound to make any investigation into the
facts or matters stated in any applicable resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture or other paper or document but the
Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if
the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and
premises of the Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and, in the absence of gross negligence or
willful misconduct in the selection thereof, the Trustee shall not be
responsible for any misconduct or negligence on the part of any agent
or attorney appointed by it hereunder; and
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(h) the Trustee shall not be personally liable, in case
of entry by it upon the Trust Estate, for debts contracted or
liabilities or damages incurred in the management or operation of the
Trust Estate.
SECTION 10.04. Not Responsible for Recitals or Issuance of
Bonds or Application of Proceeds. The recitals contained herein and in the
Bonds, except the certificate of authentication on the Bonds, shall be taken as
the statements of the Company, and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representations as to the value or
condition of the Trust Estate or any part thereof, or as to the title of the
Company thereto or as to the security afforded thereby or hereby, or as to the
validity or genuineness of any securities at any time pledged and deposited
with the Trustee hereunder, or as to the validity or sufficiency of this
Restated Indenture or of the Bonds. The Trustee shall not be accountable for
the use or application by the Company of Bonds or the proceeds thereof or of
any money paid to the Company or upon Company Order under any provision hereof.
SECTION 10.05. May Hold Bonds. The Trustee or any agent of
the Company, in its individual or any other capacity, may become the owner or
pledgee of Bonds and may otherwise deal with the Company with the same rights
it would have if it were not Trustee or such other agent.
SECTION 10.06. Money Held in Trust. Money held by the
Trustee in trust hereunder need not be segregated from other funds except to
the extent required by law. The Trustee shall, at Company Order, invest any
money held by it hereunder in obligations of the United States of America or in
other obligations carrying the highest short-term rating from both Standard and
Poor's Corporation and Moody's Investors Service, Inc., in all cases maturing
in not more than one year from date of purchase. The Trustee may sell or
liquidate any of the foregoing investments without regard to maturity date
whenever the Trustee in its sole discretion deems it necessary to make any
payment required by this Restated Indenture, and the Trustee shall not be
liable to any Person for any loss suffered because of any such investment, sale
or liquidation other than by reason of its gross negligence or willful
misconduct.
SECTION 10.07. Compensation and Reimbursement. The Company
agrees:
(a) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Restated Indenture (including
the reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to the Trustee's gross negligence or wilful
misconduct; and
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(c) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without gross
negligence or wilful misconduct on its part, arising out of or in
connection with the acceptance or administration of this trust,
including the costs and expenses of defending itself against any claim
or liability in connection with the exercise or performance of any of
its powers or duties hereunder.
As security for the performance of the obligations of the
Company under this Section the Trustee shall be secured under this Restated
Indenture by a lien prior to the Bonds, and for the payment of such
compensation, expenses, reimbursements and indemnity the Trustee shall have the
right to use and apply any Trust Moneys held by it under Article Seven. The
obligations of the Company to the Trustee under this Section 10.07 shall
survive the satisfaction and discharge of this Restated Indenture.
SECTION 10.08. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a corporation
organized and doing business under the laws of the United States of America or
of any state, authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $50,000,000 and subject to
supervision or examination by Federal or state authority. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of such supervising or examining authority, then, for the purposes
of this Section, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
SECTION 10.09. Resignation and Removal; Appointment of
Successor. (a) No resignation or removal of the Trustee and no appointment of
a successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 10.10.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If an instrument of acceptance by a
successor Trustee shall not have been delivered to the Trustee within
30 days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(c) The Trustee may be removed at any time by the holders
of a majority in principal amount of the Bonds delivered to the
Trustee and to the Company.
(d) If at any time:
(i) the Trustee shall cease to be eligible under
Section 10.08 and shall fail to resign after written request
therefor by the Company or by any such Bondholder, or
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(ii) the Trustee shall become incapable
of acting or shall be adjudged a bankrupt or insolvent or a
receiver of the Trustee or of its property shall be appointed
or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, the Company by a Board Resolution may remove the
Trustee or, subject to Section 9.18, any Bondholder who has been a bona fide
Bondholder for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of
Trustee for any cause, the Company, by a Board Resolution, shall
promptly appoint a successor Trustee. In case all or substantially
all of the Trust Estate shall be in the possession of a receiver or
trustee lawfully appointed, such receiver or trustee, by written
instrument, may similarly appoint a successor to fill such vacancy
until a new Trustee shall be appointed by the Bondholders as provided
below. If, within one year after such resignation, removal or
incapability or the occurrence of such vacancy, a successor Trustee
shall be appointed by the holders of a majority in principal amount of
the Bonds, and written notice thereof is delivered to the Company and
the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the
Company or by such receiver or trustee. If no successor Trustee shall
have been so appointed by the Company or the Bondholders and accepted
appointment in the manner hereinafter provided, subject to Section
9.18, any Bondholder who has been a bona fide Bondholder for at least
six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and
each removal of the Trustee and each appointment of a successor
Trustee by mailing written notice of such event by first-class mail,
postage prepaid, to the Bondholders at the addresses furnished as
provided in Section 1.03. Each notice shall include the name of the
successor Trustee and the address of its principal corporate trust
office.
SECTION 10.10. Acceptance of Appointment by Successor. Every
successor Trustee appointed hereunder shall execute, acknowledge and deliver to
the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act,
deed or conveyance, shall become vested with all the estates, properties,
rights, powers, trusts and duties of the retiring Trustee. On request of the
Company or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument conveying and transferring to
such successor Trustee upon the trusts herein expressed all the estates,
properties, rights, powers and trusts of the retiring Trustee, and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder, subject nevertheless to its lien, if
any, provided for in Section 10.07. Upon
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request of any such successor Trustee, the Company shall execute any and all
instruments for more fully and certainly vesting in and confirming to such
successor Trustee all such estates, properties, rights, powers and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 10.11. Merger. Conversion. Consolidation or
Succession to Business. Any corporation into which the Trustee may be merged
or converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder so long as such corporation shall be otherwise qualified and eligible
under this Article, to the extent operative, without the execution or filing of
any paper or any further act on the part of any of the parties hereto. In case
any Bonds shall have been authenticated, but not delivered, by the Trustee then
in office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver the Bonds so
authenticated with the same effect as if such successor Trustee had itself
authenticated such Bonds.
SECTION 10.12. Cotrustees and Separate Trustees. At any time
or times, for the purpose of meeting the legal requirements of any jurisdiction
in which any of the Trust Estate may at the time be located or if the Trustee
deems it necessary or appropriate in the conduct of its trust business, the
Company and the Trustee shall have power to appoint, and, upon the written
request of the Trustee or of the holders of at least 50% in principal amount of
the Bonds, the Company shall for such purpose join with the Trustee in the
execution, delivery and performance of all instruments and agreements necessary
or proper to appoint one or more Persons approved by the Trustee either to act
as cotrustee, jointly with the Trustee, of all or any part of the Trust Estate,
or to act as separate trustee of any such property, in either case with such
powers as may be provided in the instrument of appointment, and to vest in such
Person or Persons in the capacity aforesaid, any property, title, right or
power deemed necessary or desirable, subject to the other provisions of this
Section. If the Company does not join in such appointment within 15 days after
the receipt by it of a request so to do, or in case an Event of Default has
occurred and is continuing, the Trustee alone shall have power to make such
appointment.
Should any written instrument from the Company be required by
any cotrustee or separate trustee so appointed for more fully confirming to
such cotrustee or separate trustee such property, title, right or power, any
and all such instruments shall, on request, be executed, acknowledged and
delivered by the Company.
Every cotrustee or separate trustee shall, to the extent
permitted by law, but to such extent only, be appointed subject to the
following terms:
(a) The Bonds shall be authenticated and delivered, and
all rights, powers, duties and obligations hereunder in respect of the
custody of cash and other personal
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property held by, or required to be deposited or pledged with, the
Trustee hereunder, shall be exercised solely, by the Trustee.
(b) The rights, powers, duties and obligations hereby
conferred or imposed upon the Trustee in respect of any property
covered by such appointment shall be conferred or imposed upon and
exercised or performed by the Trustee or by the Trustee and such
cotrustee or separate trustee jointly, as shall be provided in the
instrument appointing such cotrustee or separate trustee, except to
the extent that under any law of any jurisdiction in which any
particular act is to be performed, the Trustee shall be incompetent or
unqualified to perform such act or shall have a conflict of interest,
in which event such rights, powers, duties and obligations shall be
exercised and performed by such cotrustee or separate trustee.
(c) The Trustee at any time, by an instrument in writing
executed by it, with the concurrence of the Company evidenced by a
Board Resolution, may accept the resignation of or remove any
cotrustee or separate trustee appointed under this Section, and, in
case an Event of Default exists, the Trustee shall have power to
accept the resignation of, or remove, any such cotrustee or separate
trustee without the concurrence of the Company. Upon the written
request of the Trustee, the Company shall join with the Trustee in the
execution, delivery and performance of all instruments and agreements
necessary or proper to effectuate such resignation or removal. A
successor to any cotrustee or separate trustee so resigned or removed
may be appointed in the manner provided in this Section.
(d) No cotrustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of the Trustee, or
any other such trustee hereunder.
(e) Any instrument executed by Bondholders and delivered
to the Trustee shall be deemed to have been delivered to each such
cotrustee and separate trustee.
SECTION 10.13. Reports to Bondholders. The Trustee will
provide to the Bondholders copies of Officers' Certificates and Opinions of
Counsel received from the Company pursuant to this Restated Indenture as soon
as practicable after receipt of such documents. The Trustee will provide to
any Bondholder copies of all other reports of the Company upon request of such
Bondholder.
SECTION 10.14 Limitations on Actions of Trustee.
Notwithstanding anything contained herein to the contrary, the Trustee shall
not be required to take any action in any jurisdiction other than in the State
of Delaware if the taking of such action will (i) require the consent or
approval or authorization or order of or the giving of notice to, or the
registration with or taking of any action in respect of, any state or other
governmental authority or agency of any jurisdiction other than the State of
Delaware; (ii) result in any fee, tax or other governmental charge under the
laws of any jurisdiction or any political subdivision thereof other than the
State of Delaware becoming payable by the Trustee in its individual capacity;
or (iii) subject the Trustee in its individual capacity to personal
jurisdiction in any jurisdiction other than the State of
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Delaware for causes of action unrelated to the consummation of the transactions
contemplated hereby.
ARTICLE ELEVEN
Consolidation. Merger. Conveyance.
Transfer or Lease
SECTION 11.01. Consolidation. Merger. Conveyance or Transfer
Only on Certain Terms. The Company shall not consolidate with or merge into
any other corporation or convey or transfer the Trust Estate substantially as
an entirety to any Person, unless:
(a) such consolidation, merger, conveyance or transfer
shall be on such terms as shall fully preserve the lien and security
hereof and the rights and powers of the Trustee and the Bondholders
hereunder;
(b) the corporation formed by such consolidation or into
which the Company is merged or the Person which acquires the Trust
Estate substantially as an entirety by conveyance or transfer shall be
a corporation organized and existing under the laws of the United
States of America or any state or the District of Columbia and shall
execute and deliver to the Trustee an indenture supplemental hereto in
form recordable and satisfactory to the Trustee, meeting the
requirements of Section 11.02 and containing:
(i) an assumption by such successor corporation
of the due and punctual payment of the principal of (and
premium, if any) and interest on all the Bonds and, subject to
Section 11.02(b), the performance and observance of every
covenant and condition of this Restated Indenture to be
performed or observed by the Company, and
(ii) a grant, conveyance, transfer and mortgage
complying with Section 11.02;
(c) immediately after giving effect to such transaction,
no Event of Default shall exist; and
(d) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each of which shall
state that such consolidation, merger, conveyance or transfer and such
supplemental indenture comply with this Article and that all
conditions precedent herein provided for relating to such transaction
have been complied with.
SECTION 11.02. Successor Corporation Substituted. Upon any
consolidation or merger or any conveyance or transfer of the Trust Estate
substantially as an entirety in accordance with Section 11.01, the successor
corporation formed by such consolidation or into which the Company is merged or
to which such conveyance or transfer is made shall succeed to, and be
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substituted for, and may exercise every right and power of, the Company under
this Restated Indenture with the same effect as if such successor corporation
had been named as the Company herein, subject to the following limitations:
(a) If the supplemental indenture required by Section
11.01 shall contain a grant, conveyance, transfer and mortgage in
terms sufficient to include and subject to the lien of this Restated
Indenture all property, rights, privileges and franchises then owned
and which may be thereafter acquired by such successor corporation
(other than Excepted Property and subject only to Permitted
Encumbrances), then such successor corporation may cause to be
executed, in its own name or in the name of the Company prior to such
succession, and delivered to the Trustee for authentication, any Bonds
issuable hereunder. Upon request of such successor corporation, and
subject to all the terms of this Restated Indenture, the Trustee shall
authenticate and deliver any Bonds which shall have been previously
executed and delivered by the company to the Trustee for
authentication, and any Bonds which such successor corporation shall
thereafter, in accordance with this Restated Indenture, cause to be
executed and delivered to the Trustee for such purpose. Such changes
in phraseology and form (but not in substance) may be made in such
Bonds as may be appropriate in view of such consolidation, merger,
conveyance or transfer.
(b) If said supplemental indenture shall not contain the
grant, conveyance, transfer and mortgage described in Subsection (a),
then such successor corporation shall not be entitled to procure the
authentication and delivery of Bonds under Article Four or Five, and
this Restated Indenture shall not, by virtue of such consolidation,
merger, conveyance, or transfer, or by virtue of such supplemental
indenture, or by virtue of the Granting Clauses, become a lien upon,
and the term Trust Estate shall not be deemed to include, any of the
property, rights, privileges and franchises of such successor
corporation owned by it at the time of such consolidation, merger,
conveyance or transfer (unless such successor corporation, in its
discretion, shall subject the same to the lien hereof), but this
Restated Indenture shall become and be a lien, subject only to
Permitted Encumbrances, only upon the following property, rights,
privileges and franchises acquired by such successor corporation after
the date of such consolidation, merger, conveyance or transfer:
(i) all betterments, extensions, improvements,
additions, repairs, renewals, replacements, substitutions and
alterations to, upon, for and of the property, rights,
privileges and franchises subject to the lien hereof, and all
property constituting appurtenances of the Trust Estate;
(ii) all property made the basis of the withdrawal
of cash from the Trustee or the release of property from the
lien of this Restated Indenture;
(iii) all property acquired or constructed with the
proceeds of any insurance on any part of the Trust Estate or
with the proceeds of any part of the Trust Estate released
from the lien of this Restated Indenture or disposed of free
from any such lien or taken by eminent domain;
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(iv) all property acquired pursuant to Section
13.07 to maintain and preserve and keep the Trust Estate in
good condition, repair and working order and all property
acquired or constructed with the proceeds of insurance on the
Trust Estate not required to be paid to the Trustee under
Section 13.08; and
(v) all property, leases, contracts,
rights-of-way, franchises, licenses, permits or easements
acquired by the Company in alteration, substitution, surrender
or modification of any property, leases, contracts,
rights-of-way, franchises, licenses, permits or easements
disposed of, altered or modified pursuant to Section 6.01.
Such supplemental indenture shall also contain a grant, conveyance, transfer
and mortgage subjecting the property referred to in this Subsection to the lien
of this Restated Indenture.
(c) No such conveyance or transfer of the Trust Estate
substantially as an entirety shall have the effect of releasing the
Person named as "the Company" in the first paragraph of this
instrument or any successor corporation which shall theretofore have
become such in the manner prescribed in this Article from its
liability as obligor on and maker of any of the Bonds, unless such
conveyance or transfer is followed by the complete liquidation of such
Person or successor corporation and substantially all its assets
immediately following such conveyance or transfer are the securities
of such successor corporation received in such conveyance or transfer.
SECTION 11.03. Limitation on Lease of Trust Estate as
Entirety. The Company shall not lease the Trust Estate substantially as an
entirety to any Person.
ARTICLE TWELVE
Supplemental Indentures and Waivers
SECTION 12.01. Supplemental Indentures Without Consent of
Bondholders. Without the consent of the Bondholders, the Company and the
Trustee may, from time to time enter into one or more indentures supplemental
hereto, in form satisfactory to the Trustee, for any of the following purposes:
(a) to correct or amplify the description of any property
at any time subject to the lien of this Restated Indenture, or better
to assure, convey and confirm unto the Trustee any property subject or
required to be subjected to the lien of this Restated Indenture, or to
subject to the lien of this Restated Indenture additional property;
(b) to add to the conditions, limitations and
restrictions on the authorized amount, terms or purposes of issue,
authentication and delivery of Bonds or of any series of Bonds, as
herein set forth, additional conditions, limitations and restrictions
thereafter to be observed;
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(c) to modify or eliminate any of the terms of this
Restated Indenture; provided, however, that:
(i) such supplemental indenture shall expressly
provide that any such modifications or eliminations shall
become effective only when there is no outstanding Bond of any
series created prior to the execution of such supplemental
indenture, and
(ii) the Trustee may, in its discretion, decline
to enter into any such supplemental indenture which, in its
opinion, may not afford adequate protection to the Trustee
when the same becomes operative;
(d) to evidence the succession of another corporation to
the Company and the assumption by any such successor of the covenants
of the Company contained herein and in the Bonds;
(e) to add to the covenants of the Company for the
benefit of the holders of all or any series of Bonds or to surrender
any right or power herein conferred upon the Company; or
(f) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein or to make any other provisions, with respect to matters or
questions arising under this Restated Indenture, which shall not be
inconsistent with the provisions of this Restated Indenture, so long
as such action shall not adversely affect the interests of the
Bondholders.
SECTION 12.02. Supplemental Indentures with Consent of
Bondholders. With the consent of the holders of not less than 66-2/3% in
principal amount of all Bonds affected by such supplemental indenture, by
written consent of such holders delivered to the Company and the Trustee, the
Company and the Trustee may enter into an indenture or indentures supplemental
hereto for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Restated Indenture or of modifying in
any manner the rights of the Bondholders under this Restated Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the holder of each outstanding Bond affected thereby:
(a) change the maturity of the principal of, or any
installment of interest on, any Bond, or reduce the principal amount
thereof or the interest thereon or any premium payable upon the
redemption thereof, or change the place of payment where, or the coin
or currency in which, any Bond or the interest thereon is payable, or
impair the right to institute suit for the enforcement of any such
payment on or after the maturity thereof (or, in the case of
redemption, on or after the redemption date);
(b) reduce the percentage in principal amount of the
Bonds, the consent of whose holders is required for any such
supplemental indenture, or the consent of whose holders is required
for any waiver provided for in this Restated Indenture of compliance
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with certain provisions of this Restated Indenture or certain defaults
hereunder and their consequences;
(c) modify any of the provisions of this Section or
Section 9.17, except to increase any percentage provided thereby or to
provide that certain other provisions of this Restated Indenture
cannot be modified or waived without the consent of the holder of each
Bond affected thereby;
(d) modify, in the case of Bonds of any series
convertible into other securities, any of the provisions of this
Restated Indenture in such manner as to affect the conversion rights
of the holders of such Bonds;
(e) except as expressly permitted herein, permit the
creation of any lien ranking prior to or on a parity with the lien of
this Restated Indenture with respect to any of the Trust Estate or
terminate the lien of this Restated Indenture on any property at any
time subject hereto or deprive any Bondholder of the security afforded
by the lien of this Restated Indenture; or
(f) modify, in the case of Bonds of any series for which
a mandatory sinking fund is provided, any of the provisions of this
Restated Indenture in such manner as to affect the rights of the
holders of such Bonds to the benefits of such sinking fund.
(g) In lieu of any supplemental indenture permitted by
this Section 12.02, except where otherwise specified herein, the
provisions of this Restated Indenture which may be modified by such a
supplemental indenture may be waived by the consent of the holders of
not less than 66 2/3% in principal amount of all Bonds affected by
such waiver.
The Trustee may in its discretion determine whether or not any
Bonds would be affected by any supplemental indenture and any such
determination shall be conclusive as to each Bondholder, whether such Bond be
theretofore or thereafter authenticated and delivered hereunder. The Trustee
shall not be liable for any such determination made in good faith.
Any written consent of Bondholders under this Section need not
approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such consent shall approve the substance thereof.
SECTION 12.03. Execution of Supplemental Indentures. In
executing, or accepting the additional trusts created by, any supplemental
indenture permitted by this Article or the modification thereby of the trusts
created by this Restated Indenture, the Trustee shall be entitled to receive,
and, subject to Section 10.01, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Restated Indenture. The Trustee may, but shall
not be obligated to, enter into any such supplemental indenture which affects
the Trustee's own rights, duties or immunities under this Restated Indenture or
otherwise.
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SECTION 12.04. Effect of Supplemental Indentures. Upon the
execution of any supplemental indenture under this Article, this Restated
Indenture shall be modified in accordance therewith and such supplemental
indenture shall form a part of this Restated Indenture for all purposes, and
every holder of Bonds theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
SECTION 12.05. Reference in Bonds to Supplemental Indentures.
Bonds authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article may, and if required by the Trustee shall,
bear a notation in form approved by the Trustee as to any matter provided for
in such supplemental indenture. If the Company shall so determine, new Bonds
so modified as to conform, in the opinion of the Trustee, to any such
supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Bonds then
outstanding.
ARTICLE THIRTEEN
Covenants
SECTION 13.01. Payment of Principal, Premium and Interest.
The Company will duly and punctually pay the principal of (and premium, if any)
and interest on the Bonds in accordance with the terms of the Bonds and this
Restated Indenture.
If the specified date for any such payment shall be a
Saturday, Sunday or legal holiday or the equivalent for banking institutions
generally (other than a moratorium) at any place of payment where payment
thereof is to be made, then such payment may be made at such place of payment
on the next succeeding Business Day which is not one of the foregoing days
without additional interest and with the same force and effect as if made on
the specified date for such payment.
SECTION 13.02. Maintenance of Office or Agency. The Company
will maintain an office or agency in Charleston, West Virginia and/or
Wilmington, Delaware, where Bonds may be presented or surrendered for payment
and where Bonds entitled to be registered, transferred, exchanged or converted
may be presented or surrendered for registration, transfer, exchange or
conversion and where notices and demands to or upon the Company in respect of
the Bonds and this Restated Indenture may be served. The Company will give
prompt written notice to the Trustee of the location, and of any change in the
location, of such offices or agencies. If at any time the Company shall fail
to maintain such offices or agencies or shall fail to furnish the Trustee with
the address thereof, such presentations, surrenders, notices and demands may be
made or served at the principal corporate trust office of the Trustee, and the
Company hereby appoints the Trustee its agent to receive all such
presentations, surrenders, notices and demands.
SECTION 13.03. Money for Bond Payments To Be Held in Trust;
Repayment of Unclaimed Money. The Company will, on or before each due date of
the principal of (and premium, if any) or interest on any of the Bonds,
segregate and hold in trust for the benefit of the holders of such Bonds a sum
sufficient to pay the principal (and premium, if any) or interest so
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becoming due until such sums shall be paid to such holders or otherwise
disposed of as herein provided, and the Company will promptly notify the
Trustee of its action or failure so to act.
Moneys so segregated or deposited and held in trust shall not
be a part of the Trust Estate and shall not be deemed Trust Moneys but shall
constitute a separate trust fund for the benefit of the Persons entitled to
such principal, premium or interest. The Company may at any time, for the
purpose of obtaining the satisfaction and discharge of this Restated Indenture
or for any other purpose, pay to the Trustee all money held in trust by the
Company, such money to be held by the Trustee upon the same trusts as those
upon which such money was held by the Company. Upon such payment by the
Company, the Company shall be discharged from such trust.
SECTION 13.04. Warranty of Title. At the time of the
execution and delivery of this instrument, the Company has good and marketable
title to the real property specifically described in the Granting Clauses,
subject to no mortgage, lien, charge or encumbrance except as stated therein or
in the Subject Clause to the Granting Clauses and except for Permitted
Encumbrances, and has full power and lawful authority to grant, bargain, sell,
alienate, remise, release, convey, assign, transfer, mortgage, pledge, set over
and confirm said real property and interests in real property in the manner and
form aforesaid.
The Company lawfully owns and is possessed of the personal
property specifically described in the Granting Clauses, subject to no
mortgage, lien, charge or encumbrance except as stated therein or in the
Subject Clause to the Granting Clauses and except for Permitted Encumbrances,
and has full power and lawful authority to mortgage, assign, transfer, deliver
and pledge said personal property in the manner and form aforesaid.
The Company hereby does and will forever warrant and defend
the title to the property specifically described in the Granting Clauses
against the claims and demands of all persons whomsoever, except for Permitted
Encumbrances.
SECTION 13.05. After-Acquired Property; Further Assurances;
Recording. All property of every kind, other than Excepted Property, acquired
by the Company after the date hereof, shall, immediately upon the acquisition
thereof by the Company, and without any further mortgage, conveyance or
assignment, become subject to the lien of this Restated Indenture, except as
permitted by Section 11.02. The Company will do, execute, acknowledge and
deliver all and every such further acts, conveyances, mortgages, financing
statements and assurances as the Trustee shall require for accomplishing the
purposes of this Restated Indenture.
The Company will cause this instrument and all supplemental
indentures, Property Certificates and other instruments of further assurance,
including all financing statements and continuation statements covering
security interests in personal property and all mortgages securing purchase
money obligations delivered to the Trustee to be promptly recorded, registered
and filed, and at all times to be kept recorded, registered and filed, and will
execute and file such financing statements and cause to be issued and filed
such continuation statements, all in such manner and in such places as may be
required by law fully to preserve and protect the rights of the
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Bondholders and the Trustee hereunder to all property comprising the Trust
Estate. Within 120 days after the execution and delivery of this instrument and
promptly after the execution and delivery of each supplemental indenture,
Property Certificate or other instrument of further assurance, the Company will
furnish to the Trustee an Opinion of Counsel stating that, in the opinion of
such Counsel, this instrument and all such supplemental indentures, Property
Certificates and other instruments of further assurance have been properly
recorded, registered and filed, or have been received for record, filing or
registration, to the extent necessary to make effective the lien intended to be
created by this Restated Indenture, reciting the details of such action or
referring to prior Opinions of Counsel in which such details are given, and
stating that all financing statements and continuation statements have been
executed and filed that are necessary fully to preserve and protect the rights
of the Bondholders and the Trustee hereunder, or stating that, in the opinion
of such counsel, no such action is necessary to make such lien effective.
Notwithstanding any provision hereof to the contrary, the
Company shall not be required to execute and deliver supplemental indentures or
Property Certificates specifically subjecting property acquired after the date
hereof to the lien of this Restated Indenture more frequently than annually,
except that the Company shall file a supplemental indenture or Property
Certificate whenever the aggregate cost of all such property acquired after the
later of the date hereof or the date of the most recent supplemental indenture
or Property Certificate so executed and delivered exceeds $20,000,000.
SECTION 13.06. Limitations on Liens; Payment of Taxes. The
Company will not create or incur or suffer or permit to be created or incurred
or to exist any mortgage, lien, charge or encumbrance on or pledge of any of
the Trust Estate prior to or upon a parity with the lien of this Restated
Indenture except Permitted Encumbrances and except that:
(a) the Company may create, incur or suffer to exist
purchase money mortgages or other purchase money liens upon any real
property purchased by the Company or acquire real property subject to
mortgages and liens existing thereon at the date of acquisition, or
acquire or agree to acquire and own personal property subject to or
upon chattel mortgages, security agreements, conditional sales
agreements or other title retention agreements, so long as:
(i) the principal amount of the indebtedness
secured by each such mortgage, lien or agreement shall not
exceed the cost or fair value to the Company at the time of
the acquisition thereof by the Company, whichever is less, of
the property subject thereto, as determined by the Board of
Directors, and
(ii) each such mortgage, lien or agreement shall
apply only to the property originally subject thereto and
fixed improvements erected on such property or affixed to such
personal property or equipment used in connection with such
real or personal property.
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(b) The Company may modify, extend, renew or replace any
mortgage, lien or agreement permitted by Subsection (a) upon the same
property theretofore subject thereto, or modify, replace, renew or
extend the indebtedness secured thereby, so long as the principal
amount of such indebtedness so modified, replaced, extended or renewed
shall not be increased.
The Company will pay or cause to be paid as they become due
and payable all taxes, assessments and other governmental charges lawfully
levied or assessed or imposed upon the Trust Estate or any part thereof or upon
any income therefrom, and also (to the extent that such payment will not be
contrary to any applicable laws) all taxes, assessments and other governmental
charges lawfully levied, assessed or imposed upon the lien or interest of the
Trustee or of the Bondholders in the Trust Estate, so that (to the extent
aforesaid) the lien of this Restated Indenture shall at all times be wholly
preserved at the cost of the Company and without expense to the Trustee or the
Bondholders; provided, however, that the Company shall not be required to pay
and discharge or cause to be paid and discharged any such tax, assessment or
governmental charge to the extent that the amount, applicability or validity
thereof shall currently be contested in good faith by appropriate proceedings
and the Company shall have established and shall maintain adequate reserves on
its books for the payment of the same.
SECTION 13.07. Maintenance of Properties. The Company will
cause all its properties used or useful in the conduct of its business to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section shall prevent the Company from
discontinuing the operation and maintenance of any of its properties if such
discontinuance is, in the judgment of the Company, desirable in the conduct of
its business and not disadvantageous in any material respect to the
Bondholders.
SECTION 13.08. Insurance. The Company will at all times keep
all its property of an insurable nature and of the character usually insured by
companies operating similar properties, insured in amounts customarily carried,
and against loss or damage from such causes as are customarily insured against,
by similar companies.
All such insurance shall be effected with responsible
insurance carriers. All policies or other contracts for such insurance upon
any part of the Trust Estate shall provide that the proceeds of such insurance
(except in the case of any particular casualty resulting in damage or
destruction not exceeding $20,000,000 in the aggregate) shall be payable to the
Trustee as its interest may appear (by means of a standard mortgagee clause or
other similar clause acceptable to the Trustee, without contribution). Each
policy or other contract for such insurance, or such mortgagee clause, shall
contain an agreement by the insurer that, notwithstanding any right of
cancellation reserved to such insurer, such policy or contract shall continue
in force for the benefit of the Trustee for at least 10 days after written
notice to the Trustee of cancellation.
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All proceeds of insurance received by the Trustee shall be
held and paid over or applied by the Trustee as provided in Article Seven.
All proceeds of any insurance on any part of the Trust Estate
not payable to the Trustee shall be applied by the Company to the repair,
rebuilding or replacement of the property destroyed or damaged or shall be
deposited with the Trustee to be held and paid over or applied by it as
provided in Article Seven.
SECTION 13.09. Corporate Existence. Subject to Article
Eleven, the Company will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights
(charter and statutory) and franchises, except that the Company shall not be
required to preserve any right or franchise if (a) the Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct
of the business of the Company and (b) the loss thereof is not disadvantageous
in any material respect to the Bondholders.
SECTION 13.10. Books and Records. The Company will keep
proper books of record and account, in which full and correct entries shall be
made of all dealings or transactions of or in relation to the Bonds and the
properties, business and affairs of the Company in accordance with the
Accounting Requirements. The Company will furnish to the Trustee any and all
information as the Trustee may reasonably request, with respect to the
performance by the Company of its covenants in this Restated Indenture.
SECTION 13.11. Use of Trust Moneys and Advances by Trustee.
If the Company shall fail to perform any of its covenants in this Restated
Indenture, the Trustee may, at any time and from time to time, use and apply
any Trust Moneys held by it under Article Seven, or make advances, to effect
performance of any such covenant on behalf of the Company. All moneys so used
or advanced by the Trustee, together with interest at an agreed rate, shall be
repaid by the Company upon demand and such advances shall be secured under this
Restated Indenture prior to the Bonds. The Trustee shall have the right to use
and apply any Trust Moneys at any time held by it under Article Seven for the
repayment of all such advances but no such use of Trust Moneys or advance shall
relieve the Company from any default hereunder.
SECTION 13.12. Statement as to Compliance. The Company will
deliver to the Trustee, within 120 days after the end of each fiscal year, a
written statement signed by the President or a Vice President and by the
Treasurer, an Assistant Treasurer, the Controller or an Assistant Controller of
the Company, stating, as to each signer thereof, that:
(a) a review of the activities of the Company during such
year and of performance under this Restated Indenture has been made
under his supervision, and
(b) to the best of his knowledge, based on such review,
the Company has fulfilled all its obligations under this Restated
Indenture throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known
to him and the nature and status thereof.
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Within 120 days after the end of each calendar year, the
Company will furnish to the Trustee an Opinion of Counsel stating that, in the
opinion of such counsel, such action has been taken with respect to the
recording, registering, filing, recording, reregistering and refiling of this
Restated Indenture and of all supplemental indentures, financing statements,
continuation statements and other instruments of further assurance as is
necessary to maintain the lien of this Restated Indenture (including the lien
on any property acquired by the Company after the execution and delivery of
this Restated Indenture and owned by the Company at the end of the preceding
calendar year) and reciting the details of such action or referring to prior
Opinions of Counsel in which such details are given and stating that all
financing statements and continuation statements have been executed and filed
that are necessary fully to preserve and protect the rights of the Bondholders
and the Trustee hereunder or stating that, in the opinion of such counsel, no
such action is necessary to maintain such lien.
Promptly after any officer of the Company may reasonably be
deemed to have knowledge of a default hereunder, the Company will deliver to
the Trustee a written notice specifying the nature and period of existence
thereof and the action the Company is taking and proposes to take with respect
thereto.
SECTION 13.13. Waiver of Provisions. Covenants and
Conditions. The Company may in any particular instance omit to comply with any
provision, covenant or condition set forth herein, except Section 13.01, if
before or after the time for such compliance the holders of at least 66-2/3% in
principal amount of all Bonds shall, by act of such Bondholders, either waive
such compliance in such instance or generally waive compliance with such
provision, covenant or condition, but no such waiver shall extend to or affect
such provision, covenant or condition except to the extent so expressly waived
and, until such waiver shall become effective, the obligations of the Company
and the duties of the Trustee in respect of any such covenant or condition
shall remain in full force and effect.
ARTICLE FOURTEEN
Redemption of Bonds
SECTION 14.01. General Applicability of Article. Bonds which
are redeemable before their maturity shall be redeemable in accordance with
their terms and (except as otherwise provided with respect to the Bonds of any
particular series by the provisions of this Restated Indenture creating such
series) in accordance with this Article.
SECTION 14.02. Election to Redeem; Notice to Trustee. The
election of the Company to redeem any Bonds shall be evidenced by an Officers'
Certificate. In case of any redemption at the election of the Company of less
than all the Bonds of any series, the Company shall, at least 20 days prior to
the redemption date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such redemption date and of
the principal amount of Bonds of such series to be redeemed.
54
<PAGE> 61
SECTION 14.03. Deposit of Redemption Price. Prior to any
redemption date, the Company shall segregate and hold in trust as provided in
Section 13.03 an amount of money sufficient to pay the redemption price of all
the Bonds which are to be redeemed on that date. Such money shall be held in
trust for the benefit of the Persons entitled to such redemption price and
shall not be deemed to be part of the Trust Estate or Trust Moneys.
SECTION 14.04. Bonds Payable on Redemption Date. Notice of
redemption having been given as aforesaid, the Bonds so to be redeemed shall,
on the redemption date, become due and payable at the redemption price therein
specified and from and after such date (unless the Company shall default in the
payment of the redemption price) such Bonds shall cease to bear interest. Upon
surrender of any such Bond for redemption in accordance with such notice, such
Bond shall be paid by the Company at the redemption price.
If any Bond called for redemption shall not be so paid upon
surrender thereof for redemption or as otherwise provided under Section 14.05
in lieu of surrender, the principal (and premium, if any) shall until paid,
bear interest from the redemption date at the rate prescribed therefor in the
Bond.
SECTION 14.05. Bonds Redeemed in Part. If less than all the
Bonds of any series are to be redeemed, each Bond of such series shall be
redeemed in part on a pro rata basis. Any Bond which is to be redeemed only in
part shall be surrendered at the appropriate office or agency of the Company
(with, if the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by the holder thereof or his attorney duly authorized in
writing) and the Company shall execute and the Trustee shall authenticate and
deliver to the holder of such Bond, without service charge, a new Bond or Bonds
of the same series of any authorized denomination or denominations as requested
by such holder in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Bond so surrendered.
In lieu of surrender under the preceding paragraph, payment of
the redemption price of a portion of the principal of any Bond may be made
directly to the holder thereof without surrender thereof, if there shall have
been filed with the Trustee either (i) a written agreement between the Company
and such holder that payment shall be so made and that such holder will not
sell, transfer or otherwise dispose of such Bond unless prior to delivery
thereof such holder shall present such Bond to the Trustee for notation thereon
of the portion of the principal thereof redeemed or shall surrender such Bond
in exchange for a new Bond or Bonds for the unredeemed balance of the principal
of the surrendered Bond or (ii) a certificate of the Company that such an
agreement has been entered into and remains in force.
55
<PAGE> 62
ARTICLE FIFTEEN
Pledged Contracts
SECTION 15.01. Performance of Pledged Contracts; No
Assumption by Trustees; Notice of Claimed Defaults. No assignment, pledge or
mortgage hereunder of any Pledged Contract by or on behalf of the Company
shall:
(a) relieve the Company of its obligations and
liabilities under such Pledged Contract, all of which shall continue
to be the obligations and liabilities of the Company, or
(b) impose any obligations or liabilities upon the
Trustee with respect to the performance or nonperformance of such
Pledged Contract, all of which obligations and liabilities shall
continue to be those of the Company.
SECTION 15.02. Rights as to Pledged Contracts.
(a) Unless an Event of Default shall exist, the Company
shall be entitled, to the extent permitted by law, to collect and
retain all sums due under all Pledged Contracts subject to the lien
hereof and to require and enforce the performance of any and all such
Pledged Contracts, without further consent of or action by the
Trustee. The Trustee shall, if the Company shall so request, deliver
to the Company suitable orders in favor of the Company or its nominee
or nominees for the payment of all sums, and the performance of all
acts and things under such Pledged Contracts. Such orders shall be
expressed to be revocable by the Trustee by written notice by the
Trustee to the parties affected thereby whenever an Event of Default
shall have occurred and be continuing.
