<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-Q
(MARK ONE)
<TABLE>
<S> <C>
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1994
OR
<TABLE>
<S> <C>
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-2700
EL PASO NATURAL GAS COMPANY
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
DELAWARE
(State or Other Jurisdiction 74-0608280
of Incorporation or Organization) (I.R.S. Employer Identification No.)
ONE PAUL KAYSER CENTER,
100 NORTH STANTON STREET, EL PASO, TEXAS 79901
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
Registrant's Telephone Number, Including Area Code (915) 541-2600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
CLASS OUTSTANDING
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<S> <C>
Common Stock, par value $3.00 per share,
as of July 31, 1994 36,719,723 shares
</TABLE>
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<PAGE> 2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EL PASO NATURAL GAS COMPANY
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER COMMON SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
SECOND QUARTER SIX MONTHS
--------------------- ---------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating revenues............................... $210,805 $220,611 $432,750 $431,523
-------- -------- -------- --------
Operating charges
Operation and maintenance...................... 75,243 78,131 145,083 151,869
Natural gas and liquids........................ 50,411 60,950 113,371 111,494
Depreciation and amortization.................. 16,156 15,154 32,385 29,411
Litigation special charge...................... -- -- 15,062 --
Taxes, other than income taxes................. 9,397 8,979 19,454 18,168
-------- -------- -------- --------
151,207 163,214 325,355 310,942
-------- -------- -------- --------
Operating income................................. 59,598 57,397 107,395 120,581
-------- -------- -------- --------
Other (income) and income deductions
Interest and debt expense...................... 19,407 18,621 39,122 35,290
Other -- net................................... (31) 5,367 (6,655) 2,044
-------- -------- -------- --------
19,376 23,988 32,467 37,334
-------- -------- -------- --------
Income before income taxes....................... 40,222 33,409 74,928 83,247
Income taxes..................................... 16,211 12,726 29,802 31,724
-------- -------- -------- --------
Net income....................................... $ 24,011 $ 20,683 $ 45,126 $ 51,523
======== ======== ======== ========
Earnings per common share........................ $ 0.65 $ 0.55 $ 1.22 $ 1.38
======== ======== ======== ========
Average common shares outstanding................ 36,835 37,325 36,864 37,252
======== ======== ======== ========
Dividends declared per common share.............. $ 0.3025 $ 0.2750 $ 0.6050 $ 0.5500
======== ======== ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
1
<PAGE> 3
EL PASO NATURAL GAS COMPANY
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1994 1993
---------- ------------
<S> <C> <C>
Current assets
Cash and temporary cash investments.............................. $ 24,138 $ --
Accounts and notes receivable, net............................... 108,922 133,437
Materials and supplies inventory................................. 35,063 34,665
Take-or-pay buy-outs, buy-downs and prepayments, net............. 35,983 34,019
Other regulatory assets.......................................... 12,000 12,000
Deferred income tax benefit...................................... 51,675 44,141
Costs recoverable through insurance.............................. 13,101 23,260
Other............................................................ 16,778 22,490
---------- ------------
Total current assets..................................... 297,660 304,012
---------- ------------
Property, plant and equipment, net................................. 1,762,762 1,765,486
Take-or-pay buy-outs, buy-downs and prepayments, net............... 27,455 48,106
Other regulatory assets............................................ 65,314 62,249
Other.............................................................. 86,854 89,810
---------- ------------
1,942,385 1,965,651
---------- ------------
Total assets............................................. $2,240,045 $2,269,663
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable................................................. $ 187,837 $ 199,883
Commercial paper................................................. -- 1,300
Take-or-pay financing liability.................................. 41,377 40,125
Accrual for regulatory issues.................................... 38,889 47,263
Current maturities of long-term debt............................. 6,495 6,184
Other............................................................ 60,033 61,709
---------- ------------
Total current liabilities................................ 334,631 356,464
---------- ------------
Long-term debt, less current maturities............................ 792,527 795,783
Deferred income taxes, less current portion........................ 302,691 298,080
Take-or-pay financing liability, less current portion.............. 17,223 40,383
Deferred credits................................................... 34,091 25,540
Other liabilities.................................................. 32,678 45,865
---------- ------------
1,179,210 1,205,651
---------- ------------
Commitments and contingent liabilities (See Notes 3, 4 and 5)
Stockholders' equity
Common stock, par value $3 per share; authorized 100,000 shares;
issued 37,350 shares.......................................... 112,051 112,051
Additional paid-in capital....................................... 454,681 455,496
Retained earnings................................................ 179,988 157,506
Less: Treasury stock (at cost) 587 shares and 486 shares......... 20,516 17,505
---------- ------------
Total stockholders' equity............................... 726,204 707,548
---------- ------------
Total liabilities and stockholders' equity............... $2,240,045 $2,269,663
========= ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
2
<PAGE> 4
EL PASO NATURAL GAS COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
--------------------------
1994 1993
--------- --------
<S> <C> <C>
Cash flows from operating activities
Net income...................................................... $ 45,126 $ 51,523
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization................................ 32,385 29,411
Deferred income taxes........................................ 16,094 19,552
Net take-or-pay recoveries................................... 15,983 26,051
Net costs recovered (recoverable) through insurance.......... 10,159 (5,500)
Other working capital changes
Accounts and notes receivable.............................. 23,590 37,776
Materials and supplies inventory........................... (398) 5,429
Other current assets....................................... (3,901) 11,642
Accounts payable........................................... (6,320) (58,828)
Accrual for regulatory issues.............................. (429) 25,860
Other current liabilities.................................. (934) 1,178
Other........................................................ (12,297) 6,297
--------- --------
Net cash provided by operating activities............... 119,058 150,391
--------- --------
Cash flows from investing activities
Capital expenditures............................................ (40,572) (54,197)
Mojave acquisition.............................................. -- (35,695)
Proceeds from property dispositions............................. 2,004 664
Other........................................................... (5,301) (954)
--------- --------
Net cash used in investing activities................... (43,869) (90,182)
--------- --------
Cash flows from financing activities
Proceeds from reissuance of treasury stock...................... 1,152 3,583
Long-term debt retirements...................................... (3,010) --
Commercial paper repayments..................................... (1,300) --
Repayment of volumetric take-or-pay receivable.................. (21,908) (19,614)
Acquisition of treasury stock................................... (4,738) --
Dividends paid.................................................. (21,299) (19,396)
Other........................................................... 52 6,916
--------- --------
Net cash used in financing activities................... (51,051) (28,511)
--------- --------
Increase in cash and temporary cash investments................... 24,138 31,698
Cash and temporary cash investments
Beginning of period..................................... -- 48,638
--------- --------
End of period........................................... $ 24,138 $ 80,336
========= ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE> 5
EL PASO NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The 1993 Annual Report on Form 10-K for El Paso Natural Gas Company and
subsidiaries includes a summary of significant accounting policies and should be
read in conjunction with this Form 10-Q. As used herein, "Company" refers to El
Paso Natural Gas Company and its subsidiaries and "EPG" refers to El Paso
Natural Gas Company, unless the context otherwise requires. The financial
statements for the periods presented are unaudited, condensed and do not contain
all of the information required by generally accepted accounting principles to
be included in a full set of financial statements. In the opinion of management,
all material adjustments necessary to present fairly the results of operations
for such periods have been included. All such adjustments are of a normal
recurring nature. Results of operations for any interim period are not
necessarily indicative of the results of operations for the entire year.
Financial statements for previous periods include certain reclassifications
which were made to conform to current presentation. Such reclassifications have
no effect on reported net income or stockholders' equity.
2. ACQUISITION
On June 1, 1993, the Company acquired from a wholly owned subsidiary of
Enron Corp., that subsidiary's 50 percent interest in Mojave Pipeline Company
("MPC"), a general partnership, for approximately $40 million in cash,
representing the approximate book value of the investment. The acquisition,
which was funded by internally generated cash flow, gives the Company 100
percent ownership of MPC. The acquisition was accounted for using the purchase
method.
The operating results of MPC for the six months ended June 30, 1994 and the
two months ended June 30, 1993, are included in the Consolidated Statement of
Income. The income effect of the Company's previously owned 50 percent equity
interest in MPC for the first four months of 1993 is included in other-net in
the Consolidated Statement of Income.
The following pro forma summary presents the consolidated results of
operations of the Company as if the acquisition had occurred as of January 1,
1993. This pro forma has been prepared for comparative purposes only and does
not purport to be indicative of what may have resulted had the acquisition
occurred as of that date or of results which may occur in the future.
<TABLE>
<CAPTION>
SECOND QUARTER 1993 SIX MONTHS 1993
------------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Operating revenues.................................. $ 224,341 $ 445,188
Net income.......................................... $ 21,406 $ 52,532
Earnings per common share........................... $ 0.56 $ 1.41
</TABLE>
3. RATES AND REGULATORY MATTERS
On January 14, 1994, EPG filed an application with the Federal Energy
Regulatory Commission ("FERC") seeking an order which would terminate, effective
January 1, 1996, certificates applicable to certain gathering and production
area facilities owned by EPG on the basis that such facilities are not subject
to FERC jurisdiction. EPG intends, effective January 1, 1996, to transfer all of
its nonjurisdictional gathering and production area facilities to a wholly owned
subsidiary of EPG, El Paso Field Services Company. The facilities to be
transferred consist of approximately 6,700 miles of various sized pipelines,
compressors with a combined horsepower of 40,600 and various treating and
processing plants.
Several producers and other shippers filed protests and requests for a
formal hearing of the January 14, 1994 application. The primary issues raised in
the protests focus on the extent of competition in EPG's producing basins and
the proper functionalization of its facilities. In response to the producer and
shipper
4
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EL PASO NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
protests, EPG made a filing on March 15, 1994 asserting that the protests raise
issues already settled under EPG's 1993 settlement agreement.
On May 25, 1994, FERC issued a series of orders which clarified their
policy regarding the regulation of gathering facilities. These orders approved
the requests of various pipelines to terminate certificates applicable to
certain of their respective gathering facilities. Although FERC has stated it
will evaluate all applications on a case by case basis, management believes
EPG's January 14, 1994 application will be approved.
EPG's 1993 settlement agreement provided, in part, for the accelerated
recovery of a substantial portion of EPG's investment in its underground storage
facility. The amount to be recovered was approximately $56.7 million plus
interest accruing beginning February 1, 1993 at the FERC allowed rate, which
approximates the prime rate. On March 25, 1994, EPG received a final FERC letter
order approving the recovery of $56.7 million of underground storage facility
costs. This is being recovered by a demand charge mechanism over the period from
October 1, 1993 through December 31, 1996. The amount recovered through June 30,
1994 was $26 million. The outstanding balance at June 30, 1994 and December 31,
1993 was $30 million and $37 million, respectively, of which $12 million is
reflected in the current portion of other regulatory assets for both periods and
$18 million and $25 million, respectively, is included in other regulatory
assets in the Consolidated Balance Sheet.
MPC filed a service and rate design restructuring plan on November 3, 1992,
in compliance with FERC's industry-wide restructuring directives. On March 2,
1993, FERC issued an order essentially approving MPC's compliance filing,
subject to changes, which were made in an amended restructuring plan on March
29, 1993.
Several of MPC's customers filed protests and requests for rehearing of the
March 2, 1993 FERC order. The rehearing requests were denied, and FERC approved
the amended restructuring plan on July 9, 1993, with an effective date of August
1, 1993. On October 15, 1993, FERC issued an order which denied requests for
rehearing of the July 9, 1993 order. Several of MPC's customers have filed
petitions with the United States Court of Appeals for the District of Columbia
Circuit ("Court of Appeals") for review of the March 2, 1993, July 9, 1993 and
October 15, 1993 orders. These petitions are currently pending. The primary
issues on appeal pertain to FERC's requirement that MPC's rates for firm
transportation service be based upon Straight Fixed Variable ("SFV") rate design
rather than Modified Fixed Variable ("MFV") rate design. The application of SFV
rates requires MPC's existing firm shippers to pay a higher proportion of their
total transportation rate in the reservation component of the rate. Such
shippers have contended that FERC's application of SFV rate design to MPC
unlawfully abrogates the rate provisions of MPC's service agreements and
constitutes an unlawful rate increase. Management believes the Court of Appeals
will uphold SFV rates as applied to MPC.
EPG has made buy-out and buy-down payments and recoupable prepayments to
resolve past and future take-or-pay exposure, to terminate and reform gas
purchase contracts, to amend pricing and take provisions of gas purchase
contracts and to settle related litigation. EPG is collecting its buy-out and
buy-down costs under FERC cost recovery procedures. Under FERC procedures,
take-or-pay cost recovery filings may be challenged by pipeline customers on
prudence and certain other grounds.
Several customers claimed that EPG sought to recover an excessive amount
for the value of certain production properties which were transferred to a
producer as part of a 1989 take-or-pay settlement. On March 8, 1993, an initial
decision from the presiding Administrative Law Judge ("ALJ") was rendered which
required EPG to refund to its customers the costs found to be ineligible for
take-or-pay recovery. On June 16, 1994, FERC affirmed the ALJ's initial
decision. As a result, EPG will be required to refund approximately $40 million,
inclusive of interest, to its customers during the third quarter of 1994. EPG
has established reserves for this refund. On July 18, 1994, EPG filed for
rehearing of the June 16, 1994 order.
5
<PAGE> 7
EL PASO NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. LEGAL PROCEEDINGS
In El Paso Natural Gas Company and Meridian Oil Gathering Inc. v. Amoco
Production Company, filed in Delaware Chancery Court on May 8, 1991, Amoco
Production Company ("Amoco") alleged breaches by EPG and a then affiliated
company, Meridian Oil Gathering Inc. ("MOGI"), of certain gas purchase,
gathering and transportation agreements pertaining to natural gas produced by
Amoco in the San Juan Basin. Amoco alleged breach of "favored nations"
contractual provisions regarding services to be performed by EPG, including
those relating to transportation capacity and rates and sought a court order
requiring specific performance by EPG and MOGI with respect to future
transportation services and an award of monetary damages of an undetermined
amount for alleged past breaches of contract. On March 4, 1992, the Court issued
a Memorandum Opinion which, among other things, denied Amoco's motion for
partial summary judgment and concluded that the Amoco contracts at issue do not
contain the general "favored nations" rights claimed by Amoco. The Court further
concluded that EPG's and MOGI's motions for summary judgment, seeking dismissal
of Amoco's counterclaim against MOGI, should be granted. Conoco Inc. ("Conoco")
asserted claims similar to Amoco's original claims, involving lesser quantities
of gas, in a separate Delaware Chancery Court proceeding filed on December 30,
1991, Conoco Inc. v. El Paso Natural Gas Company. In August 1992, the Amoco and
Conoco cases were consolidated, MOGI was dismissed as a party, and Amoco and
Conoco filed amended pleadings to restate their claims in light of the court's
March 4, 1992 ruling. EPG and Conoco concluded a settlement agreement which
resulted in dismissal of the Conoco claims. Trial of the Amoco claims concluded
on July 15, 1993, and post-trial briefing and oral arguments concluded in early
November, 1993. On March 29, 1994, the Court rendered a decision in favor of
Amoco. As a result of the Court's decision, EPG will be required to refund to
Amoco amounts which at June 30, 1994 were approximately $15 million, plus
interest of $4 million. In connection with the Amoco decision, EPG recorded a
litigation special charge of approximately $19 million in the first quarter of
1994. Additional briefs have been submitted to the court on the issue of
damages, and EPG is awaiting a final order from the trial court. EPG intends to
appeal the Court's decision.
TransAmerican Natural Gas Corporation ("TransAmerican") has filed a
complaint in a Texas state court against various parties, including EPG,
alleging fraud, tortious interference with contractual relationships, economic
duress, civil conspiracy and violation of state antitrust laws. The complaint,
as amended, seeks unspecified actual and exemplary damages. EPG is actively
defending the matter and has initiated collateral proceedings challenging both
the validity of TransAmerican's claims and the jurisdiction of the forum in
which they were filed. No discovery has been commenced pending resolution of
these threshold issues. Based on information available at this time, management
believes that the claims made by TransAmerican have no factual or legal basis
and that the ultimate resolution of this matter will not have a materially
adverse effect on the Company's financial condition.
EPG and FERC Enforcement Section, Office of the General Counsel
("Enforcement"), entered into a settlement agreement resolving all issues in
Enforcement's investigation of EPG's installation of certain delivery taps.
Enforcement asserted that EPG commenced installation of the delivery taps prior
to receiving clearances from the appropriate State Historic Preservation Office
and the United States Fish and Wildlife Service. FERC approved the settlement
agreement on May 13, 1994. In accordance with the agreement, EPG paid total
civil penalties of $160,000 in the second quarter of 1994.
The Company is a named defendant in numerous lawsuits and a named party in
numerous governmental proceedings arising in the ordinary course of business.
While the outcome of such lawsuits or other proceedings against the Company
cannot be predicted with certainty, management does not expect these matters to
have a materially adverse effect on the Company's financial condition.
6
<PAGE> 8
EL PASO NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. ENVIRONMENTAL
Accruals for environmental compliance costs are established when
environmental assessments and/or remediation are probable and when costs can be
reasonably estimated. As of June 30, 1994, EPG had a reserve of $38 million for
the following environmental contingencies with income statement impact:
1 -- EPG has been conducting remediation of polychlorinated biphenyl
("PCB") contamination at certain of its facilities. The majority of the
required PCB remediation has been completed. Future PCB remediation costs
are estimated to range between $8 million and $15 million over the next
four years.
2 -- EPG executed an Administrative Order on Consent with the United States
Environmental Protection Agency ("EPA") on June 25, 1993 to conduct a
Remedial Investigation/Feasibility Study ("RI/FS") for a Burlington
Industries, Inc. ("BI") site located in Statesville, North Carolina, that
has been identified for cleanup. BI and EPG have entered into an agreement
to jointly fund the RI/FS for the site. EPG's share of the potential
remediation costs is estimated to be between $17 million and $20 million
over a 30 year period.
3 -- On November 2, 1993, in accordance with an EPA order, EPG and Atlantic
Richfield Company ("ARCO") submitted work plans for remediation of the
subsurface at the Prewitt Refinery in McKinley County, New Mexico. EPG and
ARCO have a cost sharing agreement to each pay one-half of any remediation
costs at this site. EPG's share of the remediation costs is estimated to be
between $10 million and $20 million over a 30 year period.
4 -- On December 21, 1993, EPA issued EPG a Notice of Liability for the
Colorado School of Mines Research Institute ("CSMRI") site in Golden,
Colorado. EPA has determined that the volume of hazardous substances sent
to the site by EPG represent approximately 2.4% of the total volumes sent
by all the potentially responsible parties. Based on this percentage, EPG's
share of the potential remediation costs is estimated to be less than
$500,000.
5 -- EPG is involved in other environmental assessment and remediation
activities which include two Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA") sites (Fountain Inn,
South Carolina and Odessa, Texas) and one state Superfund site (Etowah,
Tennessee). EPG has entered into a de minimis administrative order on
consent with EPA for EPG's share of the environmental remediation costs
associated with the CERCLA site in Odessa, Texas. In accordance with the
order, EPG will pay total costs of approximately $32,000. Management
believes the amount reserved as of June 30, 1994 is sufficient to cover
these and other small environmental assessments and remediation activities.
EPG also has potential expenditures of a capital nature for the following
environmental projects:
1 -- EPG has analyzed the Clean Air Act Amendments of 1990 ("CAAA"), and
believes that these rules will impact the Company's operations primarily in
the following areas: (i) potential required reductions in the emissions of
nitrogen oxides ("NOx") in non-attainment areas; (ii) the requirement for
air emissions permitting of existing facilities; and (iii) enhanced
monitoring of air emissions. The Company anticipates capitalizing the
equipment costs associated with complying with CAAA and estimates that
approximately $5 million to $27 million will be spent during the 1995
through 1997 time frame. However, EPA's proposed enhanced monitoring rules,
when finalized, could potentially impose greater costs to the Company.
2 -- EPG has been conducting remediation of mercury contamination at
certain facilities and is replacing mercury containing meters with dry flow
devices. The remaining remediation costs are estimated to be between $8
million and $13 million. The mercury remediation project is expected to be
completed by January 1, 1996. EPG will close and retire about 2,500 earthen
siphon/dehydration pits in the San Juan Basin as recently required by
certain environmental regulations. EPG estimates costs of approximately
7
<PAGE> 9
EL PASO NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$4 million to $10 million to retire these pits. The project is expected to
be completed by January 1, 1996. The mercury remediation and pit closure
costs, which are associated with the retirement of equipment, will be
recorded as adjustments to accumulated depreciation, as permitted by
regulatory accounting.
The State of Tennessee has asserted a claim that EPG is a liable party
under state environmental laws for clean up costs associated with a site in
Elizabethton, Tennessee. The State and EPA are in the preliminary stages of
investigating the nature and extent of contamination, as well as identifying
other potentially responsible parties. Since testing is in the initial stages,
EPG is unable to estimate its potential share of any remediation costs.
It is possible that new information or future developments could require
the Company to reassess its potential exposure related to environmental matters.
As such information or developments occur, related accrual amounts will be
adjusted accordingly.
6. POSTEMPLOYMENT BENEFITS
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 112, which requires companies to account for
benefits to former or inactive employees after employment but before retirement
(referred to in SFAS No. 112 as "postemployment benefits"). As of June 30, 1994,
the Company's liability for postemployment benefit costs was approximately $8
million. Management expects to seek recovery of these costs through rates and
has recorded a regulatory asset equal to the liability.
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at June 30, 1994 and December 31, 1993
consisted of the following:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Property, plant and equipment, at cost...................... $2,888,234 $2,873,301
Less accumulated depreciation............................... 1,227,184 1,212,233
---------- ----------
1,661,050 1,661,068
Additional acquisition cost assigned to utility plant,
net of accumulated amortization........................... 101,712 104,418
---------- ----------
Property, plant and equipment, net................ $1,762,762 $1,765,486
========= =========
</TABLE>
8. SUPPLEMENTAL DISCLOSURE OF CASH FLOW ACTIVITIES
<TABLE>
<CAPTION>
SIX MONTHS
----------------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Cash Payments
Interest.................................................... $34,717 $32,106
Income taxes................................................ 35,343 11,607
</TABLE>
8
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY
Net cash provided by operating activities was $119 million for the six
months ended June 30, 1994 compared with $150 million for the same period of
1993. The decrease from the previous period was primarily due to higher tax
payments and lower accruals for regulatory issues offset by net insurance claims
received, collections of EPG's investment in its underground storage facility
and timing of working capital receipts and disbursements.
Acquisition
On June 1, 1993, the Company acquired from a wholly owned subsidiary of
Enron Corp., that subsidiary's 50 percent interest in MPC, a general
partnership, for approximately $40 million in cash, representing the approximate
book value of the investment. The acquisition, which was funded by internally
generated cash flow, gives the Company 100 percent ownership of MPC. The
acquisition was accounted for using the purchase method.
The operating results of MPC for the six months ended June 30, 1994, and
the two months ended June 30, 1993, are included in the Consolidated Statement
of Income. The income effect of the Company's previously owned 50 percent equity
interest in MPC for the first four months of 1993 is included in other-net in
the Consolidated Statement of Income.
The following pro forma summary presents the consolidated results of
operations of the Company as if the acquisition had occurred as of January 1,
1993. This pro forma has been prepared for comparative purposes only and does
not purport to be indicative of what may have resulted had the acquisition
occurred as of that date or of results which may occur in the future.
<TABLE>
<CAPTION>
SECOND QUARTER 1993 SIX MONTHS 1993
------------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Operating revenues.................................. $ 224,341 $ 445,188
Net income.......................................... $ 21,406 $ 52,532
Earnings per common share........................... $ 0.56 $ 1.41
</TABLE>
Rates and Regulatory Matters
On January 14, 1994, EPG filed an application with FERC seeking an order
which would terminate, effective January 1, 1996, certificates applicable to
certain gathering and production area facilities owned by EPG on the basis that
such facilities are not subject to FERC jurisdiction. EPG intends, effective
January 1, 1996, to transfer all of its nonjurisdictional gathering and
production area facilities to a wholly owned subsidiary of EPG, El Paso Field
Services Company. The facilities to be transferred consist of approximately
6,700 miles of various sized pipelines, compressors with a combined horsepower
of 40,600 and various treating and processing plants.
Several producers and other shippers filed protests and requests for a
formal hearing of the January 14, 1994 application. The primary issues raised in
the protests focus on the extent of competition in EPG's producing basins and
the proper functionalization of its facilities. In response to the producer and
shipper protests, EPG made a filing on March 15, 1994 asserting that the
protests raise issues already settled under EPG's 1993 settlement agreement.
On May 25, 1994, FERC issued a series of orders which clarified their
policy regarding the regulation of gathering facilities. These orders approved
the requests of various pipelines to terminate certificates applicable to
certain of their respective gathering facilities. Although FERC has stated it
will evaluate all applications on a case by case basis, management believes
EPG's January 14, 1994 application will be approved.
EPG's 1993 settlement agreement provided, in part, for the accelerated
recovery of a substantial portion of EPG's investment in its underground storage
facility. The amount to be recovered was approximately $56.7 million plus
interest accruing beginning February 1, 1993 at the FERC allowed rate, which
approximates the prime rate. On March 25, 1994, EPG received a final FERC letter
order approving the recovery of $56.7 million of underground storage facility
costs. This is being recovered by a demand charge mechanism
9
<PAGE> 11
over the period from October 1, 1993 through December 31, 1996. The amount
recovered through June 30, 1994 was $26 million. The outstanding balance at June
30, 1994 and December 31, 1993 was $30 million and $37 million, respectively, of
which $12 million is reflected in the current portion of other regulatory assets
for both periods and $18 million and $25 million, respectively, is included in
other regulatory assets in the Consolidated Balance Sheet.
MPC filed a service and rate design restructuring plan on November 3, 1992,
in compliance with FERC's industry-wide restructuring directives. On March 2,
1993, FERC issued an order essentially approving MPC's compliance filing,
subject to changes, which were made in an amended restructuring plan on March
29, 1993.
Several of MPC's customers filed protests and requests for rehearing of the
March 2, 1993 FERC order. The rehearing requests were denied, and FERC approved
the amended restructuring plan on July 9, 1993, with an effective date of August
1, 1993. On October 15, 1993, FERC issued an order which denied requests for
rehearing of the July 9, 1993 order. Several of MPC's customers have filed
petitions with the Court of Appeals for review of the March 2, 1993, July 9,
1993 and October 15, 1993 orders. These petitions are currently pending. The
primary issues on appeal pertain to FERC's requirement that MPC's rates for firm
transportation service be based upon SFV rate design rather than MFV rate
design. The application of SFV rates requires MPC's existing firm shippers to
pay a higher proportion of their total transportation rate in the reservation
component of the rate. Such shippers have contended that FERC's application of
SFV rate design to MPC unlawfully abrogates the rate provisions of MPC's service
agreements and constitutes an unlawful rate increase. Management believes the
Court of Appeals will uphold SFV rates as applied to MPC.
EPG has made buy-out and buy-down payments and recoupable prepayments to
resolve past and future take-or-pay exposure, to terminate and reform gas
purchase contracts, to amend pricing and take provisions of gas purchase
contracts and to settle related litigation. EPG is collecting its buy-out and
buy-down costs under FERC cost recovery procedures. Under FERC procedures,
take-or-pay cost recovery filings may be challenged by pipeline customers on
prudence and certain other grounds.
Several customers claimed that EPG sought to recover an excessive amount
for the value of certain production properties which were transferred to a
producer as part of a 1989 take-or-pay settlement. On March 8, 1993, an initial
decision from the presiding ALJ was rendered which required EPG to refund to its
customers the costs found to be ineligible for take-or-pay recovery. On June 16,
1994, FERC affirmed the ALJ's initial decision. As a result, EPG will be
required to refund approximately $40 million, inclusive of interest, to its
customers during the third quarter of 1994. EPG has established reserves for
this refund. On July 18, 1994, EPG filed for rehearing of the June 16, 1994
order.
Gathering and Processing Agreement
On June 27, 1994, EPG and Meridian Oil Production Inc. ("Meridian") entered
into an agreement concerning production from Meridian conventional gas wells
located on 1.5 million acres in the San Juan Basin. Under the terms of the
agreement, which is retroactive to January 1, 1994, Meridian's gas is committed
to flow exclusively through EPG's gathering and processing facilities through
February 29, 2000.
Environmental
Accruals for environmental compliance costs are established when
environmental assessments and/or remediation are probable, and when costs can be
reasonably estimated. As of June 30, 1994, EPG had a reserve of $38 million for
the following environmental contingencies with income statement impact:
1 -- EPG has been conducting remediation of PCB contamination at certain of
its facilities. The majority of the required PCB remediation has been
completed. Future PCB remediation costs are estimated to range between $8
million and $15 million over the next four years.
