<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
FORM 10-Q
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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)
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)
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.
CLASS OUTSTANDING
----- -----------
Common Stock, par value $3.00 per share,
as of July 31, 1996 36,046,018 shares
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<PAGE> 2
GLOSSARY
The following abbreviations, acronyms, or defined terms used in this Form
10-Q are defined below:
<TABLE>
<CAPTION>
ABBREVIATIONS,
ACRONYMS, OR DEFINED TERMS TERMS
- -------------------------- -----
<S> <C>
ALJ ...................... Administrative Law Judge
Board .................... Board of Directors of El Paso Natural Gas Company
CAAA ..................... Clean Air Act Amendments of 1990
CFE ...................... Comision Federal de Electricidad
Company .................. El Paso Natural Gas Company, now doing business as
El Paso Energy Corporation, and its subsidiaries
Cornerstone .............. Cornerstone Natural Gas, Inc., a wholly owned
subsidiary of El Paso Field Services Company
Court of Appeals ......... United States Court of Appeals for the District of
Columbia Circuit
Edison ................... Southern California Edison Company
EPA ...................... United States Environmental Protection Agency
EPED SAM ................. EPED SAM Holdings Company, an indirect wholly owned
subsidiary of El Paso Energy International
EPEI...................... El Paso Energy International Company, a wholly
owned subsidiary of El Paso Natural Gas Company
EPEM ..................... El Paso Energy Marketing Company (formerly Eastex
Energy Inc.), a wholly owned subsidiary of El Paso
Natural Gas Company
EPFS ..................... El Paso Field Services Company, a wholly owned
subsidiary of El Paso Natural Gas Company
EPG ...................... El Paso Natural Gas Company, now doing business as
El Paso Energy Corporation, unless the context
otherwise requires
EPGM ..................... El Paso Gas Marketing, a wholly owned subsidiary of
El Paso Natural Gas Company
EPNC ..................... El Paso New Chaco Company, a wholly owned
subsidiary of El Paso Natural Gas Company
FERC ..................... Federal Energy Regulatory Commission
Mdth/d ................... Thousand dekatherms per day
MPC ...................... Mojave Pipeline Company, an indirect wholly owned
subsidiary of El Paso Natural Gas Company
NGL ...................... Natural gas liquids
Odd-Lot Holders .......... Shareholders of El Paso Natural Gas Company owning
beneficially fewer than 100 shares of El Paso
Natural Gas Company's common stock
PCB ...................... Polychlorinated biphenyl
Plan ..................... Dividend Reinvestment and Common Stock Purchase
Plan
Program .................. Continuous Odd-Lot Stock Sales Program
PRP(s) ................... Potentially Responsible Party(ies)
RI/FS .................... Remedial Investigation/Feasibility Study
Sam II ................... Compania Samalayuca II
SEC ...................... Securities and Exchange Commission
SFAS ..................... Statement of Financial Accounting Standards
Tenneco .................. Tenneco Inc.
TransAmerican ............ TransAmerican Natural Gas Corporation
TransColorado ............ TransColorado Gas Transmission Company
</TABLE>
i
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EL PASO NATURAL GAS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER COMMON SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
SECOND QUARTER SIX MONTHS
-------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Operating revenues .................................... $ 587,284 $ 185,150 $ 1,192,919 $ 389,281
----------- ----------- ----------- -----------
Operating charges
Natural gas and liquids .......................... 419,997 30,629 854,194 73,854
Operation and maintenance ........................ 73,695 74,320 147,023 151,686
Employee separation and asset impairment charge .. -- -- 99,053 --
Depreciation, depletion, and amortization ........ 20,967 17,444 42,582 34,249
Taxes, other than income taxes ................... 11,002 9,900 21,393 20,422
----------- ----------- ----------- -----------
525,661 132,293 1,164,245 280,211
----------- ----------- ----------- -----------
Operating income ...................................... 61,623 52,857 28,674 109,070
----------- ----------- ----------- -----------
Other (income) and income deductions
Interest and debt expense ........................ 25,249 21,098 47,955 42,164
Other - net ...................................... (3,733) (1,430) (1,509) (2,808)
----------- ----------- ----------- -----------
21,516 19,668 46,446 39,356
----------- ----------- ----------- -----------
Income (loss) before income taxes ..................... 40,107 33,189 (17,772) 69,714
Income taxes (benefit) ................................ 15,682 12,989 (6,949) 27,544
----------- ----------- ----------- -----------
Net income (loss) ..................................... $ 24,425 $ 20,200 $ (10,823) $ 42,170
=========== =========== =========== ===========
Earnings (loss) per common share ...................... $ 0.69 $ 0.58 $ (0.31) $ 1.21
=========== =========== =========== ===========
Average common shares outstanding ..................... 35,476 34,798 35,264 34,976
=========== =========== =========== ===========
Dividends declared per common share ................... $ 0.3475 $ 0.3300 $ 0.6950 $ 0.6600
=========== =========== =========== ===========
</TABLE>
The accompanying Notes are an integral part of these
Consolidated Financial Statements.
1
<PAGE> 4
EL PASO NATURAL GAS COMPANY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER COMMON SHARE AMOUNT)
ASSETS
<TABLE>
<CAPTION>
JUNE 30,
1996 DECEMBER 31,
(UNAUDITED) 1995
------------ ------------
<S> <C> <C>
Current assets
Cash and temporary investments ..................................... $ 50,144 $ 39,373
Accounts and notes receivable, net ................................. 366,823 214,796
Inventories ........................................................ 35,298 37,108
Take-or-pay buy-outs, buy-downs, and prepayments, net .............. 891 10,477
Deferred income tax benefit ........................................ 20,526 22,631
Other .............................................................. 21,298 44,207
------------ ------------
Total current assets ..................................... 494,980 368,592
------------ ------------
Property, plant, and equipment, net ................................... 1,989,134 1,977,624
Intangible assets, net ................................................ 109,300 47,878
Investments in and advances to affiliates ............................. 48,384 --
Other ................................................................. 122,164 140,462
------------ ------------
2,268,982 2,165,964
------------ ------------
Total assets .............................................. $ 2,763,962 $ 2,534,556
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable ................................................... $ 426,100 $ 275,674
Short-term borrowings .............................................. 312,600 278,200
Accrual for regulatory issues ...................................... 70,785 --
Current maturities on long-term debt ............................... 108,396 7,590
Other .............................................................. 102,458 81,178
------------ ------------
Total current liabilities .................................. 1,020,339 642,642
------------ ------------
Long-term debt, less current maturities ............................... 669,540 771,892
Deferred income taxes, less current portion ........................... 264,034 314,143
Deferred credits ...................................................... 26,039 39,514
Other ................................................................. 56,092 54,279
------------ ------------
1,015,705 1,179,828
------------ ------------
Minority interest ..................................................... 39,765 --
Commitments and contingent liabilities (See Note 4)
Stockholders' equity
Common stock, par value $3 per share; authorized 100,000 shares;
issued 37,368 and 37,351 shares .................................. 112,106 112,054
Additional paid-in capital ......................................... 461,592 454,713
Retained earnings .................................................. 203,693 240,101
Less: Deferred employee compensation .............................. 35,684 69
Treasury stock (at cost) 1,751 and 3,127 shares ............. 53,554 94,713
------------ ------------
Total stockholders' equity ................................. 688,153 712,086
------------ ------------
Total liabilities and stockholders' equity ................. $ 2,763,962 $ 2,534,556
============ ============
</TABLE>
The accompanying Notes are an integral part of these
Consolidated Financial Statements.
2
<PAGE> 5
EL PASO NATURAL GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) ................................................. $ (10,823) $ 42,170
Adjustments to reconcile net income (loss) to net cash provided
by operating activities
Depreciation, depletion, and amortization ....................... 42,582 34,249
Deferred income taxes (benefit) ................................. (24,435) 17,689
Net take-or-pay recoveries ...................................... 9,586 20,360
Net employee separation and asset impairment charge
($99,053 less cash payments of $20,280) .................... 78,773 --
Net (gain) loss on disposition of property ...................... (1,676) 23
Other working capital changes
Accounts and notes receivable ................................. (130,991) 37,911
Inventories ................................................... 2,236 (109)
Other current assets .......................................... 17,621 (5,009)
Accrual for regulatory issues ................................. 65,185 --
Accounts payable .............................................. 75,215 (69,124)
Other current liabilities ..................................... 20,629 (5,211)
Other ........................................................... (3,584) 8,367
---------- ----------
Net cash provided by operating activities ................... 140,318 81,316
---------- ----------
Cash flows from investing activities
Capital expenditures .............................................. (45,541) (51,738)
Net proceeds from disposal of property ............................ 4,281 2,184
Investments in and advances to affiliates ......................... (48,384) --
Net cash flow impact of Cornerstone acquisition ................... (98,961) --
Other ............................................................. 14,023 (3,693)
---------- ----------
Net cash used in investing activities ....................... (174,582) (53,247)
---------- ----------
Cash flows from financing activities
Net commercial paper borrowings (repayments) ...................... (65,600) 37,400
Revolving credit borrowings ....................................... 263,000 --
Revolving credit repayments ....................................... (163,000) --
Long-term debt retirements ........................................ (16,008) (3,667)
Repayment of volumetric take-or-pay receivable .................... -- (19,700)
Acquisition of treasury stock ..................................... -- (37,313)
Dividends paid .................................................... (23,550) (22,424)
Contribution from minority interest ............................... 39,765 --
Other ............................................................. 10,428 3,835
---------- ----------
Net cash provided by (used in) financing activities ......... 45,035 (41,869)
---------- ----------
Increase (decrease) in cash and temporary investments ................ 10,771 (13,800)
Cash and temporary investments
Beginning of period ......................................... 39,373 27,636
---------- ----------
End of period ............................................... $ 50,144 $ 13,836
========== ==========
</TABLE>
The accompanying Notes are an integral part of these
Consolidated Financial Statements.
3
<PAGE> 6
EL PASO NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The 1995 Annual Report on Form 10-K for the Company includes a summary of
significant accounting policies and should be read in conjunction with this
Form 10-Q. In addition, investments in affiliates over which the Company has
influence but not a controlling interest are accounted for under the equity
method. The condensed consolidated financial statements at June 30, 1996, and
for the six months and quarters ended June 30, 1996, and 1995, are unaudited.
The condensed balance sheet at December 31, 1995, is derived from audited
financial statements. These financial statements do not include all disclosures
required by generally accepted accounting principles. 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 the previous periods include certain reclassifications
which were made to conform to current presentation. Such reclassifications have
no material effect on reported net income or stockholders' equity.
2. ACQUISITIONS
In June 1996, the Company and Tenneco entered into a definitive merger
agreement which provides for the acquisition of Tenneco Energy by the Company.
Tenneco Energy consists of all of the pipeline and energy assets of Tenneco.
Tenneco Energy is engaged in the interstate and intrastate transportation and
marketing of natural gas, as well as the development of, and participation in,
international pipeline, power, and energy related projects. Pursuant to the
agreement, the Company will assume $2.4 billion of Tenneco debt, issue equity
securities valued at $750 million to Tenneco's existing common and preferred
shareholders, assume $250 million of new Tenneco preferred stock to be issued
prior to closing, and assume approximately $600 million of other liabilities.
The merger is conditioned upon several events including the receipt of
favorable tax rulings, completion of a debt realignment plan by Tenneco,
certain government approvals, and approval by Tenneco shareholders. It is
expected that these conditions will be satisfied by the end of 1996. The merger
agreement has been approved by the Company's and Tenneco's boards of directors.
The acquisition will be accounted for as a purchase with a total purchase price
of approximately $4 billion.
Effective June 1996, the Company acquired Cornerstone. The purchase price
of approximately $94 million, exclusive of acquisition costs, was financed
through internally generated funds and short-term borrowings. Acquisition costs
of approximately $5 million have been capitalized. The cost of the acquisition
has been allocated on the basis of the estimated fair value of the assets
acquired and the liabilities assumed, resulting in goodwill of approximately
$59 million which will be amortized over 40 years using the straight-line
method. The acquisition has been accounted for as a purchase utilizing the
"push down" method of accounting. Cornerstone's operating results for June 1996
are included in the Company's consolidated results of operations.
Effective September 1995, the Company acquired Eastex Energy Inc., and in
December 1995, the Company acquired all of the issued and outstanding capital
stock of Premier Gas Company. Effective July 1996, the name Eastex Energy Inc.
was changed to, and its subsidiaries were merged into, EPEM. The operating
results of EPEM for the quarter and six months ended June 30, 1996, are included
in the Company's consolidated results of operations.