(b) Promptly upon the occurrence of an Event of Default:
(i) the Company shall deliver to the Trustee a
schedule of the Pledged Contracts and an executed original of
each such Pledged Contract, together with an Officers'
Certificate stating that such schedule lists all Pledged
Contracts and that each Pledged Contract so furnished is an
executed original thereof,
(ii) upon receipt of the items required to be
delivered pursuant to clause (i), the Trustee shall give
written notice of the occurrence of such Event of Default,
describing the effect of clause (iii), to all parties (other
than the Company) to all Pledged Contracts at the time subject
to the lien hereof, and
(iii) the Trustee, or any receiver or trustee in
bankruptcy or other Person who shall rightfully be in
possession of the Trust Estate, shall collect and retain, as
part of the Trust Estate, all sums due under, and require and
enforce the performance of, any and all such Pledged
Contracts, all for the benefit and further security of the
Bonds;
56
<PAGE> 63
provided, however, that, if such Event of Default shall be cured or waived and
shall no longer exist, the Trustee, or any receiver or trustee in bankruptcy or
other Person who shall rightfully be in possession of the Trust Estate, shall
so notify all parties who received notice pursuant to the provisions of clause
(ii) and the Trustee shall discontinue the collection of any sums due under
such Pledged Contracts. All sums theretofore collected pursuant to clause (iii)
shall be applied as provided in Subsections (a) and (c) of Section 9.07.
SECTION 15.03. Amendment. etc. of Pledged Contracts. (a)
Whether or not an Event of Default shall exist, the Company shall have the
right to amend, modify, supplement, surrender, cancel, terminate or replace any
Pledged Contract at the time subject to the lien hereof.
(b) Whenever the Company shall no longer be in possession
of the Trust Estate, the rights of the Company under Subsection (a)
may, upon the conditions therein stated, be exercised by the Trustee
or (with the prior written approval and consent of the Trustee) by a
receiver or trustee in bankruptcy or other Person rightfully in
possession of the Trust Estate.
SECTION 15.04. Third Parties Protected. Any party to any
Pledged Contract may, until such party shall have received written notice to
the contrary, conclusively assume that the Company is in possession of the
Trust Estate is entitled to perform and accept performance of any Pledged
Contract and to receive all sums due thereunder, and is entitled to amend,
modify, supplement, surrender, cancel, terminate or replace any such Pledged
Contract.
SECTION 15.05. Maintenance of Records Pertaining to Pledged
Contracts; Company's Chief Place of Business. The Company covenants that it
will at all times keep accurate and complete records with respect to the
Pledged Contracts, including (but not limited to) a record of all payments and
proceeds received therefrom, and agrees that the Trustee or its representatives
shall have the right at any time and from time to time to call at the Company's
place or places of business where the Pledged Contracts may be held or located
or its records pertaining thereto may be kept and to examine or cause to be
examined such records and the Pledged Contracts and to make extracts therefrom
or copies thereof. The Company hereby covenants that the Pledged Contracts and
its records pertaining thereto will be kept at 1700 MacCorkle Avenue SE,
Charleston, West Virginia, or at such other place within the United States of
America as the Company shall have specified in a written notice delivered to
the Trustee. The Company agrees to notify the Trustee promptly following any
change made in the place or location of the Pledged Contracts or its records
pertaining thereto.
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
57
<PAGE> 64
IN WITNESS WHEREOF, the parties hereto have caused this
Restated Indenture to be duly executed, and their respective corporate seals to
be hereunto affixed and attested, all as of the day and year first above
written.
COLUMBIA GAS TRANSMISSION
CORPORATION,
/s/ T. K. Morris by: /s/ M. P. O'Flynn
- ------------------------------ -----------------------------
Witness: T. K. Morris Mark P. O'Flynn - Senior Vice
President and Chief Financial
Officer
/s/ T. C. Woodyard
- ------------------------------
Witness: T. C. Woodyard
Attest:
/s/ K. D. Tawney
- ------------------------------
Kenneth E. Tawney
Assistant General Counsel
and Assistant Secretary
[Corporate Seal]
WILMINGTON TRUST COMPANY,
as Trustee,
/s/ T. P. Laskaris by: /s/ J. M. Beeson
- ------------------------------ ------------------------------
Witness: Thomas P. Laskaris Vice President John M. Beeson
/s/ J. B. Feil
- ------------------------------
Witness: Joseph B. Feil
Attest:
/s/ T. C. Tavani
- ---------------------------------------------
Financial Services Officer Terri C. Tavani
[Corporate Seal]
58
<PAGE> 65
STATE OF WEST VIRGINIA,
:
COUNTY OF KANAWHA,
On the 20th day of November, 1995, before me personally came M. P.
O'Flynn, to me known, who, being by me duly sworn, did depose and say that he
resides at 104 McDavid Lane, Charleston, West Virginia, that he is Senior Vice
President and Chief Financial Officer of Columbia Gas Transmission Corporation,
the corporation described in and which executed the foregoing instrument, and
that he signed his name thereto by order of authority of the Board of Directors
of said corporation.
My commission expires: August 23, 2005
------------------------------------------------
/s/ M. T. Turnes
----------------------------
Notary Public
[Notarial Seal]
59
<PAGE> 66
NEW YORK
STATE OF DELAWARE
COUNTY OF NEW CASTLE
On the 17th day of November, 1995, before me personally came John M.
Beeson, Jr., to me known, who, being by me duly sworn, did depose and say that
he resides at 200 North Road in Wilmington, Delaware, that he is a Vice
President of Wilmington Trust Company, the corporation described in and which
executed the foregoing insstrument, and that he signed his name thereto by
order or authority of the Board of Directors of said corporation.
MARY T. ALLIN
NOTARY PUBLIC
My commission expires: My Commission expires August 16, 1997.
--------------------------------------
/s/ M T. Allin
--------------------
NOTARY PUBLIC
60
<PAGE> 67
EXHIBIT A
[Form of Series A Bond]
COLUMBIA GAS TRANSMISSION CORPORATION
First Mortgage Bond
Series A
COLUMBIA GAS TRANSMISSION CORPORATION, a Delaware corporation
(the "Company", which term includes any successor corporation under the
Restated Indenture, as hereinafter defined), for value received, hereby
promises to pay to THE COLUMBIA GAS SYSTEM, INC. (the "Bondholder"), on each
anniversary of the date hereof the amount duly endorsed upon the grid schedule
annexed hereto as Schedule 1 as the unpaid principal balance hereof at such
time and to pay interest on the unpaid portion of such amount from the date
hereof, or from the most recent Interest Payment Date to which interest has
been paid or duly provided for, at the rate and at the times specified in the
Restated Indenture until the principal hereof is paid or duly provided for.
This Bond is one of a duly authorized issue of the Company
designated as its "First Mortgage Bonds" (the "Bonds"), issued and to be issued
in one or more series under, and all equally and ratably secured by, an Amended
and Restated Indenture of Mortgage and Deed of Trust, dated November 28, 1995
(the "Restated Indenture"), between the Company and Wilmington Trust Company,
as Trustee, to which reference is hereby made for a description of the
properties thereby mortgaged, pledged and assigned, the nature and extent of
the security, the respective rights thereunder of the Bondholders, the Trustee
and the Company and the terms upon which the Bonds are, and are to be,
authenticated and delivered. All capitalized terms used but not defined herein
shall have the meanings specified in the Restated Indenture.
Interest on this Bond will be payable on the first Business
Day of each calendar month (an "Interest Payment Date").
The principal of (and premium, if any) and interest on this
Bond shall be payable at the office or agency of the Bondholder in Wilmington,
Delaware. All such payments shall be made in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts.
As provided in the Restated Indenture, the Bonds are issuable
in series which may vary as provided or permitted in the Restated Indenture.
This Bond is one of the Series A Bonds.
The Restated Indenture provides that Bonds of this series may
be prepaid at any time, in whole or in part, at the election of the Company, as
provided in Section 4.02 of the Restated Indenture. The amount of any such
prepayment shall be endorsed upon the grid schedule annexed hereto as Schedule
1.
61
<PAGE> 68
If an Event of Default shall occur, the principal of, premium,
if any, and interest on the Bonds may become or be declared due and payable in
the manner and with the effect provided in the Restated Indenture. Any
installment of principal or interest on this Bond that is not paid when due
shall bear interest at the rate borne by this Bond plus 2% per annum.
The Restated Indenture permits, with certain exceptions
therein provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Bondholders at any time by the
Company with the consent of the holders of 66-2/3% in aggregate principal
amount of the Bonds of all series affected by such modification. The Restated
Indenture also contains provisions permitting the holders of specified
percentages in principal amount of Bonds, on behalf of all Bondholders, to
waive compliance by the Company with the provisions of the Restated Indenture
and certain past defaults under the Restated Indenture and their consequences.
Any such consent or waiver by the holder of this Bond shall be conclusive and
binding upon such holder and upon all future holders of this Bond and of any
Bond issued upon the transfer hereof or in exchange here for or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Bond.
No reference herein to the Restated Indenture and no provision
of this Bond or of the Restated Indenture shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the principal of,
premium, if any, and interest on this Bond at the times, places and rates, and
in the coin or currency, herein prescribed.
Unless the certificate of authentication hereon has been
executed by the Trustee by manual signature, this Bond shall not be entitled to
any benefit under the Restated Indenture or be valid or obligatory for any
purpose.
62
<PAGE> 69
IN WITNESS WHEREOF, the Company has caused this Bond to be duly
executed under its corporate seal.
COLUMBIA GAS TRANSMISSION
CORPORATION,
by:
----------------------
Attest:
- ---------------------------------
[Corporate Seal]
[Form of Trustee's Certificate of Authentication]
This Bond is one of the First Mortgage Bonds, Series A,
referred to in the within-mentioned Restated Indenture.
WILMINGTON TRUST COMPANY,
as Trustee,
by:
----------------------
Authorized Officer
63
<PAGE> 70
LOANS AND PAYMENTS OF PRINCIPAL
Amount of
Increase or
Decrease of Unpaid Holder's
Amount of Principal Principal Notation
Date Loan Amount Balance Made By
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
64
<PAGE> 71
[Form of Series G Bond]
COLUMBIA GAS TRANSMISSION CORPORATION
%
First Mortgage Bond
Series G
$. . . . . . . . . No. . . . .
COLUMBIA GAS TRANSMISSION CORPORATION, a Delaware corporation
(the "Company", which term includes any successor corporation under the
Restated Indenture, as hereinafter defined), for value received, hereby
promises to pay to THE COLUMBIA GAS SYSTEM, INC. (the "Bondholder"), on
November 28, 2000, the sum of $______________ (or so much thereof as shall not
have been paid upon prior redemption) and to pay interest thereon from the date
hereof or from the most recent Interest Payment Date to which interest has been
paid or duly provided for at the rate and at the times specified in the
Restated Indenture until the principal hereof is paid or duly provided for.
This Bond is one of a duly authorized issue of Bonds of the
Company designated as its "First Mortgage Bonds" (the "Bonds"), issued and to
be issued in one or more series under, and all equally and ratably secured by,
an Amended and Restated Indenture of Mortgage and Deed of Trust, dated November
28, 1995 (the "Restated Indenture"), between the Company and Wilmington Trust
Company, as Trustee, to which reference is hereby made for a description of the
properties thereby mortgaged, pledged and assigned, the nature and extent of
the security, the respective rights thereunder of the Bondholders, the Trustee
and the Company and the terms upon which the Bonds are, and are to be,
authenticated and delivered. All capitalized terms used but not defined herein
shall have the meanings specified in the Restated Indenture.
Interest on this Bond will be payable on May 28 and November
28 of each year (an "Interest Payment Date").
The principal of (and premium, if any) and interest on this
Bond shall be payable at the office or agency of the Bondholder in Wilmington,
Delaware. All such payments shall be made in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts.
As provided in the Restated Indenture, the Bonds are issuable
in series which may vary as provided or permitted in the Restated Indenture.
This Bond is one of the Series G Bonds.
65
<PAGE> 72
This Restated Indenture provides that Bonds of this series may
be redeemed in part and that upon any partial redemption of any such Bond the
same shall, except as otherwise permitted by the Restated Indenture, be
surrendered in exchange for one or more new Bonds in authorized form for the
unredeemed portion of principal. Bonds (or portions thereof) for whose
redemption and payment provision is made in accordance with the Restated
Indenture shall thereupon cease to be entitled to the lien of the Restated
Indenture and shall cease to bear interest from and after the date fixed for
redemption.
If an Event of Default shall occur, the principal of, premium,
if any, and interest on the Bonds may become or be declared due and payable in
the manner and with the effect provided in the Restated Indenture.
Any installment of principal or interest on this Bond that is
not paid when due shall bear interest at the rate borne by this Debenture plus
2% per annum.
The Restated Indenture permits, with certain exceptions as
therein provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Bondholders at any time by the
Company with the consent of the holders of 66-2/3% in aggregate principal
amount of the Bonds of all series affected by such modification. The Restated
Indenture also contains provisions permitting the holders of specified
percentages in principal amount of Bonds, on behalf of all Bondholders, to
waive compliance by the Company with the provisions of the Restated Indenture
and certain past defaults under the Restated Indenture and their consequences.
Any such consent or waiver by the holder of this Bond shall be conclusive and
binding upon such holder and upon all future holders of this Bond and of any
Bond issued upon the transfer hereof or in exchange here for or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Bond.
No reference herein to the Restated Indenture and no provision
of this Bond or of the Restated Indenture shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the principal of,
premium, if any, and interest on this Bond at the times, places and rates, and
in the coin or currency, herein prescribed.
Unless the certificate of authentication hereon has been
executed by the Trustee by manual signature, this Bond shall not be entitled to
any benefit under the Restated Indenture or be valid or obligatory for any
purpose.
66
<PAGE> 73
IN WITNESS WHEREOF, the Company has caused this Bond to be
duly executed under its corporate seal.
COLUMBIA GAS TRANSMISSION
CORPORATION,
by:
----------------------
Attest:
- -------------------------
[Corporate Seal]
[Form of Trustee's Certificate of Authentication]
This Bond is one of the First Mortgage Bonds, Series G,
referred to in the within-mentioned Restated Indenture.
WILMINGTON TRUST COMPANY,
as Trustee,
by:
----------------------
Authorized Officer
67
<PAGE> 74
Description of Real Property
The real estate descriptions contained in all instruments
referred to in this Schedule I are hereby incorporated herein by reference.
68
<PAGE> 1
EXHIBIT 10-BF(a)
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made this 17th day of January 1996, between Catherine
Good Abbott (the "Executive"), and The Columbia Gas System, Inc. (the
"Company").
W I T N E S S E T H:
WHEREAS, the Company wishes to secure the services of the Executive as
Chief Executive Officer of its two wholly-owned subsidiary companies, Columbia
Gas Transmission Corporation and Columbia Gulf Transmission Company (the
"Transmission Companies"); and
WHEREAS, the Executive is willing to serve as Chief Executive Officer
of the Transmission Companies, and to enter into this Agreement on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the Company and the Executive hereby agree as follows:
1. Employment. The Company shall employ the Executive, and the
Executive shall serve, as Chief Executive Officer of the Transmission Companies
commencing January 17, 1996.
<PAGE> 2
2
As Chief Executive Officer of the Transmission Companies, the
Executive will report directly and solely to the Chairman, President and Chief
Executive Officer of the Company. The Executive agrees to faithfully perform
the duties of Chief Executive Officer to the best of her ability and, except
for vacations and periods of temporary illness, to devote her full time and
attention to the Transmission Companies' business. If elected, the Executive
also agrees to serve as a director and/or officer of any subsidiary or
affiliate of the Company.
2. Compensation. For all services to be rendered by the
Executive under this Agreement, the Executive shall be paid compensation and
receive benefits from the Transmission Companies as follows:
(a) Base Salary. A base salary of $325,000 per annum,
payable in accordance with the usual manner of payment of executive salaries by
the Transmission Companies. Any increases that the Executive would be entitled
to shall be administered in the same manner as is applicable to all other
senior executives of the Transmission Companies as shall be approved by their
Board of Directors. The term "base salary", for the purpose of this Agreement,
shall include any increases, and, as increased, shall be reduced only if such
reduction is part of and consistent with an across-the-board reduction of
salaries which occurs prior to a change in control, as described in paragraph
(e) of Section 6, and which affects all members of the senior management of the
Transmission Companies; provided, however, that the base salary shall in no
case be reduced below $325,000 per annum.
<PAGE> 3
3
(b) Incentive Compensation Plan. The Executive shall
participate in the Transmission Companies' incentive compensation plan and all
other incentive programs for officers of the Transmission Companies as
appropriate for her status.
(c) Grant of Contingent Stock. Ninety (90) days after the
Executive commences employment with the Transmission Companies, the Company
shall transfer to the Executive 1,500 shares of the Company's Common Stock, in
consideration of the Executive's resignation from employment with her present
employer and her willingness to accept employment with the Transmission
Companies. This transfer shall be subject to the approval of a new Long Term
Incentive Plan at the Company's April, 1996 Annual Stockholders Meeting. If
such Long Term Incentive Plan is not approved, then a cash payment equivalent
to the fair market value of the shares of Contingent Stock as of the date of
the Annual Stockholder's Meeting shall be made in lieu of the grant of
Contingent Stock.
3. Reimbursement of Expenses. The parties recognize that in the
course of performing her duties under this Agreement, the Executive will incur
out-of-pocket expenses for the account of the Transmission Companies. The
Executive shall be entitled to reimbursement for all reasonable out-of-pocket
expenses so incurred, upon submission to the Transmission Companies of an
adequate, written accounting.
4. Fringe Benefits. The Executive shall be eligible to
participate fully in all fringe benefits provided by the Transmission Companies
for its employees in general, or for its executives, including, but not limited
to, the Pension Restoration Plan, the Thrift
<PAGE> 4
4
Restoration Plan, any pension plan or profit sharing plan, maintained from time
to time by the Transmission Companies, and any life, accident, health,
hospitalization or long-term disability insurance, maintained from time to time
by the Transmission Companies. The eligibility requirements under the
Transmission Companies' Sick Leave Plan shall be waived so that the Executive
shall at all times be eligible to receive the maximum benefits under such plan;
i.e., twenty-six weeks at full pay. The Executive shall also be entitled to
receive benefits under the Transmission Companies' Transfer of Personnel Plan.
Subject to any applicable legal limitations, the Executive shall continue to
participate in any such fringe benefits, or be provided an equivalent amount of
cash payments, during the period the Executive is receiving the payments set
forth in paragraph (a)(i) of Section 7 of this Agreement (Severance Benefit).
5. Vacation. The Executive shall be entitled to four weeks of
paid vacation for each consecutive 12-month period during her employment by the
Transmission Companies.
6. Termination. The Executive's employment shall be terminated
upon the first to occur of the following:
(a) The Executive's death.
(b) The Executive becoming permanently disabled. Permanent
disability shall mean physical or mental incapacity of a nature which
prevents the Executive, in the sole judgment of the Board of Directors of the
Transmission Companies, from performing her duties under this Agreement.
<PAGE> 5
5
(c) The Executive's employment being terminated by the
Transmission Companies for any reason other than for cause. Termination for
cause shall mean termination by action of the Board of Directors of the
Transmission Companies because of the willful failure of the Executive to
perform her duties and obligations under this Agreement or gross negligence in
the performance of her duties under this Agreement or the commission by the
Executive of a felony.
(d) The 90th day after the Executive notifies the
Transmission Companies in writing that she is terminating her employment as a
result of the Board of Directors of the Transmission Companies removing her
from the position of Chief Executive Officer, or a material reduction in her
duties and responsibilities in any such position. Any notice pursuant to this
paragraph must be given in writing no later than ninety (90) days after the
Board of Directors of the Transmission Companies fails to initially elect,
reelect, or removes, the Executive or after the material reduction in the
Executive's duties or responsibilities.
(e) The 90th day after the Executive notifies the
Transmission Companies (or any successor to the Transmission Companies) in
writing that she is terminating her employment as a result of one of the
following events:
(i) The Shareholders of the Company approve an agreement for
the sale or other disposition of all or substantially all of the
assets of the Company through a sale, merger, consolidation, or other
business combination transaction.
<PAGE> 6
6
(ii) The acquisition by any person or group of
associated persons of beneficial ownership of 25% or more of
the voting securities of the Company (other than a pro forma
transaction for a purpose such as changing the name or state of
incorporation of the Company).
(iii) During any period of 24 consecutive months,
individuals who at the beginning of such period constitute the Board
of Directors of the Company and any new directors whose
election by the Board of Directors of the Company or nomination for
election by the Company's Shareholders was approved by a vote of at
least 2/3 of the directors then still in office who either were
directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board of Directors of the
Company.
Any notice pursuant to this paragraph must be given in writing no later than
180 days after such event.
(f) The Executive notifies the Transmission Companies
that she is terminating her employment, or the Transmission Companies notify
the Executive that the Executive's employment is being terminated, for any
reason not set forth in the preceding paragraphs of this Section.
7. Termination Benefits.
(a) If the Executive's employment is terminated for any of
the reasons set forth in paragraph (c) or (d) of Section 6 (termination by the
Transmission Companies
<PAGE> 7
7
without cause or termination by the Executive for cause), the Transmission
Companies shall pay, or provide, to the Executive the following termination
benefits:
(i) Severance Benefit. A severance benefit in an amount
equal to the sum of (A) the Executive's then annual base salary for a
period of 24 months, or, if the Executive's employment is terminated
before the first anniversary of the signing of this Agreement by the
Company and the Executive, a period of 24 months plus the number of
months and days between the date the Executive's employment is
terminated and the first anniversary of the signing of this Agreement
by the Company and the Executive, and (B) a reasonable estimate of the
incentive compensation the Executive would have received under the
Transmission Companies' incentive compensation plan during such 24
month or longer period if her employment had not terminated. Such
benefit shall be paid in monthly installments over such 24 month or
longer period and shall commence within a reasonable period of time
after such termination.
(ii) New Employment Assistance. Reasonable assistance in
obtaining new employment, including, but not limited to, the use of an
office, a telephone, and normal secretarial and other office services.
(iii) Payment of Accrued Vacation. Payment for all
vacation periods earned and accrued to the date of such termination
but not taken. Such payment shall be made in a single sum within a
reasonable period of
<PAGE> 8
8
time after such termination.
(b) If the period of employment is terminated for the reason
set forth in paragraph (a) of Section 6 (death), the Executive's designated
beneficiary shall receive, in addition to the death and other benefits provided
under the Transmission Companies' fringe benefit programs, the termination
benefits set forth in paragraph (iii) of this Section (Payment of Accrued
Vacation).
(c) If the period of employment is terminated for the reason
set forth in paragraph (b) of Section 6 (disability), the Executive shall
receive, in addition to the disability benefits provided under the Transmission
Companies' fringe benefit programs, the termination benefits set forth in
paragraph (iii) of this Section (Payment of Accrued Vacation).
(d) If the period of employment is terminated for the reason
set forth in paragraph (e) of Section 6 (change in control), the Executive
shall receive the termination benefits set forth in paragraphs (a)(i), (ii) and
(iii) of this Section (Severance Benefit, New Employment Assistance and Payment
of Accrued Vacation), except that the amount to be paid under paragraph (a)(i)
(Severance Benefit) shall be equal to the sum of (A) the Executive's then
annual base salary for a period of 36 months, and (B) a reasonable estimate of
the incentive compensation the Executive would have received under the
Transmission Companies' incentive compensation plan, during such 36 month
period if her employment had not terminated. Such benefit shall be paid in
monthly installments over such 36 month period and shall commence within a
reasonable period of time after
<PAGE> 9
9
such termination. Notwithstanding the preceding to the contrary, in the event
that any payments or benefits received or to be received by the Executive in
connection with the Executive's termination of employment (whether under the
terms of this Agreement or any other plan, arrangement or agreement with the
Transmission Companies , the Company or any of its subsidiaries) would subject
the Executive to an excise tax under Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), then to the extent necessary to eliminate the
imposition of such an excise tax (and after taking into account any reduction
in payments or benefits under any such other plan, arrangement or agreement),
the payments under paragraph (a) (i) of this Section 6 (Severance Benefit)
shall be reduced.
(e) If the period of employment is terminated for the reason
set forth in paragraph (f) of Section 6 (any other reason), the Executive shall
receive only the termination benefit set forth in paragraph (a) (iii) of this
Section (Payment of Accrued Vacation).
8. Payment of Legal Fees and Expenses. The Transmission
Companies shall also pay to the Executive reasonable legal fees and expenses
incurred in good faith by the Executive as a result of a termination which
entitles the Executive to benefits under the Agreement (including, but not
limited to, all such fees and expenses incurred in disputing any such
termination or in seeking in good faith to obtain or enforce any benefit or
right provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of Section 4999 of the
Code to any payment or
<PAGE> 10
10
benefit provided hereunder). Such payments shall be made within 5 business
days after delivery of the Executive's written requests for payment accompanied
with such evidence of fees and expenses incurred as the Company reasonably may
require.
9. Designation of Beneficiary. The Executive may designate a
beneficiary or beneficiaries, who may be designated contingently or
successively and who may be an entity other than a natural person, to receive
any termination benefits which may become payable under Section 7 in the event
of the Executive's death. Any such designation may, from time to time and at
any time, be changed or canceled by the Executive without the consent of any
beneficiary. Any such designation must be by written notice delivered to the
Transmission Companies. If the Executive designates more than one beneficiary,
any payments to the Executive's beneficiaries shall be made in equal shares
unless the Executive designates otherwise.
10. Withholding of Taxes. Any payments to the Executive, or to
her designated beneficiary or beneficiaries, pursuant to the terms of this
Agreement shall be reduced by such amounts as are required to be withheld with
respect thereto under all present and future federal, state and local tax laws
and regulations and other laws and regulations.
11. Notices. Any notice to be given to the Executive by the
Transmission Companies under this Agreement shall be deemed to have been given
by the Transmission Companies and received by the Executive if and when it is
hand delivered to the Executive or it is sent by registered or certified mail
to the Executive at 2342 Quenby, Houston, TX 77005, or such other address as
may be given by the Executive in
<PAGE> 11
11
writing to the Transmission Companies. Any notice to be given to the
Transmission Companies by the Executive under this Agreement shall be deemed to
have been given by the Executive and received by the Transmission Companies if
and when it is hand delivered by the Executive to the Secretary of the
Transmission Companies or it is sent by registered or certified mail, addressed
to the Board of Directors of the Transmission Companies at 1700 MacCorkle
Avenue, Charleston, WV 25325, or such other address as may be given by the
Transmission Companies in writing to the Executive.
12. Full and Complete Agreement; Amendment. This Agreement
constitutes the full and complete understanding and agreement of the parties
and supersedes all prior understandings and agreements. This Agreement may be
modified only by a written instrument executed by both parties.
13. Nonassignability. This Agreement and the rights and benefits
hereunder are personal to the Company and the Transmission Companies and are
not assignable or transferrable, nor may the services to be performed hereunder
be assigned by the Company or the Transmission Companies to any person, firm or
corporation; provided, however, that this Agreement and the rights and benefits
hereunder may be assigned by the Company and the Transmission Companies to any
corporation acquiring all or substantially all of the assets of the Company or
the Transmission Companies or to any corporation into which the Company or the
Transmission Companies may be merged or consolidated, and this Agreement and
the rights and benefits hereunder will automatically be deemed assigned to any
such corporation. The Executive's rights and interest under
<PAGE> 12
12
this Agreement may not be assigned, pledged or encumbered by the Executive.
The provisions of this Agreement shall enure to the benefit of the Executive's
heirs, executors, administrators and successors in interest.
14. Construction. This Agreement shall be construed under the
laws of the State of Delaware.
15. Execution in Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same instrument.
16. Titles and Headings. Titles and headings to Sections herein
are for purposes of reference only, and shall in no way limit, define or
otherwise affect the meaning or interpretation of any of the provisions of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first set forth above.
THE COLUMBIA GAS SYSTEM, INC.
(Corporate Seal)
By: /s/ O.G. RICHARD, III
----------------------------
ATTEST: Chairman, President and
Chief Executive Officer
/s/ C.M. AFSHAR
- -------------------------------
Secretary
/s/ CATHERINE GOOD ABBOTT
--------------------------------
Catherine Good Abbott
<PAGE> 1
EXHIBIT 10-CB
U.S. $1,000,000,000
CREDIT AGREEMENT
Dated as of November 28, 1995
Among
THE COLUMBIA GAS SYSTEM, INC.
as Borrower
and
THE INITIAL LENDERS NAMED HEREIN
as Initial Lenders
and
CITIBANK, N.A.
as Agent
and
BANKERS TRUST COMPANY, BANK OF MONTREAL,
CANADIAN IMPERIAL BANK OF COMMERCE,
CHEMICAL BANK AND MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
as Managing and Co-Syndication Agents
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 1.03. Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.02. Making the Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.03. The Competitive Bid Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.04. Issuance of and Drawings and Reimbursement Under Letters of Credit. . . . . . . . . . . . . 19
SECTION 2.05. Termination or Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.06. Repayment of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.07. Interest on Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.08. Interest Rate Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.09. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.10. Optional Conversion of Revolving Credit Advances . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.11. Prepayments of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.12. Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.13. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.14. Payments and Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.15. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.16. Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.17. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of Sections 2.01 and 2.03 . . . . . . . . . . . . . . 30
SECTION 3.02. Conditions Precedent to Each Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.03. Conditions Precedent to Each Competitive Bid Borrowing . . . . . . . . . . . . . . . . . . 32
SECTION 3.04. Determinations Under Section 3.01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 5.02. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.03. Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 6.02. Actions in Respect of the Letters of Credit upon Default . . . . . . . . . . . . . . . . . 42
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 7.02. Agent's Reliance, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 7.03. Citibank and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 7.04. Lender Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 7.05. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 7.06. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 7.07. Managing and Co-Syndication Agents as Lenders . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 8.02. Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 8.03. No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 8.04. Costs and Expenses; Indemnification; Limitation of Liability . . . . . . . . . . . . . . . 44
SECTION 8.05. Right of Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 8.06. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 8.07. Assignments, Designations and Participations . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 8.08. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8.09. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8.10. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8.11. Jurisdiction, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8.12. Severability of Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
<PAGE> 4
Schedules
Schedule I - List of Applicable Lending Offices
Schedule II - Non-Core Subsidiaries
Schedule 3.01(b) - Disclosed Litigation
Schedule 4.01(c) - Required Authorizations and Approvals
Schedule 5.02(a) - Liens
Exhibits
Exhibit A-1 - Form of Revolving Credit Note
Exhibit A-2 - Form of Competitive Bid Note
Exhibit B-1 - Form of Notice of Revolving Credit Borrowing
Exhibit B-2 - Form of Notice of Competitive Bid Borrowing
Exhibit B-3 - Form of Letter of Credit Request
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Designation Agreement
Exhibit E - Form of Opinion of Counsel for the Borrower
<PAGE> 5
THE COLUMBIA GAS SYSTEM, INC.
CREDIT AGREEMENT
Dated as of November 28, 1995
The Columbia Gas System, Inc., a Delaware corporation (the
"Borrower"), the banks, financial institutions and other institutional lenders
(the "Initial Lenders") listed on the signature pages hereof, and Citibank,
N.A. ("Citibank"), as administrative agent, documentation agent and
co-syndication agent (the "Agent") for the Lenders (as hereinafter defined),
agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"Adjusted CD Rate" means, for any Interest Period for each CD
Rate Advance comprising part of the same Revolving Credit Borrowing,
an interest rate per annum equal to the sum of:
(a) the rate per annum obtained by dividing (i)
the rate of interest determined by the Agent to be the average
(rounded upward to the nearest whole multiple of 1/100 of 1%
per annum, if such average is not such a multiple) of the
consensus bid rate determined by each of the Reference Banks
for the bid rates per annum, at 9:00 A.M. (New York City time)
(or as soon thereafter as practicable) on the first day of
such Interest Period, of New York certificate of deposit
dealers of recognized standing selected by such Reference
Banks for the purchase at face value of certificates of
deposit of such Reference Bank in an amount substantially
equal to such Reference Bank's CD Rate Advance comprising part
of such Revolving Credit Borrowing and with a maturity equal
to such Interest Period, by (ii) a percentage equal to 100%
minus the Adjusted CD Rate Reserve Percentage for such
Interest Period, plus
(b) the Assessment Rate for such Interest Period.
"Adjusted CD Rate Reserve Percentage" for any Interest Period
for all CD Rate Advances comprising part of the same Revolving Credit
Borrowing means the reserve percentage applicable on the first day of
such Interest Period under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any successor)
for determining the maximum reserve requirement (including, but not
limited to, any emergency, supplemental or other marginal reserve
requirement) for Citibank with respect to liabilities consisting of or
including (among other liabilities) U.S. dollar nonpersonal time
deposits in the United States and with a maturity equal to such
Interest Period.
"Advance" means a Revolving Credit Advance, a Swing Line
Advance, a Letter of Credit Advance or a Competitive Bid Advance.
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common
control with such Person or is a director or officer of such Person.
For purposes of this definition, the term "control" (including the
terms "controlling", "controlled by" and "under common control with")
of a Person means the possession, direct or indirect, of the power to
vote 20% or more of the Voting Stock of such Person or to direct or
cause the direction of the management and policies of such Person,
whether through the ownership of Voting Stock, by contract or
otherwise.
<PAGE> 6
2
"Agent's Account" means the account of the Agent maintained
by the Agent at Citibank with its office at 1 Court Square, 7th
Floor, Zone 1, Long Island City, New York 11120, Account
No. 36852248, Attention: Wendy Rutherford.
"Applicable Lending Office" means, with respect to each
Lender, such Lender's Domestic Lending Office in the case of a Base
Rate Advance or a CD Rate Advance and such Lender's Eurodollar Lending
Office in the case of a Eurodollar Rate Advance and, in the case of a
Competitive Bid Advance, the office of such Lender notified by such
Lender to the Agent as its Applicable Lending Office with respect to
such Competitive Bid Advance.
"Applicable Margin" means, as of any date, a percentage per
annum determined by reference to the public debt rating in effect on
such date as set forth below:
<TABLE>
<CAPTION>
====================================================================================================================================
Applicable
Margin Applicable
Public Debt Rating Applicable Margin for Applicable Margin for for CD Rate Margin for
S&P/Moody's Base Rate Advances Eurodollar Rate Advances Advances Facility Fee
====================================================================================================================================
<S> <C> <C> <C> <C>
Level 1
-------
BBB+/Baa1 or higher 0 .19% .315% .11%
- ------------------------------------------------------------------------------------------------------------------------------------
Level 2
-------
BBB/Baa2 0 .2775% .4025% .14%
- ------------------------------------------------------------------------------------------------------------------------------------
Level 3
-------
BBB-/Baa3 0 .295% .42% .18%
- ------------------------------------------------------------------------------------------------------------------------------------
Level 4
-------
BB+/Ba1 0 .45% .575% .30%
- ------------------------------------------------------------------------------------------------------------------------------------
Level 5
-------
BB/Ba2 0 .60% .725% .40%
- ------------------------------------------------------------------------------------------------------------------------------------
Level 6
-------
BB-/Ba3 or lower 0 1.00% 1.125% .50%
====================================================================================================================================
</TABLE>
For purposes of this definition, "public debt rating" means, as of any
date, the rating that has been most recently announced by either S&P
or Moody's, as the case may be, for any class of non-credit enhanced
long-term senior unsecured debt issued by the Borrower. For purposes
of the foregoing, (a) if only one of S&P and Moody's shall have in
effect a public debt rating, the Applicable Margin shall be determined
by reference to the available rating; (b) if neither S&P nor Moody's
shall have in effect a public debt rating, the Applicable Margin will
be set in accordance with Level 6 under the definition of "Applicable
Margin"; (c) if the ratings established by S&P and Moody's shall fall
within different levels, the Applicable Margin shall be determined by
reference to the higher rating; provided, however, that (i) if the
ratings are different by two or more levels, the Applicable Margin
shall be determined by reference to the rating that is one rating
lower than the higher rating and (ii) if one rating is investment
grade (BBB-/Baa3 or better) and the other rating is non-investment
grade, (BB+/Ba1 or lower), then the Applicable Margin shall be
determined by reference to the higher of (A) the Applicable Margin
yielded by the previous exception or (B) except with respect to Base
Rate Advances, an increase of 5 basis points per annum in each
Applicable Margin for Level 3; (d) if any rating established by S&P or
Moody's shall be changed, such change shall be effective as of the
date on which such change is first announced publicly by the rating
agency making such change; and (e) if S&P or Moody's shall change the
basis on which ratings are established, each reference to the public
debt rating announced by S&P or Moody's, as the case may be, shall
refer to the then equivalent rating by S&P or Moody's, as the case may
be.
<PAGE> 7
3
"Appropriate Lender" means, at any time, with respect to (a)
the Revolving Credit Facility, a Lender that has a Revolving Credit
Commitment with respect to such Facility at such time, (b) the Letter
of Credit Facility, (i) any Issuing Lender and (ii) if the other
Lenders have made Letter of Credit Advances pursuant to Section
2.04(b) that are outstanding at such time, each such other Lender and
(c) the Swing Line Facility, a Swing Line Bank that has a Swing Line
Commitment with respect to such Facility at such time.
"Arranger" means Citicorp Securities, Inc., as arranger of the
syndicate of Initial Lenders hereunder.
"Assessment Rate" for any Interest Period for all CD Rate
Advances comprising part of the same Revolving Credit Borrowing means
the annual assessment rate estimated by the Agent on the first day of
such Interest Period for determining the then current annual
assessment payable by Citibank to the Federal Deposit Insurance
Corporation (or any successor) for insuring U.S. dollar deposits of
Citibank in the United States.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, and accepted by the
Agent, in substantially the form of Exhibit C hereto.
"Available Amount" of any Letter of Credit means, at any time,
the maximum amount or the U.S. Dollar Equivalent of the maximum amount
available to be drawn under such Letter of Credit at such time
(assuming compliance at such time with all conditions to drawing).
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, 11
U.S.C. Section Section 101 et seq., as amended from time to time.