2 -- EPG executed an Administrative Order on Consent with EPA on June 25,
1993 to conduct a RI/FS for a BI site located in Statesville, North
Carolina, that has been identified for cleanup. BI and EPG have entered
into an agreement to jointly fund the RI/FS for the site. EPG's share of
the potential remediation costs is estimated to be between $17 million and
$20 million over a 30 year period.
10
<PAGE> 12
3 -- On November 2, 1993, in accordance with an EPA order, EPG and ARCO
submitted work plans for remediation of the subsurface at the Prewitt
Refinery in McKinley County, New Mexico. EPG and ARCO have a cost sharing
agreement to each pay one-half of any remediation costs at this site. EPG's
share of the remediation costs is estimated to be between $10 million and
$20 million over a 30 year period.
4 -- On December 21, 1993, EPA issued EPG a Notice of Liability for the
CSMRI site in Golden, Colorado. EPA has determined that the volume of
hazardous substances sent to the site by EPG represent approximately 2.4%
of the total volumes sent by all the potentially responsible parties. Based
on this percentage, EPG's share of the potential remediation costs is
estimated to be less than $500,000.
5 -- EPG is involved in other environmental assessment and remediation
activities which include two CERCLA sites (Fountain Inn, South Carolina and
Odessa, Texas) and one state Superfund site (Etowah, Tennessee). EPG has
entered into a de minimis administrative order on consent with EPA for
EPG's share of the environmental remediation costs associated with the
CERCLA site in Odessa, Texas. In accordance with the order, EPG will pay
total costs of approximately $32,000. Management believes the amount
reserved as of June 30, 1994 is sufficient to cover these and other small
environmental assessments and remediation activities.
EPG also has potential expenditures, of a capital nature, for the following
environmental projects:
1 -- EPG has analyzed CAAA, and believes that these rules will impact the
Company's operations primarily in the following areas: (i) potential
required reductions in the emissions of NOx in non-attainment areas; (ii)
the requirement for air emissions permitting of existing facilities; and
(iii) enhanced monitoring of air emissions. The Company anticipates
capitalizing the equipment costs associated with complying with CAAA and
estimates that approximately $5 million to $27 million will be spent during
the 1995 through 1997 time frame. However, EPA's proposed enhanced
monitoring rules, when finalized, could potentially impose greater costs to
the Company.
2 -- EPG has been conducting remediation of mercury contamination at
certain facilities and is replacing mercury containing meters with dry flow
devices. The remaining remediation costs are estimated to be between $8
million and $13 million. The mercury remediation project is expected to be
completed by January 1, 1996. EPG will close and retire about 2,500 earthen
siphon/dehydration pits in the San Juan Basin as recently required by
certain environmental regulations. EPG estimates costs of approximately $4
million to $10 million to retire these pits. The project is expected to be
completed by January 1, 1996. The mercury remediation and pit closure
costs, which are associated with the retirement of equipment, will be
recorded as adjustments to accumulated depreciation, as permitted by
regulatory accounting.
The State of Tennessee has asserted a claim that EPG is a liable party
under state environmental laws for clean up costs associated with a site in
Elizabethton, Tennessee. The State and EPA are in the preliminary stages of
investigating the nature and extent of contamination, as well as identifying
other potentially responsible parties. Since testing is in the initial stages,
EPG is unable to estimate its potential share of any remediation costs.
It is possible that new information or future developments could require
the Company to reassess its potential exposure related to environmental matters.
As such information or developments occur, related accrual amounts will be
adjusted accordingly.
Other
On August 10, 1994, EPG established with a group of banks a revolving
credit facility of $400 million which expires in five years. This credit
facility replaced an existing $300 million revolving credit facility.
In January 1993, EPG experienced flood damage to its pipeline system in the
Gila, Arizona area due to heavy rain. Since that time, EPG has been incurring
costs for repairs and expects these costs to be reimbursed through its property
insurance policies. As of June 30, 1994, EPG has received approximately $10
million of insurance reimbursements and expects to be reimbursed for the
remaining costs once all repairs have been completed.
11
<PAGE> 13
EPG's largest single contract for interstate capacity to California is its
1,450 million cubic feet per day ("MMcf/d")contract with Southern California Gas
Company ("SoCal"), which has a primary term ending August 31, 2006. Pursuant to
this contract, SoCal has exercised its option to relinquish 300 MMcf/d of
capacity during the first quarter of 1996. EPG is working to offset this future
reduction in capacity commitments through new contracts with various natural gas
users.
DIVIDENDS
The following table reflects quarterly dividends declared and paid on EPG's
common stock:
<TABLE>
<CAPTION>
DECLARATION DATE AMOUNT PER SHARE PAYMENT DATE TOTAL AMOUNT
- - ----------------- ---------------- ---------------- ------------
(IN MILLIONS)
<S> <C> <C> <C>
October 12, 1993 $ 0.2750 January 4, 1994 $ 10
January 14, 1994 $ 0.3025 April 4, 1994 $ 11
April 15, 1994 $ 0.3025 July 1, 1994 $ 11
</TABLE>
On July 15, 1994, the Board of Directors declared a quarterly dividend of
$0.3025 per share on EPG's common stock, payable on October 3, 1994, to
shareholders of record on September 9, 1994.
CAPITAL EXPENDITURES
The Company's planned capital expenditures for 1994 of $210 million are
primarily for maintenance of business, system expansion and system enhancement.
Capital expenditures for the six months ended June 30, 1994 were $41 million
compared to $54 million for the same period of 1993.
On July 7, 1992, EPG filed an application with FERC, which was amended on
November 27, 1992, to expand the delivery capacity of its system in the vicinity
of Yuma, Arizona and, through an extension of its system south to San Luis Rio
Colorado, Sonora, Mexico. The proposed expansion would provide shippers the
opportunity to deliver natural gas to Mexican markets in northern Baja
California via new pipeline capacity of 348 MMcf/d. The project cost was
approximately $71 million. On June 22, 1994, EPG withdrew the July 7, 1992
application, citing delays in the conversion to natural gas and expansion of the
existing Benito Juarez Power Plant in Rosarito, Baja California Norte, Mexico.
In withdrawing the pending application, EPG emphasized that it is not abandoning
the project. At such time as the Comision Federal de Electricidad, the Mexican
government-owned utility, proceeds with its plans for the Benito Juarez Power
Plant, EPG may refile its application.
EPG is a member of a five-company consortium that plans to build the
proposed Samalayuca II Power Plant near Ciudad Juarez, Mexico. On December 17,
1992, an award for construction was granted to the consortium by the Comision
Federal de Electricidad. On March 16, 1993, EPG filed an application with FERC
to expand its system in order to provide natural gas service to the proposed
Samalayuca II Power Plant and to an existing power plant in the same location.
The proposed expansion would provide an additional 300 MMcf/d of capacity at a
cost of approximately $57 million. On November 29, 1993, FERC issued an order
which approved the proposed border crossing facility south of Clint, Texas that
would connect EPG's facilities with facilities in Mexico. FERC deferred action
on the remainder of the March 16, 1993 filing until EPG demonstrates that it has
long-term executed contracts or binding precedent agreements for a substantial
amount of the firm capacity of the proposed facilities.
On December 29, 1993, Pacific Gas & Electric Company ("PG&E"), the
California Public Utilities Commission ("CPUC") and SoCal jointly filed a motion
with FERC seeking clarification or rehearing of the November 29, 1993 FERC order
on the Samalayuca II Power Plant project discussed above.
On April 1, 1994, EPG filed an application with FERC for a certificate of
public convenience and necessity to build a 98 mile pipeline to parallel and
loop its existing Havasu Crossover Line. The proposed pipeline would allow for
the transfer of 468 MMcf/d of San Juan Basin gas to EPG's south system and would
enhance EPG's overall system flexibility to meet market demands. The project is
expected to cost approximately $62 million. At the request of several of EPG's
customers, FERC held a technical conference on August 11, 1994 with respect to
the April 1, 1994 application.
12
<PAGE> 14
On June 1, 1994, EPG filed an application with FERC for a certificate of
public convenience and necessity to expand its existing system in the San Juan
Basin by approximately 300 MMcf/d at a cost of about $26 million. The proposed
expansion would accommodate increased volumes and provide markets with enhanced
access to San Juan Basin gas supplies. FERC held a technical conference to
address the June 1, 1994 application on August 11, 1994.
The Company plans to construct a new cryogenic natural gas liquids
extraction plant in the San Juan Basin. The plant will process 400 MMcf/d and
will increase the Company's processing capability in the San Juan Basin to 950
MMcf/d. The project is expected to cost approximately $75 million and is
anticipated to be in service by the second quarter of 1996.
On March 17, 1993, MPC filed an application, which was amended on November
8, 1993 and April 18, 1994, for a certificate of public convenience and
necessity to build and operate a 475 MMcf/d expansion of its existing system.
The proposed expansion will extend from MPC's existing east lateral, located
near Bakersfield, California, approximately 352 miles northward to the vicinity
of Sacramento and the Bay Area near San Francisco. The expansion will also
include 56 miles of looping of the existing pipeline along with 207 miles of
laterals. The estimated cost of the entire expansion is approximately $500
million. MPC expects to receive its FERC certificate in 1994. Receipt of an
acceptable FERC certificate within this time frame would allow the expansion to
be put into service by mid-1996.
On December 16, 1993, FERC held a public conference to examine a
jurisdictional question raised by CPUC and PG&E regarding MPC's proposed
expansion. The primary issue was whether FERC or CPUC should have jurisdiction
over the expansion. Written comments were filed by interested parties on January
10, 1994. On February 15, 1994, FERC issued an order determining that it has
exclusive jurisdiction over MPC and its proposed expansion. On March 17, 1994,
CPUC, PG&E and other parties filed for rehearing or clarification of FERC's
February 15, 1994 order.
The capital projects discussed above are expected to be financed through
internally generated funds and short-term and long-term borrowings.
RESULTS OF OPERATIONS
Second Quarter 1994 Compared to Second Quarter 1993
Operating revenues for the second quarter ended June 30, 1994 were $10
million lower than for the same period of 1993. New system rates that became
effective January 1, 1994 resulted in lower reservation and lower transportation
revenues which decreased operating revenues by $15 million and $5 million,
respectively. Lower gas sales volumes, gas sales rates and the 1993 sale of gas
in storage decreased operating revenues by $9 million, $4 million and $3
million, respectively. The decrease due to the 1993 sale of gas in storage was
offset in operating charges. Lower accruals for regulatory issues, higher
production area rates and the consolidation of MPC offset the decrease in
operating revenues by $15 million, $6 million and $5 million, respectively.
Operating charges were $12 million lower for the second quarter ended June
30, 1994 than for the same period of 1993. Lower gas sales volumes and the 1993
sale of gas in storage contributed $9 million and $3 million, respectively, to
the decrease in operating charges. The decrease due to the 1993 sale of gas in
storage was offset in operating revenues. Operation and maintenance expense
decreased $3 million due primarily to lower stock related costs and adjustments
to the take-or-pay undercollections accrual. Offsetting the decrease were
additional operation and maintenance costs due to the consolidation of MPC.
EPG's mainline throughput for the quarter ended June 30, 1994 was 313
billion cubic feet ("Bcf") compared to 290 Bcf for the same period of 1993.
Deliveries to the California market increased in the 1994 period due to an
increase in utility electric generation demand, which resulted from a decrease
in the availability of hydroelectric power. Field transportation volumes of 118
Bcf for the second quarter ended June 30, 1994 were relatively unchanged
compared to the second quarter ended June 30, 1993 volumes of 119 Bcf.
13
<PAGE> 15
Other-net was $5 million higher for the quarter ended June 30, 1994 than
for the same period of 1993. Contributing to the 1994 increase were lower
accruals for environmental cleanup issues, a note receivable write-off in 1993
and a loss on the disposition of property in 1993. Lower allowance for funds
used during construction ("AFUDC") offset the increase in other-net by $2
million.
Six Months Ended 1994 Compared to Six Months Ended 1993
Operating revenues for the six months ended June 30, 1994 were $1 million
higher than for the same period of 1993. The consolidation of MPC, lower
accruals for regulatory issues and higher production area rates contributed $16
million, $25 million and $9 million, respectively, to the increase in operating
revenues. New system rates that became effective January 1, 1994 resulted in
lower reservation and lower transportation revenues that offset the increase in
operating revenues by $14 million and $18 million, respectively. Additionally,
lower gas sales volumes, lower transportation volumes and the 1993 sale of gas
in storage contributed $9 million, $2 million and $3 million, respectively, to
the decrease in operating revenues. The decrease due to the 1993 sale of gas in
storage was offset in operating charges.
Operating charges were $14 million higher for the six months ended June 30,
1994 than for the same period of 1993. The increase in operating charges was due
to a litigation special charge of $15 million in connection with the Amoco
decision. Higher average cost of gas contributed $17 million to the increase. In
addition, depreciation expense increased by $3 million, primarily due to the
consolidation of MPC. Lower gas sales volumes and the 1993 sale of gas in
storage offset the increase in operating charges by $8 million and $3 million,
respectively. The decrease due to the 1993 sale of gas in storage was offset in
operating revenues. Additionally, operation and maintenance expense decreased $7
million primarily due to lower stock related costs, lower take-or-pay absorption
expense, lower Gas Research Institute expense and adjustments to the take-or-pay
undercollections accrual. The consolidation of MPC partially offset the decrease
in operation and maintenance expense.
EPG's mainline throughput for the six months ended June 30, 1994 was 626
Bcf compared to 654 Bcf for the same period of 1993. Deliveries to the
California market decreased due to higher storage withdrawals and increased
competition partially offset by an increase in utility electric generation
demand, which resulted from a decrease in the availability of hydroelectric
power. The decrease was also offset by increased deliveries to off-system
markets. Field transportation volumes of 237 Bcf for the six months ended June
30, 1994 were relatively unchanged compared to 234 Bcf for the same period ended
June 30, 1993.
Interest and debt expense for the six months ended June 30, 1994 was $4
million higher than for the same period of 1993 due primarily to the
consolidation of MPC.
Other-net was $9 million higher for the six months ended June 30, 1994 than
for the same period of 1993. Contributing to the 1994 increase were $14 million
related to the recovery of EPG's investment in its underground storage facility
and lower accruals for environmental cleanup issues. The increase was offset by
interest expense related to the special charge for litigation in connection with
the Amoco decision of approximately $4 million and a reduction in partnership
earnings due to the consolidation of MPC. Additionally, a decrease in AFUDC
offset the increase in other-net by $3 million.
OTHER
Effective January 1, 1994, the Company adopted SFAS No. 112, which requires
companies to account for postemployment benefits. As of June 30, 1994, the
Company's liability for postemployment benefit costs was approximately $8
million. Management expects to seek recovery of these costs through rates and
has recorded a regulatory asset equal to the liability.
14
<PAGE> 16
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Notes 3, 4 and 5 of Notes to Consolidated Financial Statements.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
Continuous Odd-Lot Stock Sales Program
EPG has made available a Continuous Odd-Lot Stock Sales Program
("Program") in which shareholders of EPG owning beneficially fewer than
100 shares of EPG's common stock ("Odd-lot Holders") are offered a
convenient method of disposing of all their shares without incurring the
customary brokerage costs associated with the sale of an odd-lot. Only
Odd-lot Holders are eligible to participate in the Program. The Program
is strictly voluntary and no Odd-lot Holder is obligated to sell
pursuant to the Program. A brochure and related materials describing the
Program were sent to Odd-lot Holders in February 1994. The Program
currently does not have a termination date, but EPG may suspend the
Program at any time. Inquiries regarding the Program should be directed
to The First National Bank of Boston, the agent for the Program, at
1-800-736-3001.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
<TABLE>
<S> <C>
10-H -- Revolving Credit and Competitive Advance Facility Agreement dated as
of August 10, 1994 between EPG, Chemical Bank and certain other banks
(Form 10-Q, No. 1-2700, filed August 12, 1994).
11 -- Computation of Earnings Per Common Share
</TABLE>
B. Reports on Form 8-K
None
15
<PAGE> 17
SIGNATURES
Pursuant to the requirements 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.
EL PASO NATURAL GAS COMPANY
---------------------------
(Registrant)
Date: August 12, 1994 /s/ H. BRENT AUSTIN
---------------------------
H. Brent Austin
Senior Vice President and
Chief Financial Officer
Date: August 12, 1994 /s/ THOMAS E. RICKS
---------------------------
Thomas E. Ricks
Vice President, Controller and
Chief Accounting Officer
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- - --------- ------- -----------
<S> <C> <C>
10-H -- Revolving Credit and Competitive Advance Facility Agreement dated
as of August 10, 1994 between EPG, Chemical Bank and certain other
banks (Form 10-Q, No. 1-2700, filed August 12, 1994).
11 -- Computation of Earnings Per Common Share
</TABLE>
<PAGE> 1
(EXECUTION COPY)
================================================================================
EL PASO NATURAL GAS COMPANY
_____________________________________
$400,000,000
REVOLVING CREDIT AND COMPETITIVE
ADVANCE FACILITY AGREEMENT
DATED AS OF AUGUST 10, 1994
_____________________________________
CHEMICAL BANK,
AS ADMINISTRATIVE AGENT
AND CAF ADVANCE AGENT
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 1.3 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.1 The Revolving Credit Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.2 Revolving Credit Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.3 Making the Revolving Credit Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.4 CAF Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.5 Procedure for CAF Advance Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.6 CAF Advance Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.7 CAF Advance Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.8 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.9 Reduction of the Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.10 Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.11 Interest on Revolving Credit Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.12 Additional Interest on Eurodollar Rate Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.13 Interest Rate Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.14 Voluntary Conversion of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.15 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.16 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.17 Increased Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.18 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.19 Payments and Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.20 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.21 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.22 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE III
CONDITIONS OF EFFECTIVENESS AND LENDING . . . . . . . . . . . . . . . . . . . 34
SECTION 3.1 Conditions Precedent to Effectiveness of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 3.2 Conditions Precedent to Initial Advances to Any Borrowing Subsidiary . . . . . . . . . . . . . . . . . . 35
SECTION 3.3 Conditions Precedent to Each Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.1 Representations and Warranties of the Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE V
COVENANTS OF THE BORROWERS . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 5.1 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 5.2 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 5.3 Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE VI
GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 6.1 Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 6.2 No Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 6.3 Amendments, etc. with respect to the Obligations; Waiver of Rights . . . . . . . . . . . . . . . . . . . . 49
SECTION 6.4 Guarantee Absolute and Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 6.5 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE VII
EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 7.1 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE VIII
THE ADMINISTRATIVE AGENT AND THE CAF ADVANCE AGENT . . . . . . . . . . . . . . . . . . 54
SECTION 8.1 Authorization and Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 8.2 Administrative Agent's and CAF Advance Agent's Reliance, Etc. . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 8.3 Chemical and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 8.4 Lender Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 8.5 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 8.6 Successor Administrative Agent and CAF Advance Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE IX
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 9.1 Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 9.2 Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 9.3 No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 9.4 Costs and Expenses; Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 9.5 Right of Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 9.6 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 9.7 Assignments and Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 9.8 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 9.9 Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 9.10 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 9.11 Rate of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 9.12 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SCHEDULE
Schedule I Commitments, Addresses, Etc.
EXHIBITS
Exhibit A Form of Revolving Credit Note
Exhibit B Form of Notice of Borrowing
Exhibit C Form of CAF Advance Note
Exhibit D Form of CAF Advance Request
Exhibit E Form of CAF Advance Offer
Exhibit F Form of CAF Advance Confirmation
Exhibit G Form of Assignment and Acceptance
Exhibit H Form of Opinion of (Associate) General Counsel
of the Company
Exhibit I Form of Opinion of New York Counsel to the
Company
Exhibit J Form of Process Agent Letter
Exhibit K Form of Joinder Agreement
Exhibit L Form of Opinion of (Associate) General Counsel of
the Company
Exhibit M Form of Opinion of New York Counsel to the Company
</TABLE>
-iii-
<PAGE> 5
REVOLVING CREDIT AND COMPETITIVE ADVANCE FACILITY AGREEMENT,
dated as of August 10, 1994, among EL PASO NATURAL GAS COMPANY, a Delaware
corporation (the "Company"), the several banks and other financial institutions
from time to time parties to this Agreement (the "Lenders"), CHEMICAL BANK, a
New York banking corporation, as administrative agent (in such capacity, the
"Administrative Agent") and as CAF Advance Agent (in such capacity, the "CAF
Advance Agent") for the Lenders hereunder.
The parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1 Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"Administrative Agent" shall have the meaning assigned to such
term in the preamble hereof.
"Advance" means an advance by a Lender to any Borrower
pursuant to Article II, and refers to a Base Rate Advance, a
Eurodollar Rate Advance or a CAF 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.
The term "control" (including the terms "controlled by" or "under
common control with") means, with respect to any Person, the
possession, direct or indirect, of the power to vote 20% or more of
the securities having ordinary voting power for the election of
directors of such Person or to direct or cause the direction of the
management and policies of such Person, whether through ownership of
voting securities or by contract or otherwise.
"Agreement" means this Revolving Credit and Competitive
Advance Facility, as amended, supplemented or otherwise modified from
time to time.
"Alternate Program" means any other program providing for the
sale or other disposition of trade or other receivables entered into
by the Company which is in addition to or in replacement of the
program evidenced by the Receivables Purchase and Sale Agreement,
provided that such program is on terms (a) substantially similar to
the Receivables Purchase and Sale Agreement or (b) customary for
similar transactions as reasonably determined by the Administrative
Agent.
<PAGE> 6
2
"Applicable LIBO Rate" means in respect of any CAF Advance
requested pursuant to a LIBO Rate CAF Advance Request, the London
interbank offered rate for deposits in Dollars for the period
commencing on the date of such CAF Advance and ending on the maturity
date thereof which appears on Telerate Page 3750 as of 11:00 A.M.,
London time, two Business Days prior to the beginning of such period.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, and accepted by the
Administrative Agent, in substantially the form of Exhibit G hereto.
"Base CD Rate" means the sum of (a) the product of (i) the
Three-Month Secondary CD Rate and (ii) a fraction, the numerator of
which is one and the denominator of which is one minus the C/D Reserve
Percentage and (b) the C/D Assessment Rate.
"Base Rate" means for any day, a rate per annum (adjusted to
the nearest 1/16 of 1% or, if there is no nearest 1/16 of 1%, rounded
upwards to the next highest 1/16 of 1%) equal to the greatest of (a)
the Prime Rate in effect on such day, (b) the Base CD Rate in effect
on such day plus 1/2 of 1% and (c) the Effective Federal Funds Rate in
effect on such day plus 1/2 of 1%. Any change in the Base Rate due to
a change in the Prime Rate, the Three-Month Secondary CD Rate or the
Effective Federal Funds Rate shall be effective as of the opening of
business on the effective day of such change in the Prime Rate, the
Three-Month Secondary CD Rate or the Effective Federal Funds Rate,
respectively.
"Base Rate Advance" means an Advance which bears interest as
provided in Section 2.11(a)(i).
"Borrowers" means the collective reference to the Company and
each Borrowing Subsidiary; each, a "Borrower".
"Borrowing" means a borrowing consisting of Advances of the
same Type made on the same day by the Lenders, it being understood
that there may be more than one Borrowing on a particular day.
"Borrowing Subsidiary" means each domestic Principal
Subsidiary of the Company which has been designated by the Borrower as
a "Borrowing Subsidiary" by written notice to the Administrative
Agent; collectively, the "Borrowing Subsidiaries".
"Burlington" means Burlington Resources Inc., a Delaware
corporation.
"Business Day" means a day of the year on which banks are not
required or authorized to close in New York, New
<PAGE> 7
3
York and, if the applicable Business Day relates to any Eurodollar
Rate Advances or LIBO Rate CAF Advances, on which dealings are carried
on in the London interbank market.
"CAF Advance" means an Advance made pursuant to Sections 2.4
and 2.5.
"CAF Advance Agent" shall have the meaning assigned to such
term in the preamble hereof.
"CAF Advance Availability Period" means the period from and
including the Closing Date until the earlier of (a) the date which is
14 days prior to the Stated Termination Date and (b) the Termination
Date.
"CAF Advance Confirmation" means each confirmation by the
applicable Borrower of its acceptance of CAF Advance Offers, which CAF
Advance Confirmation shall be substantially in the form of Exhibit F
and shall be delivered to the CAF Advance Agent by telecopy.
"CAF Advance Interest Payment Date" means as to each CAF
Advance, each interest payment date specified by the applicable
Borrower for such CAF Advance in the related CAF Advance Request.
"CAF Advance Lenders" means Lenders from time to time
designated by the Company, in consultation with the CAF Advance Agent,
as CAF Advance Lenders as provided in Section 2.4.
"CAF Advance Maturity Date" means as to any CAF Advance, the
date specified by the applicable Borrower pursuant to Section
2.4(d)(ii) in its acceptance of the related CAF Advance Offer.
"CAF Advance Note" shall have the meaning assigned to such
term in Section 2.7 (collectively, the "CAF Advance Notes").
"CAF Advance Offer" means each offer by a CAF Advance Lender
to make CAF Advances pursuant to a CAF Advance Request, which CAF
Advance Offer shall contain the information specified in Exhibit E and
shall be delivered to the CAF Advance Agent by telephone, immediately
confirmed by telecopy.
"CAF Advance Request" means each request by the applicable
Borrower for CAF Advance Lenders to submit bids to make CAF Advances,
which request shall contain the information in respect of such
requested CAF Advances specified in Exhibit D and shall be delivered
to the CAF Advance Agent in writing, by telecopy, or by telephone,
immediately confirmed by telecopy.
<PAGE> 8
4
"Capitalization" means the sum (without duplication) of (a)
consolidated Debt of the Company and its consolidated Subsidiaries,
plus (b) the aggregate amount of Guaranties entered into by the
Company and its consolidated Subsidiaries, plus (c) the Company's
common and preferred stockholders' equity.
"C/D Assessment Rate" means for any day as applied to any Base
Rate Advance, the annual assessment rate determined by Chemical to be
payable on such day to the Federal Deposit Insurance Corporation (the
"FDIC") for the FDIC's (or any successor's) insuring time deposits at
offices of Chemical in the United States.
"C/D Reserve Percentage" means for any day as applied to any
Base Rate Advance, that percentage (expressed as a decimal) which is
in effect on such day, as prescribed by the Board of Governors of the
Federal Reserve System (or any successor) (the "Board"), for
determining the then current reserve requirement for the
Administrative Agent in respect of new non-personal time deposits in
Dollars having a maturity of 30 days or more.
"Chemical" means Chemical Bank.
"Closing Date" means the date on which the conditions
precedent set forth in Section 3.1 have been satisfied (or compliance
therewith shall have been waived by the Lenders).
"Commitment" means as to any Lender, the obligation of such
Lender to make Revolving Credit Advances to the Borrowers hereunder in
an aggregate principal amount at any one time outstanding not to
exceed the amount set forth opposite such Lender's name on Schedule I
(as such Schedule I is amended from time to time pursuant to Section
9.7(c)), as such amount may be reduced from time to time in accordance
with the provisions of this Agreement.
"Commitment Percentage" means as to any Lender at any time,
the percentage which such Lender's Commitment then constitutes of the
aggregate Commitments (or, at any time after the Commitments shall
have expired or terminated, the percentage which the aggregate
principal amount of such Lender's Advances then outstanding
constitutes of the aggregate principal amount of the Advances then
outstanding).
"Company" shall have the meaning assigned to such term in the
preamble hereof.
"Contingent Guaranty" shall have the meaning assigned to such
term in the definition of the term "Guaranty" contained in this
Section 1.1.
<PAGE> 9
5
"Convert", "Conversion" and "Converted" each refers to a
conversion of Advances of one Type into Advances of another Type
pursuant to Section 2.13, 2.14 or 2.18.
"Debt" means, as to any Person, all Indebtedness of such
Person other than (a) any Project Financing of such Person and (b) in
the case of the Company, any liabilities of the Company under the
Receivables Purchase and Sale Agreement or any Alternate Program, or
any document executed by the Company in connection therewith;
provided, however, that for purposes of Article V hereof "Debt" shall
not include up to an aggregate amount of $100,000,000 of (i) the
amount of optional payments in lieu of asset repurchase or other
payments to similar effect, including extension or renewal payments,
on off balance sheet leases and (ii) the amount of the purchase price
for optional acquisition of such asset (in either case, calculated at
the lower amount payable in respect of such asset under clause (i) or
(ii) above.