4
<PAGE> 7
EL PASO NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
3. EMPLOYEE SEPARATION AND ASSET IMPAIRMENT CHARGE
In response to changes in the natural gas industry, increased competition,
and recent and future firm capacity contract step-downs and terminations, the
Company initiated an extensive review of its business processes. In the first
quarter of 1996, the Company adopted a program to restructure its business
activities into three business segments: (i) natural gas transmission, (ii)
field and merchant services, and (iii) corporate and other. For a further
discussion of the business segments, see Item 2, Management's Discussion and
Analysis of Financial Condition and Results of Operations, Operating
Environment. Also during the first quarter of 1996, the Company adopted a
program to reduce operating costs through work force reductions and improved
work processes and adopted SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of. As a result of
the workforce reduction program and the adoption of SFAS No. 121, the Company
recorded a special charge of $99 million ($47 million for employee separation
costs and $52 million for asset impairments).
The employee separation charge included approximately $26 million for
expected severance related costs and $21 million for additional pension
benefits. As of June 30, 1996, payments of approximately $20 million had been
recorded as a reduction of the provision for employee separation. The Company
anticipates that the remaining provision for employee separation will be
expended by the end of 1996.
In accordance with SFAS No. 121, the Company determined the fair value of
certain assets based on discounted future cash flows. The resultant non-cash
charge for asset impairments included approximately $44 million for the
impairment of certain natural gas gathering, processing, and production
facilities and $8 million for the write-off of a regulatory asset established
upon the adoption of SFAS No. 112, Employers' Accounting for Postemployment
Benefits, but not recoverable through the Company's rate settlement filed with
FERC in March 1996.
4. COMMITMENTS AND CONTINGENCIES
Rates and Regulatory Matters
In June 1995, EPG made a filing with FERC for approval of new system rates
for mainline transportation to be effective January 1, 1996. In July 1995, FERC
accepted and suspended EPG's filing to be effective January 1, 1996, subject to
refund and certain other conditions. FERC also set EPG's rates for hearing.
In March 1996, EPG filed a comprehensive offer of settlement which, if
approved by FERC, would resolve issues related to the above mentioned rate
filing and issues surrounding certain contract reductions and expirations
scheduled to occur from January 1, 1996, through December 31, 1997. The
settlement provides for, among other things: (i) a long term rate stability
plan which establishes base rates for a 10-year period from January 1, 1996,
through December 31, 2005, subject to annual escalation after 1997; (ii)
payments within 8 years to EPG by its customers totaling $255 million (prior to
interest) representing recovery of approximately 35 percent of the revenues
(for the period 1996 to 2003) associated with the contract reductions and
expirations; (iii) the sharing between EPG (65 percent) and its customers (35
percent) of revenues, in excess of a threshold, which are attributable to
unsubscribed capacity sales during the period 1996 through 2003; and (iv) a
mechanism to adjust the base rate for increases or decreases resulting from
laws or regulations to the extent that costs are impacted at a level
5
<PAGE> 8
EL PASO NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
in excess of $10 million a year. The settlement contains a provision which
permits any party desiring not to be bound by the settlement to have its rates
determined pursuant to procedures established by FERC.
In March 1996, Edison, a firm shipper on EPG's system, filed its own offer
of settlement. While Edison's offer is similar in many respects to EPG's, it
contains provisions that EPG believes would be adverse to its interests if
Edison's offer was approved and EPG's offer was rejected. The ALJ has
established procedures to determine what discovery will be allowed in
connection with comments on the two offers of settlement to be filed by the
parties and in the meantime has suspended the schedule for filing comments. It
is EPG's position that discovery is inappropriate because, among other things,
a provision in EPG's offer of settlement affords Edison the opportunity to have
its rates determined separately. The ALJ will determine whether to certify
EPG's settlement to FERC and will make a similar determination concerning the
Edison offer. Even though the comment schedule has been suspended, comments
supporting EPG's settlement have been filed by FERC staff, the regulatory
agencies of California, Arizona, and Nevada, the state of New Mexico, and
customers representing 95 percent of the firm throughput on EPG's mainline
transmission system. Comments opposing Edison's offer have been filed by EPG,
FERC staff, and the customer coalition supporting EPG's settlement.
Beginning in April 1992, FERC issued Orders No. 636 and 636-A, commonly
known as the restructuring rules. These rules mandated significant changes to
the structure of the services provided by interstate natural gas pipelines and
were intended principally to assure "comparability" between pipeline and
non-pipeline gas merchants, to provide a mechanism for the allocation of
pipeline capacity, and to eliminate competitive distortions arising from rate
design differences between U. S. and Canadian pipelines. In July 1996, the
Court of Appeals issued its opinion on petitions for review of FERC's Order No.
636. The opinion upheld the "broad contours" and most "specifics" of Order No.
636, remanding only certain aspects to FERC for further explanation. Management
does not expect the opinion to have a significant impact on the Company's
financial condition or results of operations.
Since 1987, 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 collected its buy-out
and buy-down costs under FERC cost recovery procedures. The collection period
for EPG's buy-out and buy-down costs ended March 1996.
Under FERC procedures, take-or-pay cost recovery filings may be challenged
by pipeline customers on prudence and certain other grounds. In October 1992,
FERC issued an order resolving all but one of the outstanding issues regarding
EPG's take-or-pay proceedings. The issue unresolved by FERC involved the claim
by several customers 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. Following a hearing on this issue, in
June 1994, FERC affirmed a decision of an ALJ which found that the valuation
proposed by EPG was excessive and required EPG to refund to its customers the
costs found to be ineligible for take-or-pay recovery. In accordance with the
FERC decision, EPG refunded $34 million, inclusive of interest, to its
customers in September 1994. In December 1994, EPG filed a petition with the
Court of Appeals for review of the FERC decision, which petition is currently
pending.
In addition, certain of EPG's customers sought review in the Court of
Appeals of FERC's determination in the October 1992 order that certain
buy-down/buy-out costs were eligible for recovery. In January 1996, the Court
of Appeals remanded the order to FERC with direction to clarify the basis for
its decision that the take-or-pay buy-down/buy-out costs were eligible for
recovery. In March 1996, FERC issued an order to the effect that categories of
costs which had been determined to be eligible for recovery might in fact be
ineligible for recovery and established a technical conference which was held
in May 1996 to investigate the issues. A FERC decision is expected in late 1996
or early 1997.
6
<PAGE> 9
EL PASO NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
In compliance with FERC's restructuring rules, MPC filed a service and
rate design restructuring plan in November 1992 which was approved by FERC in
July 1993. Several of MPC's customers have filed petitions with the Court of
Appeals for review of the March 1993 order and certain other FERC orders. The
primary issues on appeal pertain to FERC's requirement that MPC's rates for
firm transportation service be based upon straight fixed variable rate design
rather than modified fixed variable rate design. Although the Court of Appeals
opinion on Order No. 636, as discussed above, generally upheld FERC's
requirement that pipelines use straight fixed variable rates, the petitioners
in the appeal of MPC's Order No. 636 restructuring proceeding, which is still
pending, have argued that straight fixed variable rates are inappropriate in
light of MPC's underlying certificate and contractual provisions relating to
transportation rates.
In February 1995, MPC made a filing with FERC seeking authorization to
maintain its existing rates. In March 1995, FERC accepted the filing and
allowed the rates to become effective as of March 30, 1995, subject to refund.
In September 1995, MPC filed a settlement agreement supported by FERC and the
majority of MPC's firm shippers which would continue rates at existing levels
for a 5-year period. In December 1995, FERC approved the settlement agreement
as it relates to the supporting parties. Contested issues applicable solely to
the minority customer group not supporting the settlement were the subject of a
hearing before FERC in April 1996. A ruling by the assigned ALJ is expected in
late 1996.
The Company is accruing a provision for revenues collected subject to
refund, and the balance of this provision at June 30, 1996, was approximately
$71 million. Management believes the amount being reserved will be sufficient
to cover any anticipated refunds.
Environmental Matters
The Company is subject to extensive federal, state, and local laws and
regulations governing environmental quality and pollution control. These laws
and regulations require the Company to remove or remedy the effect on the
environment of the disposal or release of specified substances at ongoing and
former operating sites. As of June 30, 1996, the Company had a reserve of
approximately $40 million for the following environmental contingencies: (i)
PCB remediation costs estimated to be $3 million over the next 4 years and (ii)
remediation of groundwater and soil contamination costs estimated to range
between $33 million and $46 million over a 30-year period. Management believes
the amount reserved as of June 30, 1996, is sufficient to cover these and other
small environmental assessments and remediation activities.
The State of Tennessee has asserted a claim that EPG is a liable party
under state environmental laws for cleanup costs associated with a site in
Elizabethton, Tennessee. The State of Tennessee and EPA are investigating the
nature and extent of contamination. Since the investigation is in the initial
stages, EPG is unable to estimate its potential share of any remediation costs.
The Company initially estimated the CAAA would require modification of
exhaust stacks at numerous locations. Based upon the latest analysis of CAAA
regulations and developments, the Company believes the modifications will not
be required, and the impact to the Company will be limited to the following:
(i) installation of emissions control equipment, (ii) the requirement to obtain
permits for air emissions of existing facilities, and (iii) compliance
assurance monitoring of emissions. The Company anticipates capitalizing the
equipment costs associated with complying with CAAA and estimates that
approximately $5 million will be spent from 1997 through 2005. When finalized,
EPA's proposed compliance assurance monitoring rules could potentially impose
greater costs on the Company.
7
<PAGE> 10
EL PASO NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Guarantees
EPNC entered into an operating lease agreement for a NGL extraction plant
being constructed in the San Juan Basin. The total amount financed via the
operating lease will not exceed $80 million, and the annual lease obligation
will be a function of the amount financed. EPG has unconditionally guaranteed
all obligations of EPNC under the lease.
EPG has also unconditionally guaranteed all obligations of EPED SAM, which
are not expected to exceed $51 million, in connection with its share of the
financing for the Samalayuca II Power Plant project. For a further discussion,
see Note 11. In addition, EPG has unconditionally guaranteed the obligations of
certain subsidiaries, which are not expected to exceed $16 million, in
connection with the TransColorado Pipeline Phase I project and the Coyote Gulch
Treating and Compression Facility project. For a further discussion of these
two projects, see Item 2, Management's Discussion and Analysis of Financial
Condition and Results of Operations, Project Investments.
Legal Proceedings
In November 1993, TransAmerican filed a complaint in a Texas state court,
TransAmerican Natural Gas Corporation v. El Paso Natural Gas Company, et. al.,
alleging fraud, tortious interference with contractual relationships, economic
duress, civil conspiracy, and violation of state antitrust laws arising from a
settlement agreement entered into by EPG, TransAmerican, and others in 1990 to
settle litigation then pending and other potential claims. The complaint, as
amended, seeks unspecified actual and exemplary damages. EPG is defending the
matter in the State District Court of Dallas County, Texas. In April 1996, a
former employee of TransAmerican filed a related case in Harris County, Texas,
Vickroy E. Stone v. Godwin & Carlton, P.C., et al. (including EPG), seeking
indemnification and other damages in unspecified amounts relating to litigation
consulting work allegedly performed for various entities, including EPG, in
cases involving TransAmerican. Based on information available at this time,
management believes that the claims asserted against it in both cases have no
factual or legal basis and that the ultimate resolution of these matters will
not have a materially adverse effect on the Company's financial condition.
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 currently does not expect these
matters to have a materially adverse effect on the Company's financial
condition.
5. FINANCING TRANSACTIONS
In January 1996, the Board authorized an increase in the Company's
short-term borrowing limits from $400 million to $500 million. In May 1996, EPG
established with a group of banks a revolving credit facility of $400 million
that expires May 2001 and a 364 day renewable $100 million revolving credit
facility with an initial expiration of May 1997. These facilities replaced EPG's
previous revolving credit facility of $400 million and were established
primarily to provide a liquidity facility for the Company's commercial paper
program. Revolving credit facility borrowings as of June 30, 1996, and December
31, 1995, were approximately $175 million and $75 million, respectively. As of
June 30, 1996, and December 31, 1995, approximately $138 million and $203
million, respectively, of commercial paper was outstanding. In addition, as of
June 30, 1996, and December 31, 1995, there were no borrowings outstanding under
EPG's $30 million line of credit facility established in October 1994.
In June 1996, EPG retired Cornerstone long-term debt in the amount of $16
million. In January 1997, EPG's 6.90 percent notes for $100 million will
mature.
8
<PAGE> 11
EL PASO NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
EPG filed a shelf registration statement in August 1994, pursuant to which
EPG may offer up to $400 million of unsecured debt securities, preferred stock,
and common stock from time to time as determined by market conditions and
Company needs. On March 10, 1995, the registration statement was declared
effective by the SEC. As of June 30, 1996, EPG had not issued any securities
pursuant to the shelf registration statement.
6. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment at June 30, 1996, and December 31, 1995,
consisted of the following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Property, plant, and equipment, at cost .......... $3,123,464 $3,042,516
Less accumulated depreciation and depletion ...... 1,225,218 1,158,486
---------- ----------
1,898,246 1,884,030
Additional acquisition cost assigned to utility
plant, net of accumulated amortization ......... 90,888 93,594
---------- ----------
Total property, plant, and equipment, net ...... $1,989,134 $1,977,624
========== ==========
</TABLE>
7. INTANGIBLE ASSETS
Intangible assets at June 30, 1996, and December 31, 1995, consisted of
the following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Goodwill ......................................... $104,633 $ 42,261
Other intangibles ................................ 15,004 14,890
-------- --------
119,637 57,151
Less accumulated amortization .................... 10,337 9,273
-------- --------
Total intangible assets, net ................... $109,300 $ 47,878
======== ========
</TABLE>
8. INVENTORIES
Inventories at June 30, 1996, and December 31, 1995, consisted of the
following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Materials and supplies ........................... $ 29,921 $ 30,354
Gas in storage ................................... 5,377 6,754
-------- --------
$ 35,298 $ 37,108
======== ========
</TABLE>
Materials and supplies and gas in storage are valued at the lower of cost
or market, with cost determined using the average cost method.
9
<PAGE> 12
EL PASO NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
9. DEFERRED EMPLOYEE COMPENSATION
The Company maintains restricted stock plans whereby awards, expressed as
shares of common stock of the Company, are issued to certain key salaried
employees. Employees earn a given percent of these shares as the Company meets
specific performance targets over a specific time period and vest in the earned
shares if certain service requirements are met. The Company has reserved
approximately 7 million shares of common stock in connection with the
restricted stock plans, and a total of 1.2 million shares have been issued as of
June 30, 1996. These shares carry voting and dividend rights; however, sale or
transfer of the shares is restricted in accordance with the vesting procedures.
Shares issued under the plans are recorded at their fair market value with a
corresponding charge to stockholders' equity as of June 30, 1996, and December
31, 1995.
The total award is amortized as compensation expense on a straight-line
basis based on the number of shares earned under the vesting provisions.
Compensation expense totaled $0.9 million and $1.8 million for the quarter and
six months ended June 30, 1996, respectively, and $0.1 million and $0.2 million
for the quarter and six months ended June 30, 1995, respectively.
10. SUPPLEMENTAL DISCLOSURE OF CASH FLOW ACTIVITIES
<TABLE>
<CAPTION>
SIX MONTHS
-------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Net cash payments
Interest ....................................... $ 36,426 $ 39,420
Income taxes ................................... 10,132 9,314
</TABLE>
10
<PAGE> 13
EL PASO NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
11. INVESTMENTS
EPED SAM formed a limited liability company with members of the consortium
building the Samalayuca II Power Plant, in which the Company has an economic
interest of approximately 30 percent. The limited liability company obtained a
$66 million loan, of which aproximately $40 million was used to purchase 99
percent of the Class B, non-voting, units of certain indirect subsidiaries of
the Company. The $40 million is reflected as a minority interest in the
indirect subsidiaries.
In May 1996, these indirect subsidiaries advanced $27 million to an
affiliated partnership and acquired an interest in Sam II for approximately $13
million. These amounts are reflected in Investments in and Advances to
Affiliates. These funds are being used to finance initial construction of the
power plant. Construction of the plant began in June 1996 and is expected to
take 35 months. The plant cost is estimated to be $660 million. The consortium
has received non-recourse senior debt construction financing of up to 80 percent
of the capital requirements from a syndicate of commercial banks, the
Inter-American Development Bank and the United States Export-Import Bank.
Construction phase loans are convertible to term loans which are repayable over
ten years beginning with the commencement of lease payments from CFE. After its
completion, the plant will be operated by CFE under a 20-year lease. Ownership
will be transferred to CFE after termination of the 20-year lease.
The Company is a member of the consortium building the $250 million
Aguaytia Energy Project, in which it has an economic interest of approximately
25 percent. The Company's total equity investment is estimated to be $40
million. In May 1996, the Company made an initial equity investment of
approximately $8 million. The remainder of its equity investment will be funded
during the construction period, which is approximately two years. The consortium
will sell electricity, propane, and natural gas to meet the growing demand for
energy in Peru. The project will be funded 60 percent with equity. The
consortium has received non-recourse debt financing for the project which is
repayable over 10 years following the completion of construction. In December
1995, the project received approval from the Overseas Private Investment
Corporation for political risk insurance coverage, to the extent available. The
project reached financial close in July 1996. Construction is expected to begin
in the second half of 1996, and operations are expected to commence in 1998.
12. RECENT PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board issued SFAS No.
125, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities. SFAS No. 125 covers transactions that include:
securitizations, sales of partial interests in financial assets, repurchase
agreements, securities lending, pledges of collateral, loan syndications and
participations, sales of receivables with recourse, servicing of mortgages and
other loans, and in-substance defeasances. SFAS No. 125 uses a "financial
components" approach for financial asset transfers. Under that approach, after
financial assets are transferred, an entity would recognize on the balance
sheet all assets it controls and liabilities it has incurred. It would remove
from the balance sheet those assets it no longer controls and liabilities it
has satisfied. SFAS No. 125 becomes effective at the beginning of 1997. The
Company is evaluating the implications of SFAS No. 125.
11
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information contained in Item 2 updates, and should be read in
conjunction with, information set forth in Part II, Items 7 and 8, in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995, in
addition to the interim consolidated financial statements and accompanying
notes presented in Item 1 of this Form 10-Q.
OPERATING ENVIRONMENT
In recognition of changes in the natural gas industry and the manner in
which the Company manages its businesses, and in order to facilitate a more
detailed understanding of the various activities in which it engages, the
Company began doing business under the name El Paso Energy Corporation
(effective April 22, 1996) and has segregated its business activities into
three business segments: (i) natural gas transmission, (ii) field and merchant
services, and (iii) corporate and other. The natural gas transmission segment
is involved in the interstate transportation of natural gas. The field and
merchant services segment is involved in the purchasing, gathering, processing,
marketing, and trading of natural gas, NGL, and power, as well as the storage
of natural gas. The corporate and other segment includes the Company's
miscellaneous subsidiaries.
Natural Gas Transmission
EPG owns and operates one of the nation's largest mainline natural gas
transmission systems, connecting natural gas supply regions in New Mexico,
Texas, Oklahoma, and Colorado to markets in California, Nevada, Arizona, New
Mexico, Texas, and northern Mexico. EPG's natural gas transmission system
consists of approximately 10,000 miles of pipeline and is connected to one of
the most prolific supply basins in the nation, the San Juan Basin of northern
New Mexico and southern Colorado. MPC serves the enhanced oil recovery
operations and associated cogeneration projects in the heavy oil fields in
central California. EPG's and MPC's pipeline facilities, services, and rates
are regulated by FERC in accordance with the Natural Gas Act of 1938 and the
Natural Gas Policy Act of 1978. The Company also has a one-third interest in
TransColorado. For a further discussion, see TransColorado Pipeline Project of
this section.
Field and Merchant Services
EPFS provides field services including gathering, products extraction,
dehydration, purification, and compression. EPFS has approximately 7,200 miles
of gathering lines and 64,000 horsepower of compression in its gathering
operations located in the San Juan, Anadarko, and Permian Basins. Effective
June 1996, the Company acquired Cornerstone. Cornerstone's assets consist of
approximately 700 miles of gathering and transportation systems and seven
natural gas processing and treating facilities principally located in East
Texas and Louisiana. Additionally, Cornerstone markets natural gas and NGL. For
a further discussion of the acquisition, see Part I, Financial Information,
Note 2. EPEM purchases, markets, and trades natural gas, NGL, power, and other
energy commodities and provides risk management activities associated with
those commodities. EPEM transports gas supplies for customers on 45 pipelines
serving 37 states in the U. S. and Canada and markets over 3,700 Mdth/d. EPGM
conducts all of EPG's gas marketing business.
Corporate and Other
Corporate and other includes EPEI and other corporate activities. The
Company conducts its international activities through EPEI.
12
<PAGE> 15
RESULTS OF OPERATIONS
Operating Income (Loss) by Business Segment (1)
<TABLE>
<CAPTION>
SECOND QUARTER SIX MONTHS
------------------------ ------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Natural gas transmission ...... $ 49,639 $ 50,265 $ 97,149 $ 104,939
Field and merchant services ... 13,721 2,926 31,664 4,964
Corporate and other ........... (1,737) (334) (100,139) (833)
---------- ---------- ---------- ----------
Consolidated ................ $ 61,623 $ 52,857 $ 28,674 $ 109,070
========== ========== ========== ==========
</TABLE>
(1) To the extent practicable, prior year results of operations have been
reclassified to conform to the current business segment presentation,
although such results are not necessarily indicative of the results which
would have been achieved had the revised business segment structure been
in effect during that period. In general, transactions among business
segments are recorded at market prices and material affiliate transactions
within business segments have been eliminated.
Natural Gas Transmission Financial Results
<TABLE>
<CAPTION>
SECOND QUARTER SIX MONTHS
------------------- -------------------
1996 1995 1996 1995
-------- -------- -------- --------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Reservation revenue ........... $113,097 $125,789 $231,455 $251,332
Transportation revenue ........ 6,159 3,100 11,245 7,230
Other revenue ................. 6,486 7,147 11,618 18,008
-------- -------- -------- --------
Total operating revenues .... 125,742 136,036 254,318 276,570
-------- -------- -------- --------
Operation and maintenance ..... 51,686 59,532 106,298 121,347
Depreciation and amortization . 14,794 12,968 29,550 25,355
Other operating expenses ...... 9,623 13,271 21,321 24,929
-------- -------- -------- --------
Total operating expenses .... 76,103 85,771 157,169 171,631
-------- -------- -------- --------
Operating income .............. $ 49,639 $ 50,265 $ 97,149 $104,939
======== ======== ======== ========
</TABLE>
Second Quarter 1996 Compared to Second Quarter 1995
Operating revenues for the quarter ended June 30, 1996, were $10 million
lower than for the same period of 1995. The decrease was primarily due to an
accrual for revenues being collected that are subject to refund and the impact
of a January 1996 transportation contract reduction. This decrease in operating
revenues was partially offset by new system rates that became effective January
1, 1996.
Operating expenses for the quarter ended June 30, 1996, were $10 million
lower than for the same period of 1995 primarily due to lower operation and
maintenance expense resulting from lower headcount. This decrease was partially
offset by higher depreciation, depletion, and amortization expense.
Mainline throughput for the quarter ended June 30, 1996, averaged 3,876
Mdth/d compared to 3,853 Mdth/d for the same period of 1995. This increase was
primarily due to higher off-system deliveries, partially offset by lower
deliveries to California due to increased availability of hydroelectric power
from the Pacific Northwest.
13
<PAGE> 16
Six Months Ended 1996 Compared to Six Months Ended 1995
Operating revenues for the six months ended June 30, 1996, were $22
million lower than for the same period of 1995. The decrease was primarily due
to an accrual for revenues being collected that are subject to refund, the
impact of a January 1996 transportation contract reduction, and a decrease in
return on take-or-pay receivables. The decrease in operating revenues was
partially offset by new system rates that became effective January 1, 1996.
Operating expenses for the six months ended June 30, 1996, were $14
million lower than for the same period of 1995. The decrease was primarily due
to lower operation and maintenance expense resulting from lower headcount and
an adjustment to the take-or-pay undercollections accrual. These decreases were
partially offset by higher depreciation, depletion, and amortization expense.
Mainline throughput for the six months ended June 30, 1996, averaged 3,853
Mdth/d compared to 3,834 Mdth/d for the same period of 1995. This increase was
primarily due to higher off-system deliveries, partially offset by lower
deliveries to California due to increased availability of hydroelectric power
from the Pacific Northwest and milder winter temperatures.
Field and Merchant Services Financial Results
<TABLE>
<CAPTION>
SECOND QUARTER SIX MONTHS
------------------- -------------------
1996 1995 1996 1995
-------- -------- -------- --------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Gathering and treating revenue .............. $ 16,250 $ 13,252 $ 33,940 $ 28,921
Products extraction revenue ................. 3,391 2,217 8,157 4,340
Merchant services revenue ................... 428,161 28,027 879,621 66,914
Other revenue ............................... 14,081 6,237 17,369 13,632
-------- -------- -------- --------
Total operating revenues .................. 461,883 49,733 939,087 113,807
-------- -------- -------- --------
Operation and maintenance ................... 20,275 14,764 39,646 30,172
Gas purchases ............................... 409,160 26,200 832,422 66,581
Depreciation, depletion, and amortization ... 6,173 4,488 13,032 8,894
Other operating expenses .................... 12,554 1,355 22,323 3,196
-------- -------- -------- --------
Total operating expenses .................. 448,162 46,807 907,423 108,843
-------- -------- -------- --------
Operating income ............................ $ 13,721 $ 2,926 $ 31,664 $ 4,964
======== ======== ======== ========
</TABLE>
Second Quarter 1996 Compared to Second Quarter 1995
Operating revenues for the quarter ended June 30, 1996, were $412 million
higher than for the same period of 1995. The increase was due primarily to the
acquisition of EPEM and Cornerstone, an increase in liquid revenues due to the
new cryogenic extraction plant becoming operational, and an increase in natural
gas gathered volumes. The increase in operating revenues was partially offset
by the elimination of certain gathering revenues previously collected in
mainline rates prior to January 1, 1996.