"Bankruptcy Court" means the United States Bankruptcy Court
for the District of Delaware, or such other court as may hereafter be
granted primary jurisdiction over the Reorganization Case.
"Base Rate" means a fluctuating interest rate per annum in
effect from time to time, which rate per annum shall at all times be
equal to the highest of:
(a) the rate of interest announced publicly by
Citibank in New York, New York, from time to time, as
Citibank's base rate; and
(b) the sum (adjusted to the nearest 1/4 of 1%
or, if there is no nearest 1/4 of 1%, to the next higher 1/4
of 1%) of (i) 1/2 of 1% per annum, plus (ii) the rate obtained
by dividing (A) the latest three-week moving average of
secondary market morning offering rates in the United States
for three-month certificates of deposit of major United States
money market banks, such three-week moving average (adjusted
to the basis of a year of 360 days) being determined weekly on
each Monday (or, if such day is not a Business Day, on the
next succeeding Business Day) for the three-week period ending
on the previous Friday by Citibank on the basis of such rates
reported by certificate of deposit dealers to and published by
the Federal Reserve Bank of New York or, if such publication
shall be suspended or terminated, on the basis of quotations
for such rates received by Citibank from three New York
certificate of deposit dealers of recognized standing selected
by Citibank, by (B) a percentage equal to 100% minus the
average of the daily percentages specified during such
three-week period by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum
reserve requirement (including, but not limited to, any
emergency, supplemental or other marginal reserve requirement)
for Citibank with respect to liabilities consisting of or
including (among other liabilities) three-month U.S. dollar
non-personal time deposits in the United States, plus (iii)
the average during such three-week period of the annual
assessment rates estimated by Citibank for determining the
then current annual assessment payable by Citibank to the
Federal Deposit Insurance Corporation (or any successor) for
insuring U.S. dollar deposits of Citibank in the United
States; and
<PAGE> 8
4
(c) 1/2 of one percent per annum above the
Federal Funds Rate.
"Base Rate Advance" means a Revolving Credit Advance that
bears interest as provided in Section 2.07(a)(i).
"Borrowing" means a Revolving Credit Borrowing, a Swing Line
Borrowing or a Competitive Bid Borrowing.
"Business Day" means a day of the year on which banks are not
required or authorized by law to close in New York City and, if the
applicable Business Day relates to any Eurodollar Rate Advances, on
which dealings are carried on in the London interbank market.
"Canadian Dollar" means lawful money of Canada.
"Canadian Dollar Letter of Credit" means a Letter of Credit
issued hereunder in Canadian Dollars.
"Canadian Dollar Letter of Credit Advance" means a Letter of
Credit Advance hereunder made in Canadian Dollars.
"Capitalized Leases" has the meaning specified in clause (e)
of the definition of "Debt".
"Cash Collateral Account" means an interest bearing cash
collateral account to be established and maintained by the Agent, over
which the Agent shall have sole dominion and control, upon such terms
as may be satisfactory to the Agent.
"CD Rate Advance" means a Revolving Credit Advance that bears
interest as provided in Section 2.07(a)(iii).
"CGTC" means Columbia Gas Transmission Corporation, a
wholly-owned subsidiary of the Borrower as of the date hereof.
"Citibank" means Citibank, N.A.
"Competitive Bid Advance" means an advance by a Lender to the
Borrower as part of a Competitive Bid Borrowing resulting from the
competitive bidding procedure described in Section 2.03 and refers to
a Fixed Rate Advance or a LIBO Rate Advance.
"Competitive Bid Borrowing" means a borrowing consisting of
simultaneous Competitive Bid Advances from each of the Lenders whose
offer to make one or more Competitive Bid Advances as part of such
borrowing has been accepted under the competitive bidding procedure
described in Section 2.03.
"Competitive Bid Note" means a promissory note of the Borrower
payable to the order of any Lender, in substantially the form of
Exhibit A-2 hereto, evidencing the indebtedness of the Borrower to
such Lender resulting from a Competitive Bid Advance made by such
Lender.
"Competitive Bid Reduction" has the meaning specified in
Section 2.01.
"Confidential Information" means information that the Borrower
furnishes to the Agent or any Lender in a writing designated as
confidential, but does not include any such information that is or
becomes generally available to the public or that is or becomes
available to the Agent or such Lender from a source other than the
Borrower or any of its Affiliates.
<PAGE> 9
5
"Consolidated" refers to the consolidation of accounts in
accordance with GAAP.
"Contract Party" has the meaning specified in clause (g) of
the definition of "Debt".
"Convert", "Conversion" and "Converted" each refers to a
conversion of Revolving Credit Advances of one Type into Revolving
Credit Advances of another Type pursuant to Section 2.08 or 2.10.
"Current Plans" means (i) the Borrower's Third Amended Plan
of Reorganization dated July 27, 1995 and all exhibits thereto and
(ii) CGTC's Second Amended Plan of Reorganization, as further amended,
dated July 17, 1995 and all exhibits thereto.
"Debt" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all obligations of
such Person for the deferred purchase price of property or services,
excluding (x) such obligations arising in the ordinary course of
business and maturing less than six months from the date of creation
thereof; and (y) such obligations arising in the ordinary course of
business and maturing in more than 6 months if in the aggregate on a
consolidated basis for the Borrower and its Subsidiaries such
obligations are less than $1,000,000, (c) all obligations of such
Person evidenced by notes, bonds, debentures or other similar
instruments, (d) all obligations of such Person created or arising
under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights
and remedies of the seller or lender under such agreement in the event
of default are limited to repossession or sale of such property), (e)
all obligations of such Person as lessee under leases that have been
or should be, in accordance with GAAP, recorded as capital leases
("Capitalized Leases"), valued at the amount that is or should be so
capitalized, (f) the aggregate liquidation value of all stock of such
Person that is mandatorily redeemable other than for the common stock
of such Person or that may be put by the holder to such Person for
consideration other than the common stock of such Person, in either
case on or before December 31, 2002, (g) to the extent required to be
reflected on the balance sheet of such Person prepared in accordance
with GAAP or in the footnotes thereto, all obligations of such Person
related to the sale, purchase or delivery of hydrocarbons or other
natural resources in respect of production payments or prepaid forward
sales (except to the extent the future delivery or purchase obligation
is covered by hydrocarbons or other natural resources accounted for as
inventory in accordance with GAAP or by a prepaid forward purchase or
sale from, or guaranteed by, a Person (the "Contract Party") with
long-term unsecured debt ratings no lower than BBB+ by S&P and Baa1 by
Moody's (or other measurements of creditworthiness satisfactory to the
Required Lenders); provided, however, that the foregoing
creditworthiness requirement is applicable only if the obligations of
such Contract Party have not been fully satisfied); provided,
however, that such obligations shall constitute Debt of the Borrower
only if and to the extent that such obligations of the Borrower and
its Subsidiaries, on a Consolidated basis, exceeds $25,000,000, (h) an
amount equal to the present value (discounted at the then applicable
five-year treasury bond rate) of operating lease obligations of such
Person in excess of $25,000,000 in any calendar year, disregarding for
this purpose leases other than those with an initial or remaining
noncancelable lease term in excess of one year, (i) to the extent
required to be reflected on the balance sheet of such Person prepared
in accordance with GAAP or in the footnotes thereto, all Debt of
others directly and indirectly guaranteed by such Person, but only to
the extent of such direct or indirect guarantee, and (j) to the extent
required to be reflected on the balance sheet of such Person prepared
in accordance with GAAP or in the footnotes thereto, all Debt referred
to in clauses (a) through (i) above secured by any Lien on property
owned by such Person, even though such Person has not assumed or
become liable for the payment of such Debt, but only to the extent of
the value of the property subject to such Lien.
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
"Designated Bidder" means (a) an Eligible Assignee or (b) a
special purpose corporation that is engaged in making, purchasing or
otherwise investing in commercial loans in the ordinary course of its
business
<PAGE> 10
6
and that issues (or the parent of which issues) commercial paper rated
at least "Prime-1" (or the then equivalent grade) by Moody's or "A-1"
(or the then equivalent grade) by S&P that, in the case of either
clause (a) or (b), (i) is organized under the laws of the United
States or any State thereof, (ii) shall have become a party hereto
pursuant to Sections 8.07(d), (e) and (f) and (iii) is not otherwise a
Lender.
"Designation Agreement " means a designation agreement entered
into by a Lender (other than a Designated Bidder) and a Designated
Bidder, and accepted by the Agent, in substantially the form of
Exhibit D hereto.
"Disclosed Litigation" has the meaning specified in Section
3.01(b).
"Domestic Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Domestic Lending Office"
opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Lender, or such other office
of such Lender as such Lender may from time to time specify to the
Borrower and the Agent.
"Effective Date" has the meaning specified in Section 3.01.
"Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a
Lender; (iii) a commercial bank organized under the laws of the United
States, or any State thereof, and having total assets in excess of
$1,000,000,000; (iv) a savings and loan association or savings bank
organized under the laws of the United States, or any State thereof,
and having total assets in excess of $1,000,000,000; (v) a commercial
bank organized under the laws of any other country that is a member of
the Organization for Economic Cooperation and Development or has
concluded special lending arrangements with the International Monetary
Fund associated with its General Arrangements to Borrow, or a
political subdivision of any such country, and having total assets in
excess of $1,000,000,000 so long as such bank is acting through a
branch or agency located in the country in which it is organized or
another country that is described in this clause (v); (vi) the central
bank of any country that is a member of the Organization for Economic
Cooperation and Development; (vii) a finance company, insurance
company or other financial institution or fund (whether a corporation,
partnership, trust or other entity) that is engaged in making,
purchasing or otherwise investing in commercial loans in the ordinary
course of its business and having total assets in excess of
$1,000,000,000 and (viii) any other Person approved by the Agent and
the Borrower, such approval not to be unreasonably withheld or
delayed; provided, however, that neither the Borrower nor an Affiliate
of the Borrower shall qualify as an Eligible Assignee.
"Environmental Action" means any material action, suit,
demand, demand letter, claim, notice of non-compliance or violation,
notice of liability or potential liability, proceeding, consent order
or consent agreement arising pursuant to, or in connection with, an
alleged violation of any Environmental Law, Environmental Permit or
Hazardous Materials or arising from alleged injury or threat of injury
to health or the environment, including, without limitation, (a) by
any governmental or regulatory authority for enforcement, cleanup,
removal, response, remedial or other actions or damages and (b) by any
governmental or regulatory authority or any third party for damages,
contribution, indemnification, cost recovery, compensation or
injunctive relief.
"Environmental Law" means any applicable federal, state or
local statute, law, ordinance, rule, regulation, code, order, judgment
or decree relating to pollution or protection of the environment,
health or natural resources, including, without limitation, those
relating to the use, handling, transportation, treatment, storage,
disposal, release or discharge of Hazardous Materials.
"Environmental Permit" means any permit, approval, license or
other authorization required under any Environmental Law.
<PAGE> 11
7
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated
and rulings issued thereunder.
"ERISA Affiliate" means any Person that for purposes of Title
IV of ERISA is a member of the Borrower's controlled group, or under
common control with the Borrower, within the meaning of Section 414(b)
or (c) of the Internal Revenue Code or, solely for purposes of Section
302 of ERISA and Section 412 of the Internal Revenue Code, the
entirety of Section 414 of the Internal Revenue Code.
"ERISA Event" means (a) (i) the occurrence of a reportable
event, within the meaning of Section 4043 of ERISA, with respect to
any ERISA Plan unless the 30-day notice requirement with respect to
such event has been waived by the PBGC, or (ii) the requirements of
subsection (1) of Section 4043(b) of ERISA (without regard to
subsection (2) of such Section) are met with a contributing sponsor,
as defined in Section 4001(a)(13) of ERISA, of an ERISA Plan, and an
event described in paragraph (9), (10), (11), (12) or (13) of Section
4043(c) of ERISA is reasonably expected to occur with respect to such
ERISA Plan within the following 30 days; (b) the application for a
minimum funding waiver with respect to an ERISA Plan; (c) the
provision by the administrator of any ERISA Plan of a notice of intent
to terminate such ERISA Plan pursuant to Section 4041(a)(2) of ERISA
(including any such notice with respect to a plan amendment referred
to in Section 4041(e) of ERISA); (d) the cessation of operations at a
facility of the Borrower or any ERISA Affiliate in the circumstances
described in Section 4062(e) of ERISA; (e) the withdrawal by the
Borrower or any ERISA Affiliate from a Multiple Employer Plan during a
plan year for which it was a substantial employer, as defined in
Section 4001(a)(2) of ERISA; (f) the conditions for the imposition of
a lien under Section 302(f) of ERISA shall have been met with respect
to any ERISA Plan; (g) the adoption of an amendment to an ERISA Plan
requiring the provision of security to such ERISA Plan pursuant to
Section 307 of ERISA; or (h) the institution by the PBGC of
proceedings to terminate an ERISA Plan pursuant to Section 4042 of
ERISA, or the occurrence of any event or condition described in
Section 4042 of ERISA that constitutes grounds for the termination of,
or the appointment of a trustee to administer, an ERISA Plan;
provided, however, that the occurrence of an event or condition
described in Section 4042(a)(4) of ERISA shall be an ERISA Event only
if (i) the Borrower or any ERISA Affiliate knows or has reason to know
thereof or (ii) the PBGC has notified the Borrower or any ERISA
Affiliate that it is considering termination of an ERISA Plan on such
basis.
"ERISA Plan" means a Single Employer Plan or a Multiple
Employer Plan.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time.
"Eurodollar Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Eurodollar Lending Office"
opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Lender (or, if no such office
is specified, its Domestic Lending Office), or such other office of
such Lender as such Lender may from time to time specify to the
Borrower and the Agent.
"Eurodollar Rate" means, for any Interest Period for each
Eurodollar Rate Advance comprising part of the same Revolving Credit
Borrowing, an interest rate per annum equal to the average (rounded
upward to the nearest whole multiple of 1/100 of 1% per annum, if such
average is not such a multiple) of the rate per annum at which
deposits in U.S. dollars are offered by the principal office of each
of the Reference Banks in London, England to prime banks in the London
interbank market at 11:00 A.M. (London time) two Business Days before
the first day of such Interest Period in an amount substantially equal
to such Reference Bank's Eurodollar Rate Advance comprising part of
such Revolving Credit Borrowing to be outstanding during such Interest
Period and for a period equal to such Interest Period. The Eurodollar
Rate for any Interest Period for each Eurodollar Rate Advance
comprising part of the same Revolving Credit Borrowing shall be
determined by the Agent on the basis of applicable rates furnished to
and received by the Agent from the Reference Banks
<PAGE> 12
8
two Business Days before the first day of such Interest Period,
subject, however, to the provisions of Section 2.08.
"Eurodollar Rate Advance" means a Revolving Credit Advance
that bears interest as provided in Section 2.07(a)(ii).
"Eurodollar Rate Reserve Percentage" of any Lender for any
Interest Period for all Eurodollar Rate Advances or LIBO Rate Advances
comprising part of the same Borrowing means the reserve percentage
applicable during such Interest Period (or if more than one such
percentage shall be so applicable, the daily average of such
percentages for those days in such Interest Period during which any
such percentage shall be so applicable) under regulations issued from
time to time by the Board of Governors of the Federal Reserve System
(or any successor) for determining the maximum reserve requirement
(including, without limitation, any emergency, supplemental or other
marginal reserve requirement) for such Lender with respect to
liabilities or assets consisting of or including Eurocurrency
Liabilities (or with respect to any other category of liabilities that
includes deposits by reference to which the interest rate on
Eurodollar Rate Advances or LIBO Rate Advances is determined) having a
term equal to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
"Facility" means the Revolving Credit Facility, the Swing Line
Facility or the Letter of Credit Facility.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is
a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"Financial Obligation Letter of Credit" means a standby Letter
of Credit other than a Performance Letter of Credit.
"Fixed Rate Advances" has the meaning specified in Section
2.03(a)(i).
"GAAP" has the meaning specified in Section 1.03.
"Hazardous Materials" means (a) petroleum and petroleum
products or byproducts, radioactive materials, asbestos-containing
materials, polychlorinated biphenyls and radon gas and (b) any other
chemicals, materials or substances designated, classified or regulated
as hazardous or toxic under any Environmental Law.
"Indenture" means the form of indenture attached as Exhibit B
to the Borrower's Current Plan.
"Information Memorandum" means, collectively, (i) the
information memorandum dated October 1995 used by the Arranger in
connection with the syndication of the Revolving Credit Commitments
and (ii) the summary information memorandum dated September 1995 used
by the Managing and Co-Syndication Agents in connection with the
management of this Agreement and the Notes and Letters of Credit
issued hereunder, as amended and supplemented by letter dated
September 12, 1995.
"Initial Swing Line Bank" means Citibank.
<PAGE> 13
9
"Interest Period" means, for each Eurodollar Rate Advance or
CD Rate Advance comprising part of the same Revolving Credit Borrowing
and each LIBO Rate Advance comprising part of the same Competitive Bid
Borrowing, the period commencing on the date of such Eurodollar Rate
Advance, CD Rate Advance or LIBO Rate Advance or the date of the
Conversion of any Base Rate Advance into such Eurodollar Rate Advance
or CD Rate Advance and ending on the last day of the period selected
by the Borrower pursuant to the provisions below and, thereafter, with
respect to Eurodollar Rate Advances and CD Rate Advances, each
subsequent period commencing on the last day of the immediately
preceding Interest Period and ending on the last day of the period
selected by the Borrower pursuant to the provisions below. The
duration of each such Interest Period shall be (a) in the case of a
Eurodollar Rate Advance, one, two, three, six, or (with the consent of
all Lenders) twelve months, as the Borrower may, upon notice received
by the Agent not later than 11:00 A.M. (New York City time) on the
third Business Day prior to the first day of such Interest Period,
select, (b) in the case of a CD Rate Advance, 30, 60, 90 or 180 days
as the Borrower may, upon notice received by the Agent not later than
11:00 A.M. (New York City time) on the second Business Day prior to
the first day of such Interest Period, select and (c) in the case of a
LIBO Rate Advance, as specified in the applicable Notice of
Competitive Bid Borrowing; provided, however, that:
(i) the Borrower may not select any Interest
Period that ends after the Termination Date;
(ii) Interest Periods commencing on the same date
for Eurodollar Rate Advances or CD Rate Advances comprising
part of the same Revolving Credit Borrowing or for LIBO Rate
Advances comprising part of the same Competitive Bid Borrowing
shall be of the same duration;
(iii) whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the
last day of such Interest Period shall be extended to occur on
the next succeeding Business Day, provided, however, that, if
such extension would cause the last day of such Interest
Period to occur in the next following calendar month, the last
day of such Interest Period shall occur on the next preceding
Business Day; and
(iv) whenever the first day of any Interest Period
occurs on a day of an initial calendar month for which there
is no numerically corresponding day in the calendar month that
succeeds such initial calendar month by the number of months
equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such
succeeding calendar month.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, and the regulations promulgated
and rulings issued thereunder.
"Issuing Lender" means Citibank, Canadian Imperial Bank of
Commerce, Morgan Guaranty Trust Company of New York and any other U.S.
or Canadian Lender mutually acceptable to the Borrower and the Agent,
each as issuer of a Letter of Credit.
"L/C Cash Collateral Account" means the interest-bearing cash
collateral account to be established and maintained by the Agent, over
which the Agent shall have sole dominion and control, upon such terms
as may be satisfactory to the Agent.
"Lenders" means the Initial Lenders, the Issuing Lenders, the
Swing Line Bank and each Person that shall become a party hereto
pursuant to Section 8.07(a), (b) and (c) and, except when used in
reference to a Revolving Credit Advance, a Revolving Credit Borrowing,
a Revolving Credit Note, a Revolving Credit Commitment or a related
term, each Designated Bidder.
"Letter of Credit" has the meaning specified in Section
2.01(c).
<PAGE> 14
10
"Letter of Credit Advance" means an advance made by any
Issuing Lender pursuant to Section 2.04(b).
"Letter of Credit Facility" means $100,000,000, as such amount
may be reduced pursuant to Section 2.05.
"Letter of Credit Request" has the meaning specified in
Section 2.04(a).
"LIBO Rate" means, for any Interest Period for all LIBO Rate
Advances comprising part of the same Competitive Bid Borrowing, an
interest rate per annum equal to the average (rounded upward to the
nearest whole multiple of 1/100 of 1% per annum, if such average is
not such a multiple) of the rate per annum at which deposits in U.S.
dollars are offered by the principal office of each of the Reference
Banks in London, England to prime banks in the London interbank market
at 11:00 A.M. (London time) two Business Days before the first day of
such Interest Period in an amount substantially equal to the amount
that would be the Reference Banks' respective ratable shares of such
Borrowing if such Borrowing were to be a Revolving Credit Borrowing to
be outstanding during such Interest Period and for a period equal to
such Interest Period. The LIBO Rate for any Interest Period for each
LIBO Rate Advance comprising part of the same Competitive Bid
Borrowing shall be determined by the Agent on the basis of applicable
rates furnished to and received by the Agent from the Reference Banks
two Business Days before the first day of such Interest Period,
subject, however, to the provisions of Section 2.08.
"LIBO Rate Advances" has the meaning specified in Section
2.03(a)(i).
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, including, without limitation, any easement,
right of way or other encumbrance of record on title to real property.
"Loan Documents" means this Agreement, each Note executed
hereunder and each Letter of Credit.
"Managing and Co-Syndication Agents" means Bankers Trust
Company, Bank of Montreal, Canadian Imperial Bank of Commerce,
Chemical Bank and Morgan Guaranty Trust Company of New York.
"Mandatory Reduction Date" has the meaning specified in
Section 2.05(b).
"Material Adverse Change" means any material adverse change in
the condition (financial or otherwise) or operations of the Borrower
and its Subsidiaries taken as a whole; provided, however, that any
such adverse change that is contemplated in either of the Current
Plans or results from any action taken pursuant to or in accordance
with either of the Current Plans shall not constitute a Material
Adverse Change hereunder.
"Material Adverse Effect" means a material adverse effect on
(a) the condition (financial or otherwise) or operations of the
Borrower and its Subsidiaries taken as a whole; provided, however,
that any such adverse effect that is contemplated in either of the
Current Plans or results from any action taken pursuant to or in
accordance with either of the Current Plans shall not constitute a
Material Adverse Effect hereunder, (b) the rights and remedies of the
Agent or any Lender under any Loan Document or (c) the ability of the
Borrower to perform its obligations under any Loan Document.
"Material Subsidiaries" means all of the Borrower's
Subsidiaries excluding (i) each Subsidiary listed on Schedule II
hereto and (ii) any other Subsidiary hereafter formed or acquired
unless or until the Borrower's direct or indirect investment therein
exceeds $10,000,000 or the assets of such Subsidiary exceeds
$25,000,000.
"Moody's" means Moody's Investors Service, Inc.
<PAGE> 15
11
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA
Affiliate is making or accruing an obligation to make contributions,
or has within any of the preceding five plan years made or accrued an
obligation to make contributions.
"Multiple Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of the Borrower or any ERISA Affiliate and at least one
Person other than the Borrower and the ERISA Affiliates or (b) was so
maintained and in respect of which the Borrower or any ERISA Affiliate
could have liability under Section 4064 or 4069 of ERISA in the event
such plan has been or were to be terminated.
"Note" means a Revolving Credit Note or a Competitive Bid
Note.
"Notice of Borrowing" means a Notice of Revolving Credit
Borrowing, a Notice of Swing Line Borrowing or a Notice of Competitive
Bid Borrowing.
"Notice of Competitive Bid Borrowing" has the meaning
specified in Section 2.03(a).
"Notice of Revolving Credit Borrowing" has the meaning
specified in Section 2.02(a).
"Notice of Swing Line Borrowing" has the meaning specified in
Section 2.02(b).
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor).
"Performance Letter of Credit" means a nontransferable standby
Letter of Credit to support certain performance obligations, other
than any payment obligation, of the Borrower or the Borrower's
Subsidiaries.
"Permitted Liens" means (a) Liens for taxes, assessments and
governmental charges or levies to the extent not required to be paid
under Section 5.01(b) hereof; (b) Liens imposed by law, such as
materialmen's, mechanics', carriers', workmen's and repairmen's Liens
and other similar Liens arising in the ordinary course of business;
(c) pledges or deposits to secure obligations under workers'
compensation laws or similar legislation or to secure public or
statutory obligations; (d) easements, rights of way and other
encumbrances on title to real property that do not themselves render
such title unmarketable or materially adversely affect the use of such
property for its present purposes; and (e) pledges or deposits to
secure the performance of bids, contracts, leases, surety or appeal
bonds or other obligations of a like nature.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust,
unincorporated association, joint venture, limited liability company
or other entity, or a government or any political subdivision or
agency thereof.
"Plans of Reorganization" means (i) the Borrower's plan of
reorganization (including all exhibits thereto) ultimately confirmed
by the Bankruptcy Court in the Borrower's Reorganization Case and (ii)
CGTC's plan of reorganization (including all exhibits thereto)
ultimately confirmed by the Bankruptcy Court in CGTC's Reorganization
Case.
"Pro Rata Share" of any amount means, with respect to any
Lender or any Swing Line Bank, as the case may be, at any time, the
product of such amount times, in the case of a Lender, a fraction the
numerator of which is the amount of such Lender's Revolving Credit
Commitment at such time and the denominator of which is the aggregate
amount of the Revolving Credit Commitments of all Lenders at such time
and, in the case of a Swing Line Bank, a fraction the numerator of
which is the amount of such Swing Line Bank's Swing Line Commitment at
such time and the denominator of which is the aggregate amount of the
Swing Line Commitments of all Swing Line Banks at such time.
<PAGE> 16
12
"PUHCA" means the Public Utility Holding Company Act of 1935,
as amended from time to time.
"Reference Banks" means Citibank and Canadian Imperial Bank of
Commerce.
"Register" has the meaning specified in Section 8.07(g).
"Reorganization Case" means each of the Borrower's and CGTC's
case pursuant to Chapter 11 of the Bankruptcy Code administered in the
Bankruptcy Court under case nos. 91-803(HSB) and 91-804 (HSB).
"Required Lenders" means at any time Lenders owed at least 51%
of the then aggregate unpaid principal amount of the Revolving Credit
Advances owing to Lenders, or, if no such principal amount is then
outstanding, Lenders having at least 51% of the Revolving Credit
Commitments.
"Revolving Credit Advance" means an advance by a Lender to the
Borrower as part of a Revolving Credit Borrowing and refers to a Base
Rate Advance, a CD Rate Advance or a Eurodollar Rate Advance (each of
which shall be a "Type" of Revolving Credit Advance).
"Revolving Credit Borrowing" means a borrowing consisting of
simultaneous Revolving Credit Advances of the same Type made by each
of the Lenders pursuant to Section 2.01.
"Revolving Credit Commitment" has the meaning specified in
Section 2.01(a).
"Revolving Credit Facility" means, at any time, the aggregate
amount of the Lenders' Revolving Credit Commitments at such time.
"Revolving Credit Note" means a promissory note of the
Borrower payable to the order of any Lender, in substantially the form
of Exhibit A-1 hereto, evidencing the aggregate indebtedness of the
Borrower to such Lender resulting from the Revolving Credit Advances
made by such Lender.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc.
"Single Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of the Borrower or any ERISA Affiliate and no Person other
than the Borrower and the ERISA Affiliates or (b) was so maintained
and in respect of which the Borrower or any ERISA Affiliate could have
liability under Section 4069 of ERISA in the event such plan has been
or were to be terminated.
"Subsidiary" of any Person means any corporation, partnership,
joint venture, limited liability company, trust or estate of which (or
in which) more than 50% of (a) the issued and outstanding capital
stock having ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether at the time
capital stock of any other class or classes of such corporation shall
or might have voting power upon the occurrence of any contingency),
(b) the interest in the capital or profits of such limited liability
company, partnership or joint venture or (c) the beneficial interest
in such trust or estate is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries.
"Swing Line Advance" means an advance made by a Swing Line
Bank pursuant to Section 2.01(b).
"Swing Line Banks" means Citibank and such other Lenders
mutually acceptable to the Borrower and the Agent.
<PAGE> 17
13
"Swing Line Borrowing" means a Borrowing consisting of a Swing
Line Advance made by a Swing Line Bank.
"Swing Line Commitment" has the meaning specified in Section
2.01(b).
"Swing Line Facility" has the meaning specified in Section
2.01(b).
"Tangible Net Worth" means, at any time, the excess of total
assets over total liabilities of the Borrower and its Subsidiaries at
such time, on a Consolidated basis, total assets and total liabilities
each to be determined in accordance with GAAP, excluding, however,
from the determination of total assets (i) goodwill, organizational
expenses, research and development expenses, trademark, trade names,
copyrights, patents, patent applications, licenses and rights if any
thereof, and other similar intangibles, (ii) all prepaid expenses and
deferred charges (other than those of the type incurred by the
Borrower and its Subsidiaries in the ordinary course of business on or
immediately prior to the date hereof) or unamortized debt discount and
expense, (iii) all reserves carried and not deducted from assets, (iv)
treasury stock, (v) securities (other than investments which are
accounted for pursuant to GAAP as investments or property, plant and
equipment) which are not readily marketable, (vi) cash held in a
sinking or other analogous fund established for the purpose of
redemption, retirement or prepayment of capital stock or indebtedness,
except to the extent such capital stock or indebtedness is included in
total liabilities pursuant to GAAP, (vii) any write-up in the book
value of any asset resulting from a revaluation thereof subsequent to
June 30, 1995, other than write-ups of assets of a going concern
business made within 12 months after the acquisition of such business
pursuant to GAAP, and (viii) any items not included in clauses (i)
through (vii) above which are treated as intangibles in conformity
with GAAP; provided, however, that notwithstanding the foregoing
exclusions, regulatory assets recorded on the Consolidated balance
sheet of the Borrower and its Subsidiaries shall not be excluded for
purposes of determining Tangible Net Worth.
"Termination Date" means the earlier of (i) the fifth
anniversary of the Effective Date and (ii) the date of termination in
whole of the Revolving Credit Commitments pursuant to Section 2.05 or
6.01.
"Total Debt" means, at any time, all Debt (including, without
limitation, the aggregate outstanding principal amount of all Advances
hereunder) of the Borrower and its Subsidiaries, on a Consolidated
basis at such time.
"Type" has the meaning specified in the definition of
"Revolving Credit Advance".
"UCP" has the meaning specified in Section 8.09.
"Unused Revolving Credit Commitment" means at any time, (a)
the aggregate Revolving Credit Commitment at such time (giving effect
to the Competitive Bid Reduction, if any, at such time) minus (b) the
sum, without duplication, of (i) the aggregate principal amount of all
Revolving Credit Advances made by all Lenders and outstanding at such
time, plus (ii) (A) the aggregate Available Amount of all Letters of
Credit outstanding at such time and (B) the aggregate principal amount
of all Letter of Credit Advances made all Issuing Lenders pursuant to
Section 2.03(c) and outstanding at such time.
"U.S. Dollar" and the sign "$" each means lawful money of the
United States.
"U.S. Dollar Equivalent" means, with respect to any Canadian
Dollar Letter of Credit Advance or the Available Amount of any
Canadian Dollar Letter of Credit, on any date of determination, the
equivalent in U.S. Dollars of an amount in Canadian Dollars,
determined at the rate of exchange quoted by Reuters BOFC page, at
12:00 p.m. (New York City time) on such date of determination, to
prime banks in New York City for the spot purchase in the New York
foreign exchange market of such amount of Canadian Dollars with U.S.
Dollars.
<PAGE> 18
14
"Voting Stock" means outstanding capital stock issued by a
corporation, or equivalent interests in any other Person, the holders
of which are ordinarily, in the absence of contingencies, entitled to
vote for the election of directors (or persons performing similar
functions) of such Person, even if the right so to vote has been
suspended by the happening of such a contingency.
"Wholly-Owned Subsidiary" of any Person means any corporation,
partnership, joint venture, limited liability company, trust or estate
of which (or in which) 100% of (a) the issued and outstanding capital
stock having ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether at the time
capital stock of any other class or classes of such corporation shall
or might have voting power upon the occurrence of any contingency),
(b) the interest in the capital or profits of such limited liability
company, partnership or joint venture or (c) the beneficial interest
in such trust or estate is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Wholly-Owned Subsidiaries or by one or more of such Person's other
Wholly-Owned Subsidiaries.
SECTION 1.02. Computation of Time Periods. In this Agreement
in the computation of periods of time from a specified date to a later
specified date, the word "from" means "from and including" and the words "to"
and "until" each mean "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles, as in effect on the date hereof, consistent
with those applied in the preparation of the financial statements referred to
in Section 4.01(e) ("GAAP").
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances. (a) The Revolving Credit
Advances. Each Lender severally agrees, on the terms and conditions
hereinafter set forth, to make Revolving Credit Advances to the Borrower from
time to time on any Business Day during the period from the Effective Date
until the Termination Date in an aggregate amount not to exceed at any time
outstanding the amount set forth opposite such Lender's name on the signature
pages hereof under the caption "Revolving Credit Commitment" or, if such Lender
has entered into any Assignment and Acceptance, set forth for such Lender in
the Register maintained by the Agent pursuant to Section 8.07(g), as such
amount may and shall be reduced pursuant to Section 2.05 (such Lender's
"Revolving Credit Commitment"), provided that the aggregate amount of the
Revolving Credit Commitments of the Lenders shall be deemed used from time to
time to the extent of the aggregate amount of the Competitive Bid Advances then
outstanding and such deemed use of the aggregate amount of the Revolving Credit
Commitments shall be allocated among the Lenders ratably according to their
respective Revolving Credit Commitments (such deemed use of the aggregate
amount of the Revolving Credit Commitments being a "Competitive Bid Reduction")
and; provided further that no Revolving Credit Borrowing shall be made if,
following the making of such Revolving Credit Borrowing the aggregate amount of
the Advances then outstanding would exceed the aggregate amount of the
Revolving Credit Commitments of the Lenders. Each Revolving Credit Borrowing
(other than a Borrowing the proceeds of which shall be used solely to repay or
prepay in full outstanding Swing Line Advances made by any Swing Line Bank or
outstanding Letter of Credit Advances made by any Issuing Lender) shall be in
an aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in
excess thereof (or, if less, an aggregate amount equal to the amount by which
the aggregate amount of a proposed Competitive Bid Borrowing requested by the
Borrower exceeds the aggregate amount of Competitive Bid Advances offered to be
made by the Lenders and accepted by the Borrower in respect of such Competitive
Bid Borrowing, if such Competitive Bid Borrowing is made on the same date as
such Revolving Credit Borrowing) and shall consist of Revolving Credit Advances
of the same Type made on the same day by the Lenders ratably according to their
respective Revolving Credit Commitments. Within the limits of each Lender's
Revolving Credit Commitment, the Borrower may borrow under this Section
2.01(a), prepay pursuant to Section 2.11 and reborrow under this Section
2.01(a).
<PAGE> 19
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(b) The Swing Line Advances. Each Swing Line Bank
severally agrees, on the terms and conditions hereinafter set forth, to make
Swing Line Advances to the Borrower from time to time on any Business Day from
the Effective Date until the Termination Date in an aggregate amount which
shall not exceed at any time outstanding the amount set opposite such Swing
Line Bank's name on the signature pages hereof under the caption "Swing Line
Commitments", as such amount may be reduced pursuant to Section 2.05(c) (such
amount, as it may have been so reduced, being such Swing Line Bank's "Swing
Line Commitment"); provided, however, that the aggregate amount of all Swing
Line Advances outstanding at any time shall not exceed $15,000,000 (the "Swing
Line Facility") and, provided further that no Swing Line Borrowing shall be
made if, following the making of such Swing Line Borrowing, either (i) the
Unused Revolving Credit Commitments of the Lenders shall be less than the
aggregate unpaid principal amount of the Swing Line Advances or (ii) the
aggregate amount of the Advances then outstanding would exceed the aggregate
amount of the Revolving Credit Commitments of the Lenders. No Swing Line
Advance shall be used for the purpose of funding the payment of principal of
any other Swing Line Advance. Each Swing Line Borrowing shall be in an amount
of $100,000 or an integral multiple of $10,000 in excess thereof and shall be
made as a Base Rate Advance. The terms and conditions of the Swing Line
Commitment of any Swing Line Bank and the Swing Line Advances made by any such
Swing Line Bank (other than terms and conditions relating to the interest rate,
tenor or term of any such Swing Line Advance) may be modified from the terms
and conditions provided herein upon mutual agreement of the Borrower and such
Swing Line Bank. Within the limits of the Swing Line Facility and within the
limits referred to in this Section, the Borrower may borrow under this Section
2.01(b), repay pursuant to Section 2.06 or prepay pursuant to Section 2.11 and
reborrow under this Section 2.01(b).
(c) Letters of Credit. Each Issuing Lender severally
agrees, on the terms and conditions hereinafter set forth, to issue letters of
credit (each a "Letter of Credit") for the account of the Borrower from time to
time on any Business Day during the period from the Effective Date until 60
days before the Termination Date; provided that the aggregate Available Amount
of all Letters of Credit shall not exceed at any time outstanding the lesser of
(i) $100,000,000 and (ii) the aggregate amount of the Revolving Credit
Commitments at such time; and provided further that each Letter of Credit
issued hereunder shall be either a standby Financial Obligation Letter of
Credit or a standby Performance Letter of Credit. Classification of a Letter
of Credit as a Financial Obligation Letter of Credit or a Performance Letter of
Credit shall be determined by the Agent in its reasonable discretion. No
Letter of Credit shall have an expiration date later than one year from the
date of issuance (excluding any provisions for the extension thereof contained
in such Letter of Credit) and under no circumstances shall any Letter of Credit
have an expiration date later than the Termination Date. Each Issuing Lender
severally agrees, on the terms and conditions hereinafter set forth, to issue
Letters of Credit in either U.S. Dollars or Canadian Dollars. The U.S. Dollar
Equivalent of each Canadian Dollar Letter of Credit Advance and of the
Available Amount of each Canadian Dollar Letter of Credit shall be recalculated
hereunder on each date on which it shall be necessary to determine the Unused
Revolving Credit Commitment, or any or all Letter of Credit Advances
outstanding on such date. Within the limits of the Letter of Credit Facility,
and subject to the limits referred to above, the Borrower may request the
issuance of Letters of Credit under this Section 2.01(c), repay any Letter of
Credit Advances resulting from drawings thereunder pursuant to Section 2.04(b)
and request the issuance of additional Letters of Credit under this Section
2.01(c).