"Dollars" and "$" means dollars in lawful currency of the
United States of America.
"Effective Federal Funds Rate" means, for any day, the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is
a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal
funds brokers of recognized standing selected by it.
"Eligible Assignee" means, with respect to any particular
assignment under Section 9.7, any bank or other financial institution
approved in writing by the Company expressly with respect to such
assignment and, except as to such an assignment by Chemical so long as
Chemical is the Administrative Agent hereunder, the Administrative
Agent as an Eligible Assignee for purposes of this Agreement, provided
that neither the Administrative Agent's nor the Company's approval
shall be unreasonably withheld.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated
and rulings issued from time to time thereunder.
"ERISA Affiliate" means any Person who is a member of the
Company's controlled group within the meaning of Section
4001(a)(14)(A) of ERISA.
<PAGE> 10
6
"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 Rate" means, for any Interest Period for each
Eurodollar Rate Advance comprising part of the same Borrowing, an
interest rate per annum equal to the average (rounded upward to the
nearest whole multiple of 1/16 of 1% per annum, if such average is not
such a multiple) of the rate per annum at which deposits in Dollars
are offered by the principal office of each of the Reference Lenders
in London, England, to prime banks in the London interbank market at
11:00 A.M. (London, England time) two Business Days before the first
day of such Interest Period (if applicable or appropriate, in an
amount comparable to the amount of such Borrowing) and for a period
equal to such Interest Period. The Eurodollar Rate for the Interest
Period for each Eurodollar Rate Advance comprising part of the same
Borrowing shall be determined by the Administrative Agent on the basis
of applicable rates furnished to and received by the Administrative
Agent from the Reference Lenders two Business Days before the first
day of such Interest Period, subject, however, to the provisions of
Section 2.13.
"Eurodollar Rate Advance" means an Advance which bears
interest determined by reference to the Eurodollar Rate, as provided
in Section 2.11(a)(ii).
"Eurodollar Rate Margin" means for each day and each
Eurodollar Rate Advance, the rate per annum set forth below opposite
the applicable S&P Bond Rating and Moody's Bond Rating:
<TABLE>
<CAPTION>
Bond Rating Eurodollar
(S&P/Moody's) Level Rate Margin
<S> <C> <C>
BBB+/Baa1 or better I .250%
BBB/Baa2 II .275%
BBB-/Baa3 III .300%
BB+/Ba1 or below IV .375%;
</TABLE>
provided that if the ratings of such rating agencies do not fall
within the same Level, the Eurodollar Rate Margin applicable to such
day will be the lower Eurodollar Rate Margin and provided, further,
that in the event a rating is not available from either rating agency,
such rating agency will be deemed to have assigned its lowest rating.
"Eurodollar Reserve Percentage" for any Lender for any
Interest Period for any Eurodollar Rate Advance means the reserve
percentage applicable during such Interest Period under regulations
issued from time to time by the Board of Governors of the Federal
Reserve System (or if more than one
<PAGE> 11
7
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) for determining the maximum
reserve requirement (including, but not limited to, any emergency,
supplemental or other marginal reserve requirement) for such Lender
with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities having a term equal to such Interest Period.
"Events of Default" shall have the meaning assigned to such
term in Section 7.1.
"Excluded Acquisition Debt" means (a) Debt, Guaranties or
reimbursement obligations of any corporation acquired by the Company
or any of its Subsidiaries and which Debt, Guaranties or reimbursement
obligations exist immediately prior to such acquisition (provided that
(i) such Debt, Guaranties or reimbursement obligations are not
incurred solely in anticipation of such acquisition and (ii)
immediately prior to such acquisition such corporation is not a
Subsidiary of the Company) or (b) Debt, Guaranties or reimbursement
obligations in respect of any asset acquired by the Company or its
Subsidiaries and which Debt, Guaranties or reimbursement obligations
exists immediately prior to such acquisition (provided that (i) such
Debt, Guaranties or reimbursement obligations are not incurred solely
in anticipation of such acquisition and (ii) immediately prior to such
acquisition such asset is not an asset of the Company or any of its
Subsidiaries).
"FERC" means the Federal Energy Regulatory Commission, or any
agency or authority of the United States from time to time succeeding
to its function.
"Fixed Rate CAF Advance" means any CAF Advance made pursuant
to a Fixed Rate CAF Advance Request.
"Fixed Rate CAF Advance Request" means any CAF Advance Request
requesting the CAF Advance Lenders to offer to make CAF Advances at a
fixed rate (as opposed to a rate composed of the Applicable LIBO Rate
plus (or minus) a margin).
"Guaranty", "Guaranteed" and "Guaranteeing" each means any act
by which any Person assumes, guarantees, endorses or otherwise incurs
direct or contingent liability in connection with, or agrees to
purchase or otherwise acquire or otherwise assures a creditor against
loss in respect of, any Debt or Project Financing of any Person other
than the Company or any of its consolidated Subsidiaries (excluding
(a) any liability by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of
business, (b) any liability in connection with obligations of the
Company or any of its consolidated
<PAGE> 12
8
Subsidiaries, including, without limitation, obligations under any
conditional sales agreement, equipment trust financing or equipment
lease, and (c) any such act in connection with a Project Financing
that either (i) guarantees performance of the completion of the
project which is financed by such Project Financing, until such time,
if any, that such guaranty becomes a guaranty of payment of such
Project Financing (other than a guaranty of payment of the type
referred to in subclause (ii) below) or (ii) is contingent upon, or
the obligation to pay or perform under which is contingent upon, the
occurrence of any event other than or in addition to the passage of
time or any Project Financing becoming due (any such act referred to
in this clause (c) being a "Contingent Guaranty"); provided, however,
that for purposes of this definition the liability of the Company or
any of its Subsidiaries with respect to any obligation as to which a
third party or parties are jointly, or jointly and severally, liable
as a guarantor or otherwise as contemplated hereby and have not
defaulted on its or their portions thereof, shall be only its pro rata
portion of such obligation.
"Indebtedness" of any Person means, without duplication (a)
indebtedness of such Person for borrowed money, (b) obligations of
such Person (other than any portion of any trade payable obligation of
such Person which shall not have remained unpaid for 91 days or more
from the original due date of such portion) to pay the deferred
purchase price of property or services, and (c) obligations of such
Person as lessee under leases which shall have been or should be, in
accordance with generally accepted accounting principles, recorded as
capital leases, except that where such indebtedness or obligation of
such Person is made jointly, or jointly and severally, with any third
party or parties other than any consolidated Subsidiary of such
Person, the amount thereof for the purposes of this definition only
shall be the pro rata portion thereof payable by such Person, so long
as such third party or parties have not defaulted on its or their
joint and several portions thereof.
"Indemnified Party" means any or all of the Lenders, the
Administrative Agent and the CAF Advance Agent.
"Interest Period" means, for each Eurodollar Rate Advance
comprising part of the same Borrowing, the period beginning on the
date of such Advance or the date of the Conversion of any Advance into
such an Advance and ending on the last day of the period selected by
the applicable Borrower pursuant to the provisions below and,
thereafter, each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of
the period selected by the applicable Borrower pursuant to the
provisions below. The duration of each such
<PAGE> 13
9
Interest Period shall be one, two, three or six months, or, subject to
availability to each Lender, nine or twelve months, in each case as
the applicable Borrower may, upon notice received by the
Administrative Agent not later than 12:00 noon (New York City time) on
the third Business Day prior to the first day of such Interest Period
with respect to Eurodollar Rate Advances, select; provided, however,
that:
(a) the duration of any Interest Period which
commences before the Termination Date and would otherwise end
after the Termination Date shall end on the Termination Date;
(b) if the last day of such Interest Period
would otherwise occur on a day which is not a Business Day,
such last day shall be extended to the next succeeding
Business Day, except if such extension would cause such last
day to occur in a new calendar month, then such last day shall
occur on the next preceding Business Day; and
(c) Interest Periods commencing on the same
date for Advances comprising the same Borrowing shall be of
the same duration.
"Joinder Agreement" means a Joinder Agreement, substantially
in the form of Exhibit K hereto, duly executed and delivered by the
Company and the Borrowing Subsidiary party thereto.
"Lenders" shall have the meaning assigned to such term in the
preamble hereof.
"LIBO Rate CAF Advance" means any CAF Advance made pursuant to
a LIBO Rate CAF Advance Request.
"LIBO Rate CAF Advance Request" means any CAF Advance Request
requesting the CAF Advance Lenders to offer to make CAF Advances at an
interest rate equal to the Applicable LIBO Rate plus (or minus) a
margin.
"Lien" means any lien, security interest or other charge or
encumbrance, or any assignment of the right to receive income, or any
other type of preferential arrangement, in each case to secure any
Indebtedness or any Guaranty of any Person.
"Majority Lenders" means Lenders the Commitment Percentages of
which aggregate at least 51%.
"Margin Stock" means "margin stock" as defined in Regulation U
of the Board of Governors of the Federal Reserve System, as in effect
from time to time.
<PAGE> 14
10
"Material Adverse Effect" means a material adverse effect on
the financial condition or operations of the Company and its
consolidated Subsidiaries on a consolidated basis.
"Mojave" means Mojave Pipeline Company.
"Mojave Northward Expansion Project" means the expansion (by
construction, acquisition or otherwise) of the natural gas
transmission system owned or to be owned by the Company, Mojave or any
Subsidiary which is not a Principal Subsidiary on the date hereof to
extend such system from Topock, AZ to the vicinity of San Francisco,
CA and Sacramento, CA and the related looping and increased
compression facilities.
"Moody's Bond Rating" means for any day, the rating of the
Company's senior long-term unsecured debt by Moody's Investor Service,
Inc. in effect at 11:00 A.M., New York City time, on such day.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA to which the Company 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 and in respect of which the Company
or an ERISA Affiliate has any liability (contingent or otherwise),
such plan being maintained pursuant to one or more collective
bargaining agreements.
"Multiple Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, which (a) is maintained for
employees of the Company or an ERISA Affiliate and at least one Person
other than the Company and its ERISA Affiliates or (b) was so
maintained and in respect of which the Company or an ERISA Affiliate
could have liability under Section 4064 or 4069 of ERISA in the event
such plan has been or were to be terminated.
"Net Worth" means with respect to the Company, as of any date
of determination, the sum of the preferred stock and stockholders'
equity of the Company as shown on the most recent consolidated balance
sheet of the Company delivered pursuant to Section 5.3.
"Note" means any Revolving Credit Note or CAF Advance Note
(collectively, the "Notes").
"Notice of Borrowing" has the meaning specified in Section
2.3(a).
"Obligations" means the collective reference to the unpaid
principal of and interest on the Notes and all other
<PAGE> 15
11
financial liabilities of the Borrowers to the Administrative Agent,
the CAF Advance Agent and the Lenders (including, without limitation,
interest accruing at the then applicable rate provided in this
Agreement after the maturity of the Advances and interest accruing at
the then applicable rate provided in this Agreement after the filing
of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to any Borrower whether or
not a claim for post-filing or post-petition interest is allowed in
such proceeding), whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred, which may
arise under, out of, or in connection with, this Agreement or the
Notes, in each case whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all fees and disbursements
of counsel to the Administrative Agent, the CAF Advance Agent or to
the Lenders that are required to be paid by any Borrower pursuant to
this Agreement).
"Other Taxes" shall have the meaning assigned to such term in
Section 2.20(b).
"Party" shall have the meaning assigned to such term in
Section 9.8.
"PBGC" means the Pension Benefit Guaranty Corporation (or
any successor).
"Permitted Claims" shall have the meaning assigned to such
term in Section 9.9(a).
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity, or a
country or any political subdivision thereof or any agency or
instrumentality of such country or subdivision.
"Plan" means a Single Employer Plan or a Multiple Employer
Plan.
"Prime Rate" means the rate of interest per annum publicly
announced from time to time by Chemical as its prime rate in effect at
its principal office in New York City. The Prime Rate is not intended
to be the lowest rate of interest charged by Chemical in connection
with extensions of credit to debtors.
"Principal Subsidiary" means, at any time, any Subsidiary of
the Company (other than a Project Financing Subsidiary) having assets
at such time greater than or equal to 5% of the consolidated assets of
the Company and its consolidated Subsidiaries at such time.
<PAGE> 16
12
"Process Agent" has the meaning specified in Section 9.9(a).
"Project Financing" means any Indebtedness incurred to finance
a project, other than any portion of such Indebtedness permitting or
providing for recourse against the Company or any of its Subsidiaries
other than (a) recourse to the stock or assets of the Project
Financing Subsidiary, if any, incurring or Guaranteeing such
Indebtedness, and (b) such recourse as exists under any Contingent
Guaranty.
"Project Financing Subsidiary" means any Subsidiary of the
Company whose principal purpose is to incur Project Financing, or to
become a partner in a partnership so created, and substantially all
the assets of which Subsidiary or partnership are limited to those
assets being financed (or to be financed) in whole or in part by a
Project Financing.
"Receivables Purchase and Sale Agreement" means the
Receivables Purchase and Sale Agreement dated as of January 14, 1992
among the Company, CIESCO L.P., a New York limited partnership,
Corporate Asset Funding Company, a Delaware corporation and Citicorp
North America, Inc., as agent, as such Agreement may be amended,
supplemented, restated or otherwise modified from time to time which
amendment, supplement, restatement or modification will not extend the
purchase of receivables and other assets thereunder to receivables and
assets other than present and future gas purchase contract take-or-pay
buyout and buydown receivables, the collateral and other support
therefor and the collections therefrom.
"Reference Lenders" means Chemical, Morgan Guaranty Trust
Company of New York and Swiss Bank Corporation.
"Register" has the meaning specified in Section 9.7(c).
"Revolving Credit Advances" shall have the meaning assigned to
such term in Section 2.1.
"Revolving Credit Note" shall have the meaning assigned to
such term in Section 2.3 (collectively, the "Revolving Credit Notes").
"S&P Bond Rating" means for any day, the rating of the
Company's senior long-term unsecured debt by Standard & Poor's Ratings
Group in effect at 11:00 A.M., New York City time, on such day.
"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 Company or an ERISA
<PAGE> 17
13
Affiliate and no Person other than the Company and its ERISA
Affiliates or (b) was so maintained and in respect of which the
Company or an ERISA Affiliate could have liability under Section 4069
of ERISA in the event such plan has been or were to be terminated.
"Stated Termination Date" means August 10, 1999.
"Subsidiary" means, as to any Person, any corporation of which
at least a majority of the outstanding stock having by the terms
thereof ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether or not at the
time stock of any other class or classes of such corporation shall or
might have voting power by reason of the happening of any contingency)
is at the time directly or indirectly beneficially owned or controlled
by such Person or one or more of its Subsidiaries or such Person and
one or more of the Subsidiaries of such Person.
"Taxes" shall have the meaning assigned to such term in
Section 2.20(a).
"Termination Date" means the earlier of (a) the Stated
Termination Date and (b) the date of termination in whole of the
Commitments pursuant to Section 2.9 or 7.1.
"Termination Event" means (a) a "reportable event," as such term
is described in Section 4043 of ERISA (other than a "reportable event"
not subject to the provision for 30-day notice to the PBGC under
subsections .11, .12, .13, .14, .16, .18, .19 or .20 of PBGC Reg.
Section 2615), or an event described in Section 4062(e) of ERISA, or
(b) the withdrawal of the Company or any ERISA Affiliate from a
Multiple Employer Plan during a plan year in which it was a
"substantial employer," as such term is defined in Section 4001(a)(2)
of ERISA or the incurrence of liability by the Company or any ERISA
Affiliate under Section 4064 of ERISA upon the termination of a
Multiple Employer Plan, or (c) the filing of a notice of intent to
terminate a Plan or the treatment of a Plan amendment as a termination
under Section 4041 of ERISA, or (d) the institution of proceedings to
terminate a Plan by the PBGC under Section 4042 of ERISA, or (e) the
conditions set forth in Section 302(f)(1)(A) and (B) of ERISA to the
creation of a lien upon property or rights to property of the Company
or any ERISA Affiliate for failure to make a required payment to a
Plan are satisfied, or (f) the adoption of an amendment to a Plan
requiring the provision of security to such Plan, pursuant to Section
307 of ERISA, or (g) the occurrence of any other event or the
existence of any other condition which would reasonably be expected to
result in the termination of, or the appointment of a trustee to
administer, any Plan under Section 4042 of ERISA.
<PAGE> 18
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"Three-Month Secondary CD Rate" means, for any day, the
secondary market rate (adjusted to the basis of a year of 365 or 366
days, as the case may be) for three-month certificates of deposit
reported as being in effect on such day (or, if such day shall not be
a Business Day, the next preceding Business Day) by the Board of
Governors of the Federal Reserve System (the "Board") through the
public information telephone line of the Federal Reserve Bank of New
York (which rate will, under the current practices of the Board, be
published in Federal Reserve Statistical Release H.15(519) during the
week following such day), or, if such rate shall not be so reported on
such day or such next preceding Business Day, the average of the
secondary market quotations for three-month certificates of deposit of
major money center banks in New York City received at approximately
10:00 A.M., New York City time, on such day (or, if such day shall not
be a Business Day, on the next preceding Business Day) by the
Administrative Agent from three New York City negotiable certificate
of deposit dealers of recognized standing selected by it.
"Type" means (a) as to any Revolving Credit Advance, its
nature as a Base Rate Advance or a Eurodollar Rate Advance and (b) as
to any CAF Advance, its nature as a Fixed Rate CAF Advance or a LIBO
Rate CAF Advance.
"Withdrawal Liability" shall have the meaning given such term
under Part 1 of Subtitle E of Title IV of ERISA.
SECTION 1.2 Computation of Time Periods. Unless otherwise
stated in this Agreement, in the computation of a period of time from a
specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each means "to but excluding."
SECTION 1.3 Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles either (a) consistent with those principles
applied in the preparation of the financial statements referred to in Section
4.1(e) or (b) not materially inconsistent with such principles (so that no
covenant contained in Section 5.1 or 5.2 would be calculated or construed in a
materially different manner or with materially different results than if such
covenant were calculated or construed in accordance with clause (a) of this
Section 1.3).
<PAGE> 19
15
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.1 The Revolving Credit Advances. Each Lender
severally agrees, on the terms and conditions hereinafter set forth, to make
revolving credit advances ("Revolving Credit Advances") to the Borrowers or any
one or more of them from time to time on any Business Day during the period
from the date hereof to and including the Termination Date in an aggregate
amount not to exceed at any time outstanding the amount of such Lender's
Commitment; provided that the aggregate amount of the Advances outstanding
shall not at any time exceed the aggregate amount of the Commitments. Each
Borrowing shall be in an aggregate amount of $5,000,000 in the case of a
Borrowing comprised of Base Rate Advances and $20,000,000 in the case of a
Borrowing comprised of Eurodollar Rate Advances, or, in each case, an integral
multiple of $1,000,000 in excess thereof (or, in the case of a Borrowing of
Base Rate Advances, the aggregate unused Commitments, if less) and shall
consist of Revolving Credit Advances of the same Type made on the same day by
the Lenders ratably according to their respective Commitments. Within the
limits of each Lender's Commitment, any Borrower may make more than one
Borrowing on any Business Day and may borrow, repay pursuant to Section 2.10 or
prepay pursuant to Section 2.15, and reborrow under this Section 2.1.
SECTION 2.2 Revolving Credit Notes. The Revolving Credit
Advances to each Borrower made by each Lender shall be evidenced by a
promissory note of such Borrower, substantially in the form of Exhibit A, with
appropriate insertions as to maker, payee, date and principal amount (a
"Revolving Credit Note"), payable to the order of such Lender and in a
principal amount equal to the lesser of (a) the amount of the initial
Commitment of such Lender and (b) the aggregate unpaid principal amount of all
Revolving Credit Advances made to such Borrower by such Lender. Each Lender is
hereby authorized to, and prior to any transfer thereof shall, record the date,
Type and amount of each Revolving Credit Advance made by such Lender, each
continuation thereof, each conversion of all or a portion thereof to another
Type, the date and amount of each payment or prepayment of principal thereof
and, in the case of Eurodollar Rate Advances, the length of each Interest
Period with respect thereto, on the schedule annexed to and constituting a part
of its Revolving Credit Note, and any such recordation shall constitute prima
facie evidence of the accuracy of the information so recorded; provided,
however, that the failure to make any such recordation shall not affect the
obligations of such Borrower hereunder or any Revolving Credit Note. Each
Revolving Credit Note shall (i) be dated (A) in the case of the Company, the
Closing Date or (B) in each other case, the date the applicable Subsidiary
Borrower became a Borrower hereunder, (ii) be stated to mature on the
Termination Date and (iii) provide for the payment of interest in accordance
with this Agreement.
<PAGE> 20
16
SECTION 2.3 Making the Revolving Credit Advances. (a) Each
Borrowing of Revolving Credit Advances shall be made on notice by the Company
to the Administrative Agent (a "Notice of Borrowing") received by the
Administrative Agent, (i) in the case of a proposed Borrowing comprised of Base
Rate Advances, not later than 10:00 A.M. (New York City time) on the Business
Day of such proposed Borrowing and (ii) in the case of a proposed Borrowing
comprised of Eurodollar Rate Advances, not later than 12:00 noon (New York City
time) on the third Business Day prior to the date of such proposed Borrowing.
Each Notice of Borrowing shall be by telecopy or telephone (and if by
telephone, confirmed promptly by telecopier), in substantially the form of
Exhibit B hereto, specifying therein the requested (A) Borrower, (B) date of
such Borrowing, (C) Type of Revolving Credit Advances comprising such
Borrowing, (D) aggregate amount of such Borrowing, and (E) in the case of a
Borrowing comprised of Eurodollar Rate Advances, the initial Interest Period
for each such Advance. Each Lender shall, before 1:00 P.M. (New York City
time) on the date of such Borrowing, make available to the Administrative Agent
at its address at 270 Park Avenue, New York, New York, 10017, Reference: El
Paso Natural Gas Company, or at such other address designated by notice from
the Administrative Agent to the Lenders pursuant to Section 9.2, in same day
funds, such Lender's ratable portion of such Borrowing. Immediately after the
Administrative Agent's receipt of such funds and upon fulfillment of the
applicable conditions set forth in Article III, the Administrative Agent will
make such funds available to the applicable Borrower at Chemical, 270 Park
Avenue, New York, New York, 10017, Account No. 323291503, Reference: El Paso
Natural Gas Company, or at such other account of the applicable Borrower
maintained by the Administrative Agent (or any successor Administrative Agent)
designated by the applicable Borrower and agreed to by the Administrative Agent
(or such successor Administrative Agent), in same day funds.
(b) Each Notice of Borrowing shall be irrevocable and binding
on the applicable Borrower. In the case of any Borrowing which the related
Notice of Borrowing specified is to be comprised of Eurodollar Rate Advances,
if such Advances are not made as a result of any failure to fulfill on or
before the date specified for such Borrowing the applicable conditions set
forth in Article III, the applicable Borrower shall indemnify each Lender
against any loss, cost or expense incurred by such Lender as a result of such
failure, including, without limitation, any loss, cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired
by such Lender to fund the Advance to be made by such Lender as part of such
Borrowing.
(c) Unless the Administrative Agent shall have received
notice from a Lender prior to the date of any Borrowing that such Lender will
not make available to the Administrative Agent such Lender's ratable portion of
such Borrowing, the Administrative Agent may assume that such Lender has made
such
<PAGE> 21
17
portion available to the Administrative Agent on the date of such Borrowing in
accordance with subsection (a) of this Section 2.2 and the Administrative Agent
may, in reliance upon such assumption, make available to the applicable
Borrower on such date a corresponding amount. If and to the extent such Lender
shall not have so made such ratable portion available to the Administrative
Agent, such Lender and the applicable Borrower severally agree to repay to the
Administrative Agent forthwith on demand such corresponding amount together
with interest thereon, for each day from the date such amount is made available
to the applicable Borrower until the date such amount is repaid to the
Administrative Agent, at the Effective Federal Funds Rate for such day. If
such Lender shall repay to the Administrative Agent such corresponding amount,
such amount so repaid shall constitute such Lender's Advance to the applicable
Borrower as part of such Borrowing for purposes of this Agreement.
(d) 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, 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 2.4 CAF Advances. Subject to the terms and
conditions of this Agreement, the Borrowers or any one or more of them may
borrow CAF Advances from time to time during the CAF Advance Availability
Period on any Business Day. The Company shall, in consultation with the CAF
Advance Agent, designate Lenders from time to time as CAF Advance Lenders by
written notice to the CAF Advance Agent. The CAF Advance Agent shall transmit
each such notice of designation promptly to each designated CAF Advance Lender.
CAF Advances shall be borrowed in amounts such that the aggregate amount of
Advances outstanding at any time shall not exceed the aggregate amount of the
Commitments at such time. Any CAF Advance Lender may make CAF Advances in
amounts which, individually and together with the aggregate amount of other
Advances of such CAF Advance Lender, exceed such CAF Advance Lender's
Commitment, and such CAF Advance Lender's CAF Advances shall not be deemed to
utilize such CAF Advance Lender's Commitment. Within the limits and on the
conditions hereinafter set forth with respect to CAF Advances, the Borrowers
from time to time may borrow, repay and reborrow CAF Advances.
SECTION 2.5 Procedure for CAF Advance Borrowings. (a) A
Borrower shall request CAF Advances by delivering a CAF Advance Request to the
CAF Advance Agent, not later than 12:00 Noon (New York City time) four Business
Days prior to the date of the proposed Borrowing (in the case of a LIBO Rate
CAF Advance Request), and not later than 10:00 A.M. (New York City time) one
Business Day prior to the date of the proposed Borrowing (in the case of a
Fixed Rate CAF Advance Request). Each CAF Advance Request may solicit bids for
CAF Advances in an aggregate
<PAGE> 22
18
principal amount of $10,000,000 or an integral multiple of $1,000,000 in excess
thereof and having not more than three alternative maturity dates. The
maturity date for each CAF Advance shall be not less than 14 days nor more than
180 days after the date of the Borrowing therefor (and in any event shall be
not later than the Stated Termination Date); provided that each LIBO Rate CAF
Advance shall mature one, two, three or six months after the date of the
Borrowing therefor. The CAF Advance Agent shall notify each CAF Advance Lender
promptly by telecopy of the contents of each CAF Advance Request received by
the CAF Advance Agent.
(b) In the case of a LIBO Rate CAF Advance Request, upon
receipt of notice from the CAF Advance Agent of the contents of such CAF
Advance Request, each CAF Advance Lender may elect, in its sole discretion, to
offer irrevocably to make one or more CAF Advances at the Applicable LIBO Rate
plus (or minus) a margin determined by such CAF Advance Lender in its sole
discretion for each such CAF Advance. Any such irrevocable offer shall be made
by delivering a CAF Advance Offer to the CAF Advance Agent, before 10:30 A.M.
(New York City time) on the day that is three Business Days before the date of
the proposed Borrowing, setting forth:
(i) the maximum amount of CAF Advances for each
maturity date and the aggregate maximum amount of CAF Advances for all
maturity dates which such CAF Advance Lender would be willing to make
(which amounts may, subject to Section 2.4, exceed such CAF Advance
Lender's Commitment); and
(ii) the margin above or below the Applicable LIBO Rate
at which such CAF Advance Lender is willing to make each such CAF
Advance.
The CAF Advance Agent shall advise the Company before 11:00 A.M. (New York City
time) on the date which is three Business Days before the proposed date of the
Borrowing of the contents of each such CAF Advance Offer received by it. If
the CAF Advance Agent, in its capacity as a CAF Advance Lender, shall elect, in
its sole discretion, to make any such CAF Advance Offer, it shall advise the
Company of the contents of its CAF Advance Offer before 10:15 A.M. (New York
City time) on the date which is three Business Days before the proposed date of
the Borrowing.
(c) In the case of a Fixed Rate CAF Advance Request, upon
receipt of notice from the CAF Advance Agent of the contents of such CAF
Advance Request, each CAF Advance Lender may elect, in its sole discretion, to
offer irrevocably to make one or more CAF Advances at a rate of interest
determined by such CAF Advance Lender in its sole discretion for each such CAF
Advance. Any such irrevocable offer shall be made by delivering a CAF Advance
Offer to the CAF Advance Agent before 9:30 A.M. (New York City time) on the
proposed date of the Borrowing, setting forth:
<PAGE> 23
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(i) the maximum amount of CAF Advances for each
maturity date, and the aggregate maximum amount for all maturity
dates, which such CAF Advance Lender would be willing to make (which
amounts may, subject to Section 2.4, exceed such CAF Advance Lender's
Commitment); and
(ii) the rate of interest at which such CAF Advance
Lender is willing to make each such CAF Advance.