Operating expenses for the quarter ended June 30, 1996, were $401 million
higher than for the same period of 1995. The increase was due to the
acquisition of EPEM and Cornerstone.
Natural gas marketed for the quarter ended June 30, 1996, averaged 3,725
Mdth/d compared to 234 Mdth/d for the same period of 1995. This increase was
primarily due to the acquisition of EPEM and Cornerstone. Natural gas gathered
for the quarter ended June 30, 1996, averaged 1,545 Mdth/d compared to 1,283
Mdth/d for the same period of 1995. This increase was largely due to the
acquisition of gathering and processing facilities, pressure reduction
projects, and the removal of mainline capacity constraints. NGL marketed for
the quarter ended June 30, 1996, increased to 50 million gallons primarily due
to the new cryogenic extraction plant becoming operational.
14
<PAGE> 17
Six Months Ended 1996 Compared to Six Months Ended 1995
Operating revenues for the six months ended June 30, 1996, were $825
million higher than for the same period of 1995. The increase was due to the
acquisition of EPEM and Cornerstone, an increase in liquid revenues due to the
new cryogenic extraction plant becoming operational, and an increase in natural
gas gathered volumes. The increase in operating revenues was partially offset
by the elimination of certain gathering revenues previously collected in
mainline rates prior to January 1, 1996.
Operating expenses for the six months ended June 30, 1996, were $799
million higher than for the same period of 1995. The increase was due to the
acquisition of EPEM and Cornerstone.
Natural gas marketed for the six months ended June 30, 1996, averaged
3,712 Mdth/d compared to 267 Mdth/d for the same period of 1995. This increase
was primarily due to the acquisition of EPEM and Cornerstone. Natural gas
gathered for the six months ended June 30, 1996, averaged 1,537 Mdth/d compared
to 1,303 Mdth/d for the same period of 1995. This increase was largely due to
the acquisition of gathering and processing facilities, pressure reduction
projects, and the removal of mainline capacity constraints. NGL marketed for
the six months ended June 30, 1996, increased to 50 million gallons primarily
due to the new cryogenic extraction plant becoming operational.
Corporate and Other Financial Results
The operating loss for the six months ended June 30, 1996, reflects a one
time special charge of $99 million for the employee separation and asset
impairment recorded in March 1996. For a further discussion of the special
charge, see Part I, Financial Information, Note 3.
Non-Operating Income and Expense
Second Quarter 1996 Compared to Second Quarter 1995
Interest and debt expense for the quarter ended June 30, 1996, was $4
million higher than for the same period of 1995 due primarily to interest
accruals for a provision for revenues collected subject to refund.
Other-net for the quarter ended June 30, 1996, was $2 million higher than
for the same period of 1995 due primarily to a 1996 gain recorded on the
disposition of property.
Six Months Ended 1996 Compared to Six Months Ended 1995
Interest and debt expense for the six months ended June 30, 1996, was $6
million higher than for the same period of 1995 due primarily to higher
interest on short-term debt and interest accruals for a provision for revenues
collected subject to refund.
Other-net for the six months ended June 30, 1996, was $1 million lower
than for the same period of 1995 due primarily to a charge for losses on
donations which is partially offset by a gain on the disposition of property.
LIQUIDITY, FINANCIAL POSITION, AND CAPITAL RESOURCES
Net cash provided by operating activities was $140 million for the six
months ended June 30, 1996, compared with $81 million for the same period of
1995. The increase from the previous year was primarily due to the collection
of revenues subject to refund and the Amoco Production Company litigation
payment made in the first quarter of 1995. These increases were partially
offset by higher severance payments, lower take-or-pay collections, and timing
differences in other working capital accounts.
15
<PAGE> 18
Acquisitions
In June 1996, the Company and Tenneco entered into a definitive merger
agreement which provides for the acquisition of Tenneco Energy by the Company.
Effective June 1996, the Company acquired Cornerstone. For a further
discussion of the Tenneco Energy and Cornerstone acquisitions, see Part I,
Financial Information, Note 2.
Effective September 1995, the Company acquired Eastex Energy Inc., and
in December 1995, the Company acquired all of the issued and outstanding
capital stock of Premier Gas Company. Effective July 1996, the name Eastex
Energy Inc. was changed to, and its subsidiaries were merged into, EPEM. The
operating results of EPEM for the quarter and six months ended June 30, 1996,
are included in the Company's consolidated results of operations.
Employee Separation and Asset Impairment Charge
In response to changes in the natural gas industry, increased competition,
and recent and future firm capacity contract step-downs and terminations, the
Company initiated an extensive review of its business processes. In the first
quarter of 1996, the Company adopted a program to restructure its business
activities into three business segments and reduce operating costs through work
force reductions and improved work processes. Also during the first quarter of
1996, the Company adopted SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of. As a result of
the workforce reduction program and the adoption of SFAS No. 121, the Company
recorded a special charge of $99 million. For a further discussion, see Part I,
Financial Information, Note 3.
Rates and Regulatory Matters
In June 1995, EPG made a filing with FERC for approval of new system rates
for mainline transportation to be effective January 1, 1996. In July 1995, FERC
accepted and suspended EPG's filing to be effective January 1, 1996, subject to
refund and certain other conditions. FERC also set EPG's rates for hearing.
In March 1996, EPG filed a comprehensive offer of settlement which, if
approved by FERC, would resolve issues related to the above mentioned rate
filing and issues surrounding certain contract reductions and expirations which
are scheduled to occur from January 1, 1996, through December 31, 1997. For a
further discussion of the March 1996 offer of settlement, see Part I, Financial
Information, Note 4.
In July 1996, the Court of Appeals issued its opinion on petitions for
review of FERC's Order No. 636. For a further discussion of the July 1996
opinion, see Part I, Financial Information, Note 4.
Since 1987, 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 collected its buy-out
and buy-down costs under FERC cost recovery procedures. For a further
discussion of EPG's take-or-pay matters, see Part I, Financial Information,
Note 4.
MPC filed a service and rate design restructuring plan in November 1992
which was approved by FERC in July 1993. In February 1995, MPC made a filing
with FERC seeking authorization to maintain its existing rates. In March 1995,
FERC accepted the filing and allowed the rates to become effective as of March
30, 1995, subject to refund. For a further discussion of MPC's rates and
regulatory matters, see Part I, Financial Information, Note 4.
Legal Proceedings
See Part I, Financial Information, Note 4.
16
<PAGE> 19
Environmental Matters
The Company is subject to extensive federal, state, and local laws and
regulations governing environmental quality and pollution control. These laws
and regulations require the Company to remove or remedy the effect on the
environment of the disposal or release of specified substances at ongoing and
former operating sites. As of June 30, 1996, the Company had a reserve of
approximately $40 million for the following environmental contingencies: (i)
PCB remediation costs estimated to be $3 million over the next 4 years and (ii)
remediation of groundwater and soil contamination costs estimated to range
between $33 million and $46 million over a 30-year period. Management believes
the amount reserved as of June 30, 1996, is sufficient to cover these and other
small environmental assessments and remediation activities.
The State of Tennessee has asserted a claim that EPG is a liable party
under state environmental laws for cleanup costs associated with a site in
Elizabethton, Tennessee. The State of Tennessee and EPA are investigating the
nature and extent of contamination. Since the investigation is in the initial
stages, EPG is unable to estimate its potential share of any remediation costs.
The Company initially estimated the CAAA would require modification of
exhaust stacks at numerous locations. Based upon the latest analysis of CAAA
regulations and developments, the Company believes the modifications will not
be required, and the impact to the Company will be limited to the following:
(i) installation of emissions control equipment, (ii) the requirement to obtain
permits for air emissions of existing facilities and (iii) compliance assurance
monitoring of emissions. The Company anticipates capitalizing the equipment
costs associated with complying with CAAA and estimates that approximately $5
million will be spent from 1997 through 2005. When finalized, EPA's proposed
compliance assurance monitoring rules could potentially impose greater costs on
the Company.
Financing Facilities
In January 1996, the Board authorized an increase in the Company's
short-term borrowing limits from $400 million to $500 million. In May 1996, EPG
established with a group of banks a revolving credit facility of $400 million
that expires May 2001 and a 364 day renewable $100 million revolving credit
facility with an initial expiration of May 1997. These facilities replaced EPG's
previous revolving credit facility of $400 million and were established
primarily to provide a liquidity facility for the Company's commercial paper
program. Revolving credit facility borrowings as of June 30, 1996, and December
31, 1995, were approximately $175 million and $75 million, respectively. As of
June 30, 1996, and December 31, 1995, approximately $138 million and $203
million, respectively, of commercial paper was outstanding. In addition, as of
June 30, 1996, and December 31, 1995, there were no borrowings outstanding under
EPG's $30 million line of credit facility established in October 1994.
In June 1996, EPG retired Cornerstone long-term debt in the amount of $16
million. In January 1997, EPG's 6.90 percent notes for $100 million will
mature.
EPG filed a shelf registration statement in August 1994, pursuant to which
EPG may offer up to $400 million of unsecured debt securities, preferred stock,
and common stock from time to time as determined by market conditions and
Company needs. On March 10, 1995, the registration statement was declared
effective by the SEC. As of June 30, 1996, EPG had not issued any securities
pursuant to the shelf registration statement.
17
<PAGE> 20
Common Stock and Other Stockholders' Equity
The following table reflects quarterly dividends declared and paid on EPG's
common stock:
<TABLE>
<CAPTION>
AMOUNT PER
DECLARATION DATE COMMON SHARE PAYMENT DATE TOTAL AMOUNT
- ---------------- ------------ -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
January 19,1996 $0.3475 April 1, 1996 $12,258
April 12, 1996 $0.3475 July 1, 1996 $12,278
</TABLE>
On July 12, 1996, the Board declared a quarterly dividend of $0.3475 per
share on EPG's common stock, payable on October 7, 1996, to shareholders of
record on September 13, 1996.
The Company maintains restricted stock plans whereby awards, expressed as
shares of common stock of the Company, are issued to certain key salaried
employees. For additional information, see Part I, Financial Information, Note
9.
In November 1994, the Board authorized the repurchase of up to 3.5 million
shares of EPG's outstanding common stock from time to time in the open market.
This authorization was in addition to a 2 million share authorization received
in October 1992. Shares repurchased are held in EPG's treasury and are expected
to be used in connection with EPG stock option compensation plans and for other
corporate purposes. Pursuant to the foregoing authorizations, the Company has
purchased 4.7 million shares, cumulatively, as of June 30, 1996.
Project Investments
International Projects
The Company is a member of a consortium that is building the $660 million
Samalayuca II Power Plant near Ciudad Juarez, Chihuahua, Mexico For additional
information, see Part I, Financial Information, Note 4 and 11. In addition, the
Company is a member of a consortium that is developing a $250 million
integrated gas and power project near Pucallpa, in central Peru, called the
Aguaytia Energy Project. For additional information see Part I, Financial
Information, Note 11.
TransColorado Pipeline Project
In the third quarter of 1995, the Company purchased a one-third interest
in TransColorado from Public Service Company of Colorado for approximately $4
million. TransColorado, which received FERC authorization in November 1994, is
a 311 mile pipeline project that is expected to provide an alternative outlet
for natural gas produced in the northern San Juan Basin and the Rocky Mountain
region. The Company paid approximately $2 million in cash. The balance of
approximately $2 million is due upon commencement of the pipeline project. KN
Energy, Inc. and Questar Pipeline Company also each own a one-third interest in
TransColorado.
In April 1996, TransColorado filed with FERC for an application for an
amendment to the existing FERC authorization in order to phase the construction
of the pipeline system. Phase I will consist of 22.5 miles of pipeline
beginning at the outlet of the Coyote Gulch Treating and Compression Facility
in La Plata County, Colorado and extending to Blanco, New Mexico. TransColorado
anticipates FERC approval of the amended authorization by the fourth quarter of
1996. The Phase I facilities are expected to be in service during the fourth
quarter of 1996. The plant cost is estimated to be $15 million, of which the
Company's share is estimated to be approximately $8 million since Questar
Pipeline Company has elected not to participate in the Phase I facilities at
this time. Phase II will consist of the remainder of the project up to
northwest Colorado.
18
<PAGE> 21
Coyote Gulch Treating and Compression Facility
The Company and KN Gas Gathering, Inc. have entered into an agreement to
construct, own, and operate Coyote Gulch Treating and Compression Facility, a
110 Mdth/d facility in La Plata County, Colorado. Construction of the facility
began in May 1996 and is expected to be completed by December 31, 1996. The
plant cost is estimated to be $16 million, of which the Company's share is
estimated to be approximately $8 million. Upon completion, the facility will
receive and treat gas for Red Cedar Gathering Company.