SECTION 2.02. Making the Advances. (a) Each Revolving
Credit Borrowing shall be made on notice, given not later than 11:00 A.M. (New
York City time) on (i) the third Business Day prior to the date of the proposed
Revolving Credit Borrowing in the case of a Revolving Credit Borrowing
consisting of Eurodollar Rate Advances, (ii) the second Business Day prior to
the date of the proposed Revolving Credit Borrowing in the case of a Revolving
Credit Borrowing consisting of CD Rate Advances, and (iii) the first Business
Day prior to the date of the proposed Revolving Credit Borrowing in the case of
a Revolving Credit Borrowing consisting of Base Rate Advances, by the Borrower
to the Agent, which shall give to each Lender prompt notice thereof by
telecopier or tested telex. Each such notice of a Revolving Credit Borrowing
(a "Notice of Revolving Credit Borrowing") shall be by telephone, confirmed
immediately in writing, or telecopier or tested telex in substantially the form
of Exhibit B-1 hereto, specifying therein the requested (i) date of such
Revolving Credit Borrowing, (ii) Type of Advances comprising such Revolving
Credit Borrowing, (iii) aggregate amount of such Revolving Credit Borrowing,
and (iv) in the case of a Revolving Credit Borrowing consisting of Eurodollar
Rate Advances or CD Rate Advances, initial Interest Period for each such
Revolving
<PAGE> 20
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Credit Advance. Each Lender shall, before 11:00 A.M. (New York City time) on
the date of such Revolving Credit Borrowing, make available for the account of
its Applicable Lending Office to the Agent at the Agent's Account, in same day
funds, such Lender's ratable portion of such Revolving Credit Borrowing. After
the Agent's receipt of such funds and upon fulfillment of the applicable
conditions set forth in Article III, the Agent will make such funds available
to the Borrower at the Agent's address referred to in Section 8.02; provided,
however, that after giving effect to each Revolving Credit Advance made
hereunder, the Unused Revolving Credit Commitment shall be equal to or greater
than the amount of Swing Line Advances then outstanding, plus interest accrued
and unpaid to and as of such date.
(b) Each Swing Line Borrowing shall be made on notice,
given not later than 2:00 P.M. (New York City time), or such later time as
agreed to by the Borrower and the applicable Swing Line Bank, on the date of
the proposed Swing Line Borrowing, by the Borrower to the applicable Swing Line
Bank and the Agent. Each such notice of a Swing Line Borrowing (a "Notice of
Swing Line Borrowing") shall be by telephone, confirmed immediately in writing,
or tested telex or telecopier, specifying therein the requested (i) date of
such Swing Line Borrowing, (ii) amount of such Swing Line Borrowing and (iii)
maturity of such Swing Line Borrowing (which maturity shall be no later than
the tenth day after the requested date of such Borrowing). The applicable
Swing Line Bank will make the amount of each Swing Line Advance available to
the Agent at the Agent's Account, in same day funds or make such amount
available to the Borrower as agreed between such applicable Swing Line Bank and
the Borrower.
(c) Anything in subsection (a) above to the contrary
notwithstanding, (i) the Borrower may not select Eurodollar Rate Advances for
any Revolving Credit Borrowing if the aggregate amount of such Revolving Credit
Borrowing is less than $10,000,000 or if the obligation of the Lenders to make
Eurodollar Rate Advances shall then be suspended pursuant to Section 2.08 or
2.13 and (ii) Revolving Credit Advances may not be outstanding as part of more
than twelve separate Borrowings; provided, however, that for purposes of the
limitation set forth in clause (ii) of this sentence, all Borrowings consisting
of Base Rate Advances shall constitute a single Borrowing.
(d) Each Notice of Borrowing shall be irrevocable and
binding on the Borrower. In the case of any Revolving Credit Borrowing that
the related Notice of Revolving Credit Borrowing specifies is to be comprised
of Eurodollar Rate Advances or CD Rate Advances, the Borrower shall indemnify
each Lender against any loss, cost or expense to the extent incurred by such
Lender as a direct result of any failure to fulfill on or before the date
specified in such Notice of Revolving Credit Borrowing for such Revolving
Credit Borrowing the applicable conditions set forth in Article III, including,
without limitation, any loss (excluding loss of anticipated profits), cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Lender to fund the Revolving Credit Advance to be
made by such Lender as part of such Revolving Credit Borrowing when such
Revolving Credit Advance, as a result of such failure, is not made on such
date.
(e) Unless the Agent shall have received notice from the
Appropriate Lender prior to the date of any Borrowing under a Facility under
which such Lender has a Revolving Credit Commitment that such Lender will not
make available to the Agent such Lender's ratable portion of such Borrowing,
the Agent may assume that such Lender has made such portion available to the
Agent on the date of such Borrowing in accordance with subsection (a) or (b) of
this Section 2.02 and the Agent may, in reliance upon such assumption, make
available to the Borrower on such date a corresponding amount. If and to the
extent that such Lender shall not have so made such ratable portion available
to the Agent, such Lender and the Borrower severally agree to repay or pay to
the Agent forthwith on demand such corresponding amount and to pay interest
thereon, for each day from the date such amount is made available to the
Borrower until the date such amount is repaid or paid to the Agent, at (i) in
the case of the Borrower, the interest rate applicable at such time under
Section 2.07 to Advances comprising such Borrowing and (ii) in the case of such
Lender, the Federal Funds Rate. If such Lender shall pay to the Agent such
corresponding amount, such amount so paid shall constitute such Lender's
Advance as part of such Borrowing for all purposes.
(f) The failure of any Lender to make the Advance to be
made by it as part of any Borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Advance on the date of such
Borrowing,
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but no Lender shall be responsible for the failure of any other Lender to make
the Advance to be made by such other Lender on the date of any Borrowing.
SECTION 2.03. The Competitive Bid Advances. (a) Each Lender
severally agrees that the Borrower may make Competitive Bid Borrowings under
this Section 2.03 from time to time on any Business Day during the period from
the Effective Date until the date occurring 30 days prior to the Termination
Date in the manner set forth below; provided that, following the making of each
Competitive Bid Borrowing, the aggregate amount of the Advances then
outstanding shall not exceed the aggregate amount of the Revolving Credit
Commitments of the Lenders (computed without regard to any Competitive Bid
Reduction).
(i) The Borrower may request a Competitive Bid Borrowing
under this Section 2.03 by delivering to the Agent, by telecopier or
tested telex, a notice of a Competitive Bid Borrowing (a "Notice of
Competitive Bid Borrowing"), in substantially the form of Exhibit B-2
hereto, specifying therein the requested (v) date of such proposed
Competitive Bid Borrowing, (w) aggregate amount of such proposed
Competitive Bid Borrowing, (x) in the case of a Competitive Bid
Borrowing consisting of LIBO Rate Advances, Interest Period, or in the
case of a Competitive Bid Borrowing consisting of Fixed Rate Advances,
maturity date for repayment of each Fixed Rate Advance to be made as
part of such Competitive Bid Borrowing (which maturity date may not be
earlier than the date occurring 10 days after the date of such
Competitive Bid Borrowing or later than the earlier of (I) 180 days
after the date of such Competitive Bid Borrowing and (II) the
Termination Date), (y) interest payment date or dates relating
thereto, and (z) other terms (if any) to be applicable to such
Competitive Bid Borrowing, not later than 10:00 A.M. (New York City
time) (A) at least two Business Day prior to the date of the proposed
Competitive Bid Borrowing, if the Borrower shall specify in the Notice
of Competitive Bid Borrowing that the rates of interest to be offered
by the Lenders shall be fixed rates per annum (the Advances comprising
any such Competitive Bid Borrowing being referred to herein as "Fixed
Rate Advances") and (B) at least five Business Days prior to the date
of the proposed Competitive Bid Borrowing, if the Borrower shall
instead specify in the Notice of Competitive Bid Borrowing that the
rates of interest be offered by the Lenders are to be based on the
LIBO Rate (the Advances comprising such Competitive Bid Borrowing
being referred to herein as "LIBO Rate Advances"). Subject to clause
(iii)(x) below, each Notice of Competitive Bid Borrowing shall be
irrevocable and binding on the Borrower. The Agent shall in turn
promptly notify each Lender of each request for a Competitive Bid
Borrowing received by it from the Borrower by sending such Lender a
copy of the related Notice of Competitive Bid Borrowing.
(ii) Each Lender may, if, in its sole discretion, it
elects to do so, irrevocably offer to make one or more Competitive Bid
Advances to the Borrower as part of such proposed Competitive Bid
Borrowing at a rate or rates of interest specified by such Lender in
its sole discretion, by notifying the Agent (which shall give prompt
notice thereof to the Borrower), before 10:00 A.M. (New York City
time) one Business Day prior to the date of the proposed Competitive
Bid Borrowing, in the case of a Competitive Bid Borrowing consisting
of Fixed Rate Advances and before 10:00 A.M. (New York City time)
three Business Days before the date of such proposed Competitive Bid
Borrowing, in the case of a Competitive Bid Borrowing consisting of
LIBO Rate Advances, of the minimum amount and maximum amount of each
Competitive Bid Advance which such Lender would be willing to make as
part of such proposed Competitive Bid Borrowing (which amounts may,
subject to the proviso to the first sentence of this Section 2.03(a),
exceed such Lender's Revolving Credit Commitment, if any), the rate or
rates of interest therefor and such Lender's Applicable Lending Office
with respect to such Competitive Bid Advance; provided that if the
Agent in its capacity as a Lender shall, in its sole discretion, elect
to make any such offer, it shall notify the Borrower of such offer at
least 30 minutes before the time and on the date on which notice of
such election is to be given to the Agent by the other Lenders. If
any Lender shall elect not to make such an offer, such Lender shall so
notify the Agent, before 10:00 A.M. (New York City time) on the date
on which notice of such election is to be given to the Agent by the
other Lenders, and such Lender shall not be obligated to, and shall
not, make any Competitive Bid Advance as part of such Competitive Bid
Borrowing; provided that the failure by any Lender to give such notice
shall not cause
<PAGE> 22
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such Lender to be obligated to make any Competitive Bid Advance as
part of such proposed Competitive Bid Borrowing.
(iii) The Borrower shall, in turn, before 11:00 A.M. (New
York City time) one Business Day prior to the date of such proposed
Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing
consisting of Fixed Rate Advances and before 11:00 A.M. (New York City
time) three Business Days before the date of such proposed Competitive
Bid Borrowing, in the case of a Competitive Bid Borrowing consisting
of LIBO Rate Advances, either:
(x) cancel such Competitive Bid Borrowing by
giving the Agent notice to that effect,
or
(y) accept one or more of the offers made by any
Lender or Lenders pursuant to paragraph (ii) above, in its
sole discretion, by giving notice to the Agent of the amount
of each Competitive Bid Advance (which amount shall be equal
to or greater than the minimum amount, and equal to or less
than the maximum amount, notified to the Borrower by the Agent
on behalf of such Lender for such Competitive Bid Advance
pursuant to paragraph (ii) above) to be made by each Lender as
part of such Competitive Bid Borrowing, and reject any
remaining offers made by Lenders pursuant to paragraph (ii)
above by giving the Agent notice to that effect. The Borrower
shall accept the offers made by any Lender or Lenders to make
Competitive Bid Advances in order of the lowest to the highest
rates of interest offered by such Lenders. If two or more
Lenders have offered the same interest rate, the amount to be
borrowed at such interest rate will be allocated among such
Lenders in proportion to the amount that each such Lender
offered at such interest rate; provided, however, that such
allocation may be adjusted upward or downward, as necessary,
to make the amount to be borrowed from each Lender equal to
$5,000,000 or an integral multiple of $1,000,000 in excess
thereof.
(iv) If the Borrower notifies the Agent that such
Competitive Bid Borrowing is cancelled pursuant to paragraph (iii)(x)
above, the Agent shall give prompt notice thereof to the Lenders and
such Competitive Bid Borrowing shall not be made.
(v) If the Borrower accepts one or more of the offers
made by any Lender or Lenders pursuant to paragraph (iii)(y) above,
the Agent shall in turn promptly notify (A) each Lender that has made
an offer as described in paragraph (ii) above, of the date and
aggregate amount of such Competitive Bid Borrowing and whether or not
any offer or offers made by such Lender pursuant to paragraph (ii)
above have been accepted by the Borrower, (B) each Lender that is to
make a Competitive Bid Advance as part of such Competitive Bid
Borrowing, of the amount of each Competitive Bid Advance to be made by
such Lender as part of such Competitive Bid Borrowing, and (C) each
Lender that is to make a Competitive Bid Advance as part of such
Competitive Bid Borrowing, upon receipt, that the Agent has received
forms of documents appearing to fulfill the applicable conditions set
forth in Article III. Each Lender that is to make a Competitive Bid
Advance as part of such Competitive Bid Borrowing shall, before 12:00
noon (New York City time) on the date of such Competitive Bid
Borrowing specified in the notice received from the Agent pursuant to
clause (A) of the preceding sentence or any later time when such
Lender shall have received notice from the Agent pursuant to clause
(C) of the preceding sentence, make available for the account of its
Applicable Lending Office to the Agent at the Agent's Account, in same
day funds, such Lender's portion of such Competitive Bid Borrowing.
Upon fulfillment of the applicable conditions set forth in Article III
and after receipt by the Agent of such funds, the Agent will make such
funds available to the Borrower at the Agent's address referred to in
Section 8.02. Promptly after each Competitive Bid Borrowing the Agent
will notify each Lender of the amount of the Competitive Bid
Borrowing, the consequent Competitive Bid Reduction and the dates upon
which such Competitive Bid Reduction commenced and will terminate.
<PAGE> 23
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(vi) If the Borrower notifies the Agent that it accepts
one or more of the offers made by any Lender or Lenders pursuant to
paragraph (iii)(y) above, such notice of acceptance shall be
irrevocable and binding on the Borrower. The Borrower shall indemnify
each Lender against any loss, cost or expense to the extent incurred
by such Lender as a direct result of any failure to fulfill on or
before the date specified in the related Notice of Competitive Bid
Borrowing for such Competitive Bid Borrowing the applicable conditions
set forth in Article III, including, without limitation, any loss
(excluding loss of anticipated profits), cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds
acquired by such Lender to fund the Competitive Bid Advance to be made
by such Lender as part of such Competitive Bid Borrowing when such
Competitive Bid Advance, as a result of such failure, is not made on
such date.
(b) Each Competitive Bid Borrowing shall be in an
aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in excess
thereof and, following the making of each Competitive Bid Borrowing, the
Borrower shall be in compliance with the limitations set forth in the proviso
to the first sentence of subsection (a) above.
(c) Within the limits and on the conditions set forth in
this Section 2.03, the Borrower may from time to time borrow under this Section
2.03, repay or prepay pursuant to subsection (d) below, and reborrow under this
Section 2.03.
(d) The Borrower shall repay to the Agent for the account
of each Lender that has made a Competitive Bid Advance, on the maturity date of
each Competitive Bid Advance (such maturity date being that specified by the
Borrower for repayment of such Competitive Bid Advance in the related Notice of
Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above), the
then unpaid principal amount of such Competitive Bid Advance. The Borrower
shall have no right to prepay any principal amount of any Competitive Bid
Advance except as specified in the Notice of Competitive Bid Borrowing relating
thereto.
(e) The Borrower shall pay interest on the unpaid
principal amount of each Competitive Bid Advance from the date of such
Competitive Bid Advance to the date the principal amount of such Competitive
Bid Advance is repaid in full, at the rate of interest for such Competitive Bid
Advance specified by the Lender making such Competitive Bid Advance in its
notice with respect thereto delivered pursuant to subsection (a)(ii) above,
payable on the interest payment date or dates specified by the Borrower for
such Competitive Bid Advance in the related Notice of Competitive Bid Borrowing
delivered pursuant to subsection (a)(i) above, as provided in the Competitive
Bid Note evidencing such Competitive Bid Advance. Upon the occurrence and
during the continuance of an Event of Default under Section 6.01(a), the
Borrower shall pay simple interest on the amount of past-due principal of and
interest on each Competitive Bid Advance owing to a Lender and any past-due
fees relating thereto, payable in arrears on the date or dates interest is
payable thereon, at a rate per annum equal at all times to 2% per annum above
the rate per annum required to be paid on such Competitive Bid Advance under
the terms of the Competitive Bid Note evidencing such Competitive Bid Advance
unless otherwise agreed in such Competitive Bid Note.
(f) The indebtedness of the Borrower resulting from each
Competitive Bid Advance made to the Borrower as part of a Competitive Bid
Borrowing shall be evidenced by a Competitive Bid Note of the Borrower payable
to the order of the Lender making such Competitive Bid Advance.
(g) Upon delivery of each Notice of Competitive Bid
Borrowing, the Borrower shall pay a non-refundable fee of $3,500 to the Agent
for its own account.
SECTION 2.04. Issuance of and Drawings and Reimbursement
Under Letters of Credit. (a) Request for Issuance. Each Letter of Credit
shall be issued upon request, given not later than 11:00 A.M. (New York City
time) on the fifth Business Day prior to the date of the proposed issuance of
such Letter of Credit (or such shorter notice as agreed between the Borrower
and any Issuing Lender), by the Borrower to the Agent, which shall give to each
Issuing Lender prompt notice thereof by tested telex, telecopier or cable.
Each such request for issuance of a Letter of Credit (a "Letter of Credit
Request") shall be by telephone, confirmed immediately in writing, or
telecopier or tested telex
<PAGE> 24
20
substantially in the form of Exhibit B-3 hereto, specifying therein the
requested (A) date of such issuance (which shall be a Business Day), (B)
currency and Available Amount of such Letter of Credit, (C) expiration date of
such Letter of Credit (which shall not be more than one year from the date of
issuance), (D) name and address of the beneficiary of such Letter of Credit and
(E) form of such Letter of Credit. If the requested form of such Letter of
Credit is reasonably acceptable to the Issuing Lender, the Issuing Lender will,
upon fulfillment of the applicable conditions set forth in Article III, make
such Letter of Credit available to the Borrower at its office referred to in
Section 8.02 or as otherwise agreed with the Borrower in connection with such
issuance. Within a reasonable time after the issuance of each Letter of Credit
hereunder, the Agent shall provide notice thereof and a copy of such Letter of
Credit to each Lender.
(b) Drawing and Reimbursement. (i) The payment by any
Issuing Lender of a draft drawn under any Letter of Credit shall constitute for
all purposes of this Agreement the making by such Issuing Lender of an Advance
(each being a "Letter of Credit Advance"), which initially shall be a Base Rate
Advance (subject to Section 2.10), in the amount of such draft; provided,
however, that if, at the time of any such drawing under a Letter of Credit the
Borrower is not able to satisfy each of the conditions set forth in Section
3.02, such drawing shall not constitute an advance hereunder and the Borrower
shall immediately reimburse the Issuing Lender for such amount drawn. The
payment by any Issuing Lender of a draft drawn under any Canadian Dollar Letter
of Credit shall constitute for all purposes of this Agreement the making by
such Issuing Lender of a Canadian Dollar Letter of Credit Advance; provided,
however, that if, at the time of any such drawing under a Canadian Dollar
Letter of Credit the Borrower is not able to satisfy each of the conditions set
forth in Section 3.02, such drawing shall not constitute an Advance hereunder
and the Borrower shall immediately reimburse the Issuing Lender for such amount
drawn. Upon the making of a Canadian Dollar Letter of Credit Advance, the
amount of such Advance in Canadian Dollars shall be immediately converted to
the U.S. Dollar Equivalent and shall thereafter constitute a Base Rate Advance
in the amount of such U.S. Dollar Equivalent. Upon written demand by any
Issuing Lender with an outstanding Letter of Credit Advance, with a copy of
such demand to the Agent, each other Lender shall purchase from such Issuing
Lender, and such Issuing Lender shall sell and assign to each such other
Lender, such other Lender's Pro Rata Share of such outstanding Letter of Credit
Advance as of the date of such purchase, by making available for the account of
its Applicable Lending Office to the Agent for the account of such Issuing
Lender, by deposit to the Agent's Account, in same day funds, an amount equal
to the portion of the outstanding principal amount of such Letter of Credit
Advance to be purchased by such other Lender; provided, however, that so long
as such written demand shall be made by any such Issuing Lender within two
Business Days of the making of such Letter of Credit Advance, each such
purchasing Lender shall also pay its Pro Rata Share of the interest accrued on
such Letter of Credit Advance through the date of such demand and; provided
further, that if any Lender's public debt rating (as such term is defined in
the definition of "Applicable Margin") falls below BBB- or Baa3 by S&P or
Moody's, respectively, such Lender shall immediately cash collateralize its Pro
Rata Share of the Available Amount of all Letters of Credit issued and
outstanding at such time by depositing such amount into the L/C Cash Collateral
Account. Promptly after receipt of all such funds from the purchasing Lenders,
the Agent shall transfer such funds to such Issuing Lender. The Borrower
hereby agrees to each such sale and assignment. Each Lender agrees to purchase
its Pro Rata Share of an outstanding Letter of Credit Advance on (A) the
Business Day on which demand therefor is made by the Issuing Lender which made
such Advance, provided notice of such demand is given not later than 11:00 A.M.
(New York City time) on such Business Day or (B) the first Business Day next
succeeding such demand if notice of such demand is given after such time. Upon
any such assignment by an Issuing Lender to any other Lender of a portion of a
Letter of Credit Advance, such Issuing Lender represents and warrants to such
other Lender that such Issuing Lender is the legal and beneficial owner of such
interest being assigned by it, free and clear of any liens, but makes no other
representation or warranty and assumes no responsibility with respect to such
Letter of Credit Advance, this Agreement or any party hereto. If and to the
extent that any Lender shall not have so made the amount of such Letter of
Credit Advance available to the Agent, such Lender agrees to pay to the Agent
forthwith on demand such amount together with interest thereon, for each day
from the date of demand by such Issuing Lender until the date such amount is
paid to the Agent, at the Federal Funds Rate for its account or the account of
such Issuing Lender, as applicable. If such Lender shall pay to the Agent such
amount for the account of such Issuing Lender on any Business Day, such amount
so paid in respect of principal shall constitute a Letter of Credit Advance
made by such Lender on such Business Day for purposes of this Agreement, and
the outstanding principal amount of the Letter of Credit Advance made by such
Issuing Lender shall be reduced by such amount on such Business Day.
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(ii) If the Borrower has commenced any action or
proceeding seeking to enjoin or preclude the payment or drawing with respect to
any Letter of Credit, and such action or proceeding is not concluded on or
prior to the Termination Date, the Agent may make demand upon the Borrower to,
and forthwith upon such demand the Borrower will, pay to the Agent on behalf of
the Lenders in same day funds at the Agent's office designated in such demand,
for deposit in the L/C Cash Collateral Account, an amount equal to the
Available Amount of any such Letter of Credit.
(c) Failure to Make Letter of Credit Advances. The
failure of any Lender to make the Letter of Credit Advance to be made by it on
the date specified in Section 2.04(b) shall not relieve any other Lender of its
obligation hereunder to make its Letter of Credit Advance on such date, but no
Lender shall be responsible for the failure of any other Lender to make the
Letter of Credit Advance to be made by such other Lender on such date.
SECTION 2.05. Termination or Reduction of Commitments. (a)
Optional Termination or Reduction of Revolving Credit Commitments. The
Borrower shall have the right, upon at least three Business Days' notice to the
Agent, to terminate in whole or reduce ratably in part the unused portions of
the respective Revolving Credit Commitments of the Lenders, provided that each
partial reduction shall be in the aggregate amount of $10,000,000 or an
integral multiple of $1,000,000 in excess thereof and provided further that the
aggregate amount of the Revolving Credit Commitments of the Lenders shall not
be reduced to an amount that is less than the aggregate principal amount of the
Competitive Bid Advances then outstanding.
(b) Mandatory Reduction of Revolving Credit Commitments.
The aggregate Revolving Credit Commitment of all Lenders shall be reduced pro
rata on December 31, 1997 and on the last day of each March, June, September
and December thereafter until and including September 30, 2000 (each such date
being a "Mandatory Reduction Date") such that the aggregate Revolving Credit
Commitment on each Mandatory Reduction Date shall be no greater than the amount
set forth below (such amounts being subject to further reduction, from time to
time, pursuant to Section 2.05(a)):
<TABLE>
<CAPTION>
Revolving Credit
Mandatory Reduction Date Commitment
------------------------ ----------
<S> <C>
December 31, 1997 $975,000,000
March 31, 1998 $950,000,000
June 30, 1998 $925,000,000
September 30, 1998 $900,000,000
December 31, 1998 $875,000,000
March 31, 1999 $850,000,000
June 30, 1999 $825,000,000
September 30, 1999 $800,000,000
December 31, 1999 $775,000,000
March 31, 2000 $750,000,000
June 30, 2000 $725,000,000
September 30, 2000 $700,000,000
</TABLE>
(c) Optional Termination or Reduction of Swing Line
Commitments. The Borrower shall have the right, upon at least three Business
Days' notice to the Agent, to terminate in whole or reduce ratably in part the
unused portions of the Swing Line Commitments of the Swing Line Banks, provided
that each such partial reduction shall be in the aggregate amount of $5,000,000
or an integral multiple of $1,000,000 in excess thereof.
SECTION 2.06. Repayment of Advances. (a) Revolving Credit
Advances. The Borrower shall repay to the Agent for the ratable account of the
Lenders on the Termination Date the aggregate principal amount of the Revolving
Credit Advances then outstanding.
<PAGE> 26
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(b) Swing Line Advances. The Borrower shall repay to the
Agent for the account of the applicable Swing Line Bank and each other Lender
that has made a Swing Line Advance the outstanding principal amount of each
Swing Line Advance made by each of them on the earlier of the maturity date
specified in the applicable Notice of Swing Line Borrowing (which maturity
shall be no later than the tenth day after the requested date of such
Borrowing) and the Termination Date.
(c) Letter of Credit Advances. (i) The Borrower shall
repay to the Agent for the account of each Issuing Lender and each other Lender
that has made a Letter of Credit Advance on the Termination Date the
outstanding principal amount of each Letter of Credit Advance made by each of
them (irrespective of whether any such Letter of Credit Advance was made
before, on or, if in accordance with applicable law, after the expiry date
stated in the applicable Letter of Credit).
(ii) The obligations of the Borrower under this Agreement
shall be unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement under all circumstances, including,
without limitation, the following circumstances:
(A) any lack of validity or enforceability of this
Agreement, any Letter of Credit or any Letter of Credit Request;
(B) any change in the time, manner or place of payment
of, or in any other term of, all or any of the obligations of the
Borrower in respect of any Letter of Credit or any other amendment or
waiver of or any consent to departure from all or any of the Letters
of Credit;
(C) the existence of any claim, set-off, defense or other
right that the Borrower may have at any time against any beneficiary
or any transferee of a Letter of Credit (or any Persons for whom any
such beneficiary or any such transferee may be acting), any Issuing
Lender or any other Person, whether in connection with the
transactions contemplated by the Letter of Credit or any unrelated
transaction;
(D) any statement or any other document presented under a
Letter of Credit proving to be forged, fraudulent or invalid or any
statement therein being untrue or inaccurate in any respect;
(E) payment by any Issuing Lender under a Letter of
Credit against presentation of a draft or certificate that does not
strictly comply with the terms of such Letter of Credit so long as
such draft or certificate substantially complies; or
(F) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing, including, without
limitation, any other circumstance that might otherwise constitute a
defense available to, or a discharge of, the Borrower or a guarantor.
SECTION 2.07. Interest on Advances. (a) Scheduled Interest.
The Borrower shall pay interest on the unpaid principal amount of each Advance
(excluding Competitive Bid Advances) owing to each Lender from the date of such
Advance until such principal amount shall be paid in full, at the following
rates per annum:
(i) Base Rate Advances. During such periods as such
Advance is a Base Rate Advance, a rate per annum equal at all times to
the sum of (x) the Base Rate in effect from time to time plus (y) the
Applicable Margin in effect from time to time, payable in arrears
quarterly on the last day of each March, June, September and December
during such periods and on the date such Base Rate Advance shall be
Converted or paid in full.
(ii) Eurodollar Rate Advances. During such periods as
such Advance is a Eurodollar Rate Advance, a rate per annum equal at
all times during each Interest Period for such Revolving Credit
Advance to the sum of (x) the Eurodollar Rate for such Interest Period
for such Revolving Credit Advance plus (y) the
<PAGE> 27
23
Applicable Margin in effect from time to time, payable in arrears on
the last day of such Interest Period and, if such Interest Period has
a duration of more than three months, on each day that occurs during
such Interest Period every three months from the first day of such
Interest Period and on the date such Eurodollar Rate Advance shall be
Converted or paid in full.
(iii) CD Rate Advances. During such periods as such
Advance is a CD Rate Advance, a rate per annum equal at all times
during each Interest Period for such Revolving Credit Advance to the
sum of (x) the Adjusted CD Rate for such Interest Period for such
Revolving Credit Advance plus (y) the Applicable Margin in effect from
time to time, payable in arrears on the last day of such Interest
Period and, if such Interest Period has a duration of more than 90
days, on each day that occurs during such Interest Period every 90
days from the first day of such Interest Period and on the date such
CD Advance shall be Converted or paid in full.
(b) Default Interest. Upon the occurrence and during the
continuance of an Event of Default under Section 6.01(a), the Borrower shall
pay simple interest on (i) the unpaid principal amount of each Advance
(excluding Competitive Bid Advances) owing to each Lender, payable in arrears
on the dates referred to in clause (a)(i), (a)(ii) or (a)(iii) above, at a rate
per annum equal at all times to 2% per annum above the rate per annum required
to be paid on such Advance pursuant to clause (a)(i), (a)(ii) or (a)(iii) above
and (ii) to the fullest extent permitted by law, the amount of any interest,
fee or other amount payable hereunder that is not paid when due, from the date
such amount shall be due until such amount shall be paid in full, payable in
arrears on the date such amount shall be paid in full and on demand, at a rate
per annum equal at all times to 2% per annum above the rate per annum required
to be paid on Base Rate Advances pursuant to clause (a)(i) above.
(c) Additional Interest on Eurodollar Rate Advances. The
Borrower shall pay to each Lender, so long as such Lender shall be required
under regulations of the Board of Governors of the Federal Reserve System to
maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities, additional interest on the unpaid principal
amount of each Advance of such Lender during such periods as such Advance is a
Eurodollar Rate Advance, from the date of such Advance until such principal
amount is paid in full, at an interest rate per annum equal at all times to the
remainder obtained by subtracting (i) the Eurodollar Rate for such Interest
Period for such Eurodollar Rate Advance from (ii) the rate obtained by dividing
such Eurodollar Rate by a percentage equal to 100% minus the Eurodollar Rate
Reserve Percentage of such Lender for such Interest Period, payable on each
date on which interest is payable on such Eurodollar Rate Advance. Such
additional interest shall be determined by such Lender and notified to the
Borrower through the Agent.
SECTION 2.08. Interest Rate Determination. (a) Each
Reference Bank agrees to furnish to the Agent timely information for the
purpose of determining each Eurodollar Rate, each Adjusted CD Rate and each
LIBO Rate. If any one or more of the Reference Banks shall not furnish such
timely information to the Agent for the purpose of determining any such
interest rate, the Agent shall determine such interest rate on the basis of
timely information furnished by the remaining Reference Banks. The Agent shall
give prompt notice to the Borrower and the Lenders of the applicable interest
rate determined by the Agent for purposes of Section 2.07(a)(i), (ii) or (iii)
or for purposes of any LIBO Rate Advance, and the rate, if any, furnished by
each Reference Bank for the purpose of determining the interest rate under
Section 2.07(a)(ii) or (iii) or any LIBO Rate Advance.
(b) If, with respect to any Eurodollar Rate Advances, the
Required Lenders notify the Agent prior to the commencement of the Interest
Period therefor that the Eurodollar Rate for such Interest Period for such
Advances will not adequately reflect the cost to such Required Lenders of
making, funding or maintaining their respective Eurodollar Rate Advances for
such Interest Period, the Agent shall forthwith so notify the Borrower and the
Lenders, whereupon (i) each Eurodollar Rate Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a Base
Rate Advance, and (ii) the obligation of the Lenders to make, or to Convert
Revolving Credit Advances into, Eurodollar Rate Advances shall be suspended
until the Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist.
<PAGE> 28
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(c) If the Borrower shall fail to select the duration of
any Interest Period for any Eurodollar Rate Advances or any CD Rate Advance in
accordance with the provisions contained in the definition of "Interest Period"
in Section 1.01, the Agent will forthwith so notify the Borrower and the
Lenders and such Advances will automatically, on the last day of the then
existing Interest Period therefor, Convert into Base Rate Advances.
(d) On the date on which the aggregate unpaid principal
amount of Eurodollar Rate Advances or CD Rate Advances comprising any Borrowing
shall be reduced, by payment or prepayment or otherwise, to less than
$10,000,000, such Advances shall automatically Convert into Base Rate Advances.
(e) Upon the occurrence and during the continuance of any
Event of Default under Section 6.01(a), (i) each Eurodollar Rate Advance and CD
Rate Advance will automatically, on the last day of the then existing Interest
Period therefor, Convert into a Base Rate Advance and (ii) the obligation of
the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances or
CD Rate Advances shall be suspended.
(f) If none of the Reference Banks furnish timely
information to the Agent for determining the Eurodollar Rate, Adjusted CD Rate
or LIBO Rate for any Eurodollar Rate Advances, CD Rate Advances or LIBO Rate
Advances, as the case may be:
(i) the Agent shall forthwith notify the Borrower and the
Lenders that the interest rate cannot be determined for such
Eurodollar Rate Advances, CD Rate Advances or LIBO Rate Advances, as
the case may be,
(ii) with respect to Eurodollar Rate Advances, each such
Advance will automatically, on the last day of the then existing
Interest Period therefor, Convert into a Base Rate Advance (or if such
Advance is then a Base Rate Advance, will continue as a Base Rate
Advance), and
(iii) the obligation of the Lenders to make Eurodollar Rate
Advances, CD Rate Advances or LIBO Rate Advances or to Convert
Revolving Credit Advances into Eurodollar Rate Advances shall be
suspended until the Agent shall notify the Borrower and the Lenders
that the circumstances causing such suspension no longer exist.
SECTION 2.09. Fees. (a) Facility Fee. The Borrower agrees
to pay to the Agent for the account of each Lender (other than the Designated
Bidders) a facility fee on the daily aggregate amount of such Lender's
Revolving Credit Commitment from the earlier of (i) the Effective Date or (ii)
30 days following the date hereof in the case of each Initial Lender and from
the effective date specified in the Assignment and Acceptance pursuant to which
it became a Lender (but not prior to the earlier of (i) the Effective Date or
(ii) 30 days following the date hereof) in the case of each other Lender until
the Termination Date at a rate per annum equal to the Applicable Margin in
effect from time to time, payable in arrears quarterly on the last day of each
March, June, September and December, commencing December 31, 1995, and on the
Termination Date.
(b) Swing Line Bank Fee. The Borrower agrees to pay to
the Agent for the account of each Swing Line Bank a facility fee on such Swing
Line Bank's Pro Rata Share of the Swing Line Facility from the earlier of (i)
the Effective Date or (ii) 30 days following the date hereof in the case of an
Initial Swing Line Bank and from the date that it became a Swing Line Bank (but
not prior to the earlier of (i) the Effective Date or (ii) 30 days following
the date hereof) in the case of each other Swing Line Bank until the
Termination Date at a rate per annum equal to the Applicable Margin in effect
from time to time, payable in arrears quarterly on the last day of each March,
June, September and December, commencing December 31, 1995, and on the
Termination Date.
(c) Participation Fee. The Borrower shall pay to the
Agent for the account of each Initial Lender a one time, up-front fee equal to
a percentage (as agreed between the Borrower and the Arranger) of such Initial
Lender's Revolving Credit Commitment.
<PAGE> 29
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(d) Agent's Fees. The Borrower shall pay to the Agent
for its own account such fees as may from time to time be agreed between the
Borrower and the Agent.
(e) Arranger's Fee. The Borrower shall pay to the
Arranger for its own account such fees as agreed between the Borrower and the
Arranger.
(f) Managing and Co-Syndication Agents' Fee. The
Borrower shall pay to the Agent for the account of each Managing and
Co-Syndication Agent such fees as agreed between the Borrower and the Agent.
(g) Letter of Credit Fees. (i) The Borrower shall pay
to the Agent for the account of each Lender a commission on such Lender's Pro
Rata Share of the daily aggregate Available Amount (in U.S. Dollars) of all
Letters of Credit outstanding from time to time at the rate per annum equal to
(A) the Applicable Margin for Eurodollar Rate Advances for Financial Obligation
Letters of Credit and (B) 50% of the Applicable Margin for Eurodollar Rate
Advances for Performance Letters of Credit, payable in arrears quarterly on the
last Business Day of each March, June, September and December, commencing
December 31, 1995, and on the Termination Date.
(ii) The Borrower shall pay to the Agent for the account
of each Issuing Lender a commission on the daily aggregate Available Amount (in
U.S. Dollars) of all Letters of Credit issued by such Issuing Lender and
outstanding from time to time at the rate per annum equal to 1/8 of 1%, payable
in arrears quarterly on the last Business Day of each March, June, September
and December, commencing December 31, 1995, and on the Termination Date.