The CAF Advance Agent shall advise the Company before 10:00 A.M. (New York City
time) on the proposed date of the Borrowing of the contents of each such CAF
Advance Offer received by it. If the CAF Advance Agent, in its capacity as a
CAF Advance Lender, shall elect, in its sole discretion, to make any such CAF
Advance Offer, it shall advise the Company of the contents of its CAF Advance
Offer before 9:15 A.M. (New York City time) on the proposed date of the
Borrowing.
(d) Before 11:30 A.M. (New York City time) three Business
Days before the proposed date of the Borrowing (in the case of CAF Advances
requested by a LIBO Rate CAF Advance Request) and before 10:30 A.M. (New York
City time) on the proposed date of the Borrowing (in the case of CAF Advances
requested by a Fixed Rate CAF Advance Request), the Company, in its absolute
discretion, shall:
(i) cancel such CAF Advance Request by giving the CAF
Advance Agent telephone notice to that effect, or
(ii) by giving telephone notice to the CAF Advance Agent
(immediately confirmed by delivery to the CAF Advance Agent of a CAF
Advance Confirmation in writing or by telecopy) (A) subject to the
provisions of Section 2.5(e), accept one or more of the offers made by
any CAF Advance Lender or CAF Advance Lenders pursuant to Section
2.5(b) or Section 2.5(c), as the case may be, of the amount of CAF
Advances for each relevant maturity date and (B) reject any remaining
offers made by CAF Advance Lenders pursuant to Section 2.5(b) or
Section 2.5(c), as the case may be.
(e) The Company's acceptance of CAF Advances in response to
any CAF Advance Request shall be subject to the following limitations:
(i) the amount of CAF Advances accepted for each
maturity date specified by any CAF Advance Lender in its CAF Advance
Offer shall not exceed the maximum amount for such maturity date
specified in such CAF Advance Offer;
(ii) the aggregate amount of CAF Advances accepted for
all maturity dates specified by any CAF Advance Lender in its CAF
Advance Offer shall not exceed the aggregate maximum amount specified
in such CAF Advance Offer for all such maturity dates;
<PAGE> 24
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(iii) the Company may not accept offers for CAF Advances
for any maturity date in an aggregate principal amount in excess of
the maximum principal amount requested in the related CAF Advance
Request; and
(iv) if the Company accepts any of such offers, it must
accept offers based solely upon pricing for such relevant maturity
date and upon no other criteria whatsoever and if two or more CAF
Advance Lenders submit offers for any maturity date at identical
pricing and the Company accepts any of such offers but does not wish
to (or by reason of the limitations set forth in Section 2.4 or in
Section 2.5(e)(iii), cannot) borrow the total amount offered by such
CAF Advance Lenders with such identical pricing, the Company shall
accept offers from all of such CAF Advance Lenders in amounts
allocated among them pro rata according to the amounts offered by such
CAF Advance Lenders (or as nearly pro rata as shall be practicable
after giving effect to the requirement that CAF Advances made by a CAF
Advance Lender on a date of the Borrowing for each relevant maturity
date shall be in a principal amount of $5,000,000 or an integral
multiple of $1,000,000 in excess thereof; provided that if the number
of CAF Advance Lenders that submit offers for any maturity date at
identical pricing is such that, after the Company accepts such offers
pro rata in accordance with the foregoing, the CAF Advance to be made
by such CAF Advance Lenders would be less than $5,000,000 principal
amount, the number of such CAF Advance Lenders shall be reduced by the
CAF Advance Agent by lot until the CAF Advances to be made by such
remaining CAF Advance Lenders would be in a principal amount of
$5,000,000 or an integral multiple of $1,000,000 in excess thereof).
(f) If the Company notifies the CAF Advance Agent that a CAF
Advance Request is cancelled pursuant to Section 2.5(d)(i), the CAF Advance
Agent shall give prompt telephone notice thereof to the CAF Advance Lenders.
(g) If the Company accepts pursuant to Section 2.5(d)(ii) one
or more of the offers made by any CAF Advance Lender or CAF Advance Lenders,
the CAF Advance Agent promptly shall notify each CAF Advance Lender which has
made such a CAF Advance Offer of (i) the aggregate amount of such CAF Advances
to be made on such Borrowing Date for each maturity date and (ii) the
acceptance or rejection of any offers to make such CAF Advances made by such
CAF Advance Lender. Before 1:00 P.M. (New York City time) on the date of the
Borrowing specified in the applicable CAF Advance Request, each CAF Advance
Lender whose CAF Advance Offer has been accepted shall make available to the
Administrative Agent at its office set forth in Section 9.2 the amount of CAF
Advances to be made by such CAF Advance Lender, in same day funds. The
Administrative Agent will make such funds available to the applicable Borrower
as soon as practicable on such date at the Administrative Agent's aforesaid
address. As
<PAGE> 25
21
soon as practicable after each Borrowing Date, the CAF Advance Agent shall
notify each Lender of the aggregate amount of CAF Advances advanced on such
Borrowing Date and the respective maturity dates thereof.
(h) The failure of any CAF Advance Lender to make the CAF
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 CAF Advance on the date
of such Borrowing, but no CAF Lender shall be responsible for the failure of
any other CAF Advance Lender to make the CAF Advance to be made by such CAF
Advance Lender on the date of any Borrowing.
SECTION 2.6 CAF Advance Payments. (a) The applicable
Borrower shall repay to the Administrative Agent, for the account of each CAF
Advance Lender which has made a CAF Advance to it, on the applicable CAF
Advance Maturity Date the then unpaid principal amount of such CAF Advance.
The Borrowers shall not have the right to prepay any principal amount of any
CAF Advance.
(b) The applicable Borrower shall pay interest on the unpaid
principal amount of each CAF Advance to it from the date of the Borrowing to
the applicable CAF Advance Maturity Date at the rate of interest specified in
the CAF Advance Offer accepted by the applicable Borrower in connection with
such CAF Advance (calculated on the basis of a 360-day year for actual days
elapsed), payable on each applicable CAF Advance Interest Payment Date.
(c) If all or a portion of the principal amount of any CAF
Advance shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such overdue principal amount shall, without
limiting any rights of any Lender under this Agreement, bear interest from the
date on which such payment was due at a rate per annum which is 1% above the
rate which would otherwise be applicable pursuant to the CAF Advance Note
evidencing such CAF Advance until the stated maturity date of such CAF Advance,
and for each day thereafter at a rate per annum which is 2% above the Base
Rate, in each case until paid in full (as well after as before judgment).
Interest accruing pursuant to this paragraph (c) shall be payable from time to
time on demand.
SECTION 2.7 CAF Advance Notes. The CAF Advances made by each
CAF Advance Lender to each Borrower shall be evidenced by a promissory note of
such Borrower, substantially in the form of Exhibit C with appropriate
insertions (a "CAF Advance Note"), payable to the order of such CAF Advance
Lender and representing the obligation of such Borrower to pay the unpaid
principal amount of all CAF Advances made to it by such CAF Advance Lender,
with interest on the unpaid principal amount from time to time outstanding of
each CAF Advance evidenced thereby as prescribed in Section 2.6(b). Each CAF
Advance Lender is hereby authorized to, and prior to any transfer thereof
shall, record the date and
<PAGE> 26
22
amount of each CAF Advance made to it by such CAF Advance Lender, the maturity
date thereof, the date and amount of each payment of principal thereof and the
interest rate with respect thereto on the schedule attached to and constituting
part of its CAF Advance Note, and any such recordation shall constitute prima
facie evidence of the accuracy of the information so recorded; provided,
however, that the failure to make any such recordation shall not affect the
obligations of such Borrower hereunder or under any CAF Advance Note. Each CAF
Advance Note shall be dated (a) in the case of the Company, the Closing Date or
(b) in each other case, the date the applicable Subsidiary Borrower became a
Borrower hereunder, and each CAF Advance evidenced thereby shall bear interest
for the period from and including the Borrowing Date of such CAF Advance on the
unpaid principal amount thereof from time to time outstanding at the applicable
rate per annum determined as provided in, and such interest shall be payable as
specified in, Section 2.6(b).
SECTION 2.8 Fees. (a) The Company agrees to pay to the
Administrative Agent for the account of each Lender a facility fee for the
period from and including the date hereof to the Termination Date, computed at
a variable rate on the average daily amount of the Commitment of such Lender
during the period for which payment is made, which rate will vary according to
the S&P Bond Rating and the Moody's Bond Rating as follows:
<TABLE>
<CAPTION>
Bond Rating Facility
(S&P/Moody's) Level Fee Rate
------------- ----- --------
<S> <C> <C>
BBB+/Baa1 or better I .120%
BBB/Baa2 II .160%
BBB-/Baa3 III .200%
BB+/Ba1 or below IV .250%;
</TABLE>
provided that if the ratings of such rating agencies do not fall within the
same Level, the rate applicable to such day will be the lower facility fee rate
and provided, further, that in the event a rating is not available from either
rating agency, such rating agency will be deemed to have assigned its lowest
rating. Such facility fees shall be payable quarterly in arrears on the last
day of each March, June, September and December and on the Termination Date or
such earlier date on which the Commitments shall terminate as provided herein,
commencing on the first of such dates to occur after the date hereof.
(b) The Company agrees to pay to the Administrative Agent
and the CAF Advance Agent the fees set forth in the fee letter, dated June 28,
1994, from Chemical to the Company.
SECTION 2.9 Reduction of the Commitments. The Company shall
have the right, upon at least three Business Days' notice to the Administrative
Agent, to terminate in whole or reduce ratably in part the unused portions of
the respective Commitments of the Lenders, provided that each partial reduction
shall be in
<PAGE> 27
23
the aggregate amount of $10,000,000 or any whole multiple of $1,000,000 in
excess thereof.
SECTION 2.10 Repayment. The Borrowers shall repay to each
Lender on the Termination Date the aggregate principal amount of the Advances
then owing to such Lender.
SECTION 2.11 Interest on Revolving Credit Advances. (a)
Ordinary Interest. The Borrowers shall pay interest on the unpaid principal
amount of each Revolving Credit Advance owing to each Lender from the date of
such Advance until such principal amount is due (whether at stated maturity, by
acceleration or otherwise), at the following rates:
(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 Base Rate in effect from time to time, payable quarterly in
arrears 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 due (whether at stated maturity, by acceleration or
otherwise).
(ii) Eurodollar Rate Advances. During such periods as
such Advance is a Eurodollar Rate Advance, at a rate per annum equal
at all times during each Interest Period for such Advance to the sum
of the Eurodollar Rate for such Interest Period plus the Eurodollar
Rate Margin in effect from time to time, payable on the last day of
each such Interest Period and, if any such Interest Period has a
duration of more than three months, on each day which occurs during
such Interest Period every three months from the first day of such
Interest Period.
(b) Default Interest. The applicable Borrower shall pay
interest on the unpaid principal amount of each Revolving Credit Advance to it
that is not paid when due (whether at stated maturity, by acceleration or
otherwise) from the date on which such amount is due until such amount is paid
in full, payable on demand, at a rate per annum equal at all times (i) from
such due date to the last day of the then existing Interest Period in the case
of each Eurodollar Rate Advance, to 1% per annum above the interest rate per
annum required to be paid on such Advance immediately prior to the date on
which such amount became due, and (ii) from and after the last day of the then
existing Interest Period, and at all times in the case of any Base Rate
Advance, to 1% per annum above the Base Rate in effect from time to time.
SECTION 2.12 Additional Interest on Eurodollar Rate Advances.
If any Lender shall determine in good faith that reserves under regulations of
the Board of Governors of the Federal Reserve System are required to be
maintained by it in respect of, or a portion of its costs of maintaining
reserves under such regulations is properly attributable to, one or more
<PAGE> 28
24
of its Eurodollar Rate Advances, the applicable Borrower shall pay to such
Lender additional interest on the unpaid principal amount of each such
Eurodollar Rate Advance to it (other than any such additional interest accruing
to a particular Lender in respect of periods prior to the 30th day preceding
the date notice of such interest is given by such Lender as provided in this
Section 2.12), payable on the same day or days on which interest is payable on
such Advance, at an interest rate per annum equal at all times during each
Interest Period for such Advance to the excess of (i) the rate obtained by
dividing the Eurodollar Rate for such Interest Period by a percentage equal to
100% minus the Eurodollar Reserve Percentage, if any, for such Lender for such
Interest Period over (ii) the Eurodollar Rate for such Interest Period. The
amount of such additional interest (if any) shall be determined by each Lender,
and such Lender shall furnish written notice of the amount of such additional
interest to the Company and the Administrative Agent, which notice shall be
conclusive and binding for all purposes, absent manifest error.
SECTION 2.13 Interest Rate Determination. (a) Each
Reference Lender agrees to furnish to the Administrative Agent timely
information for the purpose of determining the Eurodollar Rate. If any one or
more of the Reference Lenders shall not furnish such timely information to the
Administrative Agent for the purpose of determining any such interest rate, the
Administrative Agent shall determine such interest rate on the basis of timely
information furnished by the remaining Reference Lenders.
(b) The Administrative Agent shall give prompt notice to the
Company and the Lenders of the applicable interest rate determined by the
Administrative Agent for purposes of Section 2.11(a)(i) or (ii), and the
applicable rate, if any, furnished by each Reference Lender for the purpose of
determining the applicable interest rate under Section 2.11(a)(ii).
(c) If fewer than two Reference Lenders furnish timely
information to the Administrative Agent for determining the Eurodollar Rate for
any Eurodollar Rate Advances,
(i) the Administrative Agent shall give the Company and
each Lender prompt notice thereof by telephone (confirmed in writing)
that the interest rate cannot be determined for such Eurodollar Rate
Advances,
(ii) 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 obligations of the Lenders to make, or to
Convert Advances into, Eurodollar Rate Advances shall be
<PAGE> 29
25
suspended until the Administrative Agent shall notify the Company and
the Lenders that the circumstances causing such suspension no longer
exist.
(d) If, with respect to any Eurodollar Rate Advances, the
Majority Lenders determine and give notice to the Administrative Agent that, as
a result of conditions in or generally affecting the London interbank
eurodollar market, the rates of interest determined on the basis of the
Eurodollar Rate for any Interest Period for such Advances will not adequately
reflect the cost to such Majority Lenders of making, funding or maintaining
their respective Eurodollar Rate Advances for such Interest Period, the
Administrative Agent shall forthwith so notify the Company and the Lenders,
whereupon,
(i) each such 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 shall be suspended
until the Administrative Agent shall notify the Company and the
Lenders that the circumstances causing such suspension no longer
exist.
(e) If the applicable Borrower shall fail to select the
duration of any Interest Period for any Eurodollar Rate Advances in accordance
with the provisions contained in the definition of "Interest Period" in Section
1.1, the Administrative Agent will forthwith so notify the applicable 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.
(f) On the date on which the aggregate unpaid principal
amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced,
by payment or prepayment or otherwise, to less than $10,000,000, such
Eurodollar Rate Advances shall automatically Convert into Base Rate Advances,
and on and after such date the right of the applicable Borrower to Convert such
Advances into Eurodollar Rate Advances shall terminate; provided, however, that
if and so long as each such Eurodollar Rate Advance shall have the same
Interest Period as Eurodollar Rate Advances comprising another Borrowing or
other Borrowings, and the aggregate unpaid principal amount of all such
Eurodollar Rate Advances shall equal or exceed $20,000,000, the applicable
Borrower shall have the right to continue all such Advances as, or to Convert
all such Advances into Eurodollar Rate Advances having the same Interest
Period.
(g) If any Reference Lender shall for any reason no longer
have a Commitment or any Revolving Credit Advances, such Reference Lender shall
thereupon cease to be a Reference Lender, and if, as a result, there shall only
be one Reference Lender
<PAGE> 30
26
remaining, the Administrative Agent (after consultation with the Company and
the Lenders) shall, by notice to the Company and the Lenders, designate another
Lender as a Reference Lender so that there shall at all times be at least two
Reference Lenders.
SECTION 2.14 Voluntary Conversion of Advances. Any Borrower
may on any Business Day, upon notice given to the Administrative Agent, not
later than 10:00 A.M. (New York City time) on the Business Day of the proposed
Conversion of Eurodollar Rate Advances to Base Rate Advances and not later than
12:00 noon (New York City time) on the third Business Day prior to the date of
the proposed Conversion in the case of a Conversion of Base Rate Advances to
Eurodollar Rate Advances, and subject to the provisions of Sections 2.13, 2.16
and 2.18, Convert all Advances of one Type comprising the same Borrowing into
Advances of another Type; provided, however, that any Conversion of any
Eurodollar Rate Advances into Base Rate Advances made on any day other than the
last day of an Interest Period for such Eurodollar Rate Advances shall be
subject to the provisions of Section 9.4(b). 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, the duration of the Interest Period for each
such Advance.
SECTION 2.15 Prepayments. Any Borrower may upon (a) in the
case of Eurodollar Rate Advances, at least two Business Days' notice and (b) in
the case of Base Rate Advances, telephonic notice not later than 12:00 noon
(New York City time) on the date of prepayment, to the Administrative Agent
which specifies the proposed date and aggregate principal amount of the
prepayment and the Type of Advances to be prepaid, and if such notice is given
such Borrower shall, prepay the outstanding principal amounts of the Advances
comprising the same Borrowing in whole or ratably in part, together with
accrued interest to the date of such prepayment on the amount prepaid;
provided, however, that (i) each partial prepayment shall be in an aggregate
principal amount not less than $10,000,000 or an integral multiple of
$1,000,000 in excess thereof and (ii) in the event of any such prepayment of
Eurodollar Rate Advances on any day other than the last day of an Interest
Period for such Eurodollar Rate Advances, such Borrower shall be obligated to
reimburse the Lenders in respect thereof pursuant to, and to the extent
required by, Section 9.4(b); provided, further, however, that such Borrower
will use its best efforts to give notice to the Administrative Agent of the
proposed prepayment of Base Rate Advances on the Business Day prior to the date
of such proposed prepayment.
SECTION 2.16 Increased Costs. (a) If, due to either (i) the
introduction after the date of this Agreement of or any change after the date
of this Agreement (including any change by way of imposition or increase of
reserve requirements or assessments other than those referred to in the
definition of
<PAGE> 31
27
"Eurodollar Reserve Percentage," "C/D Reserve Percentage" or "C/D Assessment
Rate" contained in Section 1.1) in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request issued or made
after the date of this Agreement from or by any central bank or other
governmental authority (whether or not having the force of law), in each case
above other than those referred to in Section 2.17, there shall be any increase
in the cost to any Lender of agreeing to make, fund or maintain, or of making,
funding or maintaining, Eurodollar Rate Advances funded in the interbank
Eurodollar market, then the Borrowers shall from time to time, upon demand by
such Lender (with a copy of such demand to the Administrative Agent), pay to
the Administrative Agent for the account of such Lender additional amounts
sufficient to reimburse such Lender for all such increased costs (except those
costs incurred more than 60 days prior to the date of such demand; for the
purposes hereof any cost or expense allocable to a period prior to the
publication or effective date of such an introduction, change, guideline or
request shall be deemed to be incurred on the later of such publication or
effective date). Each Lender agrees to use its best efforts promptly to notify
the Company of any event referred to in clause (i) or (ii) above, provided that
the failure to give such notice shall not affect the rights of any Lender under
this Section 2.16(a) (except as otherwise expressly provided above in this
Section 2.16(a)). A certificate as to the amount of such increased cost,
submitted to the Company and the Administrative Agent by such Lender, shall be
conclusive and binding for all purposes, absent manifest error. After one or
more Lenders have notified the Company of any increased costs pursuant to this
Section 2.16, the Company may specify by notice to the Administrative Agent and
the affected Lenders that, after the date of such notice whenever the election
of Eurodollar Rate Advances by the applicable Borrower for an Interest Period
or portion thereof would give rise to such increased costs, such election shall
not apply to the Revolving Credit Advances of such Lenders during such Interest
Period or portion thereof, and, in lieu thereof, such Revolving Credit Advances
shall during such Interest Period or portion thereof be Base Rate Advances.
Each Lender agrees to use its best efforts (including, without limitation, a
reasonable effort to change its lending office or to transfer its affected
Advances to an affiliate of such Lender) to avoid, or minimize the amount of,
any demand for payment from the Borrowers under this Section 2.16.
(b) In the event that any Lender shall change its lending
office and such change results (at the time of such change) in increased costs
to such Lender, the Borrowers shall not be liable to such Lender for such
increased costs incurred by such Lender to the extent, but only to the extent,
that such increased costs shall exceed the increased costs which such Lender
would have incurred if the lending office of such Lender had not been so
changed, but, subject to subsection (a) above and to Section 2.18, nothing
herein shall require any Lender to change its lending office for any reason.
<PAGE> 32
28
SECTION 2.17 Increased Capital. If either (a) the
introduction of or any change in or in the interpretation of any law or
regulation or (b) compliance by any Lender with any guideline or request from
any central bank or other governmental authority (whether or not having the
force of law) affects or would affect the amount of capital required or
expected to be maintained by such Lender or any corporation controlling such
Lender and such Lender determines 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, within ten days after demand, and
delivery to the Company of the certificate referred to in the last sentence of
this Section 2.17 by such Lender (with a copy of such demand to the
Administrative Agent), the applicable Borrowers shall pay to the Administrative
Agent for the account of such 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 (except any such increase in
capital incurred more than, or compensation attributable to the period before,
90 days prior to the date of such demand; for the purposes hereof any increase
in capital allocable to, or compensation attributable to, a period prior to the
publication or effective date of such an introduction, change, guideline or
request shall be deemed to be incurred on the later of such publication or
effective date). Each Lender agrees to use its best efforts promptly to notify
the Company of any event referred to in clause (a) or (b) above, provided that
the failure to give such notice shall not affect the rights of any Lender under
this Section 2.17 (except as otherwise expressly provided above in this Section
2.17). A certificate in reasonable detail as to the basis for, and the amount
of, such compensation submitted to the Company by such Lender shall, in the
absence of manifest error, be conclusive and binding for all purposes.
SECTION 2.18 Illegality. Notwithstanding any other provision
of this Agreement, if the introduction of or any change in or in the
interpretation of any law or regulation shall make it unlawful, or any central
bank or other governmental authority shall assert that it is unlawful, for any
Lender or its lending office to perform its obligations hereunder to make
Eurodollar Rate Advances or to continue to fund or maintain such Advances
hereunder, such Lender may, by notice to the Company and the Administrative
Agent, suspend the right of the Borrowers to elect Eurodollar Rate Advances
from such Lender and, if necessary in the reasonable opinion of such Lender to
comply with such law or regulation, Convert all such Eurodollar Rate Advances
of such Lender to Base Rate Advances at the latest time permitted by the
applicable law or regulation, and such suspension and, if applicable, such
Conversion shall continue until such Lender notifies the Company and the
Administrative Agent that the circumstances making it unlawful for such Lender
to perform such
<PAGE> 33
29
obligations no longer exist (which such Lender shall promptly do when such
circumstances no longer exist). So long as the obligation of any Lender to
make Eurodollar Rate Advances has been suspended under this Section 2.18, all
Notices of Borrowing specifying Advances of such Type shall be deemed, as to
such Lender, to be requests for Base Rate Advances. Each Lender agrees to use
its best efforts (including, without limitation, a reasonable effort to change
its lending office or to transfer its affected Advances to an affiliate) to
avoid any such illegality.
SECTION 2.19 Payments and Computations. (a) The Borrowers
shall make each payment hereunder (including, without limitation, under Section
2.8, 2.10 or 2.11) and under the Notes, whether the amount so paid is owing to
any or all of the Lenders or to the Administrative Agent, not later than 12:00
noon (New York City time) without setoff, counterclaim, or any other deduction
whatsoever, on the day when due in Dollars to the Administrative Agent at its
address at 270 Park Avenue, New York, New York 10017, Reference: El Paso
Natural Gas Company, or at such other location designated by notice to the
Company from the Administrative Agent and agreed to by the Company, in same day
funds. The Administrative Agent will promptly thereafter cause to be
distributed like funds relating to the payment of principal or interest or
facility fees ratably (other than amounts payable pursuant to Section 2.12,
2.16, 2.17, 2.18 or 2.20) according to the respective amounts of such
principal, interest or facility fees then due and owing to the Lenders, and
like funds relating to the payment of any other amount payable to any Lender to
such Lender, 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
9.7(d), from and after the effective date specified in such Assignment and
Acceptance, the Administrative Agent shall make all payments hereunder and
under the Notes 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 and
of facility fees shall be made by the Administrative 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 or the Effective Federal Funds Rate shall be made
by the Administrative Agent, and all computations of interest pursuant to
Section 2.12 shall be made by each Lender with respect to its own Advances, 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 fees are payable. Each determination by the
Administrative Agent (or, in the case of Section 2.12, 2.16, 2.17, 2.18 or
2.20, by each Lender with respect to its own Advances) of an interest rate or
an increased cost or increased
<PAGE> 34
30
capital or of illegality hereunder shall be conclusive and binding for all
purposes if made reasonably and in good faith.
(c) Whenever any payment hereunder or under the Notes shall
be stated to be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of payment of interest; provided,
however, if such extension would cause payment of interest on or principal of
Eurodollar 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 Administrative Agent shall have received
notice from the Company or any other applicable Borrower prior to the date on
which any payment is due to the Lenders hereunder that the applicable Borrower
will not make such payment in full, the Administrative Agent may assume that
the applicable Borrower has made such payment in full to the Administrative
Agent on such date and the Administrative Agent may, in reliance upon such
assumption, cause to be distributed to each Lender on such due date an amount
equal to the amount then due such Lender. If and to the extent the applicable
Borrower shall not have so made such payment in full to the Administrative
Agent, each Lender shall repay to the Administrative 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 Administrative Agent, at a rate equal to the
Effective Federal Funds Rate for such day.
SECTION 2.20 Taxes. (a) Any and all payments by the
Borrowers hereunder or under the Notes to each Indemnified Party shall be made,
in accordance with Section 2.19, 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, all taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, imposed by the jurisdiction under the laws of which such
Indemnified Party is organized, domiciled, resident or doing business, or any
political subdivision thereof or by any jurisdiction in which such Indemnified
Party holds any interest in connection with this Agreement or any Note
(including, without limitation, in the case of each Lender, the jurisdiction of
such Lender's lending office) or any political subdivision thereof, other than
by any jurisdiction with which the Indemnified Party's connection arises solely
from having executed, delivered or performed obligations or received a payment
under, or enforced, this Agreement or any Note (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If any 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 Indemnified Party, (i) the sum payable
<PAGE> 35
31
shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.20) such Indemnified Party receives an amount equal to the sum
it would have received had no such deductions been made, (ii) such Borrower
shall make or cause to be made such deductions and (iii) such Borrower shall
pay or cause to be paid the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law, provided that
the Borrowers shall not be required to pay any additional amount (and shall be
relieved of any liability with respect thereto) pursuant to this subsection (a)
to any Indemnified Party that either (A) on the date such Lender became an
Indemnified Party hereunder, (y) was not entitled to submit a U.S. Internal
Revenue Service form 1001 (relating to such Indemnified Party, and entitling it
to a complete exemption from United States withholding taxes on all amounts to
be received by such Indemnified Party pursuant to this Agreement) and a U.S.
Internal Revenue Service form 4224 (relating to all amounts to be received by
such Indemnified Party pursuant to this Agreement) and (z) was not a United
States person (as such term is defined in Section 7701(a)(30) of the Internal
Revenue Code) or (B) has failed to submit any form or certificate that it was
required to file or provide pursuant to subsection (d) of this Section 2.20 and
is entitled to file or give, as applicable, under applicable law, provided,
further, that should an Indemnified Party become subject to Taxes because of
its failure to deliver a form required hereunder, the Borrowers shall take such
steps as such Indemnified Party shall reasonably request to assist such
Indemnified Party to recover such Taxes, and provided further that each
Indemnified Party, with respect to itself, agrees to indemnify and hold
harmless the Borrowers from any taxes, penalties, interest and other expenses,
costs and losses incurred or payable by the Borrowers as a result of the
failure of any of the Borrowers to comply with its obligations under clause
(ii) or (iii) above in reliance on any form or certificate provided to it by
such Indemnified Party pursuant to this Section 2.20. If any Indemnified Party
receives a net credit or refund in respect of such Taxes or amounts so paid by
the Borrowers, it shall promptly notify the Company of such net credit or
refund and shall promptly pay such net credit or refund to the applicable
Borrower, provided that the applicable Borrower agrees to return such net
credit or refund if the Indemnified Party to which such net credit or refund is
applicable is required to repay it.