Capital Expenditures
The Company's consolidated planned capital expenditures for 1996 of $125
million are primarily for maintenance of business, system expansion, and system
enhancement. Capital expenditures, exclusive of acquisitions, for the six
months ended June 30, 1996, were $45 million compared to $52 million for the
same period of 1995. Data for the six months ended June 30, 1995, has been
restated in order to provide a discussion of capital expenditures by business
segment.
Natural Gas Transmission
The segment's planned capital expenditures for 1996 of $60 million are
primarily for maintenance of business, system expansion, and system
enhancement. Capital expenditures for the six months ended June 30, 1996, were
$11 million, compared to $34 million for the same period of 1995. Capital
expenditures were lower during the first six months of 1996 primarily due to
lower maintenance capital requirements in 1996 and a system expansion in the
San Juan Basin completed in 1995.
In April 1996, EPG filed with FERC for authorization to add compression on
its Havasu Crossover Line. This project will permit an additional 185 Mdth/d
to move on the Havasu Crossover Line from the San Juan Basin in northern New
Mexico to points of delivery off EPG's southern system. EPG has executed
transportation service agreements with shippers to fully subscribe this
additional capacity. This $20 million expansion is expected to be in service
by the second quarter of 1997.
In March 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.
The proposed expansion, as filed, would provide an additional 309 Mdth/d of
capacity at a cost of approximately $57 million. In November 1993, FERC issued
an order that approved the proposed border crossing facility south of Clint,
Texas that would connect EPG's facilities with facilities in Mexico. In
December 1993, Pacific Gas & Electric Company, Southern California Gas Company,
and the California Public Utilities Commission jointly filed a motion with FERC
seeking clarification or rehearing of the November 1993 order, which motion is
currently pending. FERC has required EPG to provide a status of the
negotiations for long-term contracts or binding precedent agreements in
validation of the market for the proposed new capacity. EPG advised FERC that
the project, although progressing more slowly than expected, remains a viable
natural gas project and that EPG continues to actively pursue executed firm,
long-term transportation arrangements. EPG is also preparing to file an
application with the new regulatory agency in Mexico, the Comision Reguladora
de Energia, to build a lateral pipeline which would connect EPG's facilities to
the Samalayuca II Power Plant.
Field and Merchant Services
The segment's planned capital expenditures for 1996 of $65 million
(excluding the Cornerstone acquisition) are primarily for system enhancement,
facility purchases, joint ventures, and maintenance of business. Capital
expenditures for the six months ended June 30, 1996, were $34 million compared
to $17 million for the same period of 1995. The increase was primarily due to
the purchase of the Linc and Pandale gathering systems and the installation of
additional compression.
In February 1996, EPFS, through its wholly owned subsidiary El Paso
Intrastate Company, acquired the Linc gathering system and the Pandale
gathering system from Tejas Power Corporation for approximately $12 million.
19
<PAGE> 22
The combined throughput of the two systems is expected to contribute 46 Mdth/d
on an annual basis to EPFS's total throughput. The Linc gathering system is
located in the Waha area of the Permian Basin and should increase EPFS's market
share in that area. The Pandale gathering system is located in the Texas
counties of Crockett and Val Verde, and should give EPFS a base from which to
grow in this active drilling area. In addition, in the first quarter of 1996,
EPFS installed new compression at a total cost of $8 million.
Financing Requirements
Future funding for capital expenditures, acquisitions, long-term debt
retirements, dividends, and other expenditures is expected to be provided by a
combination of internally generated funds, available credit facilities, and
debt/equity issuances.
OTHER
Recent Pronouncements
In June 1996, the Financial Accounting Standards Board issued SFAS No.
125, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities. For a further discussion of
SFAS No. 125, see Part I, Financial Information, Note 12.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995
The Company is including the following cautionary statement in this Form
10-Q to make applicable and take advantage of the new "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995 for any forward-looking
statement made by, or on behalf of, the Company. The factors identified in
this cautionary statement are important factors (but not necessarily all
important factors) that could cause actual results to differ materially from
those expressed in any forward-looking statement made by, or on behalf of, the
Company. Forward-looking statements are identified with a footnote on the page
in which they appear.
Where any such forward-looking statement includes a statement of the
assumptions or basis underlying such forward-looking statement, the Company
cautions that, while it believes such assumptions or basis to be reasonable and
makes them in good faith, assumed facts or basis almost always vary from actual
results, and the differences between assumed facts or basis and actual results
can be material, depending upon the circumstances. Where, in any
forward-looking statement, the Company, or its management, expresses an
expectation or belief as to future results, such expectation or belief is
expressed in good faith and believed to have a reasonable basis, but there can
be no assurance that the statement of expectation or belief will result or be
achieved or accomplished.
Taking into account the foregoing, the following are identified as
important factors that could cause actual results to differ materially from
those expressed in any forward-looking statement made by, or on behalf of, the
Company:
1--The ability to increase transmission, gathering, processing, and
sales volumes can be subject to the impact of future weather
conditions, including those that favor hydroelectric generation;
price; drilling activity; and service competition, especially due to
excess pipeline capacity into California.
20
<PAGE> 23
2--Growth strategies through acquisitions and investments in joint
ventures may face legal and regulatory delays and other unforeseeable
obstacles beyond the Company's control.
3--Future profitability will be affected by the Company's ability to
compete with the services offered by other energy enterprises which
may be larger, offer more services, and possess greater resources.
4--Cost control efforts may be effected by the timing of related work
force reductions and might be further offset by unusual and
unexpected items resulting from such events as, but not limited to,
litigation settlements, adverse rulings or judgments, and unexpected
environmental remediation costs in excess of reserves.
5--Rates for certain services are related to natural gas prices such
that variations in natural gas prices may result in corresponding
variances in operating revenues.
6--Future operating results and success of business ventures in the
United States, Canada, Mexico, and Latin America may be subject to
the effects of, and changes in, United States and foreign trade and
monetary policies, laws and regulations, political and governmental
changes, inflation and exchange rates, taxes, and operating
conditions.
7--Factors affecting the availability or cost of capital such as changes
in interest rates, market perceptions of the natural gas industry,
the Company, or security ratings.
8--Authoritative generally accepted accounting principle or policy
changes from such standard setting bodies as the Financial Accounting
Standards Board and the SEC.
21
<PAGE> 24
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Part I, Financial Information, Note 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The Company held its annual meeting of stockholders on April 30, 1996.
Proposals presented for a stockholders vote included the election of seven
directors and the ratification of the appointment of the Company's independent
certified public accountants for the fiscal year 1996.
Each of the seven incumbent directors nominated by the Company were
elected with the following voting results:
<TABLE>
<CAPTION>
FOR WITHHELD
----------- ----------
<S> <C> <C>
Byron Allumbaugh 31,073,598 281,890
Eugenio Garza Laguera 28,087,460 3,268,028
James F. Gibbons 31,071,721 283,767
Ben F. Love 31,048,841 306,647
Kenneth L. Smalley 31,060,376 295,112
Malcolm Wallop 30,924,481 431,007
William A. Wise 31,046,187 309,301
</TABLE>
The appointment of Coopers & Lybrand L.L.P. as the Company's independent
certified public accountants for the fiscal year 1996 was ratified with the
following voting results:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
---------- ------- -------
<S> <C> <C> <C>
Ratification of the appointment
Coopers & Lybrand L.L.P. 31,078,950 102,107 174,521
</TABLE>
There were no broker non-votes for the election of directors or for the
ratification of Coopers & Lybrand.
ITEM 5. OTHER INFORMATION
Continuous Odd-Lot Stock Sales Program
EPG has made available a Program, in which 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.
Dividend Reinvestment and Common Stock Purchase Plan
EPG has made available a Plan, which provides all shareholders of
record a convenient and economical means of increasing their holdings in
EPG's common stock. A shareholder who owns shares of common stock in
street name or broker name and who wishes to participate in the Plan will
need to have his or her broker or nominee transfer the shares into the
shareholder's name. The Plan is strictly voluntary, and no shareholder
of record is obligated to participate in the Plan. A brochure and
related materials describing the Plan were sent to shareholders of record
in November 1994. The Plan currently does not have a termination date,
but EPG may suspend the Plan at any time. Inquiries regarding the Plan
should be directed to The First National Bank of Boston.
22
<PAGE> 25
ITEM. 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C>
10.H - $400,000,000 and $100,000,000 Revolving Credit and Competitive
Advance Facility agreements, each dated as of May 31, 1996,
between EPG, Chemical Bank and certain other banks.
10.V.1- Third Amendment to Amended and Restated Limited Liability Company
Agreement of Aguaytia Energy, LLC, dated May 10, 1996.
10.AB - Reimbursement and Loan Agreement dated as of April 30, 1996,
between Sam II Equity Funding, LLC and NationsBank of Texas, N.A.
Relating to the Samalayuca Project; EPG Guaranty dated as of
April 30, 1996.
10.AC - El Paso Energy Corporation Strategic Stock Plan, effective as of
June 19, 1996.
11 - Computation of Earnings Per Common Share
27 - Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
On May 2, 1996, the Company filed a report under Item 5 on Form 8-K, dated
May 2, 1996, with respect to the definitive merger agreement with Cornerstone.
On June 28, 1996, the Company filed a report under Item 5 on Form 8-K,
dated June 28, 1996, with respect to the definitive merger agreement with
Tenneco.
23
<PAGE> 26
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 14, 1996 /s/ H. BRENT AUSTIN
-----------------------------------
H. Brent Austin
Executive Vice President and
Chief Financial Officer
Date: August 14, 1996 /s/ JEFFREY I. BEASON
-----------------------------------
Jeffrey I. Beason
Vice President, Controller, and
Treasurer
24
<PAGE> 27
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.H - $400,000,000 and $100,000,000 Revolving Credit and Competitive
Advance Facility agreements, each dated as of May 31, 1996,
between EPG, Chemical Bank and certain other banks.
10.V.1- Third Amendment to Amended and Restated Limited Liability Company
Agreement of Aguaytia Energy, LLC, dated May 10, 1996.
10.AB - Reimbursement and Loan Agreement dated as of April 30, 1996,
between Sam II Equity Funding, LLC and NationsBank of Texas, N.A.
Relating to the Samalayuca Project; EPG Guaranty dated as of
April 30, 1996.
10.AC - El Paso Energy Corporation Strategic Stock Plan, effective as of
June 19, 1996.
11 - Computation of Earnings Per Common Share
27 - Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.h
CONFORMED COPY
================================================================================
EL PASO NATURAL GAS COMPANY
----------------------------------------
$400,000,000
REVOLVING CREDIT AND COMPETITIVE
ADVANCE FACILITY AGREEMENT
DATED AS OF MAY 31, 1996
----------------------------------------
CHEMICAL BANK,
AS ADMINISTRATIVE AGENT
AND CAF ADVANCE AGENT
================================================================================
<PAGE> 2
M-i
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . . . . . . . . 1
SECTION 1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 1.3 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 1.4 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES . . . . . . . . . . . . . . . . 16
SECTION 2.1 The Revolving Credit Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.2 Revolving Credit Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.3 Making the Revolving Credit Advances . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.4 CAF Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.5 Procedure for CAF Advance Borrowings . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.6 CAF Advance Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.7 CAF Advance Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.8 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.9 Reduction of the Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.10 Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.11 Interest on Revolving Credit Advances . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.12 Additional Interest on Eurodollar Rate Advances . . . . . . . . . . . . . . . . . . 25
SECTION 2.13 Interest Rate Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.14 Voluntary Conversion of Advances . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.15 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.16 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.17 Increased Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.18 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.19 Payments and Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.20 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.21 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.22 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE III
CONDITIONS OF EFFECTIVENESS AND LENDING . . . . . . . . . . . . . . . 35
SECTION 3.1 Conditions Precedent to Effectiveness of this Agreement . . . . . . . . . . . . . . 35
SECTION 3.2 Conditions Precedent to Initial Advances
to Any Borrowing Subsidiary or Holding . . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.3 Conditions Precedent to Each Borrowing . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE IV
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 38
SECTION 4.1 Representations and Warranties of the Borrowers . . . . . . . . . . . . . . . . . . 38
ARTICLE V
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
COVENANTS OF THE BORROWERS . . . . . . . . . . . . . . . . . . 41
SECTION 5.1 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 5.2 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 5.3 Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 5.4 Restrictions on Material Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE VI
GUARANTEE . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 6.1 Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 6.2 No Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 6.3 Amendments, etc. with respect to the Obligations; Waiver of Rights . . . . . . . . 51
SECTION 6.4 Guarantee Absolute and Unconditional . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.5 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VII
EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . 53
SECTION 7.1 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE VIII
THE ADMINISTRATIVE AGENT AND THE CAF ADVANCE AGENT . . . . . . . . . . . . 56
SECTION 8.1 Authorization and Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 8.2 Administrative Agent's and CAF Advance Agent's Reliance, Etc. . . . . . . . . . . . 57
SECTION 8.3 Chemical and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 8.4 Lender Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 8.5 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 8.6 Successor Administrative Agent and CAF Advance Agent . . . . . . . . . . . . . . . 58
ARTICLE IX
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 59
SECTION 9.1 Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 9.2 Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 9.3 No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 9.4 Costs and Expenses; Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 9.5 Right of Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 9.6 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 9.7 Assignments and Participations . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 9.8 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 9.9 Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 9.10 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 9.11 Rate of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 9.12 Effect on Outstanding CAF Advances . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 9.13 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
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
$400,000,000 REVOLVING CREDIT AND COMPETITIVE ADVANCE FACILITY
AGREEMENT, dated as of May 31, 1996, among EL PASO NATURAL GAS COMPANY, a
Delaware corporation ("EPNGC"), 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 $400,000,000 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 or a Principal Subsidiary (or for purposes of Section
5.2(a) only, any Restricted Affiliate) 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
<PAGE> 6
2
transactions as reasonably determined by the Administrative Agent.