SECTION 2.10. Optional Conversion of Revolving Credit
Advances. The Borrower may on any Business Day, upon notice given to the Agent
not later than 11:00 A.M. (New York City time) on the third Business Day prior
to the date of the proposed Conversion and subject to the provisions of
Sections 2.08 and 2.13, Convert all or any portion of the Advances of one Type
comprising the same Borrowing into Advances of another Type or change the
Interest Period therefor into another permissible Interest Period; provided,
however, that (i) in the event that any Conversion of Eurodollar Rate Advances
or CD Rate Advances into Base Rate Advances is made on a day other than the
last day of an Interest Period for such Eurodollar Rate Advances or CD Rate
Advances, the Borrower shall be obligated to reimburse the Lenders in respect
thereof pursuant to Section 8.04(c), (ii) each Conversion shall be of Advances
in an aggregate amount not less than $10,000,000, (iii) no Conversion of any
Advances shall result in more separate Borrowings than permitted under Section
2.02(c) and (iv) each Conversion of Advances comprising part of the same
Borrowing under any Facility shall be made ratably among the appropriate
Lenders in accordance with their Revolving Credit Commitments under such
Facility. Each such notice of a Conversion shall, within the restrictions
specified above, specify (A) the date of such Conversion, (B) the Advances to
be Converted and (C) if such Conversion is into Eurodollar Rate Advances or CD
Rate Advances, the duration of the initial Interest Period for each such
Advance. Each notice of Conversion shall be irrevocable and binding on the
Borrower.
SECTION 2.11. Prepayments of Advances. (a) Optional. The
Borrower may, upon (i) at least three Business Days' notice in the case of a
Eurodollar Rate Advance or CD Rate Advance, (ii) at least one Business Days'
notice in the case of a Base Rate Advance and (iii) same day notice in the
case of a Swing Line Advance, in each case to the Agent stating the proposed
date and aggregate principal amount of the prepayment, and if such notice is
given the Borrower shall, prepay the outstanding principal amount of such
Advances (other than Competitive Bid Advances) comprising part of the same
Borrowing in whole or ratably in part, together with accrued interest to the
date of such prepayment on the principal amount prepaid; provided, however,
that (x) each partial prepayment shall be in an aggregate principal amount of
$10,000,000 or an integral multiple of $1,000,000 in excess thereof (or, in the
case of Swing Line Advances, the full amount of any such Swing Line Advance);
provided, however, that following each partial prepayment of any Eurodollar
Rate Advance the remaining outstanding amount of such Advance shall be at least
$10,000,000 and (y) in the event of any such prepayment of a Eurodollar Rate
Advance or CD Rate Advance other than on the last day of the Interest Period
therefor, the Borrower shall be obligated to reimburse the Lenders in respect
thereof pursuant to Section 8.04(c).
<PAGE> 30
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(b) Mandatory. (i) The Borrower shall, on each Business
Day, prepay an aggregate principal amount of the Revolving Credit Advances
comprising part of the same Borrowings, the Letter of Credit Advances and the
Swing Line Advances equal to the amount by which (A) the sum of the aggregate
principal amount of (x) the Revolving Credit Advances, (y) the Letter of Credit
Advances and (z) the Swing Line Advances then outstanding plus the aggregate
Available Amount of all Letters of Credit then outstanding exceeds (B) the
Revolving Credit Facility on such Business Day. If, after giving effect to the
foregoing prepayments, the aggregate Available Amount of all Letters of Credit
then outstanding exceeds the Letter of Credit Facility, then the Borrower shall
pay to the Agent on behalf of the Lenders and the Issuing Lenders in same day
funds, for deposit in the L/C Cash Collateral Account, an aggregate amount
equal to such excess in accordance with arrangements reasonably satisfactory to
the Agent. For purposes of determining, at any time, the aggregate principal
amount of Letter of Credit Advances or the aggregate Available Amount of all
Letters of Credit then outstanding at such time, the aggregate principal amount
of all Canadian Dollar Letter of Credit Advances and the aggregate Available
Amount of all Canadian Dollar Letters of Credit outstanding at such time shall
be converted to the U.S. Dollar Equivalent determined as at such time.
(ii) Prepayments made pursuant to clause (i) above shall
be first applied to prepay Letter of Credit Advances then outstanding until
such Advances are paid in full, second applied to prepay Swing Line Advances
then outstanding until such Advances are paid in full, and third applied to
prepay Revolving Credit Advances then outstanding comprising part of the same
Borrowings until such Advances are paid in full.
(iii) All prepayments under this subsection (b) shall be
made together with accrued interest to the date of such prepayment on the
principal amount prepaid. If any payment required to be made under this
Section 2.05(b) on account of Eurodollar Rate Advances or CD Rate Advances
would be made other than on the last day of the applicable Interest Period
therefor, the Borrower may, in lieu of prepaying such Advance, deposit the
amount of such payment in the Cash Collateral Account until the last day of the
applicable Interest Period at which time such payment shall be made.
SECTION 2.12. Increased Costs. (a) If, due to either (i)
the introduction of or any change in or in the interpretation of any law or
regulation, with respect to any Eurodollar Rate Advance or CD Rate Advance,
after the date hereof, and with respect to any LIBO Rate Advance, after the
date on which one or more Lenders offered to make such LIBO Rate Advance or
(ii) the compliance with any guideline or request from any central bank or
other governmental authority (whether or not having the force of law), adopted
or made, with respect to any Eurodollar Rate Advance or CD Rate Advance, after
the date hereof, and with respect to any LIBO Rate Advance, after the date on
which one or more Lenders offered to make such LIBO Rate Advance, there shall
be any increase in the cost to any Lender of agreeing to make or making,
funding or maintaining Eurodollar Rate Advances, CD Rate Advances or LIBO Rate
Advances (excluding for purposes of this Section 2.12 any such increased costs
resulting from taxes, including Taxes and Other Taxes (as to which Section 2.15
shall govern)), then the Borrower shall from time to time, upon demand by such
Lender (with a copy of such demand to the Agent), pay to the Agent for the
account of such Lender additional amounts sufficient to compensate such Lender
for such increased cost to the extent actually incurred; provided, however,
that, before making any such demand, each Lender agrees to use reasonable
efforts (consistent with its internal policy and legal and regulatory
restrictions) to designate a different Applicable Lending Office if the making
of such a designation would avoid the need for, or reduce the amount of, such
increased cost and would not, in the sole reasonable judgment of such Lender,
be otherwise disadvantageous to such Lender. A certificate as to the amount of
such increased cost, setting forth the basis therefor in reasonable detail,
submitted to the Borrower and the Agent by such Lender, shall be conclusive and
binding for all purposes, absent manifest error.
(b) If any Lender reasonably determines that compliance
with any law or regulation or any guideline or request from any central bank or
other governmental authority (whether or not having the force of law) adopted
after the date hereof affects or would affect the amount of capital required or
expected to be maintained by such Lender or any corporation controlling such
Lender and that the amount of such capital is increased by or based upon the
existence of such Lender's commitment to lend hereunder and other commitments
of this type, then, upon demand by such Lender (with a copy of such demand to
the Agent), the Borrower shall pay to the Agent for the account of such
<PAGE> 31
27
Lender, from time to time as specified by such Lender, additional amounts
sufficient to compensate such Lender or such corporation in the light of such
circumstances, to the extent that such Lender reasonably determines such
increase in capital to be allocable to the existence of such Lender's
commitment to lend hereunder to the extent actually incurred; provided,
however, that, before making any such demand, each Lender agrees to use
reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions) to designate a different Applicable Lending Office if
the making of such a designation would avoid the need for, or reduce the amount
of, such additional amounts payable under this subsection (b) and would not, in
the sole reasonable judgment of such Lender, be otherwise disadvantageous to
such Lender. A certificate as to such amounts setting forth the basis therefor
in reasonable detail, submitted to the Borrower and the Agent by such Lender
shall be conclusive and binding for all purposes, absent manifest error.
(c) Notwithstanding any other provision in this Section
2.12, no Lender shall be entitled to demand compensation pursuant to this
Section 2.12 unless, at such time, it is the general policy or practice of such
Lender to demand such compensation in similar circumstances under comparable
provisions of other comparable credit agreements with borrowers of similar
credit quality. The Borrower shall pay each Lender the amount shown as due on
any certificate delivered by such Lender pursuant to subsection (a) or (b)
above within 30 days after its receipt of the same.
(d) No Lender shall be entitled to compensation under
this Section 2.12 for any costs incurred or reductions suffered with respect to
any event or circumstance unless such Lender shall have notified the Borrower,
not more than 120 days after such Lender becomes aware of such event or
circumstance, that it will demand compensation for such costs or reductions in
a certificate described in the last sentence of each of subsections (a) and (b)
above.
SECTION 2.13. Illegality. Notwithstanding any other
provision of this Agreement, if any Lender shall notify the Agent and the
Borrower that the introduction of or any change in or in the interpretation of
any law or regulation makes it unlawful, or any central bank or other
governmental authority asserts that it is unlawful, for any Lender or its
Eurodollar Lending Office to perform its obligations hereunder to make
Eurodollar Rate Advances or LIBO Rate Advances or to fund or maintain
Eurodollar Rate Advances or LIBO Rate Advances hereunder, (i) the obligation of
the Lenders to make Eurodollar Rate Advances or LIBO Rate Advances, as the case
may be, or to Convert Revolving Credit Advances into Eurodollar Rate Advances
shall be suspended, whereupon any request by the Borrower for a Borrowing
comprised of Eurodollar Rate Advances shall be deemed a request for a Base Rate
Advance until the affected Lender shall notify the Agent and the Borrower that
the circumstances causing such suspension no longer exist and (ii) the Lenders
may require that all outstanding Eurodollar Rate Advances and LIBO Rate
Advances, as the case may be, made by it be Converted to Base Rate Advances, in
which event all such Eurodollar Rate Advances and LIBO Rate Advances, as the
case may be, shall be automatically Converted to Base Rate Advances as of the
effective date of such notice; provided, however, that each Lender agrees to
use reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions) to designate a different Eurodollar Lending Office if
the making of such a designation would enable such Lender to withdraw its
notice under this Section and would not, in the reasonable judgment of such
Lender, be otherwise disadvantageous to such Lender. In the event any Lender
shall notify the Agent and the Borrower of the occurrence of the circumstances
causing such suspension under this Section, all payments and prepayments of
principal that would otherwise have been applied to repay the Eurodollar Rate
Advances or LIBO Rate Advances that would have been made by such Lender or the
Converted Eurodollar Rate Advances shall instead be applied to repay the Base
Rate Advances made by such Lender in lieu of such Eurodollar Rate Advances or
LIBO Rate Advances, or resulting from the Conversion of such Eurodollar Rate
Advances. For purposes of this Section 2.13, a notice to the Borrower by any
Lender shall be effective as to each Eurodollar Rate Advance and LIBO Rate
Advance, if lawful, on the last day of the Interest Period currently applicable
to such Eurodollar Rate Advance or LIBO Rate Advance, as the case may be; in
all other cases such notice shall be effective on the date of the occurrence of
the circumstances causing such suspension.
SECTION 2.14. Payments and Computations. (a) The Borrower
shall make each payment hereunder and under the Notes and any Letter of Credit
not later than 11:00 A.M. (New York City time) on the day when due in U.S.
dollars to the Agent at the Agent's Account in same day funds. The Agent will
promptly thereafter cause to be
<PAGE> 32
28
distributed like funds relating to the payment of principal or interest or
facility fees ratably (other than amounts payable pursuant to Section 2.03,
2.12, 2.15 or 8.04(c)) to the Lenders for the account of their respective
Applicable Lending Offices, and like funds relating to the payment of any other
amount payable to any Lender to such Lender for the account of its Applicable
Lending Office, in each case to be applied in accordance with the terms of this
Agreement. Upon its acceptance of an Assignment and Acceptance and recording
of the information contained therein in the Register pursuant to Section
8.07(c), from and after the effective date specified in such Assignment and
Acceptance, the Agent shall make all payments hereunder and under the Notes and
any Letter of Credit in respect of the interest assigned thereby to the Lender
assignee thereunder, and the parties to such Assignment and Acceptance shall
make all appropriate adjustments in such payments for periods prior to such
effective date directly between themselves.
(b) All computations of interest based on the Base Rate
shall be made by the Agent on the basis of a year of 365 or 366 days, as the
case may be, and all computations of interest based on the Eurodollar Rate,
Adjusted CD Rate or the Federal Funds Rate and of facility fees and Letter of
Credit fees shall be made by the Agent on the basis of a year of 360 days, in
each case for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest or facility fees
are payable. Each determination by the Agent of an interest rate hereunder
shall be conclusive and binding for all purposes, absent manifest error.
(c) Whenever any payment hereunder or under the Notes or
any Letter of Credit shall be stated to be due on a day other than a Business
Day, such payment shall be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of payment
of interest or facility fee, as the case may be; provided, however, that, if
such extension would cause payment of interest on or principal of Eurodollar
Rate Advances or LIBO Rate Advances to be made in the next following calendar
month, such payment shall be made on the next preceding Business Day.
(d) Unless the Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Lenders hereunder
that the Borrower will not make such payment in full, the Agent may assume that
the Borrower has made such payment in full to the Agent on such date and the
Agent may, in reliance upon such assumption, cause to be distributed to each
Lender on such due date an amount equal to the amount then due such Lender. If
and to the extent the Borrower shall not have so made such payment in full to
the Agent, each Lender shall repay to the Agent forthwith on demand such amount
distributed to such Lender together with interest thereon, for each day from
the date such amount is distributed to such Lender until the date such Lender
repays such amount to the Agent, at the Federal Funds Rate.
SECTION 2.15. Taxes. (a) Any and all payments by the
Borrower hereunder or under the Notes shall be made, in accordance with Section
2.14, free and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each Lender and the
Agent, taxes imposed on its overall net income, and franchise taxes imposed on
it in lieu of net income taxes, by the jurisdiction under the laws of which
such Lender or the Agent (as the case may be) is organized, managed or
controlled or any political subdivision thereof and, in the case of each
Lender, taxes imposed on its overall net income, and franchise taxes imposed on
it in lieu of net income taxes, by the jurisdiction of such Lender's Applicable
Lending Office or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities in
respect of payments hereunder or under the Notes being hereinafter referred to
as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from
or in respect of any sum payable hereunder or under any Note to any Lender or
the Agent, (i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.15) such Lender or the Agent (as
the case may be) receives an amount equal to the sum it would have received had
no such deductions been made, (ii) the Borrower shall make such deductions and
(iii) the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(b) In addition, the Borrower agrees to pay any present
or future stamp or documentary taxes or any other excise or property taxes,
charges or similar levies that arise from any payment made under any Note or
from
<PAGE> 33
29
the execution, delivery or registration of, performing under, or otherwise with
respect to, this Agreement or any the Note (hereinafter referred to as "Other
Taxes").
(c) The Borrower shall indemnify each Lender and the
Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any taxes imposed by any jurisdiction on amounts payable under this
Section 2.15) imposed on or paid by such Lender or the Agent (as the case may
be) and any liability (including, without limitation, penalties, interest and
expenses) arising therefrom or with respect thereto. This indemnification
shall be made within 30 days from the date such Lender or the Agent (as the
case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of
Taxes, the Borrower shall furnish to the Agent, at its address referred to in
Section 8.02, the original or a certified copy of a receipt evidencing payment
thereof. In the case of any payment hereunder or under the Notes by or on
behalf of the Borrower through an account or branch outside the United States
or by or on behalf of the Borrower by a payor that is not a United States
person, if the Borrower determines that no Taxes are payable in respect
thereof, the Borrower shall furnish, or shall cause such payor to furnish, to
the Agent, at such address, an opinion of counsel acceptable to the Agent
stating that such payment is exempt from Taxes imposed by the jurisdiction from
which such payment is made. For purposes of this subsection (d) and subsection
(e), the terms "United States" and "United States person" shall have the
meanings specified in Section 7701 of the Internal Revenue Code.
(e) Each Lender organized under the laws of a
jurisdiction outside the United States, on or prior to the date of its
execution and delivery of this Agreement in the case of each Initial Lender, on
the date of the Assignment and Acceptance pursuant to which it becomes a Lender
in the case of each other Lender, and from time to time thereafter as requested
in writing by the Borrower (but only so long as such Lender remains lawfully
able to do so), shall provide each of the Agent and the Borrower with two
original Internal Revenue Service forms 1001 or 4224, as appropriate, or any
successor or other form prescribed by the Internal Revenue Service, certifying
that such Lender is exempt from or entitled to a reduced rate of United States
withholding tax on payments pursuant to this Agreement or the Notes. If the
forms provided by a Lender at the time such Lender first becomes a party to
this Agreement indicates a United States interest withholding tax rate in
excess of zero, withholding tax at such rate shall be considered excluded from
Taxes unless and until such Lender provides the appropriate forms certifying
that a lesser rate applies, whereupon withholding tax at such lesser rate only
shall be considered excluded from Taxes for periods governed by such form;
provided, however, that, if at the date of the Assignment and Acceptance
pursuant to which a Lender assignee becomes a party to this Agreement, the
Lender assignor was entitled to payments under subsection (a) in respect of
United States withholding tax with respect to interest paid at such date, then,
to such extent, the term Taxes shall include (in addition to withholding taxes
that may be imposed in the future or other amounts otherwise includable in
Taxes) the lesser of (i) the United States withholding tax, if any, applicable
with respect to the Lender assignee on such date and (ii) the United States
withholding tax, if any, applicable with respect to the Lender assignor on such
date. For purposes of this subsection (e), the term Assignment and Acceptance
shall include a change in the Applicable Lending Office of a Lender. If any
form or document referred to in this subsection (e) requires the disclosure of
information, other than information necessary to compute the tax payable and
information required on the date hereof by Internal Revenue Service form 1001
or 4224, that the Lender reasonably considers to be confidential, the Lender
shall give notice thereof to the Borrower and shall not be obligated to include
in such form or document such confidential information.
(f) For any period with respect to which a Lender has
failed to provide the Borrower with the appropriate form described in Section
2.15(e) (other than if such failure is due to a change in law occurring
subsequent to the date on which a form originally was required to be provided,
or if such form otherwise is not required under the first sentence of
subsection (e) above), such Lender shall not be entitled to indemnification
under Section 2.15(a) or (c) with respect to Taxes imposed by the United States
by reason of such failure; provided, however, that should a Lender become
subject to Taxes because of its failure to deliver a form required hereunder,
the Borrower shall take such steps as the Lender shall reasonably request to
assist the Lender to recover such Taxes and any cost or expense incurred by the
Borrower in connection therewith shall be promptly reimbursed by such Lender.
<PAGE> 34
30
(g) If a Lender or the Agent receives a refund from a
taxing authority in respect of any Taxes or Other Taxes as to which it has been
indemnified by the Borrower or with respect to which the Borrower has paid
additional amounts pursuant to this Section 2.15, it shall within 30 days from
the date of such receipt pay over such refund to the Borrower, net of all
out-of-pocket expenses of such Lender or the Agent; provided, however, that the
Borrower, upon the request of such Lender or the Agent, agrees to repay the
amount paid over to the Borrower to such Lender or the Agent in the event such
Lender or the Agent is required to repay such refund to such taxing authority.
(h) Any Lender claiming any indemnity payment or
additional amounts payable pursuant to this Section 2.15 shall use reasonable
efforts (consistent with legal and regulatory restrictions) to file any
certificate or document reasonably requested in writing by the Borrower or to
change the jurisdiction of its Applicable Lending Office if the making of such
a filing or change would avoid the need for or reduce the amount of any such
indemnity payment or additional amounts that may thereafter accrue and would
not, in the sole reasonable judgment of such Lender, be otherwise
disadvantageous to such Lender.
SECTION 2.16. Sharing of Payments, Etc. If any Lender shall
obtain any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) on account of the Revolving Credit Advances
owing to it (other than pursuant to Section 2.12, 2.15 or 8.04(c)) in excess of
its ratable share of payments on account of the Revolving Credit Advances
obtained by all the Lenders, such Lender shall forthwith purchase from the
other Lenders such participation in the Revolving Credit Advances owing to them
as shall be necessary to cause such purchasing Lender to share the excess
payment ratably with each of them; provided, however, that if all or any
portion of such excess payment is thereafter recovered from such purchasing
Lender, such purchase from each Lender shall be rescinded and such Lender shall
repay to the purchasing Lender the purchase price to the extent of such
recovery together with an amount equal to such Lender's ratable share
(according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. The Borrower agrees that any Lender
so purchasing a participation from another Lender pursuant to this Section 2.16
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Lender were the direct creditor of the Borrower in the amount of such
participation.
SECTION 2.17. Use of Proceeds. The proceeds of the Advances
shall be available (and the Borrower agrees that it shall use such proceeds)
solely for general corporate purposes of the Borrower and its Subsidiaries,
including, without limitation, making distributions to creditors required under
the Plans of Reorganization.
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of
Sections 2.01 and 2.03. Sections 2.01 and 2.03 of this Agreement shall become
effective on and as of the first date occurring not later than December 31,
1995 (the "Effective Date") on which the following conditions precedent have
been satisfied:
(a) There shall have occurred no Material Adverse Change
since December 31, 1994.
(b) There shall exist no action, suit, investigation,
litigation or proceeding affecting the Borrower or any of its Material
Subsidiaries pending or threatened before any court, governmental
agency or arbitrator that (i) is reasonably likely to have a Material
Adverse Effect other than the matters described on Schedule 3.01(b)
hereto (the "Disclosed Litigation") or (ii) purports to affect the
legality, validity or enforceability of any Loan Document or the
consummation of the transactions contemplated thereby, and there shall
have been no material adverse change in the status, or financial
effect on the Borrower and its Material Subsidiaries taken as a whole,
of the Disclosed Litigation from that described on Schedule 3.01(b)
hereto.
<PAGE> 35
31
(c) All governmental, regulatory and third party consents
and approvals necessary in connection with the transactions
contemplated hereby (including, without limitation, all consents and
approvals required under PUHCA) shall have been obtained (without the
imposition of any conditions that are not acceptable in the reasonable
judgment of the Lenders) and shall remain in effect, and no law or
regulation shall be applicable in the reasonable judgment of the
Lenders that restrains, prevents or imposes materially adverse
conditions upon the transactions contemplated hereby.
(d) The Borrower shall have notified the Agent in writing
as to the proposed Effective Date.
(e) The Borrower shall have paid all fees and expenses of
the Agent and fees of the Lenders (including the fees and expenses of
counsel to the Agent) and fees of the Managing and Co-Syndication
Agents then due; provided that the Borrower shall not be required to
pay any expenses (including fees and expenses of counsel to the Agent)
on the Effective Date unless the Borrower shall have received an
invoice therefor at least three Business Days prior to the Effective
Date.
(f) On the Effective Date, the following statements shall
be true and the Agent shall have received for the account of each
Lender a certificate signed by a duly authorized officer of the
Borrower, dated the Effective Date, stating that:
(i) The representations and warranties contained
in Section 4.01 are correct on and as of the Effective Date,
(ii) No event has occurred and is continuing that
constitutes a Default, and
(iii) The Information Memorandum and all other
information, exhibits and reports furnished by the Borrower to
the Agent and the Lenders in connection with the negotiation
of the Loan Documents, taken as a whole, does not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements made therein,
in light of the circumstances under which they were made, not
misleading.
(g) The Borrower shall have received, and shall continue
to maintain as of the Effective Date, a long term unsecured debt
rating equal to or higher than BBB- from S&P and equal to or higher
than Baa3 from Moody's.
(h) The Bankruptcy Court shall have entered an order or
orders confirming the Plans of Reorganization, and such order or
orders shall not have been judicially stayed.
(i) The Borrower or CGTC shall not have waived any
material condition of the Plans of Reorganization without the consent
of the Agent and the Lenders and all material changes and deviations
in the Plans of Reorganization from the Current Plans shall be
satisfactory to the Agent and the Lenders.
(j) The Plans of Reorganization shall be substantially
consummated (or will be substantially consummated with the
distributions required to be made with the proceeds of the initial
Revolving Credit Advance hereunder and the initial Letters of Credit
issued hereunder and the other securities contemplated by the Plans of
Reorganization).
(k) The Agent shall have received on or before the
Effective Date the following, each dated such day, in form and
substance satisfactory to the Agent and (except for the Revolving
Credit Notes) in sufficient copies for each Lender:
(i) The Revolving Credit Notes to the order of
the Lenders, respectively.
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(ii) Certified copies of the resolutions of the
Board of Directors of the Borrower approving the Facilities,
and of all documents evidencing other necessary corporate
action, governmental and regulatory approvals and third party
consents (including, without limitation, all approvals and
consents required under PUHCA) with respect to this Agreement
and the Notes.
(iii) A certificate of the Secretary or an
Assistant Secretary of the Borrower certifying the names and
true signatures of the officers of the Borrower authorized to
sign this Agreement and the Notes and the other documents to
be delivered hereunder.
(iv) A favorable opinion of Cravath, Swaine &
Moore, counsel for the Borrower, substantially in the form of
Exhibit E hereto and as to such other matters as any Lender
through the Agent may reasonably request.
(v) A favorable opinion of Shearman & Sterling,
counsel for the Agent, in form and substance satisfactory to
the Agent.
(vi) Such other approvals, opinions or documents
as any Lender through the Agent may reasonably request.
SECTION 3.02. Conditions Precedent to Each Borrowing. The
obligation of each Lender to make an Advance (other than a Competitive Bid
Advance) on the occasion of each Borrowing or of each Issuing Lender to issue a
Letter of Credit shall be subject to the conditions precedent that the
Effective Date shall have occurred and on the date of such Borrowing or such
issuance the following statements shall be true (and each of the giving of the
applicable Notice of Borrowing or Notice of Issuance and the acceptance by the
Borrower of the proceeds of such Borrowing or of such Letter of Credit shall
constitute a representation and warranty by the Borrower that on the date of
such Borrowing or issuance such statements are true):
(i) the representations and warranties contained in
Section 4.01 are correct on and as of the date of such Revolving
Credit Borrowing, before and after giving effect to such Revolving
Credit Borrowing and to the application of the proceeds therefrom, as
though made on and as of such date, and
(ii) no event has occurred and is continuing, or would
result from such Revolving Credit Borrowing or from the application of
the proceeds therefrom, that constitutes a Default.
SECTION 3.03. Conditions Precedent to Each Competitive Bid
Borrowing. The obligation of each Lender that is to make a Competitive Bid
Advance on the occasion of a Competitive Bid Borrowing to make such Competitive
Bid Advance as part of such Competitive Bid Borrowing is subject to the
conditions precedent that (i) the Agent shall have received the written
confirmatory Notice of Competitive Bid Borrowing with respect thereto, (ii) on
or before the date of such Competitive Bid Borrowing, but prior to such
Competitive Bid Borrowing, the Agent shall have received a Competitive Bid Note
payable to the order of such Lender on such terms as were agreed to for such
Competitive Bid Advance in accordance with Section 2.03 and substantially in
the form of Exhibit A-2 hereto, and (iii) on the date of such Competitive Bid
Borrowing the following statements shall be true (and each of the giving of the
applicable Notice of Competitive Bid Borrowing and the acceptance by the
Borrower of the proceeds of such Competitive Bid Borrowing shall constitute a
representation and warranty by the Borrower that on the date of such
Competitive Bid Borrowing such statements are true):
(a) the representations and warranties contained in
Section 4.01 are correct on and as of the date of such Competitive Bid
Borrowing, before and after giving effect to such Competitive Bid
Borrowing and to the application of the proceeds therefrom, as though
made on and as of such date,
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33
(b) no event has occurred and is continuing, or would
result from such Competitive Bid Borrowing or from the application of
the proceeds therefrom, that constitutes a Default, and
(c) no event has occurred and no circumstance exists as a
result of which the information concerning the Borrower that has been
provided to the Agent and each Lender by the Borrower in connection
herewith would include an untrue statement of a material fact or omit
to state any material fact or any fact necessary to make the
statements contained therein, in the light of the circumstances under
which they were made, not misleading.
SECTION 3.04. Determinations Under Section 3.01. For
purposes of determining compliance with the conditions specified in Section
3.01, each Lender shall be deemed to have consented to, approved or accepted or
to be satisfied with each document or other matter required thereunder to be
consented to or approved by or acceptable or satisfactory to the Lenders unless
an officer of the Agent responsible for the transactions contemplated by this
Agreement shall have received notice from such Lender prior to the date that
the Borrower, by notice to the Lenders, designates as the proposed Effective
Date, specifying its objection thereto. The Agent shall promptly notify the
Lenders of the occurrence of the Effective Date, which notice shall be
conclusive and binding.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower.
The Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(b) The execution, delivery and performance by the
Borrower of each of the Loan Documents to which the Borrower is a
party, and the consummation of the transactions contemplated thereby,
are within the Borrower's corporate powers, have been duly authorized
by all necessary corporate action, and do not (A) contravene (i) the
Borrower's charter or by-laws or (ii) law or any contractual
restriction binding on or, to the Borrower's knowledge, affecting the
Borrower (except that certain orders are required under PUHCA for the
performance of this Agreement and the execution, performance and
delivery of any Note hereunder, which orders have been obtained) or
(B) result in the imposition of any Lien.
(c) No authorization or approval or other action by, and
no notice to or filing with, any governmental authority or regulatory
body or any other third party is required for the due execution,
delivery and performance by the Borrower of any Loan Document to which
the Borrower is a party, except for those authorizations, approvals,
actions, notices and filings (including any such authorizations,
approvals, actions, notices and filings required under PUHCA for the
performance of this Agreement and the execution, performance and
delivery of any Note hereunder) listed on Schedule 4.01(c) hereto, all
of which, as of the Effective Date, have been duly obtained, taken,
given or made and are in full force and effect.
(d) This Agreement has been, and each of the other Loan
Documents to which the Borrower is a party when delivered hereunder
will have been, duly executed and delivered by the Borrower. This
Agreement is, and each of the other Loan Documents to which the
Borrower is a party when delivered hereunder will be, the legal, valid
and binding obligation of the Borrower enforceable against the
Borrower in accordance with their respective terms.
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34
(e) The Consolidated balance sheet of the Borrower and
its Subsidiaries as of December 31, 1994, and the related Consolidated
statements of income and cash flows of the Borrower and its
Subsidiaries for the fiscal year then ended, accompanied by an opinion
of Arthur Andersen, LLP, independent public accountants, and the
Consolidated balance sheet of the Borrower and its Subsidiaries as of
September 30, 1995, and the related Consolidated statements of income
and cash flows of the Borrower and its Subsidiaries for the nine
months then ended, duly certified by the chief accounting officer of
the Borrower, copies of which have been furnished to each Lender,
fairly present, subject, in the case of said balance sheet as of
September 30, 1995, and said statements of income and cash flows for
the nine months then ended, to year-end audit adjustments, the
Consolidated financial condition of the Borrower and its Subsidiaries
as at such date and the Consolidated results of the operations of the
Borrower and its Subsidiaries for the period ended on such date, all
in accordance with generally accepted accounting principles
consistently applied. Since December 31, 1994, there has been no
Material Adverse Change.
(f) The Borrower is a "holding company" and each of the
Borrower's Subsidiaries is a "subsidiary company" of the Borrower
within the meaning of PUHCA; provided, however, that this
representation shall be applicable only so long as PUHCA shall not be
abolished or repealed.
(g) There is no pending or threatened action, suit,
investigation, litigation or proceeding, including, without
limitation, any Environmental Action, against or, to the Borrower's
knowledge, affecting the Borrower or any of its Material Subsidiaries
before any court, governmental agency or arbitrator that (i) is
reasonably likely to have a Material Adverse Effect (other than the
Disclosed Litigation) or (ii) purports to affect in a material way the
legality, validity or enforceability of any Loan Document or the
consummation of the transactions contemplated thereby, and there has
been no material adverse change in the status, or financial effect on
the Borrower and its Material Subsidiaries taken as a whole, of the
Disclosed Litigation from that described on Schedule 3.01(b) hereto.
(h) Neither the Borrower nor any of its Subsidiaries is
engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation
U issued by the Board of Governors of the Federal Reserve System), and
no proceeds of any Advance will be used to purchase or carry any
margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock.
(i) The Borrower and each of its Material Subsidiaries is
currently in compliance, in all material respects, with all applicable
laws, rules, regulations and orders, including, without limitation,
compliance with ERISA and Environmental Laws as provided in Section
5.01(a), except in each case to the extent that failure to do so is
not reasonably likely to have a Material Adverse Effect.
(j) No ERISA Event has occurred or is reasonably expected
to occur with respect to any ERISA Plan that is reasonably likely to
result in a Material Adverse Effect.
(k) Neither the Borrower nor any ERISA Affiliate has
incurred or is reasonably expected to incur any Withdrawal Liability
to any Multiemployer Plan that is reasonably likely to result in a
Material Adverse Effect.
(l) Neither the Borrower nor any ERISA Affiliate has been
notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or has been terminated, within
the meaning of Title IV of ERISA, and no such Multiemployer Plan is
reasonably expected to be in reorganization or to be terminated,
within the meaning of Title IV of ERISA, where such notification,
reorganization or termination is reasonably likely to result in a
Material Adverse Effect.
<PAGE> 39
35
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance
shall remain unpaid, any Letter of Credit shall be outstanding or any Lender
shall have any Revolving Credit Commitment hereunder, the Borrower will:
(a) Compliance with Laws, Etc. Comply, and cause each of
its Material Subsidiaries to comply, in all material respects, with
all material contracts to which it is a party and all applicable laws,
rules, regulations and orders, such compliance to include, without
limitation, compliance with ERISA and Environmental Laws, except in
each case to the extent that failure to do so is not reasonably likely
to result in a Material Adverse Effect; provided, however, that
neither the Borrower nor any of its Material Subsidiaries shall be
required to comply with any applicable laws, rules, regulations or
orders to the extent that the validity thereof or the application
thereof to the Borrower or its Subsidiary, as applicable, is being
contested in good faith and by proper proceedings and as to which
appropriate reserves are being maintained to the extent required by
generally accepted accounting principles.
(b) Payment of Taxes, Etc. Pay and discharge, and cause
each of its Material Subsidiaries to pay and discharge, before the
same shall become delinquent, (i) all taxes, assessments and
governmental charges or levies imposed upon it or upon its property
and (ii) all lawful claims that, if unpaid, might by law become a Lien
upon its property, except in each case to the extent that failure to
do so is not reasonably likely to result in a Material Adverse Effect;
provided, however, that neither the Borrower nor any of its Material
Subsidiaries shall be required to pay or discharge any such tax,
assessment, charge, levy or claim that is being contested in good
faith and by proper proceedings and as to which appropriate reserves
are being maintained to the extent required by generally accepted
accounting principles, unless and until any Lien resulting therefrom
attaches to its property and becomes enforceable against its other
creditors.
(c) Maintenance of Insurance. Maintain, and cause each
of its Material Subsidiaries to maintain, insurance with responsible
and reputable insurance companies or associations in such amounts and
covering such risks as is usually carried by companies engaged in
similar businesses and owning similar properties in the same general
areas in which the Borrower or such Subsidiary operates.
(d) Preservation of Corporate Existence, Etc. Preserve
and maintain, and cause each of its Material Subsidiaries to preserve
and maintain, its corporate existence, material rights (charter and
statutory) and material franchises; provided, however, that (i) the
Borrower may consummate any merger or consolidation permitted under
Section 5.02(b) and (ii) subject only to Section 5.02(c), any
Subsidiary may merge, consolidate or liquidate, or be sold or
otherwise disposed of or sell or otherwise dispose of its assets and
provided further that neither the Borrower nor any of its Material
Subsidiaries shall be required to preserve any right or franchise if
the Board of Directors of the Borrower or such Subsidiary shall
determine that the preservation thereof is no longer desirable in the
conduct of the business of the Borrower or such Subsidiary, as the
case may be, and that the loss thereof is not disadvantageous in any
material respect to the Borrower and its Subsidiaries taken as a whole
or the Lenders.
(e) Visitation Rights. At any reasonable time and from
time to time, subject to reasonable prior notice to the Borrower,
permit the Agent or any of the Lenders or any agents or
representatives thereof, to examine and make copies of and abstracts
from the records and books of account of, and visit the properties of,
the Borrower and any of its Material Subsidiaries, and to discuss the
affairs, finances and accounts of the Borrower and any of its Material
Subsidiaries with any of their officers or directors and with their
independent certified public accountants; provided that the Borrower
shall be afforded an opportunity to be present during any such
discussion with its independent certified public accountants.
<PAGE> 40
36
(f) Keeping of Books. Keep, and cause each of its
Material Subsidiaries to keep, proper books of record and account, in
which full and correct entries shall be made of all financial
transactions and the assets and business of the Borrower and each such
Subsidiary in accordance with generally accepted accounting principles
in effect from time to time.
(g) Maintenance of Properties, Etc. Maintain and
preserve, and cause each of its Material Subsidiaries to maintain and
preserve, all of its properties (including, without limitation, all
patents, trademarks and other intellectual property) that are material
to the conduct of its business in good working order and condition,
ordinary wear and tear excepted.
(h) Transactions with Affiliates. Conduct, and cause
each of its Material Subsidiaries to conduct, all material
transactions otherwise permitted under this Agreement with any of
their Affiliates (other than transactions between the Borrower and any
of its Wholly-Owned Subsidiaries or between any such Wholly-Owned
Subsidiaries; provided that such Wholly-Owned Subsidiaries have no
Debt (other than Capital Leases) owing to any third party other than
the Borrower or another of its Wholly-Owned Subsidiaries) on terms
that are fair and reasonable and no less favorable to the Borrower or
such Subsidiary than it would obtain in a comparable arm's-length
transaction with a Person not an Affiliate; provided, however, that
notwithstanding the foregoing, (i) the Borrower shall be permitted to
continue its present intercompany loan program pursuant to which the
Borrower makes loans to Wholly-Owned Subsidiaries at rates of interest
based upon the Borrower's cost of capital and (ii) transactions
between the Borrower and Wholly-Owned Subsidiaries, or between
Wholly-Owned Subsidiaries, conducted at cost, shall be permitted.