(b) In addition, each Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes,
charges or similar levies which arise from any payment made by such Borrower
hereunder or under the Notes or from the execution, delivery or performance of,
or otherwise with respect to, this Agreement or the Notes (hereinafter referred
to as "Other Taxes").
<PAGE> 36
32
(c) Each Borrower will indemnify each Indemnified Party and
the Administrative Agent for the full amount of Taxes or Other Taxes
(including, without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section 2.20) paid by such
Indemnified Party and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto except as a result of the
gross negligence (which shall in any event include the failure of such
Indemnified Party to provide to the Borrowers any form or certificate that it
was required to provide pursuant to subsection (d) below) or willful misconduct
of such Indemnified Party, whether or not such Taxes or Other Taxes were
correctly or legally asserted. This indemnification shall be made within 30
days from the date such Indemnified Party makes written demand therefor.
(d) On or prior to the date on which each Indemnified
Party organized under the laws of a jurisdiction outside the United States
becomes an Indemnified Party hereunder, such Indemnified Party shall provide
the Company with U.S. Internal Revenue Service form 1001 or 4224, as
appropriate, or any successor form prescribed by the U.S. Internal Revenue
Service, certifying that such Indemnified Party is fully exempt from United
States withholding taxes with respect to all payments to be made to such
Indemnified Party hereunder, or other documents satisfactory to the Company
indicating that all payments to be made to such Indemnified Party hereunder are
fully exempt from such taxes. Thereafter and from time to time (but only so
long as such Indemnified Party remains lawfully able to do so), each such
Indemnified Party shall submit to the Company such additional duly completed
and signed copies of one or the other of such Forms (or such successor Forms as
shall be adopted from time to time by the relevant United States taxing
authorities) as may be (i) notified by any Borrower to such Indemnified Party
and (ii) required under then-current United States law or regulations to avoid
United States withholding taxes on payments in respect of all amounts to be
received by such Indemnified Party pursuant to this Agreement or the Notes.
Upon the request of any Borrower from time to time, each Indemnified Party that
is a United States person (as such term is defined in Section 7701(a)(30) of
the Internal Revenue Code) shall submit to the Company a certificate to the
effect that it is such a United States person. If any Indemnified Party
determines, as a result of any change in applicable law, regulation or treaty,
or in any official application or interpretation thereof, that it is unable to
submit to the Company any form or certificate that such Indemnified Party is
obligated to submit pursuant to this subsection (d), or that such Indemnified
Party is required to withdraw or cancel any such form or certificate previously
submitted, such Indemnified Party shall promptly notify the Company of such
fact.
(e) Any Indemnified Party claiming any additional amounts
payable pursuant to this Section 2.20 shall use its best efforts (consistent
with its internal policy and legal and
<PAGE> 37
33
regulatory restrictions) to change the jurisdiction of its lending office if
the making of such a change would avoid the need for, or reduce the amount of,
any such additional amounts which may thereafter accrue and would not, in the
reasonable judgment of such Indemnified Party, be otherwise disadvantageous to
such Indemnified Party.
(f) Without prejudice to the survival of any other
agreement of the Borrowers hereunder, the agreements and obligations of the
Borrowers and each Indemnified Party contained in this Section 2.20 shall
survive the payment in full of principal and interest hereunder and under the
Notes.
(g) Any other provision of this Agreement to the contrary
notwithstanding, any amounts which are payable by any Borrower under this
Section 2.20 shall not be payable under Section 2.16.
SECTION 2.21 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 Advances made by it (other
than pursuant to Section 2.12, 2.16, 2.17, 2.18 or 2.20) in excess of its
ratable share of payments on account of the Advances obtained by all the
Lenders, such Lender shall forthwith purchase from the other Lenders such
participations in the Advances made by 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 each 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 (a) the amount
of such Lender's required repayment to (b) 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. Each Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section 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 such
Borrower in the amount of such participation.
SECTION 2.22 Use of Proceeds. Proceeds of the Advances may
be used for general corporate purposes of the Company and its Subsidiaries,
including, without limitation, for acquisitions and for payment of commercial
paper issued by the Company and to refinance the loans under the Company's
Revolving Credit Agreement, dated as of February 11, 1992.
<PAGE> 38
34
ARTICLE III
CONDITIONS OF EFFECTIVENESS AND LENDING
SECTION 3.1 Conditions Precedent to Effectiveness of this
Agreement. This Agreement shall become effective when (i) it shall have been
executed by the Company, the Administrative Agent and the CAF Advance Agent,
(ii) the Administrative Agent and the Company either shall have been notified
by each Lender that such Lender has executed it or shall have received a
counterpart of this Agreement executed by such Lender, and (iii) the
Administrative Agent shall, on or before September 30, 1994, have received the
following, each (except in the case of the letter referred to in Section
3.1(f)) dated the Closing Date, in form and substance satisfactory to the
Administrative Agent and (except for the Notes) in sufficient copies for each
Lender:
(a) The Notes made by the Company, to the order of the
Lenders, respectively.
(b) Certified copies of the resolutions of the Board of
Directors of the Company approving the borrowings contemplated hereby
and authorizing the execution of this Agreement and the Notes, and of
all documents evidencing other necessary corporate action of the
Company and governmental approvals to the Company, if any, with
respect to this Agreement and the Notes.
(c) A certificate of the Secretary or an Assistant Secretary
of the Company certifying the names and true signatures of the
officers of the Company authorized to sign this Agreement and the
other documents to be delivered by it hereunder.
(d) A favorable opinion of Britton White, Jr., Esq., the
General Counsel of the Company, or Eldon J. Mitrisin, Esq., the
Associate General Counsel of the Company, in substantially the form of
Exhibit H hereto, and as to such other matters as any Lender through
the Administrative Agent may reasonably request.
(e) A favorable opinion of Fried, Frank, Harris, Shriver
& Jacobson, New York counsel to the Company, in substantially the form
of Exhibit I hereto, and as to such other matters as any Lender
through the Administrative Agent may reasonably request.
(f) A letter from the Process Agent, in substantially the
form of Exhibit J hereto, agreeing to act as Process Agent for the
Company and to forward forthwith all process received by it to the
Company.
<PAGE> 39
35
(g) Evidence satisfactory to the Administrative Agent that
all advances, accrued interest and other fees and any other amounts
owing to the Lenders and the Agent under the Revolving Credit
Agreement, dated as of February 11, 1992, among the Company, the
several financial institutions from time to time parties thereto, and
Citibank, N.A., as Agent, shall have been paid in full, and the
commitments to make advances thereunder shall have been cancelled.
Anything in this Agreement to the contrary notwithstanding, if all of the
conditions to effectiveness of this Agreement specified in this Section 3.1
shall not have been fulfilled on or before September 30, 1994, this Agreement,
and all of the obligations of the Company, the Lenders, the Administrative
Agent and the CAF Advance Agent hereunder, shall be terminated on and as of
5:00 P.M. (New York City time) on September 30, 1994; provided, however, that
as soon as the Administrative Agent determines that all of the conditions to
effectiveness of this Agreement specified in this Section 3.1 shall have been
fulfilled on or before September 30, 1994, the Administrative Agent shall
furnish written notice to the Company and the Lenders to the effect that it has
so determined, and such notice by the Administrative Agent shall constitute
conclusive evidence that this Agreement shall have become effective for all
purposes.
SECTION 3.2 Conditions Precedent to Initial Advances to Any
Borrowing Subsidiary. The agreement of each Lender to make the initial
Advances to be made by it to any Borrowing Subsidiary is subject to the
Administrative Agent receiving the following, in form and substance
satisfactory to the Administrative Agent and (except for the Notes) in
sufficient copies for each Lender:
(a) A Joinder Agreement, conforming to the requirements
hereof.
(b) The Notes, dated the date such Borrowing Subsidiary
executes and delivers its Joinder Agreement, made by such Borrowing
Subsidiary, to the order of the Lenders, respectively.
(c) A certificate of the Secretary or an Assistant
Secretary of such Borrowing Subsidiary certifying the names and true
signature of the officers of such Borrowing Subsidiary authorized to
sign the Joinder Agreement and the other documents to be delivered by
it hereunder.
(d) A favorable opinion of the General Counsel or
Associate General Counsel of the Company, given upon the express
instructions of the Company, in substantially the form of Exhibit L
hereto, and as to such other matters as any Lender through the
Administrative Agent may reasonably request, with such assumptions,
qualifications and exceptions as the Administrative Agent may approve.
<PAGE> 40
36
(e) A favorable opinion of Fried, Frank, Harris, Shriver
& Jacobson or other New York counsel to the Company reasonably
satisfactory to the Administrative Agent, in substantially the form of
Exhibit M hereto, and as to such other matters as any Lender through
the Administrative Agent may reasonably request, with such
assumptions, qualifications and exceptions as the Administrative Agent
may approve.
(f) A letter from the Process Agent, in substantially
the form of Exhibit J hereto, agreeing to act as Process Agent for
such Borrowing Subsidiary and to forward forthwith all process
received by it to such Borrowing Subsidiary.
SECTION 3.3 Conditions Precedent to Each Borrowing. The
obligation of each Lender to make an Advance (including the initial Advance) on
the occasion of any Borrowing shall be subject to the conditions precedent that
on the date of such Borrowing this Agreement shall have become effective
pursuant to Section 3.1 and, before and immediately after giving effect to such
Borrowing and to the application of the proceeds therefrom, the following
statements shall be true and correct, and the giving by the Company of the
applicable Notice of Borrowing and the acceptance by the applicable Borrower of
the proceeds of such Borrowing shall constitute its representation and warranty
that on and as of the date of such Borrowing, before and immediately after
giving effect thereto and to the application of the proceeds therefrom, the
following statements are true and correct:
(a) Each representation and warranty contained in Section
4.1 is correct in all material respects as though made on and as of
such date; and
(b) No event has occurred and is continuing, or would
result from such Borrowing, which constitutes an Event of Default or
would constitute an Event of Default but for the requirement that
notice be given or time elapse or both.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 Representations and Warranties of the Borrowers.
Each Borrower represents and warrants as follows:
(a) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
Delaware. Each Principal Subsidiary is duly incorporated, validly
existing and in good standing in the jurisdiction of its
incorporation. The Company and each Principal Subsidiary possess all
corporate powers and all other authorizations and licenses necessary
to engage in its
<PAGE> 41
37
business and operations as now conducted, the failure to obtain or
maintain which would have a Material Adverse Effect.
(b) The execution, delivery and performance by each Borrower
of this Agreement, each Joinder Agreement, if any, to which it is a
party and its Notes (as applicable) are within such Borrower's
corporate powers, have been duly authorized by all necessary corporate
action, and do not contravene (i) such Borrower's charter or by-laws
or (ii) law or any contractual restriction binding on or affecting
such Borrower.
(c) 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
such Borrower of this Agreement, each Joinder Agreement, if any, to
which it is a party or its Notes (as applicable), except filings
necessary to comply with laws, rules, regulations and orders required
in the ordinary course to comply with ongoing obligations of such
Borrower under Section 5.1(a) and (b).
(d) This Agreement constitutes, and its Notes and each
Joinder Agreement, if any, to which it is a party (as applicable) when
delivered hereunder shall constitute, the legal, valid and binding
obligations of each Borrower enforceable against such Borrower in
accordance with their respective terms, except as may be limited by
any applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally or by general
principles of equity.
(e) The consolidated balance sheet of the Company and its
consolidated Subsidiaries as at December 31, 1993, and the related
consolidated statements of income and cash flows of the Company and
its consolidated Subsidiaries for the fiscal year then ended, reported
on by Coopers & Lybrand, independent public accountants, copies of
which have been furnished to the Administrative Agent and the Lenders
prior to the date hereof, fairly present the consolidated financial
condition of the Company and its consolidated Subsidiaries as at such
date and the consolidated results of the operations of the Company and
its consolidated Subsidiaries for the period ended on such date, all
in accordance with generally accepted accounting principles
consistently applied, and since December 31, 1993, there has been no
material adverse change in such condition or operations. The
unaudited consolidated balance sheet of the Company and its
consolidated Subsidiaries as of March 31, 1994, and the related
consolidated statements of income and cash flows of the Company and
its consolidated Subsidiaries for the three months then ended,
certified by the chief financial officer of the Company, copies of
which have been
<PAGE> 42
38
furnished to the Administrative Agent and the Lenders prior to the
date hereof, fairly present the consolidated results of operations of
the Company and its consolidated Subsidiaries for the three months
then ended, all in accordance with generally accepted accounting
principles consistently applied and subject to normal year-end audit
adjustments.
(f) There is no action, suit or proceeding pending, or to
the knowledge of any Borrower threatened, against or involving the
Company or any Principal Subsidiary in any court, or before any
arbitrator of any kind, or before or by any governmental body, which
in the reasonable judgment of the Company (taking into account the
exhaustion of all appeals) would have a Material Adverse Effect, or
which purports to affect the legality, validity, binding effect or
enforcement of this Agreement or the Notes.
(g) The Company and each Principal Subsidiary have duly
filed all tax returns required to be filed, and have duly paid and
discharged all taxes, assessments and governmental charges upon it or
against its properties now due and payable, the failure to pay which
would have a Material Adverse Effect, unless and to the extent only
that the same are being contested in good faith and by appropriate
proceedings by the Company or the appropriate Subsidiary.
(h) The Company and each Principal Subsidiary have good
title to their respective properties and assets, free and clear of all
mortgages, liens and encumbrances, except for mortgages, liens and
encumbrances (including covenants, restrictions, rights, easements and
minor irregularities in title) which do not materially interfere with
the business or operations of the Company or such Subsidiary as
presently conducted or which are permitted by Section 5.2(a), and
except that no representation or warranty is being made with respect
to Margin Stock.
(i) No Termination Event has occurred or is reasonably
expected to occur with respect to any Plan which, with the giving of
notice or lapse of time, or both, would constitute an Event of Default
under Section 7.1(g).
(j) Each Plan has complied with the applicable provisions
of ERISA and the Code where the failure to so comply would reasonably
be expected to result in an aggregate liability that would exceed 10%
of the Net Worth of the Company.
(k) The statement of assets and liabilities of each Plan
and the statements of changes in fund balance and in financial
position, or the statement of changes in net assets available for plan
benefits, for the most recent plan
<PAGE> 43
39
year for which an accountant's report with respect to such Plan has
been prepared, copies of which report have been furnished to the
Administrative Agent, fairly present the financial condition of such
Plan as at such date and the results of operations of such Plan for
the plan year ended on such date.
(l) Neither the Company nor any ERISA Affiliate has
incurred, or is reasonably expected to incur, any Withdrawal Liability
to any Multiemployer Plan which, when aggregated with all other
amounts required to be paid to Multiemployer Plans in connection with
Withdrawal Liability (as of the date of determination), would exceed
10% of the Net Worth of the Company.
(m) Neither the Company nor any ERISA Affiliate has
received any notification that any Multiemployer Plan is in
reorganization, insolvent or has been terminated, within the meaning
of Title IV of ERISA, and no Multiemployer Plan is reasonably expected
to be in reorganization, insolvent or to be terminated within the
meaning of Title IV of ERISA the effect of which reorganization,
insolvency or termination would be the occurrence of an Event of
Default under Section 7.1(i).
(n) The Borrowers are not engaged in the business of
extending credit for the purpose of purchasing or carrying Margin
Stock, and no proceeds of any Advance will be used to extend credit to
others (other than to any Subsidiary of the Company) for the purpose
of purchasing or carrying Margin Stock.
(o) No Borrower is an "investment company" or a "company"
controlled by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(p) No Borrower is a "holding company" or a "subsidiary
company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
All representations and warranties made by the Borrowers herein or made in any
certificate delivered pursuant hereto shall survive the making of the Advances
and the execution and delivery to the Lenders of this Agreement and the Notes.
ARTICLE V
COVENANTS OF THE BORROWERS
SECTION 5.1 Affirmative Covenants. So long as any of the
Notes or other amount payable by any Borrower hereunder shall remain unpaid or
any Lender shall have any Commitment hereunder,
<PAGE> 44
40
each Borrower will, unless the Majority Lenders shall otherwise consent in
writing:
(a) Preservation of Corporate Existence, Etc. Preserve
and maintain, and, in the case of the Company, cause each Principal
Subsidiary to preserve and maintain, its corporate existence, rights
(charter and statutory) and material franchises, except as otherwise
permitted by Section 5.2(d) or 5.2(e).
(b) Compliance with Laws, Etc. Comply, and, in the case
of the Company, cause each Principal Subsidiary to comply, in all
material respects with all applicable laws, rules, regulations and
orders (including, without limitation, all environmental laws and laws
requiring payment of all taxes, assessments and governmental charges
imposed upon it or upon its property except to the extent contested in
good faith by appropriate proceedings) the failure to comply with
which would have a Material Adverse Effect.
(c) Visitation Rights. At any reasonable time and from
time to time, permit the Administrative 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 Company and any of its Subsidiaries, and to discuss
the affairs, finances and accounts of the Company and any of its
Subsidiaries with any of their officers and with their independent
certified public accountants.
(d) Books and Records. Keep, and, in the case of the
Company, cause each of its Subsidiaries to keep, proper books of
record and account, in which full and correct entries shall be made of
all its respective financial transactions and the assets and business
of the Company and each of its Subsidiaries, as applicable, in
accordance with generally accepted accounting principles either (i)
consistently applied or (ii) applied in a changed manner provided such
change shall have been disclosed to the Administrative Agent and shall
have been consented to by the accountants which (as required by
Section 5.3(b)) report on the financial statements of the Company and
its consolidated Subsidiaries for the fiscal year in which such change
shall have occurred.
(e) Maintenance of Properties, Etc. Maintain and
preserve, and, in the case of the Company, cause each Principal
Subsidiary to maintain and preserve, all of its properties which are
used in the conduct of its business in good working order and
condition, ordinary wear and tear excepted, to the extent that any
failure to do so would have a Material Adverse Effect.
<PAGE> 45
41
(f) Maintenance of Insurance. Maintain, and, in the case
of the Company, cause each Principal Subsidiary 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 Company or such Subsidiary
operates.
SECTION 5.2 Negative Covenants. So long as any of the Notes
or other amount payable by the Borrowers hereunder shall remain unpaid or any
Lender shall have any Commitment hereunder, each Borrower will not, unless the
Majority Lenders shall otherwise consent in writing:
(a) Liens, Etc. (i) Create, assume or suffer to exist,
or, in the case of the Company, permit any Principal Subsidiary to
create, assume or suffer to exist, any Liens upon or with respect to
any of the capital stock of any Principal Subsidiary, whether now
owned or hereafter acquired, or (ii) create or assume, or, in the case
of the Company, permit any Principal Subsidiary to create or assume,
any Liens upon or with respect to any other assets material to the
consolidated operations of the Company and its consolidated
Subsidiaries taken as a whole securing the payment of Indebtedness and
Guaranties in an aggregate amount (determined without duplication of
amount (so that the amount of a Guarantee will be excluded to the
extent the Indebtedness Guaranteed thereby is included in computing
such aggregate amount)) exceeding $100,000,000; provided, however,
that this subsection (a) shall not apply to:
(A) Liens on the stock or assets of any Project
Financing Subsidiary (or any partnership interest in or assets
of any partnership of which the Project Financing Subsidiary
is a partner) securing the payment of a Project Financing and
related obligations;
(B) Liens on assets acquired by the Company or
any of its Subsidiaries after February 11, 1992 to the extent
that such Liens existed at the time of such acquisition and
were not placed thereon by or with the consent of the Company
in contemplation of such acquisition;
(C) Liens created by the Receivables Purchase and
Sale Agreement, any Alternate Program or any document executed
by any Borrower in connection therewith;
(D) Liens on Margin Stock;
(E) Liens for taxes, assessments or governmental
charges or levies not yet overdue; and
<PAGE> 46
42
(F) Liens on the stock or assets of Mojave
created in connection with the Mojave Northward Expansion
Project.
(b) Consolidated Debt and Guaranties to Capitalization.
Permit the ratio of (i) the sum of (A) the aggregate amount of
consolidated Debt of the Company and its consolidated Subsidiaries
plus (B) the aggregate amount of consolidated Guaranties of the
Company and its consolidated Subsidiaries to (ii) Capitalization to
exceed .7 to 1.
(c) Debt, Etc. In the case of the Company, permit any of
its consolidated Subsidiaries to create or suffer to exist any Debt,
any Guaranty or any reimbursement obligation with respect to any
letter of credit (other than any Project Financing), if, immediately
after giving effect to such Debt, Guaranty or reimbursement obligation
and the receipt and application of any proceeds thereof or value
received in connection therewith, the aggregate amount (determined
without duplication of amount) of Debt, Guaranties and letter of
credit reimbursement obligations of the Company's consolidated
Subsidiaries (other than any Project Financing) determined on a
consolidated basis would exceed $75,000,000; provided, however, that
the following Debt, Guaranties or reimbursement obligations shall be
excluded from the application of, and calculation set forth in, this
clause (c): (A) Debt, Guaranties or reimbursement obligations incurred
by (x) Mojave or (y) any other Subsidiary of the Company in connection
with the Mojave Northward Expansion Project, (B) Debt, Guaranties or
reimbursement obligations arising under this Agreement, (C) Debt,
Guaranties or reimbursement obligations incurred by El Paso Field
Services Company up to an amount not to exceed at any time outstanding
the tangible net worth of El Paso Field Services Company, provided
that such Debt may be guaranteed by the Company, (D) Excluded
Acquisition Debt and (E) successive extensions, refinancings or
replacements of Debt, Guaranties or reimbursement obligations referred
to in clauses (A) and (D) above and in an amount not in excess of the
amounts so extended, refinanced or replaced.
(d) Sale, Etc. of Assets. Sell, lease or otherwise
transfer, or, in the case of the Company, permit any Principal
Subsidiary to sell, lease or otherwise transfer, (in either case,
whether in one transaction or in a series of transactions) assets
constituting a material portion of the consolidated assets of the
Company and its Principal Subsidiaries taken as a whole, provided that
provisions of this subsection (d) shall not apply to:
(i) any sale of the San Juan Basin Gathering
System and related facilities in accordance with the
procedures set forth in the Master Separation Agreement dated
as of January 15, 1992 between the Company,
<PAGE> 47
43
Meridian Oil Holding Inc., a Delaware corporation, and
Burlington;
(ii) any sale of receivables and related rights
pursuant to the Receivables Purchase and Sale Agreement or any
Alternate Program;
(iii) any Project Financing Subsidiary and the
assets thereof;
(iv) sales, leases or other transfers of assets
or capital stock of any Subsidiary of the Company other than
any Principal Subsidiary;
(v) any sale of Margin Stock;
(vi) any sale of up to 20% of the equity of El
Paso Field Services Company in an initial public offering of
such corporation's equity securities;
(vii) any sale, lease or other transfer to the
Company or any Principal Subsidiary, or to any corporation
which after giving effect to such transfer will become and be
either (A) a Principal Subsidiary in which the Company's
direct or indirect equity interest will be at least as great
as its direct or indirect equity interest in the transferor
immediately prior thereto or (B) a directly or indirectly
wholly-owned Principal Subsidiary; and
(viii) any transfer permitted by Section 5.2(e).
(e) Mergers, Etc. Merge or consolidate with any person,
or permit any of its Principal Subsidiaries to merge or consolidate
with any Person, except that (i) any Principal Subsidiary may merge or
consolidate with (or liquidate into) any other Subsidiary (other than
a Project Financing Subsidiary, unless the successor corporation is
not treated as a Project Financing Subsidiary under this Agreement) or
may merge or consolidate with (or liquidate into) the Company,
provided that (A) if such Principal Subsidiary merges or consolidates
with (or liquidates into) the Company, the Company shall be the
continuing or surviving corporation and (B) if any such Principal
Subsidiary merges or consolidates with (or liquidates into) any other
Subsidiary of the Company, one of such Subsidiaries is the surviving
corporation and, if either such Subsidiary is not wholly-owned by the
Company, such merger or consolidation is on an arm's length basis, and
(ii) the Company or any Principal Subsidiary may merge or consolidate
with any other corporation (that is, in addition to the Company or any
Principal Subsidiary of the Company), provided that (A) if the Company
merges or consolidates with any such other corporation, the Company is
the surviving
<PAGE> 48
44
corporation, (B) if any Principal Subsidiary merges or consolidates
with any such other corporation, the surviving corporation is a
wholly-owned Principal Subsidiary of the Company, and (C) if either
the Company or any Principal Subsidiary merges or consolidates with
any such other corporation, after giving effect to such merger or
consolidation no Event of Default, and no event which with lapse of
time or the giving of notice, or both, would constitute an Event of
Default, shall have occurred and be continuing.
SECTION 5.3 Reporting Requirements. So long as any Note
shall remain unpaid or any Lender shall have any Commitment hereunder, the
Company will furnish to each Lender in such reasonable quantities as shall from
time to time be requested by such Lender:
(a) as soon as publicly available and in any event within
60 days after the end of each of the first three fiscal quarters of
each fiscal year of the Company, a consolidated balance sheet of the
Company and its consolidated subsidiaries as of the end of such
quarter, and consolidated statements of income and cash flows of the
Company and its consolidated subsidiaries each for the period
commencing at the end of the previous fiscal year and ending with the
end of such quarter, certified (subject to normal year-end
adjustments) as to fairness, generally accepted accounting principles
and consistency by the chief financial officer, controller or
treasurer of the Company and accompanied by a certificate of such
officer stating (i) whether or not such officer has knowledge of the
occurrence of any Event of Default which is continuing hereunder or of
any event not theretofore remedied which with notice or lapse of time
or both would constitute such an Event of Default and, if so, stating
in reasonable detail the facts with respect thereto, (ii) all relevant
facts in reasonable detail to evidence, and the computations as to,
whether or not the Company is in compliance with the requirements set
forth in subsections (b) and (c) of Section 5.2, and (iii) a listing
of all Principal Subsidiaries and consolidated Subsidiaries of the
Company showing the extent of its direct and indirect holdings of
their stocks;
(b) as soon as publicly available and in any event within
120 days after the end of each fiscal year of the Company, a copy of
the annual report for such year for the Company and its consolidated
Subsidiaries containing financial statements for such year reported by
nationally recognized independent public accountants acceptable to the
Lenders, accompanied by (i) a report signed by said accountants
stating that such financial statements have been prepared in
accordance with generally accepted accounting principles and (ii) a
letter from such accountants stating that in making the investigations
necessary for such report
<PAGE> 49
45
they obtained no knowledge, except as specifically stated therein, of
any Event of Default which is continuing hereunder or of any event not
theretofore remedied which with notice or lapse of time or both would
constitute such an Event of Default;
(c) within 120 days after the close of each of the
Company's fiscal years, a certificate of the chief financial officer,
controller or treasurer of the Company stating (i) whether or not he
has knowledge of the occurrence of any Event of Default which is
continuing hereunder or of any event not theretofore remedied which
with notice or lapse of time or both would constitute such an Event of
Default and, if so, stating in reasonable detail the facts with
respect thereto, (ii) all relevant facts in reasonable detail to
evidence, and the computations as to, whether or not the Company is in
compliance with the requirements set forth in subsections (b) and (c)
of Section 5.2 and (iii) a listing of all Principal Subsidiaries and
consolidated Subsidiaries of the Company showing the extent of its
direct and indirect holdings of their stocks;
(d) promptly after the sending or filing thereof, copies
of all publicly available reports which the Company or any Principal
Subsidiary sends to any of its security holders and copies of all
publicly available reports and registration statements which the
Company or any Principal Subsidiary files with the Securities and
Exchange Commission or any national securities exchange other than
registration statements relating to employee benefit plans and to
registrations of securities for selling security holders;
(e) within 10 days after sending or filing thereof, a
copy of FERC Form No. 2: Annual Report of Major Natural Gas
Companies, sent or filed by the Company to or with the FERC with
respect to each fiscal year of the Company;
(f) promptly in writing, notice of all litigation and of
all proceedings before any governmental or regulatory agencies against
or involving the Company or any Principal Subsidiary, except any
litigation or proceeding which in the reasonable judgment of the
Company (taking into account the exhaustion of all appeals) is not
likely to have a material adverse effect on the consolidated financial
condition of the Company and its consolidated Subsidiaries taken as a
whole;
(g) within three Business Days after an executive officer
of the Company obtains knowledge of the occurrence of any Event of
Default which is continuing or of any event not theretofore remedied
which with notice or lapse of time, or both, would constitute an Event
of Default, notice of such occurrence together with a detailed
statement by a responsible officer of the Company of the steps being
taken
<PAGE> 50
46
by the Company or the appropriate Subsidiary to cure the effect of
such event;
(h) as soon as practicable and in any event (i) within 30
days after the Company or any ERISA Affiliate knows or has reason to
know that any Termination Event described in clause (a) of the
definition of Termination Event with respect to any Plan has occurred
and (ii) within 10 days after the Company or any ERISA Affiliate knows
or has reason to know that any other Termination Event has occurred, a
statement of the chief financial officer or treasurer of the Company
describing such Termination Event and the action, if any, which the
Company or such ERISA Affiliate proposes to take with respect thereto;
(i) promptly and in any event within two Business Days
after receipt thereof by the Company or any ERISA Affiliate, copies of
each notice received by the Company or any ERISA Affiliate from the
PBGC stating its intention to terminate any Plan or to have a trustee
appointed to administer any Plan;
(j) promptly and in any event within 30 days after the
filing thereof with the Internal Revenue Service, copies of each
Schedule B (Actuarial Information) to the annual report (Form 5500
Series) with respect to each Single Employer Plan;
(k) promptly and in any event within five Business Days
after receipt thereof by the Company or any ERISA Affiliate from the
sponsor of a Multiemployer Plan, a copy of each notice received by the
Company or any ERISA Affiliate concerning (i) the imposition of
Withdrawal Liability by a Multiemployer Plan, (ii) the determination
that a Multiemployer Plan is, or is expected to be, in reorganization
or insolvent within the meaning of Title IV of ERISA, (iii) the
termination of a Multiemployer Plan within the meaning of Title IV of
ERISA, or (iv) the amount of liability incurred, or expected to be
incurred, by the Company or any ERISA Affiliate in connection with any
event described in clause (i), (ii) or (iii) above; and
(l) as soon as practicable but in any event within 60
days of any notice of request therefor, such other information
respecting the financial condition and results of operations of the
Company or any Subsidiary of the Company as any Lender through the
Administrative Agent may from time to time reasonably request.