"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 EPNGC, each
Borrowing Subsidiary and Holding once Holding executes and delivers a
Joinder Agreement; 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 Company as
a "Borrowing Subsidiary" by written notice to the Administrative
Agent; collectively, the "Borrowing Subsidiaries".
<PAGE> 7
3
"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 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
2.5(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
<PAGE> 8
4
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.
"Capitalization" of any Person means the sum (without
duplication) of (a) consolidated Debt of such Person and its
consolidated Subsidiaries, plus (b) the aggregate amount of Guaranties
entered into by such Person and its consolidated Subsidiaries, plus
(c) the consolidated common and preferred stockholders' equity of such
Person and its consolidated Subsidiaries.
"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).
<PAGE> 9
5
"Company" means (a) at all times prior to Holding becoming a
Borrower, EPNGC, and (b) thereafter, Holding.
"Contingent Guaranty" shall have the meaning assigned to such
term in the definition of the term "Guaranty" contained in this
Section 1.1.
"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 or a Principal Subsidiary, any liabilities of
the Company or such Principal Subsidiary, as the case may be, under
any Alternate Program, or any document executed by the Company or such
Principal Subsidiary, as the case may be, 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.
<PAGE> 10
6
"EPNGC" shall have the meaning assigned to such term in the
preamble hereof.
"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.
"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>
A-/A3 or higher I .200%
BBB+/Baa1 II .205%
BBB/Baa2 III .250%
BBB-/Baa3 or lower IV .300%;
</TABLE>
<PAGE> 11
7
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 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).
"Existing Facility" shall have the meaning assigned to such
term in Section 3.1(g).
"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.
<PAGE> 12
8
"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, any of its consolidated Subsidiaries or any Restricted
Affiliate, including, without limitation, obligations under any
conditional sales agreement, equipment trust financing or equipment
lease and any liability of any Restricted Affiliate in respect of
obligations of EPNGC or its consolidated Subsidiaries 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.
"Holding" means any domestic parent holding company of EPNGC
which directly or indirectly owns 100% of EPNGC's common stock;
provided, however, that immediately after Holding becomes EPNGC's
parent holding company, not less than 80% of the shareholders of
common stock of Holding are the same shareholders of common stock of
EPNGC immediately prior to Holding becoming EPNGC's parent holding
company.
"Holding Guaranty" shall have the meaning assigned to such
term in Section 5.1(g).
"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
<PAGE> 13
9
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 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.
<PAGE> 14
10
"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 or Holding, as the
case may be.
"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.
"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.
"Material Subsidiary" means any Subsidiary of Holding (other
than a Project Financing Subsidiary) that itself (on an
unconsolidated, stand-alone basis) owns in excess of 10% of the
consolidated net property, plant and equipment of Holding and its
consolidated Subsidiaries.
"Mojave" means Mojave Pipeline Company.
"Moody's Bond Rating" means for any day, the rating of EPNGC's
(so long as it is the Company) or Holding's (so long as it is the
Company), as the case may be, senior long-term unsecured debt by
Moody's Investors 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
<PAGE> 15
11
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 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.
<PAGE> 16
12
"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.
"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
(or for purposes of Section 5.2(a) only, any Restricted Affiliate)
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 (or for purposes of Section 5.2(a) only, any Restricted
Affiliate) 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 EPNGC, CIESCO L.P., a New York limited partnership, Corporate
Asset Funding Company, a Delaware
<PAGE> 17
13
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 Union Bank of Switzerland.
"Register" has the meaning specified in Section 9.7(c).
"Restricted Affiliate" means any Affiliate of EPNGC (other
than a Subsidiary of EPNGC) designated by EPNGC as a "Restricted
Affiliate" by written notice to the Administrative Agent; provided
that such Affiliate shall not become a Restricted Affiliate until such
time that (a) such Affiliate executes and delivers a guaranty (in form
and substance reasonably satisfactory to the Administrative Agent)
(each a "Restricted Affiliate Guaranty") in favor of the
Administrative Agent, for the ratable benefit of the Lenders,
guaranteeing the prompt and complete payment by each Borrower when due
(whether at the stated maturity, by acceleration or otherwise) of the
Obligations owing by such Borrower and (b) the Administrative Agent
receives legal opinions from the General Counsel or Associate General
Counsel of Holding and from New York counsel to Holding reasonably
acceptable to the Administrative Agent, which legal opinions shall be
in form and substance satisfactory to the Administrative Agent;
provided, further, that after such time as such Affiliate becomes a
Restricted Affiliate, EPNGC may terminate the designation of such
Affiliate as a Restricted Affiliate by written notice to the
Administrative Agent at which time the aforementioned guaranty of such
Affiliate shall also terminate.
"Restricted Affiliate Guaranty" shall have the meaning
assigned to such term in the definition of Restricted Affiliate.
"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 EPNGC's (so
long as it is the Company) or Holding's (so long as it is the
Company), as the case may be, senior long-term
<PAGE> 18
14
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 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 May 30, 2001.
"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
<PAGE> 19
15
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.
"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> 20
16
SECTION 1.4 References. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement, and Article, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
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;
<PAGE> 21
17
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 EPNGC, the
Closing Date or (B) in each other case, the date the applicable Subsidiary
Borrower or Holding, as the case may be, 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.
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, 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
<PAGE> 22
18
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 portion available to the Administrative Agent on the date of such
Borrowing in accordance with subsection (a) of this Section 2.3 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.
<PAGE> 23
19
SECTION 2.5 Procedure for CAF Advance Borrowings. (a) A
Borrower, or the Company on behalf of 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 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 and the applicable Borrower
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 and the applicable Borrower 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.
<PAGE> 24
20
(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:
(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 and the applicable Borrower
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 and
the applicable Borrower 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:
<PAGE> 25
21
(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;
(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
<PAGE> 26
22
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
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.
<PAGE> 27
23
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 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 EPNGC, the Closing Date or (b) in each other case, the date the
applicable Subsidiary Borrower or Holding, as the case may be, 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 per annum 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 of the Company and the Moody's Bond Rating of
the Company as follows:
<TABLE>
<CAPTION>
Bond Rating Facility
(S&P/Moody's) Level Fee Rate
--------------------- ----- --------
<S> <C> <C>
A-/A3 or higher I .100%
BBB+/Baa1 II .120%
BBB/Baa2 III .150%
BBB-/Baa3 or lower IV .200%;
</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 on the Termination Date or such
earlier date on which the Commitments
<PAGE> 28
24
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 Chase Securities Inc.,
the Administrative Agent and the CAF Advance Agent the fees set forth in the
letter, dated May 7, 1996, from Chase Securities Inc. and Chemical to EPNGC.
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 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 the case of Eurodollar Rate Advances to EPNGC and its
Subsidiaries, based on the Moody's Bond Rating and S&P Bond Rating of
EPNGC, and, in the case of all other Borrowers, based on the Moody's
Bond Rating and S&P Bond Rating of Holding) 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
<PAGE> 29
25
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 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).
<PAGE> 30
26
(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 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
<PAGE> 31
27
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 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
<PAGE> 32
28
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 "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
<PAGE> 33
29
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.
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.
<PAGE> 34
30
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 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
<PAGE> 35
31
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 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,
<PAGE> 36
32
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 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
<PAGE> 37
33
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").
(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
<PAGE> 38
34
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 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
<PAGE> 39
35
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 EPNGC's Revolving
Credit and Competitive Advance Facility Agreement, dated as of August 10, 1994.
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 EPNGC, the Administrative Agent and the CAF Advance Agent, (ii) the
Administrative Agent and EPNGC 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 June 30, 1996, 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 EPNGC, to the order of the Lenders,
respectively.
(b) Certified copies of the resolutions of the Board of
Directors of EPNGC 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 EPNGC and
governmental approvals to EPNGC, if any, with respect to this Agreement
and the Notes.
(c) A certificate of the Secretary or an Assistant Secretary
of EPNGC certifying the names and true signatures of the officers of
EPNGC authorized to sign this Agreement and the other documents to be
delivered by it hereunder.
(d) A favorable opinion of the General Counsel of EPNGC,
or the Associate General Counsel of EPNGC, 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 Jones, Day, Reavis & Pogue, New
York counsel to EPNGC, in substantially the form of
<PAGE> 40
36
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 EPNGC
and to forward forthwith all process received by it to EPNGC.
(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 agents under the Revolving Credit and
Competitive Advance Facility Agreement, dated as of August 10, 1994
(the "Existing Facility"), among EPNGC, the several financial
institutions from time to time parties thereto, and Chemical, as
Administrative Agent and CAF Advance 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 June 30, 1996, this Agreement, and
all of the obligations of EPNGC, 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 June 30, 1996; 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 June 30, 1996, the Administrative Agent shall furnish written notice to
EPNGC 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 or Holding. The agreement of each Lender to make the
initial Advances to be made by it to any Borrowing Subsidiary or Holding 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 (provided that no Subsidiary of Holding
which is not a Subsidiary of EPNGC may become a Borrower hereunder unless
Holding is a Borrower hereunder):
(a) A Joinder Agreement executed and delivered by such
Borrowing Subsidiary or Holding, as the case may be, conforming to the
requirements hereof.
(b) The Notes, dated the date such Borrowing Subsidiary or
Holding, as the case may be, executes and delivers its Joinder
Agreement, made by such Borrowing Subsidiary or Holding, as the case
may be, to the order of the Lenders, respectively.
<PAGE> 41
37
(c) A certificate of the Secretary or an Assistant
Secretary of such Borrowing Subsidiary or Holding, as the case may be,
certifying the names and true signature of the officers of such
Borrowing Subsidiary or Holding, as the case may be, 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.
(e) A favorable opinion of Jones, Day, Reavis & Pogue 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 or Holding, as the case may be, and to forward
forthwith all process received by it to such Borrowing Subsidiary or
Holding, as the case may be.
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 applicable Borrower
or the Company on such Borrower's behalf 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:
(i) 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
(ii) 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.
<PAGE> 42
38
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 and each Restricted Affiliate is
duly incorporated, validly existing and in good standing in the
jurisdiction of its incorporation. The Company, each Principal
Subsidiary and each Restricted Affiliate possess all 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, delivery and performance by (i) each
Borrower of this Agreement, each Joinder Agreement, if any, to which it
is a party and its Notes (as applicable) and (ii) each Restricted
Affiliate of its Restricted Affiliate Guaranty are within such
Borrower's or Restricted Affiliate's, as the case may be, corporate
powers, have been duly authorized by all necessary corporate action,
and do not contravene (A) such Borrower's or Restricted Affiliate's, as
the case may be, charter or by-laws or (B) law or any contractual
restriction binding on or affecting such Borrower or Restricted
Affiliate, as the case may be.
(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 (i)
such Borrower of this Agreement, each Joinder Agreement, if any, to
which it is a party or its Notes (as applicable) or (ii) any Restricted
Affiliate of its Restricted Affiliate Guaranty, 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, its Notes and each Joinder
Agreement, if any, to which it is a party (as applicable) when
delivered hereunder shall constitute and its Restricted Affiliate
Guaranty when delivered hereunder shall constitute, the legal, valid
and binding obligations of each Borrower or Restricted Affiliate, as
the case may be, enforceable against such Borrower or Restricted
Affiliate, as the case may be, in accordance with their respective
terms, except as may be limited by any applicable bankruptcy,
insolvency, reorganization, moratorium or
<PAGE> 43
39
similar laws affecting creditors' rights generally or by general
principles of equity.