(i) Reporting Requirements. Furnish to the Lenders:
(i) as soon as available and in any event within
50 days after the end of each of the first three quarters of
each fiscal year of the Borrower, Consolidated balance sheets
of the Borrower and its Subsidiaries as of the end of such
quarter and Consolidated statements of income and cash flows
of the Borrower and its Subsidiaries for the period commencing
at the end of the previous fiscal year and ending with the end
of such quarter, duly certified (subject to year-end audit
adjustments) by the chief accounting officer of the Borrower
as having been prepared in accordance with generally accepted
accounting principles and certificates of the chief financial
officer of the Borrower as to compliance with the terms of
this Agreement and setting forth in reasonable detail the
calculations necessary to demonstrate compliance with Section
5.03, provided that in the event of any change in GAAP used in
the preparation of such financial statements, the Borrower
shall also provide, if necessary for the determination of
compliance with Section 5.03, a statement of reconciliation
conforming such financial statements to GAAP;
(ii) as soon as available and in any event within
120 days after the end of each fiscal year of the Borrower,
(A) a copy of the annual audit report for such year for the
Borrower and its Subsidiaries, containing Consolidated balance
sheets of the Borrower and its Subsidiaries as of the end of
such fiscal year and Consolidated statements of income and
cash flows of the Borrower and its Subsidiaries for such
fiscal year, in each case accompanied by an opinion (without
material qualification) by Arthur Andersen, LLP or other
independent public accountants acceptable to the Required
Lenders, provided that in the event of any change in GAAP used
in the preparation of such financial statements, the Borrower
shall also provide, if necessary for the determination of
compliance with Section 5.03, a statement of reconciliation
conforming such financial statements to GAAP and (B)
consolidating balance sheets of the Borrower and its
Subsidiaries as of the end of such fiscal year and
consolidating statements of income and cash flows of the
Borrower and its Subsidiaries for such fiscal year;
<PAGE> 41
37
(iii) as soon as possible and in any event within
three Business Days after any executive officer of the
Borrower obtains knowledge of the occurrence of any Default or
any event, development or occurrence reasonably likely to have
a Material Adverse Effect continuing on the date of such
statement, a statement of the chief financial officer of the
Borrower setting forth details of such Default or event,
development or occurrence reasonably likely to have a Material
Adverse Effect and the action that the Borrower has taken and
proposes to take with respect thereto;
(iv) promptly after the sending or filing thereof,
copies of all reports that the Borrower sends to its security
holders generally, and copies of all reports and registration
statements that the Borrower or any Subsidiary files with the
Securities and Exchange Commission or any national securities
exchange, other than registration statements filed on Form
S-8, any Form 11-K or any reports or filings made pursuant to
PUHCA;
(v) promptly after the commencement thereof (or,
if later, the date that the Borrower determines that the
applicable action or proceeding is of the type described in
Section 4.01(h)), notice of all actions and proceedings before
any court, governmental agency or arbitrator against, or to
the Borrower's knowledge affecting the Borrower or any of its
Material Subsidiaries of the type described in Section
4.01(h);
(vi) promptly and in any event within 15 days
after the Borrower or any ERISA Affiliate knows or has reason
to know that any ERISA Event has occurred, a statement of the
chief financial officer of the Borrower describing such ERISA
Event and the action, if any, that the Borrower or such ERISA
Affiliate has taken and proposes to take with respect thereto;
(vii) promptly and in any event within three
Business Days after receipt thereof by the Borrower or any
ERISA Affiliate, copies of each notice from the PBGC stating
its intention to terminate any ERISA Plan or to have a trustee
appointed to administer any ERISA Plan;
(viii) promptly and in any event within 10 days
after the receipt thereof by the Borrower or any ERISA
Affiliate, a copy of the annual actuarial report for each
ERISA Plan the funded current liability percentage (as defined
in Section 302(d)(8) of ERISA) of which is less than 90% or
the unfunded current liability of which exceeds $10,000,000;
(ix) promptly and in any event within five
Business Days after receipt thereof by the Borrower or any
ERISA Affiliate from the sponsor of a Multiemployer Plan,
copies of each notice concerning (A) the imposition of
Withdrawal Liability by any such Multiemployer Plan, (B) the
reorganization or termination, within the meaning of Title IV
of ERISA, of any such Multiemployer Plan or (C) the amount of
liability incurred, or that may be incurred, by the Borrower
or any ERISA Affiliate in connection with any event described
in clause (A) or (B);
(x) promptly after the assertion or occurrence
thereof, notice of any Environmental Action against or of any
noncompliance by the Borrower or any of its Material
Subsidiaries with any Environmental Law or Environmental
Permit that would reasonably be expected to have a Material
Adverse Effect;
(xi) promptly and in any event within two Business
Days after receipt by the Borrower of notice of any change in
the Borrower's unsecured long-term debt ratings by Moody's or
S&P; and
(xii) such other information respecting the
Borrower or any of its Subsidiaries as any Lender through the
Agent may from time to time reasonably request.
<PAGE> 42
38
SECTION 5.02. Negative Covenants. So long as any Advance
shall remain unpaid, any Letter of Credit shall be outstanding or any Lender
shall have any Revolving Credit Commitment hereunder, the Borrower will not:
(a) Liens. Create or suffer to exist, or permit any of
its Material Subsidiaries to create or suffer to exist, any Lien on or
with respect to any of its properties, whether now owned or hereafter
acquired, or assign, or permit any of its Material Subsidiaries to
assign, any right to receive income, other than:
(i) Permitted Liens,
(ii) Liens to secure obligations of the Borrower's
Subsidiaries owing to the Borrower or to other direct
Wholly-Owned Subsidiaries of the Borrower that have no debt
outstanding other than to the Borrower,
(iii) Liens existing on the date hereof (and not
otherwise included in any other subsection of this Section
5.02(a)) and listed on Schedule 5.02(a) hereto,
(iv) Liens on any property acquired by the
Borrower or any of its Material Subsidiaries after the date
hereof that are existing at the time such property is so
acquired and not created in contemplation of the acquisition
of such property,
(v) Liens on any property of any Person that
becomes a Subsidiary of the Borrower after the date hereof
that are existing at the time such Person becomes a
Subsidiary, other than any such Lien created in contemplation
of such Person becoming a Subsidiary,
(vi) Liens securing Debt of the Borrower or any of
its Material Subsidiaries of the type described in Sections
3.03 and 3.04 of the Indenture; provided that, for purposes of
this clause (vi), (A) references to "Secured Debt", "Funded
Debt" or "Debt" in Sections 3.03 and 3.04 of the Indenture
shall be deemed to refer to "Debt" as defined herein, (B)
references to the "Company" in Section 3.03 of the Indenture
shall be deemed to refer to the "Borrower" or any "Material
Subsidiary" as defined herein, and (C) references to
"Significant Subsidiary" in Section 3.04 of the Indenture
shall be deemed to refer to any "Material Subsidiary" as
defined herein,
(vii) other Liens securing Debt and other
obligations in an aggregate principal amount not to exceed
$25,000,000 outstanding, and
(viii) except as otherwise restricted or prohibited
in the Indenture, the replacement, extension or renewal of any
Lien permitted above upon or in the same property theretofore
subject thereto or the replacement, extension or renewal
(without increase in the amount or change in any direct or
contingent obligor) of the Debt secured thereby.
(b) Mergers. Merge or consolidate with or into, or sell,
lease, transfer or otherwise dispose of its property or assets as, or
substantially as, an entirety in a single transaction or a series of
transactions to, any Person, except that the Borrower may merge with
any other Person so long as the Borrower is the surviving corporation
(or the surviving corporation shall be approved by Lenders holding 80%
of the Revolving Credit Commitments), provided, in each case, that (i)
no Default shall have occurred and be continuing at the time of such
proposed transaction or would result therefrom and (ii) the Borrower
shall be able to satisfy all of the conditions set forth in Section
3.02 at the time of such proposed transaction and immediately
thereafter.
<PAGE> 43
39
(c) Sale of Assets. Sell, convey, transfer or otherwise
dispose of (whether in one transaction or in a series of
transactions), without the written consent of the Required Lenders,
(i) more than 25% of its equity investments (measured as of the date
of such sale, conveyance, transfer or other disposition) in or (ii)
more than 25% of the fair market value (measured as of the date of
such sale, conveyance, transfer or other disposition) of the assets
(excluding accounts receivable and current inventory held for sale) of
either one of the following groups:
Group I: Columbia Gas Transmission Corporation;
Columbia Gulf Transmission Company
Group II: Columbia Gas of Kentucky, Inc.; Columbia
Gas of Maryland, Inc.; Columbia Gas of Ohio, Inc.;
Columbia Gas of Pennsylvania, Inc.; Commonwealth Gas
Services, Inc.;
provided, however, that in no event may the aggregate of all sales,
conveyances, transfers and other dispositions by the Borrower from the
Effective Date through the Termination Date result in the sale,
conveyance, transfer or other disposition, without the written consent
of the Required Lenders, of (i) more than 25% of its equity
investments (measured as of the date hereof) in or (ii) more than 25%
of the fair market value (measured as of the date hereof) of the
assets (excluding accounts receivable and current inventory held for
sale) of either one of the above groups and; provided further, that
any sales, conveyances, transfers and other dispositions shall not be
counted for purposes of this covenant to the extent that proceeds
therefrom are reinvested in any of the entities listed in Group I or
Group II and only to the extent that any debt incurred by such entity
in connection with such reinvestment would have been permitted if the
assets comprising such reinvestment were assets held as of the date of
this Agreement and; provided still further, that in any calendar
year, sales, conveyances, transfers or other dispositions of property
in the ordinary course of business with a value of up to $10,000,000
collectively for Groups I and II shall not be counted for purposes of
this covenant.
(d) Limitation on Subsidiary Debt. Permit its
Significant Subsidiaries (as defined in the Indenture) to incur any
Funded Debt (as defined in the Indenture) other than as permitted in
the Indenture.
(e) Limitation on Material Subsidiary Funding. Enter into
any agreement or understanding, and shall not permit any Material
Subsidiary to (except with the Borrower) enter into any agreement or
understanding, which by its terms limits, in any material respect, a
Material Subsidiary's ability to make funds available to the Borrower
(whether by way of dividend or other distribution or by way of
repayment of intercompany indebtedness); provided, however, that the
foregoing shall not prohibit (i) agreements and understandings to
which a Subsidiary is a party on the date such Subsidiary first
becomes a Subsidiary, (ii) customary provisions in leases and other
contracts that prohibit the assignment thereof and (iii) agreements or
understandings in connection with Liens permitted hereunder that apply
only to the property subject to such Liens.
SECTION 5.03. Financial Covenants. So long as any Advance
shall remain unpaid, any Letter of Credit shall be outstanding or any Lender
shall have any Revolving Credit Commitment hereunder, the Borrower will:
(a) Tangible Net Worth. Maintain at all times a Tangible
Net Worth of not less than $1,250,000,000.
(b) Leverage Ratio. Maintain a ratio of Total Debt to
the sum of Total Debt plus Tangible Net Worth of not greater than the
amount set forth below for each relevant period set forth below:
<PAGE> 44
40
<TABLE>
<CAPTION>
Relevant Period Ratio
--------------- -----
<S> <C>
Effective Date - 12/30/96 0.685:1.00
12/31/96 - 12/30/98 0.675:1.00
12/31/98 - Termination Date 0.650:1.00
</TABLE>
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following
events ("Events of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any
Advance when the same becomes due and payable; or the Borrower shall
fail to pay any interest on any Advance or make any other payment of
fees or other amounts payable under this Agreement or any Loan
Document within five Business Days after the same becomes due and
payable; or
(b) Any representation or warranty made by the Borrower
herein or by the Borrower (or any of its officers) in connection with
or pursuant to this Agreement shall prove to have been incorrect in
any material respect when made; or
(c) (i) The Borrower shall fail to perform or observe any
term, covenant or agreement contained in Section 5.01(d) (as it
applies to the Borrower's existence) or (h), 5.01(i)(vi) through (ix),
5.02 or 5.03, or (ii) the Borrower shall fail to perform or observe
any term, covenant or agreement contained in Section 5.01(e) or (i)
(other than 5.01(i)(vi) through (ix)) and such failure shall remain
unremedied for 10 days after written notice thereof shall have been
given to the Borrower by the Agent or any Lender and (iii) the
Borrower shall fail to perform or observe any other term, covenant or
agreement contained in this Agreement on its part to be performed or
observed and such failure shall remain unremedied for 30 days after
written notice thereof shall have been given to the Borrower by the
Agent or any Lender; or
(d) (i) The Borrower or any of its Material Subsidiaries
shall fail to pay any principal of or premium or interest on any Debt
that is outstanding in a principal amount of at least $30,000,000 in
the aggregate (but excluding Debt outstanding hereunder) of the
Borrower or such Subsidiary (as the case may be), when the same
becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any, specified in the
agreement or instrument relating to such Debt; or (ii) any other event
shall occur or condition shall exist under any agreement or instrument
relating to any such Debt and shall continue after the applicable
grace period, if any, specified in such agreement or instrument, if
the effect of such event or condition is to accelerate, the maturity
of such Debt; or (iii) any such Debt shall be declared to be due and
payable, or required to be prepaid or redeemed (other than by a
regularly scheduled required prepayment or redemption), purchased or
defeased, or an offer to prepay, redeem, purchase or defease such Debt
shall be required to be made, in each case prior to the stated
maturity thereof; provided, however, that the foregoing clauses (ii)
and (iii) shall not apply to any Debt that becomes due or is required
to be repaid as a result of the sale or other disposition of, or any
casualty or condemnation with respect to, any property securing such
Debt, the voluntary termination of any Capitalized Lease, or other
circumstances that are not in the nature of a default by or altered
circumstances of the obligor in respect of such Debt; or
(e) The Borrower or any of its Material Subsidiaries
shall generally not pay its debts as such debts become due, or shall
admit in writing its inability to pay its debts generally, or shall
make a general
<PAGE> 45
41
assignment for the benefit of creditors; or any proceeding shall be
instituted by or against the Borrower or any of its Material
Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar
official for it or for any substantial part of its property under any
such law and, in the case of any such proceeding instituted against it
(but not instituted by it), either such proceeding shall remain
undismissed or unstayed for a period of 60 days, or any of the actions
sought in such proceeding (including, without limitation, the entry of
an order for relief against, or the appointment of a receiver,
trustee, custodian or other similar official for, it or for any
substantial part of its property) shall occur; or the Borrower or any
of its Material Subsidiaries shall take any corporate action to
authorize any of the actions set forth above in this subsection (e);
or
(f) Any final judgment or non-appealable order for the
payment of money in excess of $10,000,000 shall be rendered against
the Borrower or any of its Material Subsidiaries and either (i)
enforcement proceedings shall have been commenced by any creditor
upon such judgment or order or (ii) there shall be any period of 30
consecutive days during which a stay of enforcement of such judgment
or order, by reason of a pending appeal or otherwise, shall not be in
effect; or
(g) (i) Any Person or two or more Persons acting in
concert (excluding any thrift plan or any other employee benefit plan
of the Borrower) shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange Commission under
the Securities Exchange Act of 1934), directly or indirectly, of
Voting Stock of the Borrower (or other securities convertible into
such Voting Stock) representing 20% or more of the combined voting
power of all Voting Stock of the Borrower (determined on a fully
diluted basis); or (ii) during any period of up to 24 consecutive
months, commencing after the date of this Agreement, individuals who
at the beginning of such 24-month period were directors of the
Borrower shall cease for any reason to constitute a majority of the
board of directors of the Borrower (it being understood that, for
purposes of this clause, individuals elected to become new directors
of the Borrower during a 24-month period shall be deemed to have been
directors of the Borrower at the beginning of such period if the
election or nomination of such individuals as directors was approved
by a majority of those individuals who at the beginning of such
24-month period were directors of the Borrower and any new directors
so approved); or (iii) any Person or two or more Persons acting in
concert shall have acquired by contract or otherwise (excluding
employment contracts with officers of the Borrower), or shall have
entered into a contract or arrangement (excluding employment contracts
with officers of the Borrower) that, upon consummation, will result in
its or their acquisition of the power to exercise, directly or
indirectly, a controlling influence over the management or policies of
the Borrower; or
(h) The Borrower or any of its ERISA Affiliates shall
incur, or, in the reasonable opinion of the Required Lenders, shall be
reasonably likely to incur liability in excess of $10,000,000 in the
aggregate as a result of one or more of the following: (i) the
occurrence of any ERISA Event; (ii) the partial or complete withdrawal
of the Borrower or any of its ERISA Affiliates from a Multiemployer
Plan; or (iii) the reorganization or termination of a Multiemployer
Plan;
then, and in any such event, the Agent (i) shall at the request, or may with
the consent, of the Required Lenders, by notice to the Borrower, declare the
obligation of each Lender to make Advances (other than Letter of Credit
Advances) or to issue Letters of Credit to be terminated, whereupon the same
shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the Notes,
all interest thereon and all other amounts payable under this Agreement to be
forthwith due and payable, whereupon the Notes, all such interest and all such
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby
expressly waived by the Borrower; provided, however, that in the event of an
actual or deemed entry of an order for relief with respect to the Borrower
under the Federal Bankruptcy Code, (A) the obligation of each Lender to make
Advances (other than Letter of Credit Advance) and issue Letters of Credit
shall
<PAGE> 46
42
automatically be terminated and (B) the Notes, all such interest and all such
amounts shall automatically become and be due and payable, without presentment,
demand, protest or any notice of any kind, all of which are hereby expressly
waived by the Borrower.
SECTION 6.02. Actions in Respect of the Letters of Credit
upon Default. If any Event of Default shall have occurred and be continuing,
the Agent may, irrespective of whether it is taking any of the actions
described in Section 6.01 or otherwise, make demand upon the Borrower to, and
forthwith upon such demand the Borrower will, pay to the Agent on behalf of the
Lenders in same day funds at the Agent's office designated in such demand, for
deposit in the L/C Cash Collateral Account, an amount equal to the aggregate
Available Amount of all Letters of Credit then outstanding. If at any time the
Agent determines that any funds held in the L/C Cash Collateral Account are
subject to any right or claim of any Person other than the Agent and the
Lenders or that the total amount of such funds is less than the aggregate
Available Amount of all Letters of Credit, the Borrower will, forthwith upon
demand by the Agent, pay to the Agent, as additional funds to be deposited and
held in the L/C Cash Collateral Account, an amount equal to the excess of (a)
such aggregate Available Amount over (b) the total amount of funds, if any,
then held in the L/C Cash Collateral Account that the Agent determines to be
free and clear of any such right and claim.
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action. Each Lender hereby
appoints and authorizes the Agent to take such action as agent on its behalf
and to exercise such powers and discretion under this Agreement as are
delegated to the Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto. As to any matters not
expressly provided for by this Agreement (including, without limitation,
enforcement or collection of the Notes), the Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding upon all Lenders and all holders of Notes;
provided, however, that the Agent shall not be required to take any action that
exposes the Agent to personal liability or that is contrary to this Agreement
or applicable law. The Agent agrees to give to each Lender prompt notice of
each notice given to it by the Borrower pursuant to the terms of this
Agreement.
SECTION 7.02. Agent's Reliance, Etc. Neither the Agent nor
any of its directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them under or in connection with
this Agreement, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, the Agent:
(i) may treat the payee of any Note as the holder thereof until the Agent
receives and accepts an Assignment and Acceptance entered into by the Lender
that is the payee of such Note, as assignor, and an Eligible Assignee, as
assignee, as provided in Section 8.07; (ii) may consult with legal counsel
(including counsel for the Borrower), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations (whether written or oral) made in or in connection with this
Agreement; (iv) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement on the part of the Borrower or to inspect the property (including the
books and records) of the Borrower; (v) shall not be responsible to any Lender
for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; and (vi) shall incur no liability under or in
respect of this Agreement by acting upon any notice, consent, certificate or
other instrument or writing (which may be by telecopier, telegram or telex)
believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 7.03. Citibank and Affiliates. With respect to its
Revolving Credit Commitment, the Advances made by it and the Note issued to it,
Citibank shall have the same rights and powers under this Agreement as
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any other Lender and may exercise the same as though it were not the Agent; and
the term "Lender" or "Lenders" shall, unless otherwise expressly indicated,
include Citibank in its individual capacity. Citibank and its Affiliates may
accept deposits from, lend money to, act as trustee under indentures of, accept
investment banking engagements from and generally engage in any kind of
business with, the Borrower, any of its Subsidiaries and any Person who may do
business with or own securities of the Borrower or any such Subsidiary, all as
if Citibank were not the Agent and without any duty to account therefor to the
Lenders.
SECTION 7.04. Lender Credit Decision. Each Lender
acknowledges that it has, independently and without reliance upon the Agent or
any other Lender and based on the financial statements referred to in Section
4.01 and such other documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement. Each
Lender also acknowledges that it will, independently and without reliance upon
the Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under this Agreement.
SECTION 7.05. Indemnification. The Lenders (other than the
Designated Bidders) agree to indemnify the Agent (to the extent not reimbursed
by the Borrower), ratably according to the respective principal amounts of the
Revolving Credit Notes then held by each of them (or if no Revolving Credit
Notes are at the time outstanding or if any Revolving Credit Notes are held by
Persons that are not Lenders, ratably according to the respective amounts of
their Revolving Credit Commitments), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever that may be imposed
on, incurred by, or asserted against the Agent in any way relating to or
arising out of this Agreement or any action taken or omitted by the Agent under
this Agreement, provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Agent's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Lender (other than the Designated Bidders) agrees to reimburse the Agent
promptly upon demand for its ratable share of any out-of-pocket expenses
(including counsel fees) incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
to the extent that the Agent is not reimbursed for such expenses by the
Borrower.
SECTION 7.06. Successor Agent. The Agent may resign at any
time by giving written notice thereof to the Lenders and the Borrower and may
be removed at any time with or without cause by the Required Lenders. Upon any
such resignation or removal, the Required Lenders shall have the right to
appoint a successor Agent with the consent of the Borrower (which consent shall
not be unreasonably withheld). If no successor Agent shall have been so
appointed by the Required Lenders, and shall have accepted such appointment,
within 30 days after the retiring Agent's giving of notice of resignation or
the Required Lenders' removal of the retiring Agent, then the retiring Agent
may, on behalf of the Lenders with the consent of the Borrower (which consent
shall not be unreasonably withheld), appoint a successor Agent, which shall be
a commercial bank organized under the laws of the United States of America or
of any State thereof and having a combined capital and surplus of at least
$50,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, discretion, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Agent's resignation or
removal hereunder as Agent, the provisions of this Article VII shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement.
SECTION 7.07. Managing and Co-Syndication Agents as Lenders.
No Managing and Co-Syndication Agent shall have any rights, responsibilities or
obligations other than as a Lender hereunder.
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. Other than as specified in
Section 2.01(b) or 5.02(b), no amendment or waiver of any provision of this
Agreement or the Notes, nor consent to any departure by the Borrower therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Required Lenders, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given;
provided, however, that no amendment, waiver or consent shall, unless in
writing and signed by all the Lenders (other than the Designated Bidders), do
any of the following: (a) waive any of the conditions specified in Section
3.01, (b) increase the Revolving Credit Commitments of the Lenders or subject
the Lenders to any additional obligations, (c) reduce the principal of, or
interest on, the Notes or any fees or other amounts payable to the Lenders
hereunder, (d) postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees or other amounts payable to the Lenders
hereunder, (e) change the percentage of the Revolving Credit Commitments or of
the aggregate unpaid principal amount of the Notes, or the number of Lenders,
that shall be required for the Lenders or any of them to take any action
hereunder or (f) amend this Section 8.01; and provided further that no
amendment, waiver or consent shall, unless in writing and signed by the Agent
in addition to the Lenders required above to take such action, affect the
rights or duties of the Agent under this Agreement or any Note.
SECTION 8.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing (including
telecopier, telegraphic or telex communication) and mailed, telecopied,
telegraphed, telexed or delivered, if to the Borrower, at its address at 20
Montchanin Road,Wilmington, Delaware 19807, Attention: Treasurer; if to any
Initial Lender, at its Domestic Lending Office specified opposite its name on
Schedule I hereto; if to any other Lender, at its Domestic Lending Office
specified in the Assignment and Acceptance pursuant to which it became a
Lender; and if to the Agent, at its address at 1 Court Square, 7th Floor, Zone
1, Long Island City, New York 11120, Attention: Wendy Rutherford; or, as to the
Borrower or the Agent, at such other address as shall be designated by such
party in a written notice to the other parties and, as to each other party, at
such other address as shall be designated by such party in a written notice to
the Borrower and the Agent. All such notices and communications shall, when
mailed, telecopied, telegraphed or telexed, be effective when deposited in the
mails, telecopied, delivered to the telegraph company or confirmed by telex
answerback, respectively, except that notices and communications to the Agent
pursuant to Article II, III or VII shall not be effective until received by the
Agent. Delivery by telecopier of an executed counterpart of any amendment or
waiver of any provision of this Agreement or the Notes or of any Exhibit hereto
to be executed and delivered hereunder shall be effective as delivery of a
manually executed counterpart thereof.
SECTION 8.03. No Waiver; Remedies. No failure on the part of
any Lender or the Agent to exercise, and no delay in exercising, any right
hereunder or under any Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. Costs and Expenses; Indemnification; Limitation
of Liability . (a) The Borrower agrees to pay on demand all costs and
expenses of the Agent and the Arranger in connection with the preparation,
execution, delivery, administration, modification and amendment of this
Agreement, the Notes and the other documents to be delivered hereunder,
including, without limitation, (A) all due diligence, syndication (including
printing, distribution and bank meetings), transportation, computer,
duplication, appraisal, consultant, and audit expenses and (B) the reasonable
fees and expenses of counsel for the Agent and the Arranger with respect
thereto and with respect to advising the Agent and the Arranger as to their
respective rights and responsibilities under this Agreement. The Borrower
further agrees to pay on demand all costs and expenses of the Agent, the
Arranger and the Lenders, if any (including, without limitation, reasonable
counsel fees and expenses), in connection with the enforcement (whether through
negotiations, legal proceedings or otherwise) of this Agreement, the Notes and
the other documents to be delivered hereunder, including, without limitation,
reasonable fees and expenses of counsel for the Agent and each Lender in
connection with the enforcement of rights under this Section 8.04(a).
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(b) (i) The Borrower agrees to indemnify and hold
harmless the Agent, the Arranger, each Managing and Co-Syndication Agent, each
Lender and each Issuing Lender and each of their Affiliates and their officers,
directors, employees, agents and advisors (each, an "Indemnified Party") from
and against any and all claims, damages, losses, liabilities and reasonable
expenses (including, without limitation, reasonable fees and expenses of
counsel) that may be incurred by or asserted or awarded against any Indemnified
Party, in each case arising out of or in connection with or by reason of, or in
connection with the preparation for a defense of, any investigation, litigation
or proceeding arising out of, related to or in connection with (i) the Notes,
this Agreement, any of the transactions contemplated herein or the actual or
proposed use of the proceeds of the Advances and (ii) the issuance of any
Letter of Credit or the payment of any amount thereunder, in each case whether
or not such investigation, litigation or proceeding is brought by the Borrower,
its directors, shareholders or creditors or an Indemnified Party or any other
Person or any Indemnified Party is otherwise a party thereto and whether or not
the transactions contemplated hereby are consummated, except to the extent such
claim, damage, loss, liability or expense is found in a final, non-appealable
judgment by a court of competent jurisdiction to have resulted from such
Indemnified Party's gross negligence or willful misconduct.
(ii) Any action, inaction or omission suffered or taken by
any Issuing Lender in connection with any Letter of Credit, if taken in good
faith and in conformity with foreign or U.S. laws or regulations, shall be
binding upon the Borrower and shall not place any Issuing Lender under any
resulting liability to the Borrower. Without limiting the generality of the
foregoing, the Issuing Lenders (a) may act in reliance upon any oral,
telephonic, telegraphic, facsimile electronic or written request or notice in
good faith believed to have been authorized by the Borrower, (b) shall not be
responsible for the form, genuineness, identity or authority of any signer or
falsification or legal effect of documents presented under any Letter of Credit
if such documents on their face appear to be in order, (c) may accept or pay as
complying with the terms of any Letter of Credit any drafts or other documents
appearing on their face to be signed by or issued to the administrator,
executor, successor or trustee in bankruptcy of, or the receiver of any
property of, or any other person or entity acting as the representative or in
the place of the beneficiary, (d) may waive inconsequential discrepancies and
letter of credit terms imposed solely for bank convenience or bank protection
and (e) shall be fully protected in acting in accordance with any prevailing
banking usage. Assistance provided by any Issuing Lender in preparing the
text of any Letter of Credit shall not deem such Issuing Lender the drafter of
such Letter of Credit and such Issuing Lender shall not be responsible for the
effectiveness or suitability of such Letter of Credit for the Borrower's
commercial purpose. Notwithstanding anything contained in this Section 8.04(b)
or in Section 2.06(c)(ii), no Issuing Lender will be excused from any liability
for damage, loss or expense if such damage, loss or expense is found in a
final, non-appealable judgment by a court of competent jurisdiction to have
resulted from such Issuing Lender's gross negligence or willful misconduct;
provided, however, that no Issuing Lender shall be liable to the Borrower for
any consequential or special damages relating to any Letter of Credit.
(c) If any payment of principal of, or Conversion of, any
Eurodollar Rate Advance or LIBO Rate Advance is made by the Borrower to or for
the account of a Lender other than on the last day of the Interest Period for
such Advance, as a result of a payment or Conversion pursuant to Section
2.08(d) or (e), 2.10 or 2.12, acceleration of the maturity of the Notes
pursuant to Section 6.01 or for any other reason, the Borrower shall, upon
demand by such Lender (with a copy of such demand to the Agent), pay to the
Agent for the account of such Lender any amounts required to compensate such
Lender for any additional losses, costs or expenses that it may reasonably
incur as a result of such payment or Conversion, including, without limitation,
any loss (excluding loss of anticipated profits), cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired
by any Lender to fund or maintain such Advance.
(d) Without prejudice to the survival of any other
agreement of the Borrower hereunder, the agreements and obligations of the
Borrower contained in Sections 2.12, 2.15 and 8.04 shall survive the payment in
full of principal, interest and all other amounts payable hereunder and under
the Notes.
SECTION 8.05. Right of Set-off. Upon (i) the occurrence and
during the continuance of any Event of Default and (ii) the making of the
request or the granting of the consent specified by Section 6.01 to authorize
the Agent to declare the Notes due and payable pursuant to the provisions of
Section 6.01, each Lender is hereby authorized
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at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Lender to or for the credit or the account of the Borrower against any
and all of the obligations of the Borrower now or hereafter existing under this
Agreement and the Note held by such Lender, whether or not such Lender shall
have made any demand under this Agreement or such Note and although such
obligations may be unmatured. Each Lender agrees promptly to notify the
Borrower after any such set-off and application, provided that the failure to
give such notice shall not affect the validity of such set-off and application.
The rights of each Lender under this Section are in addition to other rights
and remedies (including, without limitation, other rights of set-off) that such
Lender and its Affiliates may have.
SECTION 8.06. Binding Effect. This Agreement shall become
effective (other than Sections 2.01 and 2.03, which shall only become effective
upon satisfaction of the conditions precedent set forth in Section 3.01) when
it shall have been executed by the Borrower and the Agent and when the Agent
shall have been notified by each Initial Lender that such Initial Lender has
executed it and thereafter shall be binding upon and inure to the benefit of
the Borrower, the Agent and each Lender and their respective successors and
assigns, except that the Borrower shall not have the right to assign its rights
hereunder or any interest herein without the prior written consent of the
Lenders.
SECTION 8.07. Assignments, Designations and Participations.
(a) Each Lender (other than the Designated Bidders) may, upon the written
consent of the Borrower (which consent shall not be unreasonably withheld) and,
if demanded by the Borrower (following a demand by such Lender pursuant to
Section 2.12 or 2.15 or notice from such Lender pursuant to Section 2.13) upon
at least five Business Days' notice to such Lender and the Agent, will, assign
to one or more Persons all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Revolving Credit Commitment, the Advances owing to it and the Note or Notes
held by it); provided, however, that (i) each such assignment shall be of a
constant, and not a varying, percentage of all rights and obligations under
this Agreement (other than any right to make Competitive Bid Advances,
Competitive Bid Advances owing to it and Competitive Bid Notes), (ii) except in
the case of an assignment to a Person that, immediately prior to such
assignment, was a Lender or an assignment of all of a Lender's rights and
obligations under this Agreement, the amount of the Revolving Credit Commitment
of the assigning Lender being assigned pursuant to each such assignment
(determined as of the date of the Assignment and Acceptance with respect to
such assignment) shall in no event be less than the lesser of (A) 1% of the
total Revolving Credit Commitment, (B) $5,000,000 or (C) the full amount of
such assigning Lender's Revolving Credit Commitment, (iii) unless an assigning
Lender assigns the full amount of its Revolving Credit Commitment, such
assigning Lender may not assign Revolving Credit Commitments such that its
remaining Revolving Credit Commitments are in an amount less than the lesser of
(A) 1% of the total Revolving Credit Commitment or (B) $5,000,000; (iv) each
such assignment shall be to an Eligible Assignee, (v) each such assignment made
as a result of a demand by the Borrower pursuant to this Section 8.07(a) shall
be arranged by the Borrower after consultation with the Agent and shall be
either an assignment of all of the rights and obligations of the assigning
Lender under this Agreement or an assignment of a portion of such rights and
obligations made concurrently with another such assignment or other such
assignments that together cover all of the rights and obligations of the
assigning Lender under this Agreement, (vi) no Lender shall be obligated to
make any such assignment as a result of a demand by the Borrower pursuant to
this Section 8.07(a) unless and until such Lender shall have received one or
more payments from either the Borrower or one or more Eligible Assignees in an
aggregate amount at least equal to the aggregate outstanding principal amount
of the Advances owing to such Lender, together with accrued interest thereon to
the date of payment of such principal amount and all other amounts payable to
such Lender under this Agreement, and (vii) the parties to each such assignment
shall provide the Agent with written notice of such assignment and shall
execute and deliver to the Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance, together with any Revolving Credit Note
subject to such assignment and a processing and recordation fee of $3,000;
provided further that in the case of an assignment by any Lender to an
Affiliate of such Lender, or an assignment by any Lender to any other Lender,
the Borrower must be given written notice thereof, but the consent of the
Borrower shall not be required. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Assignment and
Acceptance, (x) the assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, have the rights and obligations of a Lender
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hereunder and (y) the Lender assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto).
(b) By executing and delivering an Assignment and
Acceptance, the Lender assignor thereunder and the assignee thereunder confirm
to and agree with each other and the other parties hereto as follows: (i)
other than as provided in such Assignment and Acceptance, such assigning Lender
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
this Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other instrument or
document furnished pursuant hereto; (ii) such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower or the performance or observance by the
Borrower of any of its obligations under this Agreement or any other instrument
or document furnished pursuant hereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of the financial
statements referred to in Section 4.01 and such other documents and information
as it has deemed appropriate to make its own credit analysis and decision to
enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Agent, such assigning Lender or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (v) such assignee confirms that it is
an Eligible Assignee; (vi) such assignee appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such powers and
discretion under this Agreement as are delegated to the Agent by the terms
hereof, together with such powers and discretion as are reasonably incidental
thereto; and (vii) such assignee agrees that it will perform in accordance with
their terms all of the obligations that by the terms of this Agreement are
required to be performed by it as a Lender.
(c) Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender and an assignee representing that it is an
Eligible Assignee, together with any Revolving Credit Note or Notes subject to
such assignment, the Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Exhibit C hereto, subject to the
Borrower's consent thereto, (if required), (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Borrower. Within ten Business Days
after its receipt of such notice, the Borrower, at its own expense, shall
execute and deliver to the Agent in exchange for the surrendered Revolving
Credit Note a new Note to the order of such Eligible Assignee in an amount
equal to the Revolving Credit Commitment assumed by it pursuant to such
Assignment and Acceptance and, if the assigning Lender has retained a Revolving
Credit Commitment hereunder, a new Revolving Credit Note to the order of the
assigning Lender in an amount equal to the Revolving Credit Commitment retained
by it hereunder. Such new Revolving Credit Note or Notes shall be in an
aggregate principal amount equal to the aggregate principal amount of such
surrendered Revolving Credit Note or Notes, shall be dated the effective date
of such Assignment and Acceptance and shall otherwise be in substantially the
form of Exhibit A-1 hereto.
(d) Each Lender (other than the Designated Bidders) may
designate one or more banks or other entities to have a right to make
Competitive Bid Advances as a Lender pursuant to Section 2.03; provided,
however, that (i) no such Lender shall be entitled to make more than two such
designations, (ii) each such Lender making one or more of such designations
shall retain the right to make Competitive Bid Advances as a Lender pursuant to
Section 2.03, (iii) each such designation shall be to a Designated Bidder and
(iv) the parties to each such designation shall execute and deliver to the
Agent, for its acceptance and recording in the Register, a Designation
Agreement. Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Designation Agreement, the designee
thereunder shall be a party hereto with a right to make Competitive Bid
Advances as a Lender pursuant to Section 2.03 and the obligations related
thereto.
(e) By executing and delivering a Designation Agreement,
the Lender making the designation thereunder and its designee thereunder
confirm and agree with each other and the other parties hereto as follows: (i)
such Lender makes no representation or warranty and assumes no responsibility
with respect to any statements, warranties
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or representations made in or in connection with this Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or the
performance or observance by the Borrower of any of its obligations under this
Agreement or any other instrument or document furnished pursuant hereto; (iii)
such designee confirms that it has received a copy of this Agreement, together
with copies of the financial statements referred to in Section 4.01 and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Designation Agreement; (iv)
such designee will, independently and without reliance upon the Agent, such
designating Lender or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
designee confirms that it is a Designated Bidder; (vi) such designee appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers and discretion under this Agreement as are delegated to
the Agent by the terms hereof, together with such powers and discretion as are
reasonably incidental thereto; and (vii) such designee agrees that it will
perform in accordance with their terms all of the obligations which by the
terms of this Agreement are required to be performed by it as a Lender.
(f) Upon its receipt of a Designation Agreement executed
by a designating Lender and a designee representing that it is a Designated
Bidder, the Agent shall, if such Designation Agreement has been completed and
is substantially in the form of Exhibit D hereto, (i) accept such Designation
Agreement, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Borrower.