Each balance sheet and other financial statement furnished
pursuant to subsections (a) and (b) of this Section 5.3 shall contain
comparative financial information which conforms to the presentation required
in Form 10-Q and 10-K, as appropriate, under the Securities Exchange Act of
1934, as amended.
<PAGE> 51
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ARTICLE VI
GUARANTEES
SECTION 6.1 Guarantees. (a) The Company hereby
unconditionally and irrevocably guarantees to the Administrative Agent, for the
ratable benefit of the Lenders and their respective successors, indorsees,
transferees and assigns, the prompt and complete payment by each Borrowing
Subsidiary when due (whether at the stated maturity, by acceleration or
otherwise) of the Obligations owing by each Borrowing Subsidiary.
(b) Subject to the provisions of Section 6.1(c), each
Borrowing Subsidiary hereby, jointly and severally, unconditionally and
irrevocably guarantees to the Administrative Agent, for the ratable benefit of
the Lenders and their respective successors, indorsees, transferees and
assigns, the prompt and complete payment by the Company when due (whether at
the stated maturity, by acceleration or otherwise) of the Obligations owing by
the Company.
(c) Anything in this Article VI to the contrary
notwithstanding, the maximum liability of each Borrowing Subsidiary under this
Article VI shall in no event exceed the amount which can be guaranteed by such
Borrowing Subsidiary under applicable federal and state laws relating to the
insolvency of debtors.
(d) Each Borrowing Subsidiary agrees that the Obligations
owing by the Company may at any time and from time to time exceed the amount of
the liability of such Borrowing Subsidiary under this Article VI without
impairing the guarantee of such Borrowing Subsidiary under this Article VI or
affecting the rights and remedies of the Administrative Agent or any Lender
under this Article VI.
(e) No payment or payments made by any Borrower or any
other Person or received or collected by the Administrative Agent or any Lender
from any Borrower or any other Person by virtue of any action or proceeding or
any set-off or appropriation or application, at any time or from time to time,
in reduction of or in payment of the Obligations shall be deemed to modify,
reduce, release or otherwise affect the liability of the Borrowers under this
Article VI which shall, notwithstanding any such payment or payments, continue
until the Obligations are paid in full and the Commitments are terminated.
(f) Each Borrower agrees that whenever, at any time, or
from time to time, it shall make any payment to the Administrative Agent or any
Lender on account of its liability under this Article VI, it will notify the
Administrative Agent in writing that such payment is made under this Article VI
for such purpose.
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48
SECTION 6.2 No Subrogation. (a) Notwithstanding anything to
the contrary contained herein, the Company hereby irrevocably waives all rights
which may have arisen in connection with this Agreement to be subrogated to any
of the rights (whether contractual, under the Bankruptcy Code, including
Section 509 thereof, under common law or otherwise) of any Lender against any
Borrowing Subsidiary or against any collateral security or guarantee or right
of offset held by such Lender for the payment of the Obligations. The Company
hereby further irrevocably waives all contractual, common law, statutory or
other rights of reimbursement, contribution, exoneration or indemnity (or any
similar right) from or against each Borrowing Subsidiary or any other Person
which may have arisen in connection with this Agreement. So long as the
Obligations remain outstanding, if any amount shall be paid by or on behalf of
any Borrowing Subsidiary to the Company on account of any of the rights waived
in this Section, such amount shall be held by the Company in trust, segregated
from other funds of the Company, and shall, forthwith upon receipt by the
Company, be turned over to the Administrative Agent in the exact form received
by the Company (duly indorsed by the Company to the Administrative Agent, if
required), to be applied against the Obligations, whether matured or unmatured,
in such order as the Administrative Agent may determine. The provisions of
this Section shall survive the termination of this Agreement and the payment in
full of the Obligations and the termination of the Commitments.
(b) Notwithstanding any payment or payments made by any
Borrowing Subsidiary under this Article VI or any set- off or application of
funds of such Borrowing Subsidiary by the Administrative Agent or any Lender,
such Borrowing Subsidiary shall not be entitled to be subrogated to any of the
rights of the Administrative Agent or any Lender against the Company or against
any collateral security or guarantee or right of offset held by the
Administrative Agent or any Lender for the payment of the Obligations, nor
shall such Borrowing Subsidiary seek or be entitled to seek any contribution or
reimbursement from the Company in respect of payments made by such Borrowing
Subsidiary hereunder, until all amounts owing to the Administrative Agent and
the Lenders by the Company on account of the Obligations are paid in full and
the Commitments are terminated. If any amount shall be paid to any Borrowing
Subsidiary on account of such subrogation rights at any time when all of the
Obligations shall not have been paid in full, such amount shall be held by such
Borrowing Subsidiary in trust for the Administrative Agent and the Lenders,
segregated from other funds of such Borrowing Subsidiary, and shall, forthwith
upon receipt by such Borrowing Subsidiary, be turned over to the Administrative
Agent in the exact form received by such Borrowing Subsidiary (duly indorsed by
such Borrowing Subsidiary to the Administrative Agent, if required), to be
applied against the Obligations, whether matured or unmatured, in such order as
the Administrative Agent may determine.
<PAGE> 53
49
SECTION 6.3 Amendments, etc. with respect to the Obligations;
Waiver of Rights. Each Borrower shall remain obligated under this Article VI
notwithstanding that, without any reservation of rights against such Borrower,
and without notice to or further assent by such Borrower, any demand for
payment of any of the Obligations made by the Administrative Agent or any
Lender may be rescinded by the Administrative Agent or such Lender, and any of
the Obligations continued, and the Obligations, or the liability of any other
party upon or for any part thereof, or any collateral security or guarantee
therefor or right of offset with respect thereto, may, from time to time, in
whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by the Administrative Agent or any
Lender, and this Agreement, any Notes and any other documents executed and
delivered in connection herewith may be amended, modified, supplemented or
terminated, in whole or in part, as the Administrative Agent (or the Majority
Lenders, as the case may be) may deem advisable from time to time, and any
collateral security, guarantee or right of offset at any time held by the
Administrative Agent or any Lender for the payment of the Obligations may be
sold, exchanged, waived, surrendered or released. Neither the Administrative
Agent nor any Lender shall have any obligation to protect, secure, perfect or
insure any Lien at any time held by it as security for the Obligations or for
this Agreement or any property subject thereto. When making any demand
hereunder against any Borrower, the Administrative Agent or any Lender may, but
shall be under no obligation to, make a similar demand on the applicable
Borrowing Subsidiaries or any other guarantor, and any failure by the
Administrative Agent or any Lender to make any such demand or to collect any
payments from the other Borrowers or any such other guarantor or any release of
the other Borrowers or such other guarantor shall not relieve such Borrower of
its obligations or liabilities hereunder, and shall not impair or affect the
rights and remedies, express or implied, or as a matter of law, of the
Administrative Agent or any Lender against such Borrower For the purposes
hereof "demand" shall include the commencement and continuance of any legal
proceedings.
SECTION 6.4 Guarantee Absolute and Unconditional. Each
Borrower waives any and all notice of the creation, renewal, extension or
accrual of any of the Obligations and notice of or proof of reliance by the
Administrative Agent or any Lender upon this Agreement or acceptance of this
Agreement; the Obligations, and any of them, shall conclusively be deemed to
have been created, contracted or incurred, or renewed, extended, amended or
waived, in reliance upon this Agreement; and all dealings between any Borrowing
Subsidiary or the Company, on the one hand, and the Administrative Agent and
the Lenders, on the other, shall likewise be conclusively presumed to have been
had or consummated in reliance upon this Agreement. Each Borrower waives
diligence, presentment, protest, demand for payment and notice of default or
nonpayment to or upon the Borrowing Subsidiaries or the Company (as applicable)
with respect to the Obligations. The guarantee
<PAGE> 54
50
contained in this Article VI shall be construed as a continuing, absolute and
unconditional guarantee of payment without regard to (a) the validity,
regularity or enforceability of this Agreement, any Note, any of the
Obligations or any other collateral security therefor or guarantee or right of
offset with respect thereto at any time or from time to time held by the
Administrative Agent or any Lender, (b) any defense, set-off or counterclaim
(other than a defense of payment or performance) which may at any time be
available to or be asserted by any Borrower against the Administrative Agent or
any Lender, or (c) any other circumstance whatsoever (with or without notice to
or knowledge of any Borrower) which constitutes, or might be construed to
constitute, an equitable or legal discharge of any Borrower for the
Obligations, or of the Borrowers under this Agreement, in bankruptcy or in any
other instance. When pursuing its rights and remedies hereunder against any
Borrower, the Administrative Agent and any Lender may, but shall be under no
obligation to, pursue such rights and remedies as it may have against any other
Borrower or any other Person or against any collateral security or guarantee
for the Obligations or any right of offset with respect thereto, and any
failure by the Administrative Agent or any Lender to pursue such other rights
or remedies or to collect any payments from other Borrowers or any such other
Person or to realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of any other Borrower or any
such other Person or of any such collateral security, guarantee or right of
offset, shall not relieve any Borrower of any liability hereunder, and shall
not impair or affect the rights and remedies, whether express, implied or
available as a matter of law, of the Administrative Agent or any Lender against
such Borrower. The guarantees contained in this Article VI shall remain in
full force and effect and be binding in accordance with and to the extent of
its terms upon each Borrower and its successors and assigns thereof, and shall
inure to the benefit of the Administrative Agent and the Lenders, and their
respective successors, indorsees, transferees and assigns, until all the
Obligations and the obligations of the Borrower under this Agreement shall have
been satisfied by payment in full and the Commitments shall be terminated,
notwithstanding that from time to time during the term of this Agreement the
Borrowers may be free from any Obligations.
SECTION 6.5 Reinstatement. The provisions of this Article VI
shall continue to be effective, or be reinstated, as the case may be, if at any
time payment, or any part thereof, of any of the Obligations is rescinded or
must otherwise be restored or returned by the Administrative Agent or any
Lender upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of any Borrower or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, any
Borrower or any substantial part of its property, or otherwise, all as though
such payments had not been made.
<PAGE> 55
51
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.1 Event of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) Any Borrower shall fail to pay any installment of
principal of any of its Notes when due, or any interest on any of its
Notes or any other amount payable by it hereunder within five Business
Days after the same shall be due; or
(b) Any representation or warranty made or deemed made by
any Borrower herein or by any Borrower (or any of its officers) in
connection with this Agreement shall prove to have been incorrect in
any material respect when made or deemed made; or
(c) Any 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 any such failure shall remain
unremedied for 30 days after written notice thereof shall have been
given to such Borrower by the Administrative Agent or by any Lender
with a copy to the Administrative Agent; or
(d) The Company or any Principal Subsidiary shall fail to
pay any Debt or Guaranty (excluding Debt incurred pursuant hereto) of
the Company or such Subsidiary (as the case may be) in an aggregate
principal amount of $25,000,000 or more, or any installment of
principal thereof or interest or premium thereon, when due (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 Guaranty; or any other default under any agreement or
instrument relating to any such Debt, or any other event, shall occur
and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such
default or event is to accelerate, or to permit the acceleration of,
the maturity of such Debt; or any such Debt shall be required to be
prepaid (other than by a regularly scheduled required prepayment),
prior to the stated maturity thereof, as a result of either (i) any
default under any agreement or instrument relating to any such Debt or
(ii) the occurrence of any other event the effect of which would
otherwise accelerate or to permit the acceleration of the maturity of
such Debt; provided that, notwithstanding any provision contained in
this subsection (d) to the contrary, to the extent that pursuant to
the terms of any agreement or instrument relating to any Debt or
Guaranty referred to in this subsection (d) (or in the case of any
such Guaranty, relating to any obligations Guaranteed thereby), any
sale,
<PAGE> 56
52
pledge or disposal of Margin Stock, or utilization of the proceeds of
such sale, pledge or disposal, would result in a breach of any
covenant contained therein or otherwise give rise to a default or
event of default thereunder and/or acceleration of the maturity of the
Debt or obligations extended pursuant thereto, or payment pursuant to
any Guaranty, and as a result of such terms or of such sale, pledge,
disposal, utilization, breach, default, event of default or
acceleration or nonpayment under such Guaranty, or the provisions
thereof relating thereto, this Agreement or any Advance hereunder
would otherwise be subject to the margin requirements or any other
restriction under Regulation U issued by the Board of Governors of the
Federal Reserve System, then such breach, default, event of default or
acceleration, or nonpayment under any Guaranty, shall not constitute a
default or Event of Default under this subsection (d); or
(e)(i) The Company or any Principal Subsidiary shall (A)
generally not pay its debts as such debts become due; or (B) admit in
writing its inability to pay its debts generally; or (C) make a
general assignment for the benefit of creditors; or (ii) any
proceeding shall be instituted or consented to by the Company or any
such Subsidiary 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, or other similar official for it
or for any substantial part of its property; or (iii) any such
proceeding shall have been instituted against the Company or any such
Subsidiary and either such proceeding shall not be stayed or dismissed
for 60 consecutive days or any of the actions sought in such
proceeding (including, without limitation, the entry of an order for
relief against it or the appointment of a receiver, trustee, custodian
or other similar official for it or any substantial part of its
property) shall occur; or (iv) the Company or any such Subsidiary
shall take any corporate action to authorize any of the actions set
forth above in this subsection (e); or
(f) Any judgment or order of any court for the payment of
money in excess of $25,000,000 shall be rendered against the Company
or any Principal Subsidiary and either (i) enforcement proceedings
shall have been commenced by any creditor upon such judgment or order
(other than any enforcement proceedings consisting of the mere
obtaining and filing of a judgment lien or obtaining of a garnishment
or similar order so long as no foreclosure, levy or similar process in
respect of such lien, or payment over in respect of such garnishment
or similar order, has commenced) or (ii) there shall be any period of
30 consecutive days during
<PAGE> 57
53
which a stay of execution or of enforcement proceedings (other than
those referred to in the parenthesis in clause (i) above) in respect
of such judgment or order, by reason of a pending appeal, bonding or
otherwise, shall not be in effect; or
(g) (i) Any Termination Event with respect to a Plan
shall have occurred and, 30 days after notice thereof shall have been
given to the Company by the Administrative Agent, such Termination
Event shall still exist; or (ii) the Company or any ERISA Affiliate
shall have been notified by the sponsor of a Multiemployer Plan that
it has incurred Withdrawal Liability to such Multiemployer Plan; or
(iii) the Company or any ERISA Affiliate shall have been notified by
the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization, or is insolvent or is being terminated, within the
meaning of Title IV of ERISA; or (iv) any Person shall engage in a
"prohibited transaction" (as defined in Section 406 of ERISA or
Section 4975 of the Code) involving any Plan; and in each case in
clauses (i) through (iv) above, such event or condition, together with
all other such events or conditions, if any, would result in an
aggregate liability of the Company or any ERISA Affiliate that would
exceed 10% of the Net Worth of the Company.
(h) Upon completion of, and pursuant to, a transaction,
or a series of transactions (which may include prior acquisitions of
capital stock of the Company in the open market or otherwise),
involving a tender offer (i) a "person" (within the meaning of Section
13(d) of the Securities Exchange Act of 1934) other than Burlington,
the Company, a Subsidiary of the Company or any employee benefit plan
maintained for employees of the Company and/or any of its Subsidiaries
or the trustee therefor, shall have acquired direct or indirect
ownership of and paid for in excess of 50% of the outstanding capital
stock of the Company entitled to vote in elections for directors of
the Company and (ii) at any time before the later of (A) six months
after the completion of such tender offer and (B) the next annual
meeting of the shareholders of the Company following the completion of
such tender offer more than half of the directors of the Company
consists of individuals who (y) were not directors before the
completion of such tender offer and (z) were not appointed, elected or
nominated by the Board of Directors in office prior to the completion
of such tender offer (other than any such appointment, election or
nomination required or agreed to in connection with, or as a result
of, the completion of such tender offer); or
(i) Any event of default shall occur under any agreement
or instrument relating to or evidencing any Debt now or hereafter
existing of the Company or any Principal
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Subsidiary as the result of any change of control of the Company; or
(j) The guarantees contained in Article VI shall cease,
for any reason, to be in full force and effect or any Borrower shall
so assert;
then, and in any such event, the Administrative Agent shall at the request, or
may with the consent, of the Majority Lenders, by notice to the Company, (i)
declare the obligation of each Lender to make Advances to be terminated,
whereupon the same shall forthwith terminate, and (ii) 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 Borrowers; provided, however, that if an Event of
Default under subsection (e) of this Section 7.1 (except under clause (i)(A)
thereof) shall occur, (A) the obligation of each Lender to make Advances shall
automatically be terminated and (B) the Notes, all interest thereon and all
other amounts payable under this Agreement shall automatically become and be
forthwith due and payable, without presentment, demand, protest or any notice
of any kind, all of which are hereby expressly waived by the Borrowers.
ARTICLE VIII
THE ADMINISTRATIVE AGENT AND THE CAF ADVANCE AGENT
SECTION 8.1 Authorization and Action. Each Lender hereby
appoints and authorizes the Administrative Agent and the CAF Advance Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Administrative Agent and the CAF Advance
Agent by the terms hereof, together with such powers as are reasonably
incidental thereto. As to any matters not expressly provided for by this
Agreement (including, without limitation, enforcement of this Agreement or
collection of the Notes), the Administrative Agent and the CAF Advance Agent
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in
so acting or refraining from acting) upon the instructions of the Majority
Lenders, and such instructions shall be binding upon all Lenders and all
holders of Notes; provided, however, that the Administrative Agent and the CAF
Advance Agent shall not be required to take any action which exposes the
Administrative Agent or the CAF Advance Agent to personal liability or which is
contrary to this Agreement or applicable law. The Administrative Agent and the
CAF Advance Agent agree to give to each Lender prompt notice of each notice
given to it by any Borrower pursuant to the terms of this Agreement.
<PAGE> 59
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SECTION 8.2 Administrative Agent's and CAF Advance Agent's
Reliance, Etc. None of the Administrative Agent, the CAF Advance Agent or any
of its respective 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
Administrative Agent and the CAF Advance Agent: (i) may treat the payee of any
Note as the holder thereof until the Administrative Agent receives and accepts
an Assignment and Acceptance entered into by the Lender which is the payee of
such Note, as assignor, and an Eligible Assignee, as assignee, as provided in
Section 9.7; (ii) may consult with legal counsel (including counsel for the
Company), 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 Borrowers or to inspect the property (including the books and
records) of the Borrowers; (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 telegram, telecopier, cable or telex) believed by it to be
genuine and signed or sent by the proper party or parties.
SECTION 8.3 Chemical and Affiliates. With respect to its
Commitment, the Advances made by it and the Note issued to it, Chemical shall
have the same rights and powers under this Agreement as any other Lender and
may exercise the same as though it were not the Administrative Agent or the CAF
Advance Agent; and the term "Lender" or "Lenders" shall, unless otherwise
expressly indicated, include Chemical in its individual capacity. Chemical and
its affiliates may accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of business with, the Company,
any of its Subsidiaries and any Person who may do business with or own
securities of the Company or any of its Subsidiaries, all as if Chemical were
not the Administrative Agent or the CAF Advance Agent and without any duty to
account therefor to the other Lenders.
SECTION 8.4 Lender Credit Decision. Each Lender acknowledges
that it has, independently and without reliance upon the Administrative Agent,
the CAF Advance Agent or any other Lender and based on the financial statements
referred to in
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56
Section 4.1 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 Administrative Agent, the CAF Advance 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 8.5 Indemnification. The Lenders agree to indemnify
the Administrative Agent and the CAF Advance Agent (to the extent not
reimbursed by the Borrowers), ratably according to the respective principal
amounts of the Notes then held by each of them (or if no Notes are at the time
outstanding or if any Notes are held by Persons which are not Lenders, ratably
according to the respective amounts of their aggregate 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 which may be imposed on, incurred by, or asserted against the
Administrative Agent or the CAF Advance Agent in any way relating to or arising
out of this Agreement or any action taken or omitted by the Administrative
Agent or the CAF Advance 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 Administrative Agent's or the CAF Advance Agent's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Lender agrees to reimburse the Administrative Agent and the CAF Advance Agent
promptly upon demand for its ratable share of any out-of-pocket expenses
(including reasonable counsel fees) incurred by the Administrative Agent or the
CAF Advance Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings, in bankruptcy or insolvency proceedings, or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement, to the extent that the Administrative Agent or the CAF Advance
Agent is not reimbursed for such expenses by the Borrowers.
SECTION 8.6 Successor Administrative Agent and CAF Advance
Agent. The Administrative Agent and the CAF Advance Agent may resign at any
time by giving written notice thereof to the Lenders and the Company and may be
removed at any time with or without cause by the Majority Lenders. Upon any
such resignation or removal, the Majority Lenders shall have the right to
appoint a successor Administrative Agent or the CAF Advance Agent. If no
successor Administrative Agent or CAF Advance Agent shall have been so
appointed by the Majority Lenders, and shall have accepted such appointment,
within 30 days after the retiring Administrative Agent's or the CAF Advance
Agent giving of notice of resignation or the Majority Lenders' removal of the
retiring Administrative Agent or CAF Advance Agent, then such retiring
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Administrative Agent or CAF Advance Agent may, on behalf of the Lenders,
appoint a successor Administrative Agent or CAF Advance Agent, which shall be a
Lender and a commercial bank organized, or authorized to conduct a banking
business, under the laws of the United States of America or of any State
thereof and having a combined capital and surplus of at least $500,000,000.
Upon the acceptance of any appointment as Administrative Agent or CAF Advance
Agent hereunder by a successor Administrative Agent or CAF Advance Agent, such
successor Administrative Agent or CAF Advance Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent or CAF Advance Agent, and the retiring
Administrative Agent or CAF Advance Agent shall be discharged from its duties
and obligations under this Agreement. After any retiring Administrative
Agent's or CAF Advance Agent's resignation or removal hereunder as
Administrative Agent or CAF Advance 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 Administrative Agent or CAF Advance Agent under this Agreement.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Amendments, Etc. An amendment or waiver of any
provision of this Agreement or the Notes, or a consent to any departure by any
Borrower therefrom, shall be effective against the Lenders and all holders of
the Notes if, but only if, it shall be in writing and signed by the Majority
Lenders, and then such a waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that no such amendment, waiver or consent shall, unless in writing and
signed by all the Lenders, be effective to: (a) waive any of the conditions
specified in Article III, (b) increase the Commitments of the Lenders or
subject the Lenders to any additional obligations, (c) reduce the principal of,
or interest on, the Notes or any facility fees hereunder, (d) postpone any date
fixed for any payment of principal of, or interest on, the Notes or any
facility fees hereunder, (e) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes, or the number of Lenders, which
shall be required for the Lenders or any of them to take any action under this
Agreement, (f) amend this Section 9.1 or (g) amend, waive or consent to any
departure of any provision in Article VI; provided, further, that no amendment,
waiver or consent shall, unless in writing and signed by the Administrative
Agent and the CAF Advance Agent in addition to the Lenders required hereinabove
to take such action, affect the rights or duties of the Administrative Agent or
the CAF Advance Agent under this Agreement or any Note.
<PAGE> 62
58
SECTION 9.2 Notices, Etc. Except as otherwise provided in
Section 2.3(a), 2.5(d) or 2.15(b), all notices and other communications
provided for hereunder shall be in writing (including telecopier and other
readable communication) and mailed by certified mail, return receipt requested,
telecopied or otherwise transmitted or delivered, if to the Company, at 1 Paul
Kayser Center, 100 North Stanton Street, El Paso, Texas 79901, Attention:
Senior Vice President and Chief Financial Officer, Telecopier: (915) 541-5008;
if to any Lender, at its address set forth under its name on Schedule I hereto;
if to the Administrative Agent, at 270 Park Avenue, New York, New York 10017,
Attention: John Gehebe, Telecopier: (212) 270-4892; and if to the CAF Advance
Agent, at 140 East 45th Street, New York, New York 10017, Attention: Terri
Reilly, Telecopier: (212) 622-0003, Telephone: (212) 622- 8779; or, as to
each party and each Borrowing Subsidiary, at such other address as shall be
designated by such party in a written notice to the other parties. All such
notices and communications shall, if so mailed, telecopied or otherwise
transmitted, be effective when received, if mailed, or when the appropriate
answerback or other evidence of receipt is given, if telecopied or otherwise
transmitted, respectively. A notice received by the Administrative Agent, the
CAF Advance Agent or a Lender by telephone pursuant to Section 2.3(a), 2.5(d)
or 2.15(b) shall be effective if the Administrative Agent or Lender believes in
good faith that it was given by an authorized representative of the applicable
Borrower and acts pursuant thereto, notwithstanding the absence of written
confirmation or any contradictory provision thereof.
SECTION 9.3 No Waiver; Remedies. No failure on the part of
any Lender, the Administrative Agent or the CAF Advance 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 right
hereunder or under any Note 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 9.4 Costs and Expenses; Indemnity. (a) Each
Borrower agrees to pay on demand (to the extent not reimbursed by any other
Borrower) (i) all reasonable fees and out-of-pocket expenses of counsel for the
Administrative Agent in connection with the preparation, execution and delivery
of this Agreement, the Notes and the other documents to be delivered hereunder
and the fulfillment or attempted fulfillment of conditions precedent hereunder,
(ii) all reasonable costs and expenses incurred by the Administrative Agent and
its Affiliates in initially syndicating all or any portion of the Commitments
hereunder, including, without limitation, the related reasonable fees and
out-of-pocket expenses of counsel for the Administrative Agent or its
Affiliates, travel expenses, duplication and printing costs and courier and
postage fees, and excluding any syndication fees paid to other parties joining
the syndicate and (iii) all
<PAGE> 63
59
out-of-pocket costs and expenses, if any, incurred by the Administrative Agent,
the CAF Advance Agent and the Lenders in connection with the enforcement
(whether through negotiations, legal proceedings in bankruptcy or insolvency
proceedings, or otherwise) of this Agreement, the Notes and the other documents
to be delivered hereunder and thereunder, including the reasonable fees and
out-of-pocket expenses of counsel.
(b) If any payment of principal of, or Conversion of, any
Eurodollar Rate Advance or CAF Advance is made by any Borrower to or for the
account of a Lender on any day other than the last day of the Interest Period
for such Advance, as a result of a prepayment pursuant to Section 2.15 or a
Conversion pursuant to Section 2.13(f) or Section 2.14 or due to acceleration
of the maturity of the Notes pursuant to Section 7.1 or due to any other reason
attributable to such Borrower, such Borrower shall, upon demand by such Lender
(with a copy of such demand to the Administrative Agent), pay to the
Administrative Agent for the account of such Lender any amounts required to
compensate such Lender for any additional losses, costs or expenses which 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.