(e) The consolidated balance sheet of EPNGC and its
consolidated Subsidiaries as at December 31, 1995, and the related
consolidated statements of income and cash flows of EPNGC and its
consolidated Subsidiaries for the fiscal year then ended, reported on
by Coopers & Lybrand LLP, 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 EPNGC and its consolidated Subsidiaries as at such date
and the consolidated results of the operations of EPNGC 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, 1995, there has been no material
adverse change in such condition or operations. The unaudited
consolidated balance sheet of EPNGC and its consolidated Subsidiaries
as of March 31, 1996, and the related consolidated statements of income
and cash flows of EPNGC and its consolidated Subsidiaries for the three
months then ended, certified by the chief financial officer of EPNGC,
copies of which have been furnished to the Administrative Agent and the
Lenders prior to the date hereof, fairly present the consolidated
results of operations of EPNGC and its consolidated Subsidiaries for
the three months then ended, all in accordance with generally accepted
accounting principles consistently applied (except as approved by the
chief financial officer of EPNGC and as disclosed therein) 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, any Principal Subsidiary or any Restricted Affiliate 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, each Principal Subsidiary and each
Restricted Affiliate 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, the appropriate
Subsidiary or the appropriate Restricted Affiliate.
<PAGE> 44
40
(h) The Company, each Principal Subsidiary and each
Restricted Affiliate 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, such Subsidiary or such Restricted Affiliate 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 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
<PAGE> 45
41
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, 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 and each Restricted Affiliate 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 and each Restricted
Affiliate 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, any of its Subsidiaries and any Restricted
Affiliate, and to discuss the affairs, finances and accounts of the
Company and any of its Subsidiaries and any Restricted
<PAGE> 46
42
Affiliate 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 and each Restricted Affiliate
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, each of its Subsidiaries and
each Restricted Affiliate, 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 and each Restricted Affiliate 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.
(f) Maintenance of Insurance. Maintain, and, in the case
of the Company, cause each Principal Subsidiary and each Restricted
Affiliate 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, such Subsidiary or such Restricted Affiliate operates.
(g) Holding Guaranty. Once Holding is formed, cause (i)
Holding to execute and deliver a guaranty (in form and substance
reasonably satisfactory to the Administrative Agent) (the "Holding
Guaranty") in favor of the Administrative Agent, for the ratable
benefit of the Lenders, guaranteeing the prompt and complete payment by
each Borrower when due (whether at the stated maturity, by acceleration
or otherwise) of the Obligations owing by such Borrower and (ii) the
delivery to the Administrative Agent of legal opinions from the General
Counsel or the Associate General Counsel of Holding and from New York
counsel to Holding reasonably acceptable to the Administrative Agent,
which legal opinions shall be in form and substance reasonably
satisfactory to the Administrative Agent.
<PAGE> 47
43
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 or any Restricted Affiliate 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 Restricted Affiliate (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, any
of its Subsidiaries or any Restricted Affiliate 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 any Alternate Program or any
document executed by any Borrower or any Restricted Affiliate
in connection therewith;
(D) Liens on Margin Stock; and
(E) Liens for taxes, assessments or governmental
charges or levies not yet overdue.
(b) Consolidated Debt and Guarantees to Capitalization.
(i) Permit the ratio of (A) the sum of (1) the aggregate amount of
consolidated Debt of EPNGC and its consolidated Subsidiaries and all
Restricted Affiliates and their consolidated Subsidiaries (without
duplication and determined as to all of the foregoing entities on a
consolidated basis) plus (2) the aggregate amount of
<PAGE> 48
44
consolidated Guaranties of EPNGC and its consolidated Subsidiaries and
all Restricted Affiliates and their consolidated Subsidiaries (without
duplication and determined as to all of the foregoing entities on a
consolidated basis) to (B) Capitalization of EPNGC and all Restricted
Affiliates (without duplication and determined as to all of the
foregoing entities on a consolidated basis) to exceed .7 to 1; and (ii)
from and after the date that Holding becomes a Borrower hereunder,
permit the ratio of (A) the sum of (1) the aggregate amount of
consolidated Debt of Holding and its consolidated Subsidiaries plus (2)
the aggregate amount of consolidated Guaranties of Holding and its
consolidated Subsidiaries to (B) Capitalization of Holding 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 paragraph (c): (A)
Debt, Guaranties or reimbursement obligations incurred by (x) Mojave or
(y) so long as it is a Borrower, EPNGC, (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:
<PAGE> 49
45
(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 EPNGC, Meridian Oil Holding
Inc., a Delaware corporation, and Burlington;
(ii) any sale of receivables and related rights
pursuant to 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;
(viii) any transfer permitted by Section 5.2(e);
and
(ix) any transfer to Holding or any of its
Subsidiaries of any stock or assets other than FERC regulated
assets (or stock or any other equity interest in an entity
owning FERC regulated assets) used in the mainline gas
transmission business; provided that (A) no Default or Event
of Default shall have occurred and be continuing before and
after giving effect to such transfer and (B) no Borrower may
be so transferred unless Holding is also a Borrower.
(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
<PAGE> 50
46
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 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 each of EPNGC and, following its formation,
Holding, a consolidated balance sheet of each of EPNGC and, following
its formation, Holding and its respective consolidated subsidiaries as
of the end of such quarter, and consolidated statements of income and
cash flows of each of EPNGC and, following its formation, Holding and
its respective 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 being
fairly stated in all material respects 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
<PAGE> 51
47
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 each of EPNGC and,
following its formation, Holding, a copy of the annual report for such
year for each of EPNGC and, following its formation, Holding and its
respective 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 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, any Principal
Subsidiary or any Restricted Affiliate sends to any of its security
holders and copies of all publicly available reports and registration
statements which the Company, any Principal Subsidiary or any
Restricted Affiliate 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;
<PAGE> 52
48
(f) promptly in writing, notice of all litigation and of
all proceedings before any governmental or regulatory agencies against
or involving the Company, any Principal Subsidiary or any Restricted
Affiliate, 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 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
<PAGE> 53
49
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.
SECTION 5.4 Restrictions on Material Subsidiaries. Upon
Holding becoming a Borrower hereunder, Holding will not, and will not permit
any Material Subsidiary, to enter into any agreement or understanding pursuant
to which (a) any claim Holding may have against any Material Subsidiary would
be subordinate in any manner to the payment of any other obligation of such
Material Subsidiary or (b) by its terms limits or restricts the ability of such
Material Subsidiary to make funds available to Holding (whether by dividend or
other distribution, by replacement of any inter-company advance or otherwise)
if, in any such case referred to in this clause (b), there is, at the time any
such agreement is entered into, a reasonable likelihood that all such
agreements and understandings, considered together, would materially and
adversely affect the ability of Holding to meet its obligations as they become
due.
ARTICLE VI
GUARANTEES
SECTION 6.1 Guarantees. (a) Subject to the provisions of
Section 6.1(b), each Borrower 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 other Borrower when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations owing by such other
Borrower.
(b) Anything in this Article VI to the contrary
notwithstanding, the maximum liability of each Borrower (other than a Borrower
which is guaranteeing the Obligations of its Subsidiaries) under this Article
VI shall in no event exceed the amount which can be guaranteed by such
Borrowing Subsidiary under
<PAGE> 54
50
applicable federal and state laws relating to the insolvency of debtors.
(c) Each Borrower agrees that the Obligations owing by any
other Borrower may at any time and from time to time exceed the amount of the
liability of such other Borrower under this Article VI without impairing the
guarantee of such Borrower under this Article VI or affecting the rights and
remedies of the Administrative Agent or any Lender under this Article VI.
(d) 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.
(e) 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.
SECTION 6.2 No Subrogation. Notwithstanding any payment or
payments made by any Borrower under this Article VI or any set-off or
application of funds of such Borrower by the Administrative Agent or any
Lender, such Borrower shall not be entitled to be subrogated to any of the
rights of the Administrative Agent or any Lender against any other Borrower 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 Borrower seek or be entitled to seek any contribution or
reimbursement from any other Borrower in respect of payments made by such
Borrower hereunder, until all amounts owing to the Administrative Agent and the
Lenders by the other Borrowers on account of the Obligations are paid in full
and the Commitments are terminated. If any amount shall be paid to any
Borrower 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
Borrower in trust for the Administrative Agent and the Lenders, segregated from
other funds of such Borrower, and shall, forthwith upon receipt by such
Borrower, be turned over to the Administrative Agent in the exact form received
by such Borrower (duly indorsed by such Borrower 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.
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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 Borrower,
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
other Borrowers with respect to the Obligations. The guarantee contained in
this Article VI shall be construed as a
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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 Borrowers 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.
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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, any Principal Subsidiary or any
Restricted Affiliate shall fail to pay any Debt or Guaranty (excluding
Debt incurred pursuant hereto) of the Company, such Subsidiary or such
Restricted Affiliate (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,
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relating to any obligations Guaranteed thereby), any sale, 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, any Principal Subsidiary or any
Restricted Affiliate 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, any such Subsidiary or any such Restricted Affiliate
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, any such Subsidiary or any
such Restricted Affiliate 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, any such
Subsidiary or any such Restricted Affiliate 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,
any Principal Subsidiary or any Restricted Affiliate 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,
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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 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 EPNGC or Holding 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,
EPNGC or Holding, a Subsidiary of EPNGC or Holding or any employee
benefit plan maintained for employees of EPNGC or Holding and/or any of
their respective 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 EPNGC or Holding entitled to vote
in elections for directors of EPNGC or Holding 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 EPNGC or
Holding following the completion of such tender offer more than half of
the directors of EPNGC or Holding consists of individuals who (1) were
not directors before the completion of such tender offer and (2) 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
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(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 Subsidiary or Restricted
Affiliate as the result of any change of control of the Company; or
(j) Any of (i) the guarantees contained in Article VI,
(ii) the Restricted Affiliate Guarantees or (iii) the Holding Guaranty
shall cease, for any reason, to be in full force and effect or any
Borrower, any Restricted Affiliate or Holding 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
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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.
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
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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 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
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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
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,
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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.
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 any Borrower, c/o the
Company at 1 Paul Kayser Center, 100 North Stanton Street, El Paso, Texas
79901, Attention: Executive 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; 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
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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 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).
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62
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 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
<PAGE> 67
63
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 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,
<PAGE> 68
64
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 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 EPNGC, the Closing Date
and (B) in the case of Notes made by any other Borrower, the date such other
Borrower executes and delivers its Joinder Agreement, and shall otherwise be in
substantially the form of Exhibits A and C.
(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
<PAGE> 69
65
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 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)
<PAGE> 70
66
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 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
<PAGE> 71
67
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.
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.
SECTION 9.12 Effect on Outstanding CAF Advances. The parties
hereto acknowledge and agree that upon the effectiveness of this Agreement all
"CAF Advances" under the Existing Facility immediately before the effectiveness
of this Agreement will be converted to CAF Advances hereunder on terms and
conditions set forth in this Agreement.
<PAGE> 72
68
SECTION 9.13 Execution in Counterparts. This Agreement may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. 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.
<PAGE> 73
69
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 /s/ H. Brent Austin
----------------------------
Title: Executive Vice President
CHEMICAL BANK, as Administrative
Agent, CAF Advance Agent and a
Lender
By /s/ Peter Ling
----------------------------
Title: Vice President
THE BANK OF NEW YORK
By /s/ Raymond J. Palmer
----------------------------
Title: Vice President
CITIBANK, N.A.
By /s/ Areezo Jafari
----------------------------
Title: Assistant Vice President
CREDIT LYONNAIS NEW YORK BRANCH
By /s/ Pascal Poupelle
----------------------------
Title: Senior Vice President
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, NEW YORK BRANCH
By /s/ A. Yoshino
----------------------------
Title: Executive Vice President
Houston Office
<PAGE> 74
70
KREDIETBANK N.V.,
GRAND CAYMAN BRANCH
By /s/ Robert Snauffer
----------------------------
Title: Vice President
By /s/ Raymond F. Murray
----------------------------
Title: Vice President
MELLON BANK, N.A.
By /s/ E. Marc Cuenod, Jr.
----------------------------
Title: First Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ John Kowalczuk
----------------------------
Title: Vice President
NATIONSBANK OF TEXAS, N.A.
By /s/ Dale T. Wilson
----------------------------
Title: Vice President
ROYAL BANK OF CANADA
By /s/ J.D. Frost
----------------------------
Title: Senior Manager
SOCIETE GENERALE
By /s/ Richard A. Gould
----------------------------
Title: Vice President
THE SUMITOMO BANK, LIMITED
By /s/ Harumitsu Seki
----------------------------
Title: General Manager
<PAGE> 75
71
TORONTO DOMINION (TEXAS), INC.
By /s/ Linda A. Lavin
----------------------------
Title: Director
UNION BANK OF SWITZERLAND
By /s/ Evans Swann
----------------------------
Title: Managing Director
By /s/ Kelly Boots
----------------------------
Title: Assistant Treasurer
<PAGE> 76
SCHEDULE I
COMMITMENTS, ADDRESSES, ETC.