(g) The Agent shall maintain at its address referred to
in Section 8.02 a copy of each Assignment and Acceptance and each Designation
Agreement delivered to and accepted by it and a register for the recordation of
the names and addresses of the Lenders and, with respect to Lenders other than
Designated Bidders, the Revolving Credit Commitment of, and principal amount of
the Advances owing to, each Lender from time to time (the "Register"). The
entries in the Register shall be conclusive and binding for all purposes,
absent manifest error, and the Borrower, the Agent and the Lenders may treat
each Person whose name is recorded in the Register as a Lender hereunder for
all purposes of this Agreement. The Register shall be available for inspection
by the Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(h) Each Lender may sell participations to one or more
banks or other entities (other than the Borrower or any of its Affiliates) in
or to all or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Revolving Credit
Commitment, the Advances owing to it and the Note or Notes held by it);
provided, however, that (i) such Lender's obligations under this Agreement
(including, without limitation, its Revolving Credit Commitment to the Borrower
hereunder) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (iii) such Lender shall remain the holder of any such Note for all
purposes of this Agreement, (iv) the Borrower, the Agent and the other Lenders
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement and (v) no
participant under any such participation shall have any right to approve any
amendment or waiver of any provision of this Agreement or any Note, or any
consent to any departure by the Borrower therefrom, except to the extent that
such amendment, waiver or consent would reduce the principal of, or interest
on, the Notes or any fees or other amounts payable hereunder, in each case to
the extent subject to such participation, or postpone any date fixed for any
payment of principal of, or interest on, the Notes or any fees or other amounts
payable hereunder, in each case to the extent subject to such participation.
(i) Any Lender may, in connection with any assignment,
designation or participation or proposed assignment, designation or
participation pursuant to this Section 8.07, disclose to the assignee, designee
or participant or proposed assignee, designee or participant, any information
relating to the Borrower furnished to such Lender by or on behalf of the
Borrower; provided that, prior to any such disclosure, the assignee, designee
or participant or proposed assignee, designee or participant shall agree to
preserve the confidentiality of any Confidential Information relating to the
Borrower received by it from such Lender on the terms set forth in Section
8.08.
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(j) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Advances owing to it and the Note or Notes held by it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of Governors of the
Federal Reserve System.
SECTION 8.08. Confidentiality. Neither the Agent nor any
Lender shall disclose any Confidential Information to any other Person without
the consent of the Borrower, other than (a) to the Agent's or such Lender's
Affiliates and their officers, directors, employees, agents and advisors and,
as contemplated by Section 8.07(i), to actual or prospective assignees and
participants, provided that any Person to whom disclosure is made shall agree
to be bound by this Section, (b) as required by any law, rule or regulation or
judicial process, provided that, to the extent practicable, prior notice of
such disclosure shall be given to the Borrower, (c) to any rating agency when
required by it, provided that, prior to any such disclosure, such rating agency
shall undertake to preserve the confidentiality of any Confidential Information
relating to the Borrower received by it from such Lender, and (d) as requested
or required by any state, federal or foreign authority or examiner regulating
banks or banking. Each Lender and each other Person required to preserve the
confidentiality of Confidential Information hereunder shall use such
information only for purposes of evaluating extensions of credit to the
Borrower and its Subsidiaries.
SECTION 8.09. Governing Law. This Agreement and the Notes
shall be governed by, and construed in accordance with, the laws of the State
of New York. Each Letter of Credit issued under this Agreement shall be
governed by, and construed in accordance with, the Uniform Customs and Practice
for Documentary Credits, version 500, published by the International Chamber of
Commerce (the "UCP") or such later version in effect at the time of the
issuance of the Letter of Credit. Matters not addressed by the UCP shall be
subject to and governed by the laws of the State of New York.
SECTION 8.10. Execution in Counterparts. This Agreement may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 8.11. Jurisdiction, Etc. (a) Each of the parties
hereto hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the Notes, 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 any such New York 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. Nothing in this Agreement shall affect
any right that any party may otherwise have to bring any action or proceeding
relating to this Agreement or the Notes in the courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection that 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 or
the Notes in any New York State 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.
SECTION 8.12. Severability of Provisions. Any provision of
this Agreement which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
<PAGE> 54
50
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
THE COLUMBIA GAS SYSTEM, INC.
By /s/ L. J. Bainter
----------------------------------
Title: Treasurer
CITIBANK, N.A.,
as Agent
By /s/ Arezoo Jafari
----------------------------------
Title: Arezoo Jafari
Assistant Vice President
Initial Lenders
Revolving Credit Swing Line
Commitment Commitment
$166,666,666.67 $15,000,000 CITIBANK, N.A.
By /s/ Arezoo Jafari
----------------------------------
Title: Arezoo Jafari
Assistant Vice President
$166,666,666.67 $0 BANKERS TRUST COMPANY
By /s/ Mary Jo Jolly
----------------------------------
Title: Mary Jo Jolly
Assistant Vice President
$166,666,666.67 $0 BANK OF MONTREAL
By /s/ Bernard Silgardo
----------------------------------
Title: Director
$166,666,666.67 $0 CIBC INC.
By /s/ R. E. Long
----------------------------------
Title: Vice President
<PAGE> 55
51
Initial Lenders (continued)
Revolving Credit Swing Line
Commitment Commitment
$166,666,666.66 $0 CHEMICAL BANK
By /s/ James H. Ramage
--------------------------
Title: James H. Ramage
Vice President
$166,666,666.66 $0 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ J. S. Finch
--------------------------
Title: Vice President
$1,000,000,000 $15,000,000 Total
<PAGE> 56
SCHEDULE I
THE COLUMBIA GAS SYSTEM, INC.
$1,000,000,000 CREDIT AGREEMENT
APPLICABLE LENDING OFFICES
<TABLE>
<S> <C> <C>
Name of Initial Lender Domestic Lending Office Eurodollar Lending Office
- ---------------------- ----------------------- -------------------------
</TABLE>
<PAGE> 57
SCHEDULE II
THE COLUMBIA GAS SYSTEM, INC.
$1,000,000,000 CREDIT AGREEMENT
NON-CORE SUBSIDIARIES
Columbia Atlantic Trading Corporation
Columbia Coal Gasification Corporation
Columbia LNG Corporation
CLNG Corporation
Columbia Propane Corporation
Commonwealth Propane, Inc.
Columbia Energy Services Corporation
Columbia Energy Marketing Corporation
TriStar Capital Corporation
TriStar Gas Technologies, Inc.
TriStar Ventures Corporation
TriStar Pedrick General Corporation
TriStar Pedrick Limited Corporation
TriStar Fuel Cells Corporation
TriStar Binghamton General Corporation
TriStar Binghamton Limited Corporation
TriStar Georgetown General Corporation
TriStar Georgetown Limited Corporation
TriStar Vineland General Corporation
TriStar Vineland Limited Corporation
TriStar Rumford Limited Corporation
TriStar Nine Corporation
TriStar Ten Corporation
TriStar System, Inc.
<PAGE> 58
EXHIBIT A-1 - FORM OF
REVOLVING CREDIT
PROMISSORY NOTE
U.S.$_______________ Dated: _______________, 199_
FOR VALUE RECEIVED, the undersigned, The Columbia Gas
System, Inc., a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY
to the order of _________________________ (the "Lender") for the account of its
Applicable Lending Office on the Termination Date (each as defined in the
Credit Agreement referred to below) the principal sum of U.S.$[amount of the
Lender's Revolving Credit Commitment in figures] or, if less, the aggregate
principal amount of the Revolving Credit Advances made by the Lender to the
Borrower pursuant to the Credit Agreement dated as of _______________, 1995
among the Borrower, the Lender and certain other lenders parties thereto, and
Citibank, N.A., as Agent for the Lender and such other lenders (as amended or
modified from time to time, the "Credit Agreement"; the terms defined therein
being used herein as therein defined) outstanding on the Termination Date.
The Borrower promises to pay interest on the unpaid
principal amount of each Revolving Credit Advance from the date of such
Revolving Credit Advance until such principal amount is paid in full, at such
interest rates, and payable at such times, as are specified in the Credit
Agreement.
Both principal and interest are payable in lawful money of
the United States of America to Citibank, N.A., as Agent, at 1 Court Square,
7th Floor, Zone 1, Long Island City, New York, 11120, Attn: Wendy Rutherford,
in same day funds. Each Revolving Credit Advance owing to the Lender by the
Borrower pursuant to the Credit Agreement, and all payments made on account of
principal thereof, shall be recorded by the Lender and, prior to any transfer
hereof, endorsed on the grid attached hereto which is part of this Promissory
Note.
This Promissory Note is one of the Revolving Credit Notes
referred to in, and is entitled to the benefits of, the Credit Agreement. The
Credit Agreement, among other things, (i) provides for the making of Revolving
Credit Advances by the Lender to the Borrower from time to time in an aggregate
amount not to exceed at any time outstanding the U.S. dollar amount first above
mentioned, the indebtedness of the Borrower resulting from each such Revolving
Credit Advance being evidenced by this Promissory Note, and (ii) contains
provisions for acceleration of the maturity hereof upon the happening of
certain stated events and also for prepayments on account of principal hereof
prior to the maturity hereof upon the terms and conditions therein specified.
THE COLUMBIA GAS SYSTEM, INC.
By
---------------------------------
Title:
<PAGE> 59
ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
=======================================================================================================================
AMOUNT OF
AMOUNT OF PRINCIPAL PAID UNPAID PRINCIPAL NOTATION
DATE ADVANCE OR PREPAID BALANCE MADE BY
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
=======================================================================================================================
</TABLE>
<PAGE> 60
EXHIBIT A-2 - FORM OF
COMPETITIVE BID
PROMISSORY NOTE
U.S.$_______________ Dated: _______________, 199_
FOR VALUE RECEIVED, the undersigned, The Columbia Gas
System, Inc., a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY
to the order of _________________________ (the "Lender") for the account of its
Applicable Lending Office (as defined in the Credit Agreement dated as of
_______________, 1995 among the Borrower, the Lender and certain other lenders
parties thereto, and Citibank, N.A., as Agent for the Lender and such other
lenders (as amended or modified from time to time, the "Credit Agreement"; the
terms defined therein being used herein as therein defined)), the principal
amount of each Competitive Bid Advance made by the Lender to the Borrower on
the maturity date of such Competitive Bid Advance specified in the related
Notice of Competitive Bid Borrowing.
The Borrower promises to pay interest on the unpaid
principal amount of each Competitive Bid Advance made by the Lender to the
Borrower from the date such Advance is made until such principal amount is paid
in full, at the interest rate and payable on the interest payment date or dates
agreed pursuant to the procedures set forth in the Credit Agreement.
Both principal and interest are payable in lawful money of
the United States of America to Citibank, N.A, for the account of the Lender at
the office of Citibank, N.A. at 1 Court Square, 7th Floor, Zone 1, Long Island
City, New York, 11120, Attn: Wendy Rutherford, in same day funds. Each
Competitive Bid Advance owing to the Lender by the Borrower pursuant to the
Credit Agreement,the maturity date thereof, the interest rate applicable
thereto and the date or dates on which interest is payable thereon, and all
payments made on account of principal thereof, shall be recorded by the Lender
and, prior to any transfer hereof, endorsed on the grid attached hereto which
is part of this Promissory Note.
This Promissory Note is one of the Competitive Bid Notes
referred to in, and is entitled to the benefits of, the Credit Agreement. The
Credit Agreement, among other things, contains provisions for acceleration of
the maturity hereof upon the happening of certain stated events.
The Borrower hereby waives presentment, demand, protest and
notice of any kind. No failure to exercise, and no delay in exercising, any
rights hereunder on the part of the holder hereof shall operate as a waiver of
such rights.
THE COLUMBIA GAS SYSTEM, INC.
By
---------------------------------
Title:
<PAGE> 61
COMPETITIVE BID ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
=================================================================================================================================
AMOUNT OF INTEREST AMOUNT OF
DATE OF COMPETITIVE MATURITY INTEREST PAYMENT PRINCIPAL PAID UNPAID PRINCIPAL NOTATION
ISSUANCE BID ADVANCE DATE RATE DATE OR PREPAID BALANCE MADE BY
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
=================================================================================================================================
</TABLE>
<PAGE> 62
EXHIBIT B-1 - FORM OF NOTICE OF
REVOLVING CREDIT BORROWING
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
399 Park Avenue
New York, New York 10043
[Date]
Attention: [_______________]
Ladies and Gentlemen:
The undersigned, The Columbia Gas System, Inc., refers to
the Credit Agreement, dated as of _______________, 1995 (as amended or modified
from time to time, the "Credit Agreement", the terms defined therein being used
herein as therein defined), among the undersigned, certain Lenders parties
thereto and Citibank, N.A., as Agent for said Lenders, and hereby gives you
notice, irrevocably, pursuant to Section 2.02(a) of the Credit Agreement that
the undersigned hereby requests a Revolving Credit Borrowing under the Credit
Agreement, and in that connection sets forth below the information relating to
such Revolving Credit Borrowing (the "Proposed Revolving Credit Borrowing") as
required by Section 2.02(a) of the Credit Agreement:
(i) The Business Day of the Proposed Revolving Credit
Borrowing is _______________, 199_.
(ii) The Type of Advances comprising the Proposed
Revolving Credit Borrowing is [Base Rate Advances] [Eurodollar Rate
Advances] [CD Rate Advances].
(iii) The aggregate amount of the Proposed Revolving
Credit Borrowing is $_______________.
[(iv) The initial Interest Period for each Eurodollar
Rate Advance/CD Rate Advance made as part of the Proposed Revolving
Credit Borrowing is _____ month[s]/___ days.]
The undersigned hereby certifies that the following
statements are true on the date hereof, and will be true on the date of the
Proposed Revolving Credit Borrowing:
(A) the representations and warranties contained in
Section 4.01 of the Credit Agreement are correct, before and after
giving effect to the Proposed Revolving Credit Borrowing and to the
application of the proceeds therefrom, as though made on and as of
such date; and
(B) no event has occurred and is continuing, or would
result from such Proposed Revolving Credit Borrowing or from the
application of the proceeds therefrom, that constitutes a Default.
Very truly yours,
THE COLUMBIA GAS SYSTEM, INC.
By
-------------------------------
Title:
<PAGE> 63
EXHIBIT B-2 - FORM OF NOTICE OF
COMPETITIVE BID BORROWING
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
399 Park Avenue
New York, New York 10043 [Date]
Attention: [_______________]
Ladies and Gentlemen:
The undersigned, The Columbia Gas System, Inc., refers to
the Credit Agreement, dated as of _______________, 1995 (as amended or modified
from time to time, the "Credit Agreement", the terms defined therein being used
herein as therein defined), among the undersigned, certain Lenders parties
thereto and Citibank, N.A., as Agent for said Lenders, and hereby gives you
notice, irrevocably, pursuant to Section 2.03 of the Credit Agreement that the
undersigned hereby requests a Competitive Bid Borrowing under the Credit
Agreement, and in that connection sets forth the terms on which such
Competitive Bid Borrowing (the "Proposed Competitive Bid Borrowing") is
requested to be made:
<TABLE>
<S> <C> <C>
(A) Date of Proposed Competitive Bid Borrowing ________________________
(B) Amount of Proposed Competitive Bid Borrowing ________________________
(C) [Maturity Date] [Interest Period] ________________________
(D) Interest Rate Basis ________________________
(E) Interest Payment Date(s) ________________________
(F) ___________________ ________________________
(G) ___________________ ________________________
(H) ___________________ ________________________
</TABLE>
The undersigned hereby certifies that the following
statements are true on the date hereof, and will be true on the date of the
Proposed Competitive Bid Borrowing:
(a) the representations and warranties contained in
Section 4.01 are correct, before and after giving effect to the
Proposed Competitive Bid Borrowing and to the application of the
proceeds therefrom, as though made on and as of such date;
(b) no event has occurred and is continuing, or would
result from the Proposed Competitive Bid Borrowing or from the
application of the proceeds therefrom, that constitutes a Default;
(c) no event has occurred and no circumstance exists
as a result of which the information concerning the undersigned that
has been provided to the Agent and each Lender by the undersigned in
connection with the Credit Agreement would include an untrue statement
of a material fact or omit to state any material fact or any fact
necessary to make the statements contained therein, in the light of
the circumstances under which they were made, not misleading; and
<PAGE> 64
2
(d) the aggregate amount of the Proposed
Competitive Bid Borrowing and all other Borrowings to be
made on the same day under the Credit Agreement is within
the aggregate amount of the unused Revolving Credit
Commitments of the Lenders.
The undersigned hereby confirms that the Proposed
Competitive Bid Borrowing is to be made available to it in accordance with
Section 2.03(a)(v) of the Credit Agreement.
Very truly yours,
THE COLUMBIA GAS SYSTEM, INC.
By
--------------------------------
Title:
<PAGE> 65
EXHIBIT B-3 - FORM OF
LETTER OF CREDIT REQUEST
LETTER OF CREDIT REQUEST
No. 6 Dated: ___________, 199_
TO: _____________, in its capacity as an Issuing Bank under the Credit
Agreement, dated as of November 28, 1995 ( as amended, modified or
supplemented from time to time, the "Agreement"), among THE COLUMBIA
GAS SYSTEM, INC., a Delaware corporation (the "Borrower"), the Lenders
named therein and Citibank, N.A., as agent.
Dear Sirs:
We hereby request that you issue a standby Letter of Credit on
______________, 199__ ( the "Date of Issuance") in the aggregate stated amount
of $___________ with legend set forth below indicated on its face.
For purposes of this Letter of Credit Request, unless
otherwise defined, all capitalized terms used herein which are defined in the
Agreement shall have the respective meanings provided therein.
The beneficiary of the requested Letter of Credit will be:
-----------------------
-----------------------
--------------
Such Letter of Credit will have a stated termination date of
___________________, 199_ unless extended in accordance with the provisions of
the Letter of Credit and will be in support of
______________________________________________.
THE COLUMBIA GAS SYSTEM, INC.
-----------------------------------
Name: L. J. Bainter
Title: Treasurer
<PAGE> 66
EXHIBIT C - FORM OF
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of
_______________, 1995 (as amended or modified from time to time, the "Credit
Agreement") among The Columbia Gas System, Inc., a Delaware corporation (the
"Borrower"), the Lenders (as defined in the Credit Agreement) and Citibank,
N.A., as agent for the Lenders (the "Agent"). Terms defined in the Credit
Agreement are used herein with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule I
hereto agree as follows:
1. The Assignor hereby sells and assigns to the
Assignee, and the Assignee hereby purchases and assumes from the Assignor, an
interest in and to the Assignor's rights and obligations under the Credit
Agreement as of the date hereof (other than in respect of Competitive Bid
Advances and Competitive Bid Notes) equal to the percentage interest specified
on Schedule 1 hereto of all outstanding rights and obligations under the Credit
Agreement (other than in respect of Competitive Bid Advances and Competitive
Bid Notes). After giving effect to such sale and assignment, the Assignee's
Revolving Credit Commitment and the amount of the Revolving Credit Advances
owing to the Assignee will be as set forth on Schedule 1 hereto.
2. The Assignor (i) represents and warrants that it is
the legal and beneficial owner of the interest being assigned by it hereunder
and that such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto; (iii) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower or the performance or observance by the
Borrower of any of its obligations under the Credit Agreement or any other
instrument or document furnished pursuant thereto; and (iv) attaches the
Revolving Credit Note held by the Assignor and requests that the Agent exchange
such Revolving Credit Note for a new Revolving Credit Note payable to the order
of the Assignee in an amount equal to the Revolving Credit Commitment assumed
by the Assignee pursuant hereto or new Revolving Credit Notes payable to the
order of the Assignee in an amount equal to the Revolving Credit Commitment
assumed by the Assignee pursuant hereto and the Assignor in an amount equal to
the Revolving Credit Commitment retained by the Assignor under the Credit
Agreement, respectively, as specified on Schedule 1 hereto.
3. The Assignee (i) confirms that it has received a copy
of the Credit Agreement, together with copies of the financial statements
referred to in Section 4.01 thereof and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into this Assignment and Acceptance; (ii) agrees that it will, independently
and without reliance upon the Agent, the Assignor or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Agent to take such action as agent on its behalf
and to exercise such powers and discretion under the Credit Agreement as are
delegated to the Agent by the terms thereof, together with such powers and
discretion as are reasonably incidental thereto; (v) agrees that it will
perform in accordance with their terms all of the obligations that by the terms
of the Credit Agreement are required to be performed by it as a Lender; and
(vi) attaches any U.S. Internal Revenue Service forms required under Section
2.15 of the Credit Agreement.
4. Following the execution of this Assignment and
Acceptance, it will be delivered to the Agent for acceptance and recording by
the Agent. The effective date for this Assignment and Acceptance (the
"Effective Date") shall be the date of acceptance hereof by the Agent, unless
otherwise specified on Schedule 1 hereto.
5. Upon such acceptance and recording by the Agent and
subject to the Borrower's consent (if required), as of the Effective Date, (i)
the Assignee shall be a party to the Credit Agreement and, to the extent
provided in this Assignment and Acceptance, have the rights and obligations of
a Lender thereunder and (ii) the Assignor shall,
<PAGE> 67
2
to the extent provided in this Assignment and Acceptance, relinquish its
rights and be released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Agent, from
and after the Effective Date, the Agent shall make all payments under the
Credit Agreement and the Revolving Credit Notes in respect of the interest
assigned hereby (including, without limitation, all payments of principal,
interest and facility fees with respect thereto) to the Assignee. The Assignor
and Assignee shall make all appropriate adjustments in payments under the
Credit Agreement and the Revolving Credit Notes for periods prior to the
Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by,
and construed in accordance with, the laws of the State of New York.
8. This Assignment and Acceptance may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of Schedule 1 to this Assignment and
Acceptance by telecopier shall be effective as delivery of a manually executed
counterpart of this Assignment and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused
Schedule 1 to this Assignment and Acceptance to be executed by their officers
thereunto duly authorized as of the date specified thereon.
<PAGE> 68
Schedule 1
to
Assignment and Acceptance
Percentage interest assigned: _____%
Assignee's Revolving Credit Commitment: $__________
Aggregate outstanding principal amount of
Revolving Credit Advances assigned: $__________
Principal amount of Revolving Credit Note
payable to Assignee: $__________
Principal amount of Revolving Credit Note
payable to Assignor: $__________
Effective Date(1): _______________, 199_
[NAME OF ASSIGNOR], as Assignor
By
------------------------------------
Title:
Dated: , 199
--------------- -
[NAME OF ASSIGNEE], as Assignee
By
------------------------------------
Title:
Dated: , 199
--------------- -
Domestic Lending Office:
[Address]
Eurodollar Lending Office:
[Address]
Accepted [and Approved](2) this
day of , 199
- ---------- --------------- -
, as Agent
- -------------------------
By
-----------------------------------------
Title:
(1) This date should be no earlier than five Business Days after the
delivery of this Assignment and Acceptance to the Agent.
(2) Required if the Assignee is an Eligible Assignee solely by reason of
clause (viii) of the definition of "Eligible Assignee".
<PAGE> 69
2
[Approved this day
----------
of , 199
--------------- -
[NAME OF BORROWER]
By ](3)
-----------------------------------------
Title:
- --------------------------------
(3) Required if the Assignee is an Eligible Assignee solely by reason of
clause (viii) of the definition of "Eligible Assignee".
<PAGE> 70
EXHIBIT D - FORM OF
DESIGNATION AGREEMENT
Dated _______________, 199_
Reference is made to the Credit Agreement dated as of
_______________, 1995 (as amended or modified from time to time, the "Credit
Agreement") among The Columbia Gas System, Inc., a Delaware corporation (the
"Borrower"), the Lenders (as defined in the Credit Agreement) and Citibank,
N.A., as agent for the Lenders (the "Agent"). Terms defined in the Credit
Agreement are used herein with the same meaning.
_________________________ (the "Designor") and
_________________________ (the "Designee") agree as follows:
1. The Designor hereby designates the Designee, and the
Designee hereby accepts such designation, to have a right to make Competitive
Bid Advances pursuant to Section 2.03 of the Credit Agreement.
2. The Designor makes no representation or warranty and
assumes no responsibility with respect to (i) any statements, warranties or
representations made in or in connection with the Credit Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Credit Agreement or any other instrument or document furnished
pursuant thereto and (ii) the financial condition of the Borrower or the
performance or observance by the Borrower of any of its obligations under the
Credit Agreement or any other instrument or document furnished pursuant
thereto.
3. The Designee (i) confirms that it has received a copy
of the Credit Agreement, together with copies of the financial statements
referred to in Section 4.01 thereof and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into this Designation Agreement; (ii) agrees that it will, independently and
without reliance upon the Agent, the Designor or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) confirms that it is a Designated Bidder; (iv)
appoints and authorizes the Agent to take such action as agent on its behalf
and to exercise such powers and discretion under the Credit Agreement as are
delegated to the Agent by the terms thereof, together with such powers and
discretion as are reasonably incidental thereto; and (v) agrees that it will
perform in accordance with their terms all of the obligations which by the
terms of the Credit Agreement are required to be performed by it as a Lender.
4. Following the execution of this Designation Agreement
by the Designor and its Designee, it will be delivered to the Agent for
acceptance and recording by the Agent. The effective date for this Designation
Agreement (the "Effective Date") shall be the date of acceptance hereof by the
Agent, unless otherwise specified on the signature page hereto.
5. Upon such acceptance and recording by the Agent, as
of the Effective Date, the Designee shall be a party to the Credit Agreement
with a right to make Competitive Bid Advances as a Lender pursuant to Section
2.03 of the Credit Agreement and the rights and obligations of a Lender related
thereto.
6. This Designation Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
7. This Designation Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Designation
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Designation Agreement.
<PAGE> 71
2
IN WITNESS WHEREOF, the Designor and the Designee
have caused this Designation Agreement to be executed by their
officers thereunto duly authorized as of the date first above written.
Effective Date(4): ,199
--------------- --
[NAME OF DESIGNOR],
as Designor
By
---------------------------------
Title:
[NAME OF DESIGNEE],
as Designee
By
---------------------------------
Title:
Applicable Lending Office (and
address for notices):
[Address]
Accepted this day
----
of , 199
--------------- -
, as Agent
- -------------------------
By
---------------------------------
Title:
- ----------------------------
(4) This date should be no earlier than five Business Days after the
delivery of this Designation Agreement to the Agent.
<PAGE> 72
[DRAFT -- 11/17/95]
EXHIBIT E
[ ], 1995
THE COLUMBIA GAS SYSTEM, INC.
$1,000,000,000 CREDIT AGREEMENT
DATED AS OF [_________], 1995
Dear Sirs:
We have acted as special counsel to The Columbia Gas System,
Inc., a Delaware corporation (the "Borrower"), in connection with the Credit
Agreement dated as of [ ], 1995 (the "Credit Agreement"), among
the Borrower, the financial institutions listed on the signature pages thereof
(the "Lenders") and Citibank, N.A., as administrative and documentation agent
for the Lenders (the "Agent"). This opinion is being delivered to you pursuant
to Section 3.01(k)(iv) of the Credit Agreement. Capitalized terms not
otherwise defined herein shall have the meanings assigned to them in the Credit
Agreement.
In connection with this opinion, we have investigated such
questions of law, received such information from officers and representatives
of the Borrower and examined such certificates of public officials, corporate
documents and records as we consider necessary or appropriate for the purposes
of this opinion. We have examined, among other documents, (a) executed copies
of (i) the Credit Agreement and (ii) each Note, (b) the certificate of
incorporation and by-laws of the Borrower, (c) the Plans of Reorganization and
(d) the orders of the Bankruptcy Court (the "Confirmation Orders") confirming
the Plans of Reorganization. We have also examined originals, or copies
certified to our satisfaction, of the documents listed in the certificate of
the chief financial officer of the Borrower attached hereto (such documents
being referred to herein as the "Reviewed Documents"). As to questions of
fact, we have, when relevant facts were not independently established by us,
relied on certificates of the Borrower and its officers or representations in
the Credit Agreement.
In rendering our opinion, we have assumed (i) the due
authorization, execution and delivery of the Credit Agreement by all parties
thereto (other than the Borrower), (ii) the authenticity of all documents
submitted to us as originals and (iii) the conformity to original documents of
all documents submitted to us as copies.
Based on the foregoing and subject to the qualifications
hereinafter set forth, we are of opinion that:
1. The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
<PAGE> 73
2
2. The execution, delivery and performance by the
Borrower of the Credit Agreement and the Notes are within the Borrower's
corporate powers, have been duly authorized by all necessary corporate action
and do not contravene (a) the Borrower's certificate of incorporation or
by-laws, (b) any Federal law of the United States of America or law of the
State of New York binding on or affecting the Borrower or (c) any contractual
or legal restriction contained in any Reviewed Document.
3. No authorization or approval or other action by, and
no notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes, except such as have been duly obtained, taken,
given or made and are in full force and effect.
4. Each of the Credit Agreement and the Notes has been
duly executed and delivered by the Borrower. The Credit Agreement is, and,
after giving effect to the initial Borrowing, the Notes will be, legal, valid
and binding obligations of the Borrower enforceable against the Borrower in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or similar laws
from time to time in effect affecting the enforceability of creditors' rights
generally and to general principles of equity (including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing)
regardless of whether considered in a proceeding in equity or at law, and
except that (i) insofar as provisions contained in the Credit Agreement provide
for indemnification, the enforcement thereof may be limited by public policy
considerations, (ii) we express no opinion as to the effect of the law of any
jurisdiction other than the State of New York wherein the Borrower or any
Lender may be located or wherein enforcement of the Credit Agreement or the
Notes may be sought which limits the rates of interest legally chargeable or
collectible and (iii) we express no opinion as to Section 2.14 of the Credit
Agreement insofar as it provides that any Lender purchasing a participation
from another Lender pursuant thereto may exercise set-off or similar rights
with respect to such participation.
5. To our knowledge, there are no pending or overtly
threatened actions or proceedings against the Borrower or any of its Material
Subsidiaries before any court, governmental agency or arbitrator that purport
to affect the legality, validity, binding effect or enforceability of the
Credit Agreement or any of the Notes or the consummation of the transactions
contemplated thereby or, except as described in Schedule 3.01(b) to the Credit
Agreement, that are reasonably likely to have a material adverse effect upon
the financial condition or operations of the Borrower and its Subsidiaries
taken as a whole.
6. Each of the Plans of Reorganization has been
confirmed by the Bankruptcy Court. To our knowledge, the Confirmation Orders
have not been stayed by any court having jurisdiction to do so.
7. Assuming that (i) the proceeds of the initial
Revolving Credit Advance under the Credit Agreement, (ii) the initial Letters
of Credit issued thereunder and (iii) the other securities contemplated by the
Plans of Reorganization are distributed in accordance with the terms of the
Plans of Reorganization, the Plans of Reorganization will be substantially
consummated at such time of distribution.
We are admitted to practice only in the State of New York and
express no opinion as to matters governed by any laws other than the laws of
the State of New York, the Federal laws of the United States of America and the
General Corporation Law of the State of Delaware.
<PAGE> 74
3
This opinion is rendered solely to you in connection with the
above matter and may not be relied upon by any other person (other than your
successors and assigns that become Lenders party to the Credit Agreement) or
for any other purpose.
Very truly yours,
To the Lenders party to
the above-referenced Credit Agreement
In care of Citibank, N.A., as Agent
399 Park Avenue
New York, NY 10043
<PAGE> 1
EXHIBIT 10-CC
THIS FIRST AMENDMENT AND SUPPLEMENT TO CREDIT AGREEMENT AND ASSIGNMENT
(this "First Amendment") is made and entered into as of the 6th day of
December, 1995 (the "Syndication Effective Date"), with respect to the
US$1,000,000,000 Credit Agreement dated as of November 28, 1995 (the "Credit
Agreement") among The Columbia Gas System, Inc., a Delaware corporation
("Borrower"), Citibank, N.A., individually and as administrative, documentation
and co-syndication agent (in such capacity, the "Agent"), Bank of Montreal,
Bankers Trust Company, Chemical Bank, CIBC, Inc., and Morgan Guaranty Trust
Company of New York, each as a Co-Syndication Agent (collectively, with the
Agent, the "Existing Lenders") and each of the banks and financial institutions
listed on Schedule II hereto under the heading "Assignee" (collectively, the
"New Lenders"). Defined terms used in this First Amendment and not otherwise
defined herein shall have the meanings ascribed to such terms in the Credit
Agreement.
RECITALS
WHEREAS, the Existing Lenders now desire to effect a general
syndication of the Credit Agreement and the related assignment of the
outstanding Advances and Letters of Credit thereunder, and certain other
changes to the Credit Agreement, by amending certain terms of the Credit
Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
Amendments
Section 1.1. All references to "Schedule I" in the Credit
Agreement are hereby amended to refer to Schedule I attached to this First
Amendment.
Section 1.2. The following terms, which are defined in Section
1.01 of the Credit Agreement, are hereby amended as follows:
(a) The definition of "Reference Banks" is amended in its
entirety to read as follows:
"Reference Banks" means Citibank, Canadian Imperial Bank of
Commerce and PNC Bank National Association.
(b) The definition of "Swing Line Banks" is amended in
its entirety to read as follows:
"Swing Line Banks" means Citibank, PNC Bank National
Association and such other Lenders mutually acceptable to the Borrower
and the Agent.
<PAGE> 2
2
Section 1.3 Section 1.01 of the Credit Agreement is hereby
further amended and supplemented by adding the following new definitions,
which, respectively, read in their entirety as follows:
"First Amendment" means that certain First Amendment and
Supplement to Credit Agreement and Assignment dated as of December 6,
1995, among the Borrower, the Agent and the lenders party thereto.
"Co-Agents" means Commerzbank A.G. and PNC Bank National
Association.
Section 1.4 Section 7.07 of the Credit Agreement is hereby
amended in its entirety to read as follows:
Managing and Co-Syndication Agents/ Co-Agents as Lenders. No
Managing and Co-Syndication Agent or Co-Agent shall have any rights,
responsibilities or obligations other than as a Lender hereunder.
Section 1.5 Section 5.02(c) of the Credit Agreement is hereby
amended by inserting the following language in the first sentence of such
Section, immediately after the words "(whether in one transaction or a series
of transactions),":
"or permit its Material Subsidiaries to sell, convey, transfer
or otherwise dispose of (whether in one transactions or a series of
transactions;"
Section 1.6 Section 8.04(b)(i) of the Credit Agreement is hereby
amended by inserting the following language in the first sentence of such
Section, immediately after the words "each Managing and Co-syndication Agent,":
"each Co-Agent,".
Section 1.7 Section 8.04(b)(ii) of the Credit Agreement is hereby
amended by adding the following sentence to the end of Section 8.04(b)(ii):
"In the event that any Letter of Credit, at the request or
direction of the Borrower, shall expressly choose a state or country
law other than New York, U.S.A., the Borrower shall be obligated to
reimburse the Issuing Lender for payments made under such Letter of
Credit if such payment is justified under either New York law or the
law governing such Letter of Credit."
Section 1.8 Section 8.07(a) of the Credit Agreement is hereby
amended by adding the following language to such Section, immediately following
subsection (ii) of the first proviso thereof:
<PAGE> 3
3
"subject to the right of the Agent and each Managing and
Co-Syndication Agent and each Co-Agent, from the date hereof until
March 31, 1996, to make assignments of their respective Revolving
Credit Commitment in accordance with this Section 8.07 in an amount
equal to or greater than $1,000,000, provided that the assignee of any
such assignment, after giving effect to all assignments being made to
such assignee, shall have Revolving Credit Commitments of at least
#$5,000,000,".
Section 1.9 Section 8.07(a) of the Credit Agreement is hereby
further amended by amending, in its entirety, the second proviso thereof as
follows:
"provided further that (A) in the case of an assignment by any
Lender to an Affiliate of such Lender, or an assignment by any Lender
to any other Lender, the Borrower must be given written notice
thereof, but the consent of the Lender shall not be required and (B)
to the extent that more than one Lender makes an assignment to the
same assignee on the same date prior to March 31, 1996, only one
processing and recordation fee shall be required to be paid in
connection with all of such assignments.
ARTICLE 11
Sales and Assignments; Funding
Section 2.1 Effective on and as of the Syndication Effective
Date, each Existing Lender hereby sells, assigns and transfers to the
applicable New Lenders, and each New Lender hereby purchases and assumes from
the applicable Existing Lenders and undivided interest in and to such Existing
Lender's Commitment in the amounts set forth on Schedule II hereto, together
with a corresponding undivided interest in and to such Existing Lender's rights
and obligations under the Credit Agreement, as amended and supplemented hereby,
resulting in the New Lenders and the Existing Lenders constituting the Lenders
under the Credit Agreement. The result of the assignments contained in this
Section 2.1 is that the respective Revolving Credit Commitment and Swing Line
Commitment of each Existing Lender and each New Lender shall be in the amounts
set forth opposite such Lender's name on the signature pages hereto, with each
such Lender holding a promissory note from the Borrower in the amount reflected
on such signature pages under the heading "Revolving Credit Commitment". Each
New Lender (i) agrees that upon the effectiveness of this First Amendment it
will perform, in accordance with their terms, all of the obligations required
to be performed by such New Lender under the terms of the Credit Agreement and
(ii) appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers and discretion under the Credit Agreement as
are delegated to the Agent by the terms thereof, together with such powers and
discretion as are reasonably incidental thereto. Each New Lender has attached
hereto any United States Internal Revenue Service forms required under Section
2.15 of the Credit Agreement.
<PAGE> 4
4
Section 2.2 Subject to the prior effectiveness of this First
Amendment, and in order to give effect to the reallocation of the Commitments
and the outstanding Advances among the Existing Lenders and the New Lenders
provided for by Section 2.1 of this First Amendment, before 11:00 a.m (New York
City time) on the Syndication Effective Date:
(i) Each New Lender shall make available to the Agent's
Account, for the respective accounts of the Existing Lenders,
an amount equal to such New Lender's Pro Rata Share of the
outstanding Advances under the Credit Agreement and the
outstanding Letters of Credit issued under the Credit
Agreement (as such amounts are reflected on Schedule III
hereto); and
(ii) Promptly thereafter (but in any event on the same
day), the Agent shall cause to be distributed in like funds to
each Existing Lender, for the account of its Applicable
Lending Office, such Existing Lender's Pro Rata Share (without
giving effect to the reallocation of Commitments under this
First Amendment) of the amount paid by the New Lenders
pursuant to clause (i) of this Section 2.2.