(c) Each Borrower agrees to indemnify and hold harmless
the Administrative Agent, the CAF Advance Agent and each Lender (to the extent
not reimbursed by any other Borrower) from and against any and all claims,
damages, liabilities and expenses (including, without limitation, fees and
disbursements of counsel) which may be incurred by or asserted against the
Administrative Agent, the CAF Advance Agent or such Lender in connection with
or arising out of any investigation, litigation, or proceeding (whether or not
the Administrative Agent, the CAF Advance Agent or such Lender is party
thereto) related to any acquisition or proposed acquisition by the Company, or
by any Subsidiary of the Company, of all or any portion of the stock or
substantially all the assets of any Person or any use or proposed use of the
Advances by any Borrower (excluding any claims, damages, liabilities or
expenses incurred by reason of the gross negligence or willful misconduct of
the party to be indemnified or its employees or agents, or by reason of any use
or disclosure of information relating to any such acquisition or use or
proposed use of the proceeds by the party to be indemnified or its employees or
agents).
SECTION 9.5 Right of Set-Off. Upon the declaration of the
Notes as due and payable pursuant to the provisions of Section 7.1, each Lender
is hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Lender to or for the
<PAGE> 64
60
credit or the account of the applicable Borrower against any and all of the
obligations of such Borrower now or hereafter existing under this Agreement and
the Notes of such Borrower held by such Lender, irrespective of whether or not
such Lender shall have made any demand under this Agreement or such Notes and
although such obligations may be unmatured. Each Lender agrees promptly to
notify the Company after any such set-off and application made by such Lender,
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 9.5
are in addition to other rights and remedies (including, without limitation,
other rights of set-off) which such Lender may have.
SECTION 9.6 Binding Effect. This Agreement shall become
effective in accordance with the provisions of Section 3.1, and thereafter
shall be binding upon and inure to the benefit of the Borrowers, the
Administrative Agent, the CAF Advance Agent and each Lender and their
respective successors and assigns, except that no Borrower shall have the right
to assign its rights hereunder or any interest herein without the prior written
consent of all of the Lenders.
SECTION 9.7 Assignments and Participations. (a) Each Lender
may assign to one or more banks or other financial institutions all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment, the Advances owing to it and
the 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, (ii) the amount of the 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 $15,000,000 (or, if less, the entire Commitment of the
assigning Lender) and shall be an integral multiple of $1,000,000, (iii) each
such assignment shall be to an Eligible Assignee, and (iv) the parties to each
such assignment shall execute and deliver to the Administrative Agent, for its
acceptance and recording in the Register, an Assignment and Acceptance,
together with any Notes subject to such assignment and a processing and
recordation fee of $2,500, and shall send to the Company an executed
counterpart of such Assignment and Acceptance. Upon such execution, delivery,
acceptance and recording, from and after the effective date specified in each
Assignment and Acceptance, (A) 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 hereunder and (B) the assigning Lender 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
<PAGE> 65
61
obligations under this Agreement, such Lender shall cease to be a party
hereto).
(b) By executing and delivering an Assignment and
Acceptance, each 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 each Borrower or the performance or observance by each
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 4.1 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 Administrative Agent, the CAF
Advance 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 Administrative Agent and the CAF
Advance Agent to take such action as agent on its behalf and to exercise such
powers under this Agreement as are delegated to the Administrative Agent and
the CAF Advance Agent by the terms hereof, together with such powers as are
reasonably incidental thereto; and (vii) such assignee 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.
(c) The Administrative Agent shall maintain at its
address referred to in Section 9.2 a copy of each Assignment and Acceptance
delivered to and accepted by it and a register for the recordation of the names
and addresses of the Lenders and the 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 each Borrower, the Administrative Agent, the CAF Advance
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 any Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice. Upon the
acceptance of any Assignment and Acceptance for
<PAGE> 66
62
recordation in the Register, Schedule I hereto shall be deemed to be amended to
reflect the revised Commitments of the Lenders parties to such Assignment and
Acceptance as well as administrative information with respect to any new Lender
as such information is recorded in the Register.
(d) Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender and as assignee representing that it is an
Eligible Assignee, together with any Notes subject to such assignment, the
Administrative Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Exhibit G hereto, (i) accept such
Assignment and Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Company; within five
Business Days after its receipt of such notice and its receipt of an executed
counterpart of such Assignment and Acceptance, the Borrowers, at their own
expense, shall execute and deliver to the Administrative Agent in exchange for
the surrendered Notes new Notes to the order of such Eligible Assignee in an
amount equal to the Commitment assumed by it pursuant to such Assignment and
Acceptance and, if the assigning Lender has retained a Commitment hereunder,
new Notes to the order of the assigning Lender in an amount equal to the
Commitment retained by it hereunder. Such new Notes shall be in an aggregate
principal amount equal to the aggregate principal amount of such surrendered
Notes, shall be dated (A) in the case of Notes made by the Company, the Closing
Date and (B) in the case of Notes made by a Borrowing Subsidiary, the date such
Borrowing Subsidiary executes and delivers its Joinder Agreement, and shall
otherwise be in substantially the form of Exhibits A and C hereto.
(e) Each Lender may sell participations to one or more
banks or other entities in or to all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Commitment, and the Advances owing to it and the Notes held by it); provided,
however, that (i) such Lender's obligations under this Agreement (including,
without limitation, its Commitment to the Borrowers 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 Notes for all purposes of this Agreement, (iv)
the Borrowers, the Administrative Agent, the CAF Advance 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, (v)
such Lender shall continue to be able to agree to any modification or amendment
of this Agreement or any waiver hereunder without the consent, approval or vote
of any such participant or group of participants, other than modifications,
amendments and waivers which (A) postpone any date fixed for any payment of, or
reduce any payment of, principal of or interest on such Lender's Notes or any
facility fees payable under this Agreement, or (B) increase the amount of
<PAGE> 67
63
such Lender's Commitment in a manner which would have the effect of increasing
the amount of a participant's participation, or (C) reduce the interest rate
payable under this Agreement and such Lender's Notes, or (D) consent to the
assignment or the transfer by any Borrower of any of its rights and obligations
under the Agreement, and (vi) except as contemplated by the immediately
preceding clause (v), no participant shall be deemed to be or to have any of
the rights or obligations of a "Lender" hereunder.
(f) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.7, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrowers furnished to such Lender
by or on behalf of the Borrowers; provided that, prior to any such disclosure,
the assignee or participant or proposed assignee or participant shall agree in
writing for the benefit of the Borrowers to preserve the confidentiality of any
confidential information relating to the Borrowers received by it from such
Lender in a manner consistent with Section 9.8.
(g) Anything in this Agreement to the contrary
notwithstanding, 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 Notes issued to it hereunder in
favor of any Federal Reserve Bank in accordance with Regulation A of the Board
of Governors of the Federal Reserve System (or any successor regulation) and
the applicable operating circular of such Federal Reserve Bank.
SECTION 9.8 Confidentiality. Each Lender, the Administrative
Agent and the CAF Advance Agent (each, a "Party") agrees that it will use its
best efforts not to disclose, without the prior consent of the Company (other
than to its, or its Affiliate's, employees, auditors, accountants, counsel or
other representatives, whether existing at the date of this Agreement or any
subsequent time), any information with respect to the Borrowers which is
furnished pursuant to this Agreement, provided that any Party may disclose any
such information (i) as has become generally available to the public, (ii) as
may be required or appropriate in any report, statement or testimony submitted
to any municipal, state or Federal regulatory body having or claiming to have
jurisdiction over such party or to the Board of Governors of the Federal
Reserve System or the Federal Deposit Insurance Corporation or similar
organizations (whether in the United States or elsewhere) or their successors,
(iii) as may be required or appropriate in response to any summons or subpoena
or in connection with any litigation or regulatory proceeding, (iv) in order to
comply with any law, order, regulation or ruling applicable to such party, or
(v) to any prospective assignee or participant in connection with any
contemplated assignment of any rights or obligations hereunder, or any sale of
any participation therein, by such Party pursuant to Section 9.7, if such
prospective assignee or participant, as the case may be, executes
<PAGE> 68
64
an agreement with the Company containing provisions substantially similar to
those contained in this Section 9.8; provided, however, that the Company
acknowledges that the Administrative Agent has disclosed and may continue to
disclose such information as the Administrative Agent in its sole discretion
determines is appropriate to the Lenders from time to time.
SECTION 9.9 Consent to Jurisdiction. (a) Each Borrower
hereby irrevocably submits to the jurisdiction of any New York State or Federal
court sitting in New York City and any appellate court from any thereof in any
action or proceeding by the Administrative Agent, the CAF Advance Agent, any
Lender or the holder of any Note in respect of, but only in respect of, any
claims or causes of action arising out of or relating to this Agreement or the
Notes (such claims and causes of action, collectively, being "Permitted
Claims"), and each Borrower hereby irrevocably agrees that all Permitted Claims
may be heard and determined in such New York State court or in such Federal
court. Each Borrower hereby irrevocably waives, to the fullest extent it may
effectively do so, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any aforementioned court in respect of Permitted
Claims. Each Borrower hereby irrevocably appoints CT Corporation System (the
"Process Agent"), with an office on the date hereof at 1633 Broadway, New York,
New York 10019, as its agent to receive on behalf of such Borrower and its
property service of copies of the summons and complaint and any other process
which may be served by the Administrative Agent, any Lender or the holder of
any Note in any such action or proceeding in any aforementioned court in
respect of Permitted Claims. Such service may be made by delivering a copy of
such process to the Company by courier and by certified mail (return receipt
requested), fees and postage prepaid, both (i) in care of the Process Agent at
the Process Agent's above address and (ii) at the Company's address specified
pursuant to Section 9.2, and each Borrower hereby irrevocably authorizes and
directs the Process Agent to accept such service on its behalf. Each Borrower
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law.
(b) Nothing in this Section 9.9 (i) shall affect the
right of any Lender, the holder of any Note or the Administrative Agent or the
CAF Advance Agent to serve legal process in any other manner permitted by law
or affect any right otherwise existing of any Lender, the holder of any Note or
the Administrative Agent or the CAF Advance Agent to bring any action or
proceeding against any Borrower or its property in the courts of other
jurisdictions or (ii) shall be deemed to be a general consent to jurisdiction
in any particular court or a general waiver of any defense or a consent to
jurisdiction of the courts expressly referred to in subsection (a) above in any
action or proceeding in respect of any claim or cause of action other than
Permitted Claims.
<PAGE> 69
65
SECTION 9.10 GOVERNING LAW. THIS AGREEMENT AND THE NOTES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK.
SECTION 9.11 Rate of Interest. It is the intention of the
parties hereto that each Lender shall each conform strictly to usury laws
applicable to it. Accordingly, if the transactions contemplated hereby would
be usurious as to any Lender under laws applicable to it, then, in that event,
notwithstanding anything to the contrary in this Agreement or in the Notes to
the order of such Lender, it is agreed as follows: (a) the aggregate of all
consideration which constitutes interest under law applicable to such Lender
that is contracted for, taken, reserved, charged or received by such Lender
hereunder, or under such Notes or otherwise, shall under no circumstances
exceed the maximum amount allowed by such applicable law, and any excess shall
be credited by such Lender on the principal amount of the sums owed to such
Lender (or, if all amounts owing to such Lender shall have been paid in full,
refunded by such Lender to the applicable Borrower); or (b) in the event that a
prepayment of any Advances owed to any Lender is required, then such
consideration that constitutes interest under law applicable to such Lender may
never include more than the maximum amount allowed by such applicable law, and
excess interest, if any, provided for shall be cancelled automatically by such
Lender as of the date of such prepayment and, if theretofore paid, shall be
credited by such Lender on the principal amount of such prepayment obligation
(or, if the principal amount of such prepayment obligation shall have been paid
in full, refunded by such Lender to the applicable Borrower). To the extent
that Article 5069-1.04 of the Texas Revised Civil Statutes is relevant to any
Lender for the purpose of determining the maximum amount of interest allowed by
applicable law, such Lender hereby elects to determine the applicable rate
ceiling under such Article by the indicated (weekly) rate ceiling from time to
time in effect, subject to such Lender's right subsequently to change such
method in accordance with applicable law. In no event, however, shall Article
5069, Chapter 15, of the Texas Revised Civil Statutes apply to this Agreement
or the Notes or the transactions contemplated hereby.
<PAGE> 70
66
SECTION 9.12 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 to the Administrative Agent of a counterpart executed by a
Lender shall constitute delivery of such counterpart to all of the Lenders.
This Agreement may be delivered by facsimile transmission of the relevant
signature pages hereof.
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.
EL PASO NATURAL GAS COMPANY
By_________________________________
Title:
CHEMICAL BANK, as Administrative
Agent, CAF Advance Agent and a
Lender
By_________________________________
Title:
THE BANK OF NEW YORK
By_________________________________
Title:
CITIBANK, N.A.
By_________________________________
Title:
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By_________________________________
Title:
<PAGE> 71
67
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By_________________________________
Title:
NATIONSBANK OF TEXAS, N.A.
By_________________________________
Title:
UNION BANK OF SWITZERLAND
HOUSTON AGENCY
By_________________________________
Title:
By_________________________________
Title:
MELLON BANK, N.A.
By_________________________________
Title:
ROYAL BANK OF CANADA
By_________________________________
Title:
THE SUMITOMO BANK, LIMITED HOUSTON
AGENCY
By_________________________________
Title:
<PAGE> 72
68
SWISS BANK CORPORATION NEW YORK
BRANCH
By_________________________________
Title:
By_________________________________
Title:
TORONTO DOMINION (TEXAS), INC.
By_________________________________
Title:
THE INDUSTRIAL BANK OF JAPAN,
LIMITED NEW YORK BRANCH
By_________________________________
Title:
KREDIETBANK N.V.
By_________________________________
Title:
By_________________________________
Title:
SOCIETE GENERALE, SOUTHWEST
AGENCY
By_________________________________
Title:
<PAGE> 73
SCHEDULE I
COMMITMENTS, ADDRESSES, ETC.
<TABLE>
<CAPTION>
Name and Address of Lender Amount of Commitment
- - ------------------------- --------------------
<S> <C>
CHEMICAL BANK $38,000,000
270 Park Avenue
New York, New York 10017
Attention: John Gehebe
Telecopier: (212) 270-4892
THE BANK of NEW YORK $32,000,000
One Wall Street, 19th Floor
New York, New York 10286
Attention: Raymond J. Palmer
Telecopier: (212) 635-7923
CITIBANK, N.A. $32,000,000
c/o Citicorp North America, Inc.
1200 Smith Street, Suite 2000
Houston, Texas 77002
Attention: Carol Rooney
Telecopier: (713) 654-2849
CREDIT LYONNAIS CAYMAN ISLAND $32,000,000
BRANCH
c/o Credit Lyonnais Houston
Representative Office
1000 Louisiana, Suite 5360
Houston, Texas 77002
Attention: Richard S. Kaufman
Telecopier: (713) 751-0307
MORGAN GUARANTY TRUST COMPANY $32,000,000
OF NEW YORK
60 Wall Street
New York, New York 10260
Attention: Philip W. McNeal
Telecopier: (212) 648-5023
NATIONSBANK OF TEXAS, N.A. $32,000,000
901 Main Street, 49th Floor
Dallas, Texas 75283-0104
Attention: Denise Smith
Telecopier: (214) 508-1285
</TABLE>
<PAGE> 74
2
<TABLE>
<CAPTION>
Name and Address of Lender Amount of Commitment
- - -------------------------- --------------------
<S> <C>
UNION BANK OF SWITZERLAND $32,000,000
HOUSTON AGENCY
1100 Louisiana
Houston, Texas 77002
Attention: Jean Claude de Rouche
Telecopier: (713) 655-6555
MELLON BANK, N.A. $25,000,000
c/o Mellon Financial Services
1100 Louisiana, Suite 3600
Houston, Texas 77002
Attention: Janet O'N. Jenkins
Telecopier: (713) 650-3409
ROYAL BANK OF CANADA $25,000,000
600 Wilshire Boulevard, Suite 800
Los Angeles, California 90017
Attention: Everett M. Harner
Telecopier: (213) 955-5350
THE SUMITOMO BANK, LIMITED $25,000,000
HOUSTON AGENCY
700 Louisiana, Suite 1750
Houston, Texas 77002
Attention: William R. McKown, III
Telecopier: (713) 759-0020
SWISS BANK CORPORATION NEW YORK $25,000,000
BRANCH
222 Broadway
New York, New York 10038
Attention: Nancy A. Hanrahan
Telecopier: (212) 574-4395
TORONTO DOMINION (TEXAS), INC. $25,000,000
909 Fannin Street, 17th Floor
Houston, Texas 77010
Attention: Jano Mott
Telecopier: (713) 951-9921
THE INDUSTRIAL BANK OF JAPAN, $15,000,000
LIMITED NEW YORK BRANCH
245 Park Avenue
New York, New York 10167
Attention: Ira Gottlieb
Telecopier: (212) 557-3581
KREDIETBANK N.V. $15,000,000
125 West 55th Street
New York, New York 10019
Attention: Diane M. Grimmig
Telecopier: (212) 956-5580
</TABLE>
<PAGE> 75
3
<TABLE>
<CAPTION>
Name and Address of Lender Amount of Commitment
- - -------------------------- --------------------
<S> <C>
SOCIETE GENERALE, SOUTHWEST AGENCY $15,000,000
2001 Ross Avenue, Suite 48000
Dallas, Texas 75201
Attention: Molly Franklin
Telecopier: (214) 754-0171
</TABLE>
<PAGE> 76
EXHIBIT A
FORM OF
REVOLVING CREDIT NOTE
$
New York, New York
, 1994
FOR VALUE RECEIVED, the undersigned, ___________________, a ________
corporation (the "Borrower"), hereby unconditionally promises to pay to the
order of (the "Lender") at the office of Chemical Bank,
located at 270 Park Avenue, New York, New York 10017, in lawful money of the
United States of America and in same day funds, on the Termination Date the
principal amount of (a) DOLLARS ($ ), or, if less,
(b) the aggregate unpaid principal amount of all Revolving Credit Advances made
by the Lender to the Borrower pursuant to subsection 2.1 of the Credit
Agreement, as hereinafter defined. The Borrower further agrees to pay interest
in like money at such office on the unpaid principal amount hereof from time to
time outstanding at the rates and on the dates specified in the Credit
Agreement.
The holder of this Note is authorized to, and prior to any transfer
hereof shall, endorse on the schedules attached hereto and made a part hereof
or on a continuation thereof which shall be attached hereto and made a part
hereof the date, Type and amount of each Revolving Credit Advance made pursuant
to subsection 2.1 of the Credit Agreement and the date and amount of each
payment or prepayment of principal thereof, each continuation thereof, each
conversion of all or a portion thereof to another Type and, in the case of
Eurodollar Rate Advances, the length of each Interest Period with respect
thereto. Each such endorsement shall constitute prima facie evidence of the
accuracy of the information endorsed. The failure to make any such endorsement
shall not affect the obligations of the Borrower in respect of such Revolving
Credit Advance.
This Note (a) is one of the Revolving Credit Notes referred to in the
Revolving Credit and Competitive Advance Facility Agreement, dated as of August
10, 1994 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among El Paso Natural Gas Company, the Lender, the other
banks and financial institutions from time to time parties thereto and Chemical
Bank, as Administrative Agent and CAF Advance Agent, (b) is subject to the
provisions of the Credit Agreement and (c) is subject to optional and mandatory
prepayment in whole or in part as provided in the Credit Agreement.
<PAGE> 77
A-2
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind except
those expressly required under the Credit Agreement.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
(BORROWER)
By _____________________________
Title:
<PAGE> 78
Schedule A to Revolving Credit Note
ADVANCES, CONVERSIONS AND REPAYMENTS OF BASE RATE ADVANCES
<TABLE>
<CAPTION>
Amount of Base
Amount of Rate Advances
Amount of Amount Converted Principal of Converted to Unpaid Principal Notation
Base Rate to Base Rate Base Rate Eurodollar Rate Balance of Base Made
Date Advances Advances Advances Repaid Advances Rate Advances By
---- --------- ---------------- --------------- --------------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C>
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
</TABLE>
<PAGE> 79
Schedule B to Revolving Credit Note
ADVANCES, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR RATE ADVANCES
<TABLE>
<CAPTION>
Amount of
Eurodollar
Interest Amount of Rate Unpaid
Period and Principal of Advances Principal
Amount of Amount Eurodollar Eurodollar Converted Balance of
Eurodollar Converted to Rate with Rate to Base Eurodollar Notation
Rate Eurodollar Respect Advances Rate Rate Made
Date Advances Rate Advances Thereto Repaid Advances Advances By
---- --------- ------------- ----------- ----------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
</TABLE>
<PAGE> 80
EXHIBIT B
FORM OF
NOTICE OF BORROWING
<TABLE>
<S> <C>
Chemical Bank, as Administrative Agent
for the Lenders parties
to the Credit Agreement
referred to below
270 Park Avenue
New York, New York 10017 [Date]
Attention: El Paso Natural Gas Company
</TABLE>
Ladies and Gentlemen:
The undersigned, EL PASO NATURAL GAS COMPANY, refers to the
Revolving Credit and Competitive Advance Facility Agreement, dated as of August
10, 1994 (the "Credit Agreement", the terms defined therein being used herein
as therein defined), among the undersigned, certain Lenders parties thereto and
Chemical Bank, as Administrative Agent and CAF Advance Agent for said Lenders,
and hereby gives you notice, irrevocably, pursuant to Section 2.3 of the Credit
Agreement that the undersigned hereby requests a Borrowing under the Credit
Agreement, and in that connection sets forth below the information relating to
such Borrowing (the "Proposed Borrowing") as required by Section 2.3(a) of the
Credit Agreement:
(i) The Borrower for the Proposed Borrowing is
______________.
(ii) The Business Day of the Proposed Borrowing is
___________, 19__.
(iii) The Type of Advances comprising the Proposed
Borrowing is [Base Rate Advances] [Eurodollar Rate Advances].
(iv) The aggregate amount of the Proposed Borrowing is
$__________.
(v) The Interest Period for each Eurodollar Rate Advance
made as part of the Proposed Borrowing is [______ month(s)].
The undersigned hereby certifies that the following statements
are true on the date hereof, and will be true on the date of the Proposed
Borrowing, before and immediately after giving effect thereto and to the
application of the proceed therefrom:
<PAGE> 81
B-2
(A) each representation and warranty contained in Section
4.1 is correct in all material respects as though made on and as of
such date; and
(B) no event has occurred and is continuing, or would
result from such Proposed Borrowing, which constitutes an Event of
Default or would constitute an Event of Default but for the
requirement that notice be given or time elapse or both.
Very truly yours,
EL PASO NATURAL GAS COMPANY
By_________________________
Title:
<PAGE> 82
EXHIBIT C
FORM OF
CAF ADVANCE NOTE
$400,000,000.00 New York, New York
_________ __, 1994
FOR VALUE RECEIVED, the undersigned, ,
a ________ corporation (the "Borrower"), hereby unconditionally promises
to pay to the order of (the "Lender") at the office of Chemical Bank
located at 270 Park Avenue, New York, New York 10017, in lawful money of the
United States of America and in immediately available funds, the principal
amount of (a) FOUR HUNDRED MILLION DOLLARS ($400,000,000.00), or, if less, (b)
the aggregate unpaid principal amount of each CAF Advance which is made by the
Lender to the Borrower pursuant to Section 2.4 of the Credit Agreement, as
hereinafter defined. The principal amount of each CAF Advance evidenced hereby
shall be payable on the maturity date therefor set forth on the schedule
attached hereto and made a part hereof or on a continuation of such schedule
which shall be attached hereto and made a part hereof (the "Grid"). The
Borrower further agrees to pay interest in like money at such office on the
unpaid principal amount of each CAF Advance evidenced hereby, at the rate per
annum set forth in respect of such CAF Advance on the Grid, calculated on the
basis of a year of 360 days and actual days elapsed from the date of such CAF
Advance until the due date thereof (whether at the stated maturity, by
acceleration or otherwise) and thereafter at the rates determined in accordance
with subsection 2.6(c) of the Credit Agreement. Interest on each CAF Advance
evidenced hereby shall be payable on the date or dates set forth in respect of
such CAF Advance on the Grid. CAF Advances evidenced by this Note may not be
prepaid.
The holder of this Note is authorized to, and prior to any transfer
hereof shall, endorse on the Grid the date, amount, interest rate, interest
payment dates and maturity date in respect of each CAF Advance made pursuant to
subsection 2.4 of the Credit Agreement and each payment of principal with
respect thereto. Each such endorsement shall constitute prima facie evidence
of the accuracy of the information endorsed. The failure to make any such
endorsement shall not affect the obligations of the Borrower in respect of such
CAF Advance.
This Note is one of the CAF Advance Notes referred to in the Revolving
Credit and Competitive Advance Facility Agreement, dated as of August 10, 1994
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among El Paso Natural Gas Company, the Lender, the other banks and
financial institutions from time to time parties thereto and Chemical Bank, as
Administrative Agent and CAF Advance Agent, and is subject to the provisions of
the Credit Agreement.
<PAGE> 83
C-2
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind except
those expressly required under the Credit Agreement.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
(BORROWER)
By
Title:
<PAGE> 84
SCHEDULE OF CAF ADVANCES
<TABLE>
<CAPTION>
Date of Transfer
Date of CAF Amount of CAF Interest Payment to Individual CAF
Advance Advance Interest Rate Dates Maturity Date Payment Date Advance Note Authorization
- - ----------- ------------- ------------- ---------------- -------------- ------------ ----------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
________________________________________________________________________________________________________________________________
</TABLE>
<PAGE> 85
EXHIBIT D
FORM OF
CAF ADVANCE REQUEST
__________, 199__
Chemical Bank, as CAF Advance Agent
270 Park Avenue
New York, New York 10017
Reference is made to the Revolving Credit and Competitive
Advance Facility Agreement, dated as of August 10, 1994, among the undersigned,
the Lenders named therein and Chemical Bank, as Administrative Agent and CAF
Advance Agent (as the same may be amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"). Terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the Credit
Agreement.
This is a (Fixed Rate) (LIBO Rate) CAF Advance Request*
pursuant to Section 2.5 of the Credit Agreement requesting quotes for the
following CAF Advances:
<TABLE>
<CAPTION>
Loan 1 Loan 2 Loan 3
------ ------ ------
<S> <C> <C> <C
Aggregate Principal Amount $__________ $__________ $_________
CAF Advance Date
Maturity Date
Interest Payment Dates
</TABLE>
Very truly yours,
[BORROWER]
By ______________________________
Name:
Title:
_____________
* Pursuant to the Credit Agreement, a CAF Advance Request may be
transmitted in writing, by telecopy, or by telephone, immediately
confirmed by telecopy. In any case, a CAF Advance Request shall
contain the information specified in the second paragraph of this
form.
<PAGE> 86
EXHIBIT E
FORM OF
CAF ADVANCE OFFER
_____________ , 199____
Chemical Bank, as CAF Advance Agent
270 Park Avenue
New York, New York 10017
Reference is made to the Revolving Credit and Competitive
Advance Facility Agreement, dated as of August 10, 1994, among the undersigned,
the Lenders named therein and Chemical Bank, as Administrative Agent and CAF
Advance Agent (as the same may be amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"). Terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the Credit
Agreement.
In accordance with Section 2.5 of the Credit Agreement, the
undersigned Lender offers to make CAF Advances thereunder in the following
amounts with the following maturity dates:
CAF Advance Date: Aggregate Maximum Amount: $_________
__________, 199__
Maturity Date 1: Maximum Amount: $__________
__________, 199__ $________ offered at _______*
$________ offered at _______*
Maturity Date 2: Maximum Amount: $__________
__________, 199__ $________ offered at _______*
$________ offered at _______*
Maturity Date 3: Maximum Amount: $__________
__________, 199__ $________ offered at _______*
$________ offered at _______*
Very truly yours,
(NAME OF CAF ADVANCE LENDER)
By ______________________________
Name:
Title:
Telephone No.:
Telecopy No.:
__________________________________
* Insert the interest rate offered for the specified CAF Advance. In
the case of LIBO Rate CAF Advances, insert a margin bid. In the case
of Fixed Rate CAF Advances, insert a fixed rate bid.
<PAGE> 87
EXHIBIT F
FORM OF
CAF ADVANCE CONFIRMATION
_________ __, 19__
Chemical Bank, as CAF Advance Agent
270 Park Avenue
New York, New York 10017
Reference is made to the Revolving Credit and Competitive
Advance Facility Agreement, dated as of August 10, 1994, among the undersigned,
the Lenders named therein, and Chemical Bank, as Administrative Agent and CAF
Advance Agent(as the same may be amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"). Terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the Credit
Agreement.