Section 2.3 Subject to the prior effectiveness of this First
Amendment, and in order to give effect to the reallocation of the commitments
among the Existing Lenders and the New Lenders provided for by Section 2.1 of
this First Amendment and the participation fees required to be paid under the
Credit Agreement, before 11:00 a.m. (New York City time) on the Syndication
Effective Date:
(i) Each Existing Lender shall make available to the
Agent's Account, for the respective accounts of the New
Lenders, $69,916.67 (the total amount being the "Syndicate
Participation Fees"); and
(ii) Promptly thereafter (but in any event on the same
day), the Agent shall cause to be distributed in like funds to
each New Lender, for the account of its Applicable Lending
Office, the amount of the Syndicate Participation Fees as set
forth on Schedule IV hereto.
Section 2.4 Upon receipt of the monies by the Agent, as provided
in Section 2.2(i) and 2.3(i) of this First Amendment and payment of the monies
by the Agent, as provided in Section 2.2(ii) and 2.3(ii) of this First
Amendment, the Agent shall make appropriate entries in its books pursuant to
Section 8.07 of the Credit Agreement to reflect the reallocation of
Commitments, Advances and Letters of Credit effected by this First Amendment.
ARTICLE III
Effectiveness
<PAGE> 5
5
Section 3.1 This First Amendment shall become effective as of the
date first above written when, and only when, the Agent shall have received
counterparts of this First Amendment executed by the Borrower, the Existing
Lenders and the New Lenders or, as to any of the Lenders, advice satisfactory
to the Agent that such Lender has executed this First Amendment. The Agent
shall promptly notify the Borrower when all such counterparts have been
received. This First Amendment is subject to the provisions of Section 8.01 of
the Credit Agreement.
ARTICLE IV
Waivers to Credit Agreement
Section 4.1 The Borrower, Agent and each Existing Lender agrees
to waive the requirements of Section 8.07 of the Credit Agreement solely for
the purpose of and to the extent required to permit the reallocation of
Commitments, Advances and Letters of Credit pursuant to the provisions of this
First Amendment.
ARTICLE V
Miscellaneous
Section 5.1 The Credit Agreement, as specifically amended by this
First Amendment, is and shall continue to be in full force and effect and is
hereby in all respects ratified and confirmed. The execution, delivery and
effectiveness of this First Amendment shall not, except as expressly provided
herein, operate as a waiver of any right, power or remedy of the Borrower or
any Lender or the Agent under the Credit Agreement, nor constitute a waiver of
any provision of the Credit Agreement.
Section 5.2 This First Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto were upon the same instrument. Delivery of an executed
counterpart of a signature page of this First Amendment by telecopier shall be
effective as delivery of a manually executed counterpart of this First
Amendment.
Section 5.3 This First Amendment shall benefit and bind the
parties hereto, as well as their respective assigns, successors, heirs and
legal representatives.
Section 5.4 This First Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York.
<PAGE> 6
6
If you agree to the terms and provisions hereof, please
evidence such agreement by executing and returning a counterpart of this First
Amendment to Shearman & Sterling, 599 Lexington Avenue, New York, New York,
10022, Attention: Michael Bowman, fax number (212) 848-7179.
Very truly yours,
THE COLUMBIA GAS SYSTEM, INC.
By /s/ L. J. Bainter
----------------------------------
Title: Treasurer
CITIBANK, N.A.,
as Agent
By /s/ Arezoo Jafari
----------------------------------
Title: Arezoo Jafari
Assistant Vice President
<PAGE> 7
7
Agreed as of the date first above written:
<TABLE>
<CAPTION>
Revolving Credit Swing Line
Commitment Commitment
- ---------- ----------
<S> <C> <C>
$78,900,000 $15,000,000 CITIBANK, N.A.,
By /s/ Arezoo Jafari
----------------------------------
Title: Arezoo Jafari
Assistant Vice President
$78,900,000 $0 BANK OF MONTREAL,
CHICAGO BRANCH
By /s/ Bernard Silgardo
----------------------------------
Title: Director
$78,900,000 $0 BANKERS TRUST COMPANY
By /s/ Mary Jo Jolly
----------------------------------
Title: Mary Jo Jolly
Assistant Vice President
$78,900,000 $0 CIBC, INC.
By /s/ R. E. Long
----------------------------------
Title: Vice President
$78,900,000 $0 CHEMICAL BANK
By /s/ James H. Ramage
----------------------------------
Title: James H. Ramage
Vice President
</TABLE>
<PAGE> 8
8
<TABLE>
<CAPTION>
Revolving Credit Swing Line
Commitment Commitment
- ---------- ----------
<S> <C> <C>
$78,900,000 $0 MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By /s/ J. S. Finch
----------------------------------
Title: Vice President
$65,800,000 $0 COMMERZBANK, A.G.,
NEW YORK BRANCH
By /s/ Dempsey Gable
----------------------------------
Title: Senior Vice President
$65,800,000 $15,000,000 PNC BANK NATIONAL ASSOCIATION
By /s/ L. E. Susack
----------------------------------
Title: Vice President
$60,000,000 $0 SOCIETE GENERALE, NEW YORK
BRANCH
By /s/ Gordon Eadon
----------------------------------
Title: Gordon Eadon
Vice President
</TABLE>
<PAGE> 9
9
<TABLE>
<CAPTION>
Revolving Credit Swing Line
Commitment Commitment
- ---------- ----------
<S> <C> <C>
$50,000,000 $0 CREDIT LYONNAIS
CAYMAN ISLAND BRANCH
By /s/ Xavier Ratouis
----------------------------------
Title: Xavier Ratouis
Authorized Signature
$50,000,000 $0 THE SANWA BANK. LIMITED
By /s/ Dorn Sorreso
----------------------------------
Title: Vice President
$35,000,000 $0 CAISSE NATIONALE DE CREDIT
AGRICOLE
By /s/ Dean Balice
----------------------------------
Title: Dean Balice
Senior Vice President
Branch Manager
25,000,000 $0 THE BANK OF NOVA SCOTIA
By /s/ F. C. H. Ashby
----------------------------------
Title: F. C. H. Ashby
Senior Manager Loan Operations
$25,000,000 $0 DAI-ICHI KANGYO BANK, LTD.
By /s/ Takeshi Kurita
----------------------------------
Title: Vice President
</TABLE>
<PAGE> 10
10
<TABLE>
<CAPTION>
Revolving Credit Swing Line
Commitment Commitment
- ---------- ----------
<S> <C> <C>
$25,000,000 $0 THE FIRST NATIONAL BANK OF
CHICAGO
By /s/ Kenneth Bauer
-----------------------------------------
Title: Corporate Banking Officer
$25,000,000 $0 KREDIETBANK N.V.
By /s/ Armen Karozichian Robert Snauffer
----------------------------------------
Title:Armen Karozichian Robert Snauffer
Vice President Vice President
$25,000,000 $0 THE MITSUBISHI BANK, LIMITED,
NEW YORK BRANCH
By /s/ Robert J. Dilloff
-----------------------------------------
Title: Robert J. Dilloff
Vice President
$25,000,000 $0 NATIONAL CITY BANK, COLUMBUS
By /s/ Jeffrey Hawthorne
-----------------------------------------
Title: Vice President
$25,000,000 $0 ROYAL BANK OF CANADA
By /s/ J. D. Frost
-----------------------------------------
Title: J. D. Frost
Senior Manager
</TABLE>
<PAGE> 11
11
<TABLE>
<CAPTION>
Revolving Credit Swing Line
Commitment Commitment
- ---------- ----------
<S> <C> <C>
$25,000,000 $0 UNION BANK OF SWITZERLAND,
NEW YORK BRANCH
By /s/ James P. Kelleher
--------------------------------------------------
Title: James P. Kelleher
Assistant Vice President
By /s/ Peter B. Yearley
----------------------------------------------------
Title: Peter B. Yearley
Vice President
$1,000,000,000 $30,000,000 Total of the Commitments
</TABLE>
<PAGE> 12
SCHEDULE I
THE COLUMBIA GAS SYSTEM, INC.
$1,000,000,000 CREDIT AGREEMENT
APPLICABLE LENDING OFFICES
<TABLE>
<CAPTION>
Name of Initial Lender Domestic Lending Office Eurodollar Lending Office
- ---------------------- ----------------------- -------------------------
<S> <C> <C>
Bank of Montreal Bank of Montreal, Chicago Branch Bank of Montreal, Chicago
115 S. LaSalle Street Branch
Chicago, IL 60603 115 S. LaSalle Street
Attn: Loan Accounting Chicago, IL 60603
Attn: Loan Accounting
CIBC, Inc. CIBC, Inc. CIBC, Inc.
2727 Paces Ferry Road 2727 Paces Ferry Road
Suite 1200 Suite 1200
Atlanta, GA 30339 Atlanta, GA 30339
Attn: Suzanne Miles Attn: Suzanne Miles
Morgan Guaranty Trust Company Morgan Guaranty Trust Company Morgan Guaranty Trust Company
of New York of New York of New York
60 Wall Street Nassau Bahamas Office
New York, NY 10260 c/o J.P. Morgan Services, Inc.
Attn: Loan Operations Loan Operations, 3rd Floor
500 Stanton Christiana Road
Newark, DE 19713
Royal Bank of Canada Royal Bank of Canada Royal Bank of Canada
1 Financial Square 1 Financial Square
24th Floor 24th Floor
New York, NY 10005 New York, NY 10005
Attn: Attn:
National City Bank, Columbus National City Bank, Columbus National City Bank, Columbus
155 East Broad Street 155 East Broad Street
Columbus, OH 43251 Columbus, OH 43251
Attn: Jeffrey L. Hawthorne, V.P. Attn: Jeffrey L. Hawthorne, V.P.
The Dai-Ichi Kangyo Bank, The Dai-Ichi Kangyo Bank, The Dai-Ichi Kangyo Bank,
Limited Limited, New York Branch Limited, New York Branch
One World Trade Center, One World Trade Center,
Suite 4911 Suite 4911
New York, NY 10048 New York, NY 10048
Attn: Attn:
</TABLE>
<PAGE> 13
SCHEDULE I
THE COLUMBIA GAS SYSTEM, INC.
$1,000,000,000 CREDIT AGREEMENT
APPLICABLE LENDING OFFICES (Continued)
<TABLE>
<CAPTION>
Name of Initial Lender Domestic Lending Office Eurodollar Lending Office
- ---------------------- ----------------------- -------------------------
<S> <C> <C>
The Mitsubishi Bank, Limited - The Mitsubishi Bank, Limited - The Mitsubishi Bank, Limited -
New York Branch New York Branch New York Branch
225 Liberty Street 225 Liberty Street
Two World Financial Center Two World Financial Center
New York, NY 10281 New York, NY 10281
Attn: James Fuell Attn: James Fuell
</TABLE>
<PAGE> 14
SCHEDULE II
<TABLE>
<CAPTION>
================================================================================================================
AMOUNT OF
ASSIGNOR ASSIGNEE COMMITMENT ASSIGNED
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Citibank, N.A. Union Bank of Switzerland $25,000,000
- ----------------------------------------------------------------------------------------------------------------
Citibank, N.A. Royal Bank of Canada $25,000,000
- ----------------------------------------------------------------------------------------------------------------
Citibank, N.A. National City Bank, Columbus $25,000,000
- ----------------------------------------------------------------------------------------------------------------
Citibank, N.A. Mitsubishi Bank, Limited $12,766,667
- ----------------------------------------------------------------------------------------------------------------
Bank of Montreal Mitsubishi Bank, Limited $12,233,333
- ----------------------------------------------------------------------------------------------------------------
Bank of Montreal Kredietbank N.V. $25,000,000
- ----------------------------------------------------------------------------------------------------------------
Bank of Montreal The First National Bank of Chicago $25,000,000
- ----------------------------------------------------------------------------------------------------------------
Bank of Montreal Dai-Ichi Kangyo Bank, Ltd. $25,000,000
- ----------------------------------------------------------------------------------------------------------------
Bank of Montreal The Bank of Nova Scotia $533,334
- ----------------------------------------------------------------------------------------------------------------
Bankers Trust The Bank of Nova Scotia $24,466,666
- ----------------------------------------------------------------------------------------------------------------
Bankers Trust Caisse Nationale de Credit Agricole $35,000,000
- ----------------------------------------------------------------------------------------------------------------
Bankers Trust Sanwa Bank, Limited $28,300,001
- ----------------------------------------------------------------------------------------------------------------
CIBC, Inc. Sanwa Bank, Limited $21,699,999
- ----------------------------------------------------------------------------------------------------------------
CIBC, Inc. Credit Lyonnais $50,000,000
- ----------------------------------------------------------------------------------------------------------------
CIBC, Inc. Societe Generale $16,066,668
- ----------------------------------------------------------------------------------------------------------------
Chemical Bank Societe Generale $43,933,332
- ----------------------------------------------------------------------------------------------------------------
Chemical Bank PNC Bank National Association (Co-Agent) $43,833,335
- ----------------------------------------------------------------------------------------------------------------
Morgan Guaranty Trust Company of
New York PNC Bank National Association (Co-Agent) $21,966,665
- ----------------------------------------------------------------------------------------------------------------
Morgan Guaranty Trust Company of
New York Commerzbank, A.G. (Co-Agent) $65,800,000
- ----------------------------------------------------------------------------------------------------------------
Total
================================================================================================================
</TABLE>
<PAGE> 15
SCHEDULE III
PRO RATA SHARE OF OUTSTANDING ADVANCES AND LETTERS OF CREDIT
Outstanding Advances as of the Syndication Effective Date: $330,000,000
Issued Letters of Credit as of the Syndication Effective Date: $58,822,523.15
<TABLE>
<CAPTION>
PRO RATA SHARE PRO RATA SHARE
OF OUTSTANDING OF OUTSTANDING
NEW BANK ADVANCES LETTERS OF CREDIT
- -------- ---------------------- -----------------
<S> <C> <C>
CITIBANK, N.A. $26,037,000 $4,641,097.10
BANK OF MONTREAL $26,037,000 $4,641,097.10
BANKERS TRUST COMPANY $26,037,000 $4,641.097.10
CIBC, INC. $26,037,000 $4,641,097.10
CHEMICAL BANK $26,037,000 $4,641,097.10
MORGAN GUARANTY TRUST $26,037,000 $4,641,097.10
OF NEW YORK
COMMERZBANK, A.G. $21,714,000 $3,870,522.00
PNC BANK NATIONAL $21,714,000 $3,870,522.00
ASSOCIATION
SOCIETE GENERALE $19,800,000 $3,529,351.30
CREDIT LYONNAIS $16,500,000 $2,941,126.15
THE SANWA BANK LIMITED $16,500,000 $2,941,126.15
CAISSE NATIONALE DE $11,550,000 $2,058,788.15
CREDIT AGRICOLE
THE BANK OF NOVA SCOTIA $ 8,250,000 $1,470,563.10
DAI-ICHI KANGYO BANK, LTD. $ 8,250,000 $1,470,563.10
THE FIRST NATIONAL $ 8,250,000 $1,470,563.10
BANK OF CHICAGO
KREDIETBANK N.V. $ 8,250,000 $1,470,563.10
THE MITSUBISHI BANK, LIMITED $ 8,250,000 $1,470,563.10
NATIONAL CITY BANK, COLUMBUS $ 8,250,000 $1,470,563.10
ROYAL BANK OF CANADA $ 8,250,000 $1,470,563.10
UNION BANK OF SWITZERLAND $ 8,250,000 $1,470,563.10
</TABLE>
<PAGE> 16
SCHEDULE IV
EACH NEW LENDERS PARTICIPATION FEE
<TABLE>
<CAPTION>
NEW BANK PARTICIPATION FEE
- -------- -----------------
<S> <C>
COMMERZBANK, A.G. $82,250
PNC BANK NATIONAL $82,250
ASSOCIATION
SOCIETE GENERALE $54,000
CREDIT LYONNAIS $40,000
THE SANWA BANK LIMITED $40,000
CAISSE NATIONALE DE $21,000
CREDIT AGRICOLE
THE BANK OF NOVA SCOTIA $12,500
DAI-ICHI KANGYO BANK, LTD. $12,500
THE FIRST NATIONAL $12,500
BANK OF CHICAGO
KREDIETBANK N.V. $12,500
THE MITSUBISHI BANK, LIMITED $12,500
NATIONAL CITY BANK, COLUMBUS $12,500
ROYAL BANK OF CANADA $12,500
UNION BANK OF SWITZERLAND $12,500
</TABLE>
<PAGE> 1
Exhibit 11
THE COLUMBIA GAS SYSTEM, INC. AND SUBSIDIARIES
Statements Re Computation of Per Share Earnings
Year Ended December 31,
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Computation for Statements of Consolidated
- ------------------------------------------
Income ($ in millions)
- ----------------------
Income (Loss) before extraordinary item and
cumulative effect of accounting change . . . . . . . . . . . . (432.3) 246.2 152.2
Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . 71.6 - -
Change in accounting for postemployment benefits . . . . . . . . . - (5.6) -
- ----------------------------------------------------------------------------------------------------------------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . (360.7) 240.6 152.2
- ----------------------------------------------------------------------------------------------------------------
Earnings (Loss) per share of common stock (based
on average shares outstanding) ($)
Before extraordinary item and accounting change . . . . . . . . . . (8.57) 4.87 3.01
Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . 1.42 - -
Change in accounting for postemployment benefits . . . . . . . . . - (0.11) -
- ----------------------------------------------------------------------------------------------------------------
Earnings (Loss) on common stock . . . . . . . . . . . . . . . . . (7.15) 4.76 3.01
================================================================================================================
Additional computation of average common
shares outstanding (thousands) NOTE
- ----------------------------------------------------------------------------------------------------------------
Average shares of common stock outstanding . . . . . . . . . . . . 50,468 50,560 50,559
Incremental common shares applicable to
common stock based on the common stock
daily average market price:
Applicable to contingent stock awards . . . . . . . . . . . . . . - 3 4
- ----------------------------------------------------------------------------------------------------------------
Average common shares as adjusted . . . . . . . . . . . . . . . . . 50,468 50,563 50,563
================================================================================================================
Average shares of common stock outstanding . . . . . . . . . . . . 50,468 50,560 50,559
Incremental common shares applicable to
common stock based on the more dilutive
of the common stock ending or daily average
market price during the year:
Applicable to contingent stock awards . . . . . . . . . . . . . . - 3 4
- ----------------------------------------------------------------------------------------------------------------
Average common shares assuming full dilution . . . . . . . . . . . 50,468 50,563 50,563
================================================================================================================
Earnings (Loss) per share of common stock
as adjusted:
Before extraordinary item and accounting change . . . . . . . . . (8.57) 4.87 3.01
Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . 1.42 - -
Change in accounting for postemployment benefits . . . . . . . . . - (0.11) -
- ----------------------------------------------------------------------------------------------------------------
Earnings (Loss) on common stock as adjusted ($) . . . . . . . . . . (7.15) 4.76 3.01
================================================================================================================
Earnings (Loss) per common shares assuming full
dilution:
Before extraordinary item and accounting change . . . . . . . . . . (8.57) 4.87 3.01
Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . 1.42 -
Change in accounting for postemployment benefits . . . . . . . . . - (0.11) -
- ----------------------------------------------------------------------------------------------------------------
Earnings (Loss) on common stock assuming full
dilution ($) . . . . . . . . . . . . . . . . . . . . . . . . . . (7.15) 4.76 3.01
================================================================================================================
</TABLE>
NOTE These caculations are submitted in accordance with the Securities
Exchange Act of 1934 Release No. 9083 although not required by
footnote 2 to paragraph 14 of Accounting Principles Opinion No. 15
because they result in dilution of less than 3%.
<PAGE> 1
Exhibit 12
THE COLUMBIA GAS SYSTEM, INC. AND SUBSIDIARIES
Statements of Ratio of Earnings to Fixed Charges
($ in millions)
<TABLE>
<CAPTION>
Twelve Months
Ended December 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Consolidated Income (Loss) from Continuing Operations
before Income Taxes, Extraordinary Item and Cumulative
Effect of Accounting Change . . . . . . . . . . . (643.0) 392.2 288.1 161.4 (1,205.8)
Adjustments:
Interest during construction . . . . . . . . . . (20.2) - - - (3.4)
Distributed (Undistributed) equity income . . . . (7.9) (0.9) (0.1) (0.1) (2.4)
Fixed charges . . . . . . . . . . . . . . . . . 1,040.8 14.8 101.5 13.7 139.9
--------- -------- ------- -------- --------
Earnings Available . . . . . . . . . . . . . . 369.7 406.1 389.5 175.0 (1,071.7)
--------- -------- ------- -------- --------
Fixed Charges:
Interest on long-term and short-term debt . . . . 987.2 0.7 3.1 4.9 112.4
Other interest . . . . . . . . . . . . . . . . . 53.6 14.1 98.4 8.8 27.6
--------- -------- ------- -------- --------
Total Fixed Charges before Adjustments*,** . . 1,040.8 14.8 101.5 13.7 140.0
--------- -------- ------- -------- --------
Adjustments:
Gain/(Loss) on reacquired debt . . . . . . . . . - - - - (0.1)
--------- -------- ------- -------- --------
Total Fixed Charges . . . . . . . . . . . . . . 1,040.8 14.8 101.5 13.7 139.9
--------- -------- ------- -------- --------
Ratio of Earnings Before Taxes to Fixed Charges . . N/A(a) 27.44 3.84 12.77 N/A(a)
========= ======== ======= ======== ========
</TABLE>
(a) To achieve a one-to-one coverage, the Corporation would need an additional
$671.1 and $1,211.6 million of earnings in 1995 and 1991, respectively.
* This amount excludes approximately $230 million, $210 million, $204
million and $86 million of interest expenses not recorded for the twelve
months ended 1994, 1993, 1992 and 1991, respectively. Includes interest
expense of $982.9 including write-off of unamortized discounts on
debentures recorded in 1995. Reference is made to the Statements of
Consolidated Income for the twelve months ended December 31, 1995, as
reported on Form 10-K and to Note 2 of Notes to Consolidated Financial
Statements of the Corporation's Annual Report on Form 10-K for the year
ended December 31, 1995.
** This amount excludes $8.6 million, $8.6 million, $8.6 million and $15.5
million of interest expense not recorded with respect to the registrant's
guarantee of LESOP Trust's debentures for the twelve months ended December
31, 1994, 1993, 1992, and 1991, respectively.
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF THE COLUMBIA GAS SYSTEM, INC.
as of December 31, 1995
<TABLE>
<CAPTION>
State of
Segment / Subsidiary Incorporation
- --------------------------------------------------- --------------------
<S> <C>
Oil and Gas Operations
- ----------------------
Columbia Gas Development Corporation Delaware
Columbia Natural Resources, Inc. Texas
Transmission Operations
- -----------------------
Columbia Gas Transmission Corporation Delaware
Columbia Gulf Transmission Company Delaware
Distribution Operations
- -----------------------
Columbia Gas of Kentucky, Inc. Kentucky
Columbia Gas of Maryland, Inc. Delaware
Columbia Gas of Ohio, Inc. Ohio
Columbia Gas of Pennsylvania, Inc. Pennsylvania
Commonwealth Gas Services, Inc. Virginia
Other Energy Operations
- -----------------------
Columbia Atlantic Trading Corporation Delaware
Columbia Coal Gasification Corporation Delaware
Columbia Energy Services Corporation Kentucky
Columbia Gas System Service Corporation Delaware
Columbia LNG Corporation Delaware
Columbia Propane Corporation Delaware
Commonwealth Propane, Inc. Virginia
TriStar Ventures Corporation Delaware
TriStar Capital Corporation Delaware
</TABLE>
<PAGE> 1
Exhibit 23-A
CONSENT
As independent petroleum and natural gas consultants, we
hereby consent to the filing of this Letter Report dated January 29, 1996 in
its entirety as an Exhibit to the 1995 Annual Report of The Columbia Gas
System, Inc., to the Securities and Exchange Commission on Form 10-K, and any
Registration Statement of The Columbia Gas System, Inc., relating to the issue
of securities to the public during 1996; to the quotation or summarization of
portions of this Letter Report, subject to our approval of the related page(s)
of the document(s), in the 10-K, the Prospectus included in said Registration
Statement(s) or the 1995 annual Report to Stockholders; and, subject to
approval of the related page(s) of the document(s), to the use of our name and
the reliance upon our authority as experts in said Annual Report to
Stockholders, Form 10-K and Prospectus(es) and in Part II of said Registration
Statement(s). We have no interest of a substantial or material nature in The
Columbia Gas System, Inc., or in any affiliate, nor are we to receive any such
interest as payment for the preparation of this Letter Report; we have not been
employed for such preparation on a contingent fee basis; and we are not
connected with The Columbia Gas System, Inc., or any affiliate as a promoter,
underwriter, voting trustee, director, officer, employee, or affiliate.
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Houston, Texas
January 29, 1996
<PAGE> 2
EXHIBIT 23-A
January 29, 1996
The Columbia Gas System, Inc.
20 Montchanin Road
Wilmington, Delaware 19807
Attention: Mr. Jeffrey Grossman, Assistant Controller
Arthur Andersen & Company
1345 Avenue of the Americas
New York, New York 10105
Attention: Mr. J. M. Sepanski
Gentlemen:
The estimated reserve volumes and future income amounts
presented in this report are related to hydrocarbon prices. December 1995
hydrocarbon prices were used in the preparation of this report as required by
Securities and Exchange Commission (SEC) and Financial Accounting Standards
Bulletin No. 69 (FASB 69) guidelines; however, actual future prices may vary
significantly from December 1995 prices. Therefore, volumes of reserves
actually recovered and amounts of income actually received may differ
significantly from the estimated quantities presented in this report.
Our estimates of the net proved reserves attributable to the
interests of The Columbia Gas System, Inc. (referred to herein as the Company)
as of December 31, 1995 are presented below. Table 1 is a tabulation of the
oil, gas, and natural gas liquid reserves by subsidiary. The Company's
reserves are located in the United States and the Federal Offshore waters.
<TABLE>
<CAPTION>
Proved Net Reserves
As of December 31, 1995
-----------------------------------------
Liquid, Barrels Gas, MMCF
------------------ -------------
<S> <C> <C>
Developed and Undeveloped 11,551,735 736,520
Developed 10,568,537 583,274
</TABLE>
The "Liquid" reserves shown above are comprised of crude oil,
condensate, and natural gas liquids. Natural gas liquids comprise 11.6 percent
of the Company's developed liquid reserves and 11.0 percent of the Company's
developed and undeveloped liquid reserves. All hydrocarbon liquid reserves are
expressed in standard 42 gallon barrels. All gas volumes are sales gas
expressed in MMCF at the pressure and temperature bases of the area where the
gas reserves are located.
In accordance with the requirements of FASB 69, our estimates
of the Company's net proved reserves as of December 31, 1992, 1993, 1994, and
1995, as contained in this report and our previous reports, are presented in
attached Table No. 2 together with a tabulation of the components of the
differences in the estimates as of such dates.
<PAGE> 3
The Columbia Gas System, Inc.
Arthur Andersen & Company
January 29, 1996
Page 2
The proved reserves presented in this report comply with the
SEC's Regulation S-X Part 210.4-10 Sec. (a) as clarified by subsequent
Commission Staff Accounting Bulletins, and are based on the following
definitions and criteria:
Proved reserves of crude oil, condensate, natural gas, and
natural gas liquids are estimated quantities that geological and
engineering data demonstrate with reasonable certainty to be recoverable
in the future from known reservoirs under existing conditions.
Reservoirs are considered proved if economic producibility is supported
by actual production or formation tests. In certain instances, proved
reserves are assigned on the basis of a combination of core analysis and
electrical and other type logs which indicate the reservoirs are
analogous to reservoirs in the same field which are producing or have
demonstrated the ability to produce on a formation test. The area of a
reservoir considered proved includes (1) that portion delineated by
drilling and defined by fluid contacts, if any, and (2) the adjoining
portions not yet drilled that can be reasonably judged as economically
productive on the basis of available geological and engineering data. In
the absence of data on fluid contacts, the lowest known structural
occurrence of hydrocarbons controls the lower proved limit of the
reservoir. Proved reserves are estimates of hydrocarbons to be recovered
from a given date forward. They may be revised as hydrocarbons are
produced and additional data become available. Proved natural gas
reserves are comprised of non-associated, associated, and dissolved gas.
An appropriate reduction in gas reserves has been made for the expected
removal of natural gas liquids, for lease and plant fuel, and the
exclusion of non-hydrocarbon gases if they occur in significant
quantities and are removed prior to sale. Reserves that can be produced
economically through the application of improved recovery techniques are
included in the proved classification when these qualifications are met:
(1) successful testing by a pilot project or the operation of an
installed program in the reservoir provides support for the engineering
analysis on which the project or program was based, and (2) it is
reasonably certain the project will proceed. Improved recovery includes
all methods for supplementing natural reservoir forces and energy, or
otherwise increasing ultimate recovery from a reservoir, including (1)
pressure maintenance, (2) cycling, and (3) secondary recovery in its
original sense. Improved recovery also includes the enhanced recovery
methods of thermal, chemical flooding, and the use of miscible and
immiscible displacement fluids. Estimates of proved reserves do not
include crude oil, natural gas, or natural gas liquids being held in
underground storage. Depending on the status of development, these
proved reserves are further subdivided into:
(i) "developed reserves" which are those proved reserves
reasonably expected to be recovered through existing wells with
existing equipment and operating methods, including (a) "developed
producing reserves" which are those proved developed reserves
reasonably expected to be produced from existing completion
intervals now open for production in existing wells, and (b)
"developed non-producing reserves" which are those proved
developed reserves which exist behind the casing of existing wells
which are reasonably expected to be produced through these wells
in the predictable future where the cost of making such
hydrocarbons available for production should be relatively small
compared to the cost of a new well; and
(ii) "undeveloped reserves" which are those proved reserves
reasonably expected to be recovered from new wells on undrilled
acreage, from existing wells where a relatively large expenditure
is required, and from acreage for which an application of fluid
injection or other improved recovery technique is contemplated
where the technique has been proved effective by actual tests in
the area in the same reservoir. Reserves from undrilled acreage
are limited to those drilling units offsetting productive units
that are reasonably certain of production when
<PAGE> 4
The Columbia Gas System, Inc.
Arthur Andersen & Company
January 29, 1996
Page 3
drilled. Proved reserves for other undrilled units are included
only where it can be demonstrated with reasonable certainty that
there is continuity of production from the existing productive
formation.
Because of the direct relationship between volumes of proved
undeveloped reserves and development plans, we include in the proved
undeveloped category only reserves assigned to undeveloped locations that we
have been assured will definitely be drilled and reserves assigned to the
undeveloped portions of secondary or tertiary projects which we have been
assured will definitely be developed.
The Company has interests in certain tracts which have
substantial additional hydrocarbon quantities which cannot be classified as
proved and consequently are not included herein. The Company has active
exploratory and development drilling programs which may result in the
reclassification of significant additional volumes to the proved category.
In accordance with the requirements of FASB 69, our estimates
of future cash inflows, future costs, and future net cash inflows before income
tax as of December 31, 1995 from this report and as of December 31, 1994 from
our previous report are presented below.
<TABLE>
<CAPTION>
As of December 31
($000)
---------------------------------------
1995 1994
--------------- ---------------
<S> <C> <C>
Future Cash Inflows $ 2,256,591 $ 1,667,288
Future Costs
Production $ 711,564 $ 492,036
Development 217,685 167,946y
------------ -------------
Total Costs $ 929,249 $ 659,982
Future Net Cash Inflows
Before Income Tax $ 1,327,342 $ 1,007,306
Present Value at 10%
Before Income Tax $ 706,832 $ 549,046
</TABLE>
The future cash inflows are gross revenues before any
deductions. The production costs were based on current data and include
production taxes, ad valorem taxes, and certain other items such as
transportation costs in addition to the operating costs directly applicable to
the individual leases or wells. The development costs were based on current
data and include certain dismantlement and abandonment costs net of salvage.
Table 3 presents a tabulation showing future cash inflow data by subsidiary.
The Company furnished us with gas prices in effect at December
31, 1995 and with its forecasts of future gas prices which take into account
SEC guidelines, current market prices, contract prices, and fixed and
determinable price escalations where applicable. In accordance with SEC
guidelines, the future gas prices used in this report make no allowances for
future gas price increases which may occur as a result of inflation nor do they
account for seasonal variations in gas prices which may cause future yearly
average gas prices to be somewhat lower than December gas prices. For gas sold
under contract, the contract gas price including fixed and determinable
escalations
<PAGE> 5
The Columbia Gas System, Inc.
Arthur Andersen & Company
January 29, 1996
Page 4
exclusive of inflation adjustments, was used until the contract expires and
then was adjusted to the current market price for the area and held at this
adjusted price to depletion of the reserves.
The Company furnished us with liquid prices in effect at
December 31, 1995 and these prices were held constant to depletion of the
properties. In accordance with SEC guidelines, changes in liquid prices
subsequent to December 31, 1995 were not considered in this report.
Operating costs for the leases and wells in this report are
based on the operating expense reports of the Company and include only those
costs directly applicable to the leases or wells. When applicable, the
operating costs include a portion of general and administrative costs allocated
directly to the leases and wells under terms of operating agreements.
Development costs were furnished to us by the Company and are based on
authorizations for expenditure for the proposed work or actual costs for
similar projects. The current operating and development costs were held
constant throughout the life of the properties. The estimated net cost of
abandonment after salvage was considered for the Appalachia properties and
offshore properties where abandonment costs net of salvage are significant.
The estimates of net abandonment costs furnished by the Company were accepted
without independent verification. Abandonment costs for certain other onshore
properties were not considered because of their relative insignificance.
No deduction was made for indirect costs such as general
administration and overhead expenses, loan repayments, interest expenses, and
exploration and development prepayments. No attempt has been made to quantify
or otherwise account for any accumulated gas production imbalances that may
exist.
In our examination, we made a detailed investigation of
reserves and future production and income for those properties of the Company
which comprise 93.0 percent of the total future net income discounted at 10
percent. Due to the limitations of time and to their relative insignificance,
we accepted without examination and included herein the Company's estimates of
reserves and future production and income for those properties which comprise
the remaining 7.0 percent of total future net income discounted at 10 percent.
No consideration was given in this report to potential environmental
liabilities which may exist nor were any costs included for potential inability
to restore and clean up damages, if any, caused by past operating practices.
The Company informed us that it has furnished us all of the accounts, records,
geological and engineering data and reports and other data required for our
investigation The ownership interests, prices and other factual data were
accepted as represented. Moreover, to facilitate timely issuance of this
report, production data used in this report includes estimated production for
the last few months of 1995.
The reserves included in this report are estimates only and
should not be construed as being exact quantities. They may or may not be
actually recovered, and if recovered, the revenues therefrom and the actual
costs related thereto could be more or less than the estimated amounts.
Moreover, estimates of reserves may increase or decrease as a result of future
operations.
In general, we estimate that future gas production rates will
continue to be the same as the average rate for the latest available 12 months
of actual production until such time that the well or wells are incapable of
producing at this rate. The well or wells were then projected to decline at
their decreasing delivery capacity rate. Our general policy on estimates of
future gas production rates is adjusted when necessary to reflect actual gas
market conditions in specific cases. The future production rates from wells
now on production may be more or less than estimated because of changes in
market demand or allowables set by regulatory bodies. Wells or locations which
are not
<PAGE> 6
The Columbia Gas System, Inc.
Arthur Andersen & Company
January 29, 1996
Page 5
currently producing may start producing earlier or later than anticipated in
our estimates of their future production rates.
While it may reasonably be anticipated that the future prices
received for the sale of production and the operating costs and other costs
relating to such production may also increase or decrease from existing levels,
such changes were, in accordance with rules adopted by the SEC, omitted from
consideration in making this evaluation.
Neither we nor any of our employees have any interest in the
subject properties and neither the employment to make this study nor the
compensation is contingent on our estimates of reserves and future cash inflows
for the subject properties.
Very truly yours,
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Harry J. Gaston, Jr., P.E.
President
HJG/sw
<PAGE> 1
Exhibit 23-B
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated February 5, 1996, included in The Columbia Gas System, Inc.'s
1995 Annual Report on Form 10-K, into the following previously filed
registration statements:
1.Form S-8 of The Columbia Gas System, Inc. (File No. 33-10004)
2.Form S-8 of The Columbia Gas System, Inc. (File No. 33-42776)
ARTHUR ANDERSEN LLP
New York, New York
February 23, 1996
<TABLE> <S> <C>
<ARTICLE> OPUR1
<CIK> 0000022099
<NAME> THE COLUMBIA GAS SYSTEM, INC. AND SUBSIDIARIES
<SUBSIDIARY>
<NUMBER> 1
<NAME> CGS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,581,200
<OTHER-PROPERTY-AND-INVEST> 729,800
<TOTAL-CURRENT-ASSETS> 1,275,900
<TOTAL-DEFERRED-CHARGES> 48,100
<OTHER-ASSETS> 422,000
<TOTAL-ASSETS> 6,057,000
<COMMON> 506,200
<CAPITAL-SURPLUS-PAID-IN> 595,800
<RETAINED-EARNINGS> 69,800
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,114,000
0
399,900
<LONG-TERM-DEBT-NET> 2,004,500
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 500
399,900
<CAPITAL-LEASE-OBLIGATIONS> 2,900
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,538,600
<TOT-CAPITALIZATION-AND-LIAB> 6,057,000
<GROSS-OPERATING-REVENUE> 2,635,200
<INCOME-TAX-EXPENSE> (210,700)
<OTHER-OPERATING-EXPENSES> 2,245,000
<TOTAL-OPERATING-EXPENSES> 2,245,000
<OPERATING-INCOME-LOSS> 390,200
<OTHER-INCOME-NET> (44,800)
<INCOME-BEFORE-INTEREST-EXPEN> 345,400
<TOTAL-INTEREST-EXPENSE> 988,400
<NET-INCOME> (360,700)
0
<EARNINGS-AVAILABLE-FOR-COMM> (360,700)
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> (807,400)
<EPS-PRIMARY> (7.15)
<EPS-DILUTED> (7.15)
</TABLE>