In accordance with Section 2.5(d) of the Credit Agreement, the
undersigned accepts and confirms the offers by the CAF Advance Lender(s) to
make CAF Advances to the undersigned on _________________________ , 19____
(date of CAF Advance Borrowing) under Section 2.5(d) in the (respective)
amount(s) set forth on the attached list of CAF Advances offered.
Very truly yours,
(BORROWER)
By __________________________________
Name:
Title:
(The Borrower must attach CAF Advance offer list prepared by the CAF Advance
Agent with accepted amount entered by the Borrower to the right of each CAF
Advance offer).
<PAGE> 88
EXHIBIT G
FORM OF
ASSIGNMENT AND ACCEPTANCE
Dated _____________, 19__
Reference is made to the Revolving Credit and Competitive
Advance Facility Agreement, dated as of August 10, supplemented 1994 (as the
same may be amended or otherwise modified from time to time, the "Credit
Agreement") among EL PASO NATURAL GAS COMPANY, a Delaware corporation (the
"Company"), the Lenders (as defined in the Credit Agreement) and Chemical Bank,
as Administrative Agent (the "Administrative Agent") and CAF Advance Agent (the
"CAF Advance Agent") for the Lenders. Terms defined in the Credit Agreement
are used herein with the same meaning.
_____________ (the "Assignor") and (the "Assignee") agree as
follows:
1. The Assignor hereby sells and assigns to the
Assignee, and the Assignee hereby purchases and assumes from the Assignor, that
interest in and to all of the Assignor's rights and obligations under the
Credit Agreement as of the date hereof which represents the percentage interest
specified on Schedule 1 of all outstanding rights and obligations under the
Credit Agreement, including, without limitation, such interest in the
Assignor's Commitment, the Advances owing to the Assignor, and the Notes held
by the Assignor. After giving effect to such sale and assignment, the
Assignee's Commitment and the amount of the Advances owing to the Assignee will
be as set forth in Section 2 of Schedule 1.
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 each Borrower or the performance or observance by each
Borrower of any of its obligations under the Credit Agreement or any other
instrument or document furnished pursuant thereto; and (iv) attaches the Notes
referred to in paragraph 1 above and requests that the Administrative Agent
exchange such Notes for new Notes payable to the order of the Assignee in an
amount equal to the Commitment assumed by the Assignee pursuant hereto or new
Notes payable to the order of the Assignee in an amount equal to the
<PAGE> 89
G-2
Commitment assumed by the Assignee pursuant hereto and the Assignor in an
amount equal to the 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 4.1 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 Administrative 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 Administrative Agent and CAF Advance
Agent to take such action as agent on its behalf and to exercise such powers
under the Credit Agreement as are delegated to the Administrative Agent and CAF
Advance Agent by the terms thereof, together with such powers as are reasonably
incidental thereto; (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; (and) (vi) specifies as its address
for notices the address set forth beneath its name on the signature pages
hereof (and (vii) attaches the forms prescribed by the Internal Revenue Service
of the United States certifying as to the Assignee's status for purposes of
determining exemption from United States withholding taxes with respect to all
payments to be made to the Assignee under the Credit Agreement and the Notes or
such other documents as are necessary to indicate that all such payments are
subject to such rates at a rate reduced by an applicable tax treaty)*.
4. Following the execution of this Assignment and
Acceptance by the Assignor and the Assignee, it will be delivered to the
Administrative Agent for acceptance and recording by the Administrative Agent.
The effective date of this Assignment and Acceptance shall be the date of
acceptance thereof by the Administrative Agent, unless otherwise specified on
Schedule 1 hereto (the "Effective Date").
5. Upon such acceptance and recording by the
Administrative Agent, 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 Lender thereunder and (ii)
the Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement.
__________________________________
* If the Assignee is organized under the laws of a jurisdiction outside
the United States.
<PAGE> 90
G-3
6. Upon such acceptance and recording by the
Administrative Agent, from and after the Effective Date, the
Administrative Agent shall make all payments under the Credit
Agreement and the Notes in respect of the interest assigned hereby
(including, without limitation, all payments of principal, interest
and commitment fees with respect thereto) to the Assignee. The
Assignor and Assignee shall make all appropriate adjustments in
payments under the Credit Agreement and the 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.
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Acceptance to be executed by their respective officers
thereunto duly authorized, as of the date first above written, such
execution being made on Schedule 1 hereto.
<PAGE> 91
Schedule 1
to
Assignment and Acceptance
Dated _________, 19__
Section 1.
Percentage Interest: ___________%
Section 2.
Assignee's Commitment: $___________
Aggregate Outstanding Principal
Amount of Advances owing to the Assignee: $___________
Revolving Credit Note payable to the order of the Assignee
Dated: ____________________, 19____
Principal amount: $___________
CAF Advance Note payable to the order of the Assignee
Dated: ____________________, 19____
Principal amount: $400,000,000
Revolving Credit Note payable to the order of the Assignor
Dated: ____________________, 19____
Principal amount: $___________
CAF Advance Note payable to the order of the Assignor
Dated: ____________________, 19____
Principal amount: $400,000,000
Section 3.
Effective Date*: ____________________, 19____
[NAME OF ASSIGNOR] [NAME OF ASSIGNOR]
By:_________________________ By:____________________________
Title: Title:
Address for notices:
[Address]
_________
* This date should be no earlier than the date of acceptance by the
Administrative Agent.
<PAGE> 92
2
Consented to:
EL PASO NATURAL GAS COMPANY CHEMICAL BANK, as
Administrative Agent
By:________________________ By:_____________________
Title: Title:
Accepted this __ day
of __________, 19__
CHEMICAL BANK, as
Administrative Agent
By:___________________
Title:
<PAGE> 93
EXHIBIT H
FORM OF OPINION OF [ASSOCIATE] GENERAL COUNSEL OF THE COMPANY
___________ __, 1994
To Each of the Lenders, the Administrative Agent
and the CAF Advance Agent
Referred to Below
c/o Chemical Bank
270 Park Avenue
New York, New York 10017
Re: El Paso Natural Gas Company
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 3.1(d) of
the Revolving Credit and Competitive Advance Facility Agreement, dated as of
August 10, 1994 (the "Credit Agreement"), among El Paso Natural Gas Company
(the "Borrower"), the banks and other financial institutions from time to time
party thereto (each a "Lender," and together the "Lenders"), and Chemical Bank,
as Administrative Agent (in such capacity, the "Administrative Agent") and as
CAF Advance Agent (in such capacity, the "CAF Advance Agent") for the Lenders.
Unless the context otherwise requires, all capitalized terms used herein
without definition shall have the meanings ascribed to them in the Credit
Agreement.
I am [Associate] General Counsel of the Borrower, and I, or
attorneys over whom I exercise supervision, have acted as counsel for the
Borrower in connection with the preparation, execution and delivery of the
Credit Agreement. In that connection, I or such attorneys have examined:
(1) the Credit Agreement, executed by the parties
thereto;
(2) the Notes, executed by the Borrower; and
(3) the other documents furnished by the Borrower
pursuant to Section 3.1 of the Credit Agreement.
I, or attorneys over whom I exercise supervision, have also
examined the originals, or copies certified to our satisfaction, of the
agreements, instruments and other documents, and all of the orders, writs,
judgments, awards, injunctions and decrees, which affect or purport to affect
the Borrower's ability to perform the Borrower's obligations under the Credit
Agreement or the Notes (collectively referred to herein as the "Documents").
In addition, I, or attorneys over whom I exercise supervision, have examined
the originals, or copies certified to
<PAGE> 94
H-2
our satisfaction, of such other corporate records of the Borrower, certificates
of public officials and of officers of the Borrower, and agreements,
instruments and other documents, as I have deemed necessary as a basis for the
opinions hereinafter expressed. In all such examinations, I, or attorneys over
whom I exercise supervision, have assumed the legal capacity of all natural
persons executing documents, the genuineness of all signatures on original or
certified, conformed or reproduction copies of documents of all parties (other
than, with respect to the Documents, the Borrower), the authenticity of
original and certified documents and the conformity to original or certified
copies of all copies submitted to such attorneys or me as conformed or
reproduction copies. As to various questions of fact relevant to the opinions
expressed herein, I have relied upon, and assume the accuracy of,
representations and warranties contained in the Credit Agreement and
certificates and oral or written statements and other information of or from
public officials, officers and/or representatives of the Borrower and others.
I have assumed that the parties to the Documents other than
the Borrower have the power to enter into and perform such documents and that
such documents have been duly authorized, executed and delivered by, and
constitute legal, valid and binding obligations of, such parties.
The opinions expressed below are limited to the federal laws
of the United States and the laws of the State of Texas and, to the extent
relevant hereto, the General Corporation Law of the State of Delaware, as
currently in effect. I assume no obligation to supplement this opinion if any
applicable laws change after the date hereof or if I become aware of any facts
that might change the opinions expressed herein after the date hereof.
Based on the foregoing and upon such investigation as we have
deemed necessary, and subject to the limitations, qualifications and
assumptions set forth herein, I am of the following opinion:
1. The Borrower (i) is a corporation duly incorporated
and existing in good standing under the laws of the State of Delaware,
and (ii) possesses all the corporate powers and all other
authorizations and licenses necessary to engage in its business and
operations as now conducted, the failure to obtain or maintain which
would have a Material Adverse Effect.
2. The execution, delivery and performance by the
Borrower of the Documents are within the Borrower's corporate powers
and have been duly authorized by all necessary corporate action in
respect of or by the Borrower, and do not contravene (i) the
Borrower's charter or by-laws, each as amended to date, (ii) any Texas
or federal law, rule or regulation applicable to the Borrower
(excluding provisions of federal law expressly referred to in and
<PAGE> 95
H-3
covered by the opinion of Fried, Frank, Harris, Shriver & Jacobson
delivered to you in connection with the transactions contemplated
hereby), or (iii) any contractual restriction binding on or affecting
the Borrower. The Documents have been duly executed and delivered on
behalf of the Borrower.
3. No authorization or approval or other action by, and
no notice to or filing with, any Texas or federal governmental
authority or regulatory body (including, without limitation, the FERC)
is required for the due execution, delivery and performance by the
Borrower of the Documents, except those required in the ordinary
course of business in connection with the performance by the Borrower
of its obligations under certain covenants and warranties contained in
the Documents.
4. To the best of my knowledge, there is no action, suit
or proceeding pending or overtly threatened against or involving the
Borrower or any of the Principal Subsidiaries which, in my reasonable
judgment (taking into account the exhaustion of all appeals), would
have a material adverse effect upon the consolidated financial
condition of the Borrower and its consolidated Subsidiaries taken as a
whole, or which purports to affect the legality, validity, binding
effect or enforceability of any Document.
These opinions are given as of the date hereof and are solely
for your benefit in connection with the transactions contemplated by the Credit
Agreement. These opinions may not be relied upon by you for any other purpose
or relied upon by any other person for any purpose without my prior written
consent.
Very truly yours,
<PAGE> 96
EXHIBIT I
FORM OF OPINION OF FRIED FRANK, HARRIS, SHRIVER
& JACOBSON, NEW YORK COUNSEL TO THE COMPANY
__________ __, 1994
To Each of the Lenders, the Administrative Agent
and the CAF Advance Agent
Referred to Below
c/o Chemical Bank
270 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
We have acted as special New York counsel for El Paso Natural
Gas Company, a Delaware corporation (the "Borrower"), in connection with the
Revolving Credit and Competitive Advance Facility Agreement, dated as of August
10, 1994 (the "Credit Agreement"), among the Borrower, the banks and other
financial institutions from time to time party thereto (each a "Lender," and
together the "Lenders"), and Chemical Bank, as Administrative Agent (in such
capacity, the "Administrative Agent") and as CAF Advance Agent (in such
capacity, the "CAF Advance Agent") for the Lenders. This opinion is delivered
to you pursuant to Section 3.1(e) of the Credit Agreement. All capitalized
terms used herein that are defined in, or by reference in, the Credit Agreement
have the meanings assigned to such terms therein, or by reference therein,
unless otherwise defined herein. With your permission, all assumptions and
statements of reliance herein have been made without any independent
investigation or verification on our part except to the extent otherwise
expressly stated, and we express no opinion with respect to the subject matter
or accuracy of such assumptions or items relied upon.
In connection with this opinion, we have (i) investigated such
questions of law, (ii) examined originals or certified, conformed or
reproduction copies of such documents, and (iii) received such information from
officers and representatives of the Borrower as we have deemed necessary or
appropriate for the purposes of this opinion. We have examined, among other
documents, the following:
(a) an executed copy of the Credit Agreement; and
(b) an executed copy of each of the Notes.
The documents referred to in items (a) and (b) above are referred to herein
collectively as the "Documents."
<PAGE> 97
I-2
In all such examinations, we have assumed the legal capacity
of all natural persons executing documents, the genuineness of all signatures
on original or certified, conformed or reproduction copies of documents of all
parties, the authenticity of original and certified documents and the
conformity to original or certified copies of all copies submitted to us as
conformed or reproduction copies. As to various questions of fact relevant to
the opinions expressed herein, we have relied upon, and assume the accuracy of,
representations and warranties contained in the Documents and certificates and
oral or written statements and other information of or from representatives of
the Borrower and others. With respect to the opinions expressed in paragraph
(a) below, our opinions are limited (x) to our actual knowledge of the
Borrower's specially regulated business activities and properties based solely
upon an officer's certificate in respect of such matters and without any
independent investigation or verification on our part and (y) to our review of
only those laws and regulations that, in our experience, are normally
applicable to transactions of the type contemplated by the Documents.
To the extent it may be relevant to the opinions expressed
herein, we have assumed that the parties to the Documents other than the
Borrower have the power to enter into and perform such documents and that such
documents have been duly authorized, executed and delivered by, and constitute
legal, valid and binding obligations of, such parties.
Based upon the foregoing, and subject to the limitations,
qualifications and assumptions set forth herein, we are of the opinion that:
(a) The execution and delivery to the Administrative
Agent, the CAF Advance Agent and the Lenders by the Borrower of the
Documents and the performance by the Borrower of its obligations
thereunder (i) do not require under present law, any filing or
registration by the Borrower with, or approval or consent to the
Borrower of, any governmental agency or authority of the State of New
York, except those, if any, required in the ordinary course of
business in connection with the performance by the Borrower of its
obligations under certain covenants and warranties contained in the
Documents and (ii) do not violate any present law, or present
regulation of any governmental agency or authority, of the State of
New York applicable to the Borrower or its property.
(b) The Documents constitute the legal, valid and binding
obligations of the Borrower enforceable against the Borrower in
accordance with their respective terms.
(c) The borrowings by the Borrower under the Credit
Agreement and the applications of the proceeds thereof as provided in
the Credit Agreement will not violate Regulation G, T, U or X of the
Board of Governors of the Federal Reserve System.
<PAGE> 98
I-3
The opinions set forth above are subject to the following
qualifications:
(A) We express no opinion as to:
(i) the validity, binding effect or
enforceability (a) of any provision of the Documents relating
to indemnification, contribution or exculpation in connection
with violations of any securities laws or statutory duties or
public policy, or in connection with willful, reckless or
criminal acts or gross negligence of the indemnified or
exculpated party or the party receiving contribution; or (b)
of any provision of any of the Documents relating to
exculpation of any party in connection with its own negligence
that a court would determine in the circumstances under
applicable law to be unfair or insufficiently explicit;
(ii) the validity, binding effect or
enforceability of (a) any purported waiver, release,
variation, disclaimer, consent or other agreement to similar
effect (all of the foregoing, collectively, a "Waiver") by the
Borrower under the Documents to the extent limited by
provisions of applicable law (including judicial decisions),
or to the extent that such a Waiver applies to a right, claim,
duty, defense or ground for discharge otherwise existing or
occurring as a matter of law (including judicial decisions),
except to the extent that such a Waiver is effective under and
is not prohibited by or void or invalid under provisions of
applicable law (including judicial decisions) or (b) any
provision of any Document relating to choice of governing law
to the extent that the validity, binding effect or
enforceability of any such provision is to be determined by
any court other than a court of the State of New York;
(iii) the enforceability of any provision in the
Documents specifying that provisions thereof may be waived
only in writing, to the extent that an oral agreement or an
implied agreement by trade practice or course of conduct has
been created that modifies any provision of the Documents;
(iv) the effect of any law of any jurisdiction
other than the State of New York wherein the Administrative
Agent, the CAF Advance Agent or any Lender may be located or
wherein enforcement of any document referred to above may be
sought that limits the rates of interest legally chargeable or
collectible; and
(v) any approval, consent or authorization of the
FERC or any other United States federal agency or authority
needed in connection with the execution,
<PAGE> 99
I-4
delivery and performance by the Borrower of the Documents, the
consummation of the transactions contemplated thereby and
compliance with the terms and conditions thereof.
(B) Our opinions above are subject to (i) applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or similar laws from time to time in effect affecting
creditors' rights generally, (ii) general principles of equity
(including, without limitation, standards of materiality, good faith,
fair dealing and reasonableness), whether such principles are
considered in a proceeding at law or in equity and (iii) the
qualification that certain other provisions of the Documents may be
unenforceable in whole or in part under the laws (including judicial
decisions) of the State of New York or the United States of America,
but the inclusion of such provisions does not affect the validity as
against the Borrower of the Documents as a whole, and the Documents
contain adequate provisions for enforcing payment of the obligations
governed thereby, subject to the other qualifications contained in
this letter.
(C) For purposes of the opinions set forth in paragraph
(c) above, we have assumed that (i) none of the Administrative Agent,
the CAF Advance Agent or any of the Lenders has or will have the
benefit of any agreement or arrangement (excluding the Documents)
pursuant to which any Advances are directly or indirectly secured by
Margin Stock, (ii) none of the Administrative Agent, the CAF Advance
Agent, any of the Lenders or any of their respective affiliates has
extended or will extend any other credit to the Borrower directly or
indirectly secured by Margin Stock and (iii) none of the
Administrative Agent, the CAF Advance Agent or any of the Lenders has
relied or will rely upon any Margin Stock as collateral in extending
or maintaining any Advances pursuant to the Credit Agreement.
(D) For purposes of our opinions above, insofar as they
relate to the Borrower, we have assumed that (i) the Borrower is a
corporation validly existing in good standing in its jurisdiction of
incorporation, has all requisite power and authority, and has obtained
all requisite corporate, shareholder, third party and governmental
authorizations, consents and approvals, and made all requisite filings
and registrations, necessary to execute, deliver and perform the
Documents (except to the extent noted in paragraph (a) above), and
that such execution, delivery and performance will not violate or
conflict with any law, rule, regulation, order, decree, judgment,
instrument or agreement binding upon or applicable to the Borrower or
its properties (except to the extent noted in paragraph (a) above),
and (ii) the Documents have been duly executed and delivered by the
Borrower.
<PAGE> 100
I-5
The opinions expressed herein are limited to the federal laws
of the United States of America (in the case of the matters covered in
paragraph (c) above) and the laws of the State of New York, as currently in
effect.
The opinions expressed herein are solely for the benefit of
the Administrative Agent, the CAF Advance Agent and the Lenders and may not be
relied on in any manner or for any purpose by any other person or entity.
Very truly yours,
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
By:_____________________________________
Robert L. Cunningham, Jr.
<PAGE> 101
EXHIBIT J
(Letterhead of Process Agent)
______________, 199
To each of the Lenders parties
to the Credit Agreement (as
defined and referred to
below) and to Chemical Bank
as Administrative Agent and
CAF Advance Agent for said Lenders
c/o Chemical Bank
270 Park Avenue
New York, New York 10017
To El Paso Natural Gas Company
P.O. Box 1492
100 North Stanton
El Paso, Texas 79901
El Paso Natural Gas Company
Gentlemen:
Reference is made to that certain Revolving Credit and
Competitive Advance Facility Agreement, dated as of August 10, 1994 (said
Agreement, as it may hereafter be amended, supplemented or otherwise modified
from time to time, being the "Credit Agreement", the terms defined therein
being used herein with the same meaning) among El Paso Natural Gas Company (the
"Company"), certain banks and other financial institutions from time to time
party thereto as Lenders thereunder (the "Lenders") and Chemical Bank, as
Administrative Agent and CAF Advance Agent (in such capacities, the
"Administrative Agent" and the "CAF Advance Agent" for the Lenders).
Pursuant to Section 9.9(a) of the Credit Agreement
(the "Borrower") has appointed the undersigned (with an office on the date
hereof at 1633 Broadway, New York, New York 10019) as Process Agent to receive
on behalf of the Borrower and its property service of copies of the summons and
complaint and any other process which may be served by the Administrative
Agent, the CAF Advance Agent, any Lender or the holder of any Note in any
action or proceeding by the Administrative Agent, the CAF Advance Agent, any
Lender or the holder of any Note in any New York State or Federal court sitting
in New York City in respect of, but only in respect of, any
<PAGE> 102
J-2
claims or causes of action arising out of or relating to the Credit Agreement
and the Notes issued pursuant thereto.
The undersigned hereby accepts such appointment as Process
Agent and agrees with each of you that (i) the undersigned will not terminate
the undersigned's agency as such Process Agent prior to August 10, 2000 (and
hereby acknowledges that the undersigned has been paid in full by the Borrower
for its services as Process Agent through such date), (ii) the undersigned will
maintain an office in New York City through such date and will give the
Administrative Agent prompt notice of any change of address of the undersigned,
(iii) the undersigned will perform its duties as Process Agent in accordance
with Section 9.9(a) of the Credit Agreement and (iv) the undersigned will
forward forthwith to the Borrower at its address specified below copies of any
summons, complaint and other process which the undersigned receives in
connection with its appointment as Process Agent.
This acceptance and agreement shall be binding upon the
undersigned and all successors of the undersigned.
Very truly yours,
CT CORPORATION SYSTEM
By:_______________________
Title:
Address of the Borrower:
(Address)
<PAGE> 103
EXHIBIT K
FORM OF
JOINDER AGREEMENT
Reference is made to the Revolving Credit and CAF Advance
Facility Agreement, dated as of August 10, 1994 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"; terms defined
therein being used herein as therein defined), among El Paso Natural Gas
Company (the "Company"), certain banks and other financial institutions from
time to time party thereto and Chemical Bank, as Administrative Agent and CAF
Advance Agent.
The undersigned hereby acknowledges that it has received and
reviewed a copy (in execution form) of the Credit Agreement, and agrees to:
(a) join the Credit Agreement as a Borrowing Subsidiary party
thereto;
(b) be bound by all covenants, agreements and acknowledgements
attributable to a Borrowing Subsidiary in the Credit Agreement
and any Note to which it is a party; and
(c) perform all obligations required of it by the Credit Agreement
and any Note to which it is a party.
The undersigned hereby represents and warrants that the
representations and warranties with respect to it contained in, or made or
deemed made by it in, Article IV of the Credit Agreement are true and correct
on the date hereof.
THIS JOINDER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 104
K-2
IN WITNESS WHEREOF, the undersigned has caused this Joinder
Agreement to be duly executed and delivered in New York, New York by its proper
and duly authorized officer as of this day of , 199 .
(BORROWING SUBSIDIARY)
By:
__________________
Title:
ACKNOWLEDGED AND AGREED TO:
EL PASO NATURAL GAS COMPANY
By:
________________________
Title:
<PAGE> 105
EXHIBIT L
FORM OF OPINION OF (ASSOCIATE)
GENERAL COUNSEL OF THE COMPANY
(a) Each of the Company and the Borrowing Subsidiary (i)
is a corporation duly incorporated and existing in good standing under
the laws of the jurisdiction of its organization, and (ii) possesses
all the corporate powers and all other authorizations and licenses
necessary to engage in its business and operations as now conducted,
the failure to obtain or maintain which would have a Material Adverse
Effect.
(b) The execution and delivery by the Company and the
Borrowing Subsidiary of the Joinder Agreement and by the Borrowing
Subsidiary of the Notes made by it and the performance by the
Borrowing Subsidiary of its obligations as a "Borrowing Subsidiary"
under the Credit Agreement and the Notes made by it are within such
corporation's corporate powers and have been duly authorized by all
necessary corporate action in respect of or by each of the Company and
the Borrowing Subsidiary (as applicable), and do not contravene (i)
the Company's or the Borrowing Subsidiary's charter or by-laws, each
as amended to date, (ii) any Texas or federal law, rule or regulation
applicable to the Company or the Borrowing Subsidiary (excluding
provisions of federal law expressly referred to in and covered by the
opinion of (New York Counsel) delivered to you in connection with the
transactions contemplated hereby), or (iii) any contractual
restriction binding on or affecting the Company or the Borrowing
Subsidiary. The Joinder Agreement has been duly executed and
delivered on behalf of the Company and the Borrowing Subsidiary and
the Notes made by the Borrowing Subsidiary have been duly executed and
delivered on behalf of the Borrowing Subsidiary.
(c) No authorization or approval or other action by, and
no notice to or filing with, any Texas or federal governmental
authority or regulatory body (including, without limitation, the FERC)
is required for the due execution and delivery by the Company or the
Borrowing Subsidiary of the Joinder Agreement, the performance by the
Borrowing Subsidiary of its obligations as a "Borrowing Subsidiary"
under the Credit Agreement and by the execution, delivery and
performance of the Notes made by the Borrowing Subsidiary, except
those required in the ordinary course of business in connection with
the performance by the Company or the Borrowing Subsidiary of its
obligations under certain covenants and warranties contained in the
Joinder Agreement, the Credit Agreement and the Notes.
<PAGE> 106
L-2
(d) To the best of my best knowledge, there is no action,
suit or proceeding pending or overtly threatened against or involving
the Company or any of the Principal Subsidiaries which, in my
reasonable judgment (taking into account the exhaustion of all
appeals), would have a material adverse effect upon the consolidated
financial condition of the Company and its consolidated Subsidiaries
taken as a whole, or which purports to affect the legality, validity,
binding effect or enforceability of the Joinder Agreement, the Credit
Agreement or the Notes.
<PAGE> 107
EXHIBIT M
FORM OF OPINION OF NEW YORK
COUNSEL TO THE COMPANY
(a) The execution and delivery to the Administrative
Agent, the CAF Advance Agent and the Lenders by the Company and the
Borrowing Subsidiary of the Joinder Agreement and by the Borrowing
Subsidiary of the Notes made by it and the performance by the
Borrowing Subsidiary of its obligations as a "Borrowing Subsidiary"
under the Credit Agreement and the Notes made by it (i) do not require
under present law, any filing or registration by the Company or the
Borrowing Subsidiary with, or approval or consent to the Company or
the Borrowing Subsidiary of, any governmental agency or authority of
the State of New York or the State of Delaware, except those, if any,
required in the ordinary course of business in connection with the
performance by the Company or the Borrowing Subsidiary of their
respective obligations under certain covenants and warranties
contained in the Joinder Agreement, the Credit Agreement and the
Notes, (ii) do not violate any present law, or present regulation of
any governmental agency or authority, of the State of New York
applicable to the Company or the Borrowing Subsidiary or their
respective property or (iii) do not violate any present General
Corporation Law of the State of Delaware, or present regulation of any
governmental agency or authority, of the State of Delaware applicable
to the Company or the Borrowing Subsidiary or its property.
(b) The Joinder Agreement, the Credit Agreement and the
Notes (as applicable) constitute the legal, valid and binding
obligations of each of the Company and the Borrowing Subsidiary
enforceable against each of the Company and the Borrowing Subsidiary
in accordance with their respective terms.
(c) The borrowings by the Borrowing Subsidiary under the
Credit Agreement and the applications of the proceeds thereof as
provided in the Credit Agreement will not violate Regulation G, T, U
or X of the Board of Governors of the Federal Reserve System.
<PAGE> 1
EL PASO NATURAL GAS COMPANY
EARNINGS PER COMMON SHARE
FORM 10-Q, EXHIBIT 11
<TABLE>
<CAPTION>
SECOND QUARTER SIX MONTHS
-------------------------- --------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income available for common stock
dividends............................. $24,011,000 $20,683,000 $45,126,000 $51,523,000
Fully diluted average common shares
outstanding........................... 37,231,380 37,849,930 37,291,545 37,769,062
Fully diluted earnings per common
share................................. $ 0.6449 $ 0.5464 $ 1.2101 $ 1.3642
</TABLE>
Outstanding stock options of EPG are common stock equivalents but are excluded
from primary earnings per common share due to immateriality.
See following calculation:
<TABLE>
<CAPTION>
SECOND QUARTER SIX MONTHS
-------------------------- --------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total primary earnings per common
share................................. $ 0.6518 $ 0.5541 $ 1.2241 $ 1.3831
Fully diluted earnings per common share
(includes stock options).............. $ 0.6449 $ 0.5464 $ 1.2101 $ 1.3642
Percent dilution........................ 1.0586% 1.3896% 1.1437% 1.3665%
</TABLE>