<TABLE>
<CAPTION>
Name and Address of Lender Amount of Commitment
- -------------------------- --------------------
<S> <C>
CHEMICAL BANK $40,000,000
270 Park Avenue
New York, NY 10017
Attention: John Gehebe
Telecopier: 212-270-4892
THE BANK OF NEW YORK $34,400,000
One Wall Street, 19th Floor
New York, NY 10288
Attention: Raymond Palmer
Telecopier: 212-835-7923
CITIBANK, N.A. $34,400,000
One Court Square - 7th Floor
Long Island City, NY 11102
Attention: Leena Caligiure
Telecopier: 718-248-4844
CREDIT LYONNAIS $34,400,000
NEW YORK BRANCH
1000 Louisiana, Suite 5360
Houston, TX 77002
Attention: Bernadette Archie
Telecopier: 713-751-0307
THE INDUSTRIAL BANK OF JAPAN, $16,000,000
LIMITED, NEW YORK BRANCH
245 Park Avenue, 23rd Floor
New York, NY 10167
Attention: Atsushi Kawai
Agnes Aberin
Telecopier: 212-557-3581/949-0134
with a copy to:
Three Allen Center
Suite 4850
333 Clay Street
Houston, TX 77002
Attention: Lynn Williford
Telecopier: 713-651-9209
</TABLE>
<PAGE> 77
2
<TABLE>
<CAPTION>
Name and Address of Lender Amount of Commitment
-------------------------- --------------------
<S> <C>
KREDIETBANK N.V., $16,000,000
GRAND CAYMAN BRANCH
c/o Kredietbank N.V.,
New York Branch
125 West 55th Street
New York, NY 100109
Attention: Lynda Resuma
Mayra Ramirez
Telecopier: 212-956-5580
MELLON BANK, N.A. $26,400,000
Three Mellon Bank Center
Room 2302
Pittsburgh, PA 15258
Attention: Andrew Plonsky
Telecopier: 412-234-5049
with a copy to:
1100 Louisiana, Suite 3600
Houston, TX 77002
Attention: Janet O'N Jenkins
Telecopier: 713-650-3409
MORGAN GUARANTY TRUST COMPANY $34,400,000
OF NEW YORK
60 Wall Street
New York, NY 10260-0060
Attention: Vernon M. Ford, Jr.
Telecopier: 212-648-5023
NATIONSBANK OF TEXAS, N.A. $34,400,000
303 West Wall Street
P.O. Box 1599
Midland, TX 79702-1599
Attention: Dale T. Wilson
Telecopier: 915-685-2009
ROYAL BANK OF CANADA $26,400,000
600 Wilshire Boulevard, Suite 800
Los Angeles, CA 90017
Attention: J.D. Frost
Telecopier: 213-955-5350
</TABLE>
<PAGE> 78
3
<TABLE>
<CAPTION>
Name and Address of Lender Amount of Commitment
-------------------------- --------------------
<S> <C>
SOCIETE GENERALE $16,000,000
2001 Ross Avenue, Suite 4800
Dallas, TX 75201
Attention: Tequlla English
Telecopier: 214-754-0171
with a copy to:
1111 Bagby, Suite 2020
Houston, TX 77002
Attention: Richard A. Gould
Telecopier: 713-650-0824
THE SUMITOMO BANK, LIMITED $26,400,000
700 Louisiana Street, Suite 1750
Houston, TX 77002
Attention: William R. McKown
Telecopier: 713-759-0020
TORONTO DOMINION (TEXAS), INC. $26,400,000
909 Fannin Street, 17th Floor
Houston, TX 77010
Attention: Lisa Allison
Telecopier: 713-951-9921
UNION BANK OF SWITZERLAND $34,400,000
1100 Louisana, Suite 4500
Houston, TX 77005
Attention: Evans Swann
Telecopier: 713-655-6555
with a copy to:
299 Park Avenue
New York, NY 10171-0026
Attention: James Broadus
Telecopier: 212-821-3259
</TABLE>
<PAGE> 79
CONFORMED COPY
================================================================================
EL PASO NATURAL GAS COMPANY
_____________________________________
$100,000,000
REVOLVING CREDIT AND COMPETITIVE
ADVANCE FACILITY AGREEMENT
DATED AS OF MAY 31, 1996
_____________________________________
CHEMICAL BANK,
AS ADMINISTRATIVE AGENT
AND CAF ADVANCE AGENT
================================================================================
<PAGE> 80
N-i
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 1.3 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 1.4 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES . . . . . . . . . . . . . . . . 16
SECTION 2.1 The Revolving Credit Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.2 Revolving Credit Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.3 Making the Revolving Credit Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.4 CAF Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.5 Procedure for CAF Advance Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.6 CAF Advance Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.7 CAF Advance Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.8 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.9 Reduction of the Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.10 Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.11 Interest on Revolving Credit Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.12 Additional Interest on Eurodollar Rate
Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.13 Interest Rate Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.14 Voluntary Conversion of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.15 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.16 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.17 Increased Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.18 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.19 Payments and Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.20 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.21 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.22 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.23 Extension of Stated Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE III
CONDITIONS OF EFFECTIVENESS AND LENDING . . . . . . . . . . . . . . . 36
SECTION 3.1 Conditions Precedent to Effectiveness of
this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.2 Conditions Precedent to Initial Advances
to Any Borrowing Subsidiary or Holding . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 3.3 Conditions Precedent to Each Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE IV
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 39
SECTION 4.1 Representations and Warranties of the
Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
<PAGE> 81
<TABLE>
<S> <C> <C>
ARTICLE V
COVENANTS OF THE BORROWERS . . . . . . . . . . . . . . . . . . 42
SECTION 5.1 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 5.2 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 5.3 Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 5.4 Restrictions on Material Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE VI
GUARANTEE . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.1 Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.2 No Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.3 Amendments, etc. with respect to the
Obligations; Waiver of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 6.4 Guarantee Absolute and Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.5 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE VII
EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . 54
SECTION 7.1 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE VIII
THE ADMINISTRATIVE AGENT AND THE CAF ADVANCE AGENT . . . . . . . . . . . . 58
SECTION 8.1 Authorization and Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 8.2 Administrative Agent's and CAF Advance
Agent's Reliance, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 8.3 Chemical and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 8.4 Lender Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 8.5 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 8.6 Successor Administrative Agent and CAF
Advance Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE IX
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 61
SECTION 9.1 Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 9.2 Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 9.3 No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 9.4 Costs and Expenses; Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 9.5 Right of Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 9.6 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 9.7 Assignments and Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 9.8 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 9.9 Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 9.10 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 9.11 Rate of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 9.12 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
</TABLE>
-ii-
<PAGE> 82
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
Exhibit N Form of Extension Request
-iii-
<PAGE> 83
$100,000,000 REVOLVING CREDIT AND COMPETITIVE ADVANCE FACILITY
AGREEMENT, dated as of May 31, 1996, among EL PASO NATURAL GAS COMPANY, a
Delaware corporation ("EPNGC"), 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 $100,000,000 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 or a Principal Subsidiary (or for purposes of Section
5.2(a) only, any Restricted Affiliate) 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
<PAGE> 84
2
transactions as reasonably determined by the Administrative Agent.
"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 EPNGC, each
Borrowing Subsidiary and Holding once Holding executes and delivers a
Joinder Agreement; 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 Company as
a "Borrowing Subsidiary" by written notice to the Administrative
Agent; collectively, the "Borrowing Subsidiaries".
<PAGE> 85
3
"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 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
2.5(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
<PAGE> 86
4
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.
"Capitalization" of any Person means the sum (without
duplication) of (a) consolidated Debt of such Person and its
consolidated Subsidiaries, plus (b) the aggregate amount of Guaranties
entered into by such Person and its consolidated Subsidiaries, plus
(c) the consolidated common and preferred stockholders' equity of such
Person and its consolidated Subsidiaries.
"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 Expiration Date" shall have the meaning assigned
to such term in Section 2.23(a).
"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
<PAGE> 87
5
aggregate principal amount of the Advances then outstanding).
"Company" means (a) at all times prior to Holding becoming a
Borrower, EPNGC, and (b) thereafter, Holding.
"Contingent Guaranty" shall have the meaning assigned to such
term in the definition of the term "Guaranty" contained in this
Section 1.1.
"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 or a Principal Subsidiary, any liabilities of
the Company or such Principal Subsidiary, as the case may be, under
any Alternate Program, or any document executed by the Company or such
Principal Subsidiary, as the case may be, 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,
<PAGE> 88
6
provided that neither the Administrative Agent's nor the Company's
approval shall be unreasonably withheld.
"EPNGC" shall have the meaning assigned to such term in the
preamble hereof.
"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.
"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 .220% per annum.
"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 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
<PAGE> 89
7
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).
"Exposure" means (a) with respect to an Objecting Lender at
any time, the aggregate outstanding principal amount of its Loans and
(b) with respect to any other Lender at any time, the maximum amount
of the Commitment of such Lender.
"Extension Request" means each request by the Borrowers made
pursuant to Section 2.23 for the Lenders to extend the Stated
Termination Date, which shall contain the information in respect of
such extension specified in Exhibit N and shall be delivered to the
Administrative Agent in writing.
"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
<PAGE> 90
8
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, any of its consolidated Subsidiaries or
any Restricted Affiliate, including, without limitation, obligations
under any conditional sales agreement, equipment trust financing or
equipment lease and any liability of any Restricted Affiliate in
respect of obligations of EPNGC or its consolidated Subsidiaries 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.
"Holding" means any domestic parent holding company of EPNGC
which directly or indirectly owns 100% of EPNGC's common stock;
provided, however, that immediately after Holding becomes EPNGC's
parent holding company, not less than 80% of the shareholders of
common stock of Holding are the same shareholders of common stock of
EPNGC immediately prior to Holding becoming EPNGC's parent holding
company.
"Holding Guaranty" shall have the meaning assigned to such
term in Section 5.1(g).
"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
<PAGE> 91
9
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 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 second anniversary of the Termination
Date and would otherwise end after the second anniversary of
the Termination Date shall end on the second anniversary of
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;
(c) Interest Periods commencing on the same date
for Advances comprising the same Borrowing shall be of the
same duration; and
(d) with respect to Advances made by an Objecting
Lender, no Interest Period with respect to such Advances shall
end after the second anniversary of such Objecting Lender's
Commitment Expiration Date.
<PAGE> 92
10
"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 or Holding, as the
case may be.
"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%, provided, that at any time after the
Commitment Expiration Date with respect to any Objecting Lender (but
prior to the termination of all the Commitments), "Majority Lenders"
shall mean Lenders whose Exposure aggregates at least 51% of the
aggregate Exposure of all the Lenders.
"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.
"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.
"Material Subsidiary" means any Subsidiary of Holding (other
than a Project Financing Subsidiary) that itself (on an
unconsolidated, stand-alone basis) owns in excess of 10% of the
consolidated net property, plant and equipment of Holding and its
consolidated Subsidiaries.
"Mojave" means Mojave Pipeline Company.
"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),
<PAGE> 93
11
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 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).
"Objecting Lenders" shall have the meaning assigned to such
term in Section 2.23(a).
"Other Taxes" shall have the meaning assigned to such term in
Section 2.20(b).
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12
"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.
"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
(or for purposes of Section 5.2(a) only, any Restricted Affiliate)
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 (or for purposes of Section 5.2(a) only, any Restricted
Affiliate) 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.
<PAGE> 95
13
"Receivables Purchase and Sale Agreement" means the
Receivables Purchase and Sale Agreement dated as of January 14, 1992
among EPNGC, 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 Union Bank of Switzerland.
"Register" has the meaning specified in Section 9.7(c).
"Required Lenders" means Lenders (a) which are not Objecting
Lenders with respect to any previous Extension Request and (b) which
have Commitment Percentages aggregating at least 66-2/3% of the
aggregate Commitment Percentages of such non-Objecting Lenders.
"Restricted Affiliate" means any Affiliate of EPNGC (other
than a Subsidiary of EPNGC) designated by EPNGC as a "Restricted
Affiliate" by written notice to the Administrative Agent; provided
that such Affiliate shall not become a Restricted Affiliate until such
time that (a) such Affiliate executes and delivers a guaranty (in form
and substance reasonably satisfactory to the Administrative Agent)
(each a "Restricted Affiliate Guaranty") in favor of the
Administrative Agent, for the ratable benefit of the Lenders,
guaranteeing the prompt and complete payment by each Borrower when due
(whether at the stated maturity, by acceleration or otherwise) of the
Obligations owing by such Borrower and (b) the Administrative Agent
receives legal opinions from the General Counsel or Associate General
Counsel of Holding and from New York counsel to Holding reasonably
acceptable to the Administrative Agent, which legal opinions shall be
in form and substance satisfactory to the Administrative Agent;
provided, further, that after such time as such Affiliate becomes a
Restricted Affiliate, EPNGC may terminate the designation of such
Affiliate as a Restricted Affiliate by written notice to the
Administrative Agent at which time the aforementioned guaranty of such
Affiliate shall also terminate.
"Restricted Affiliate Guaranty" shall have the meaning
assigned to such term in the definition of Restricted Affiliate.
<PAGE> 96
14
"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").
"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 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 May 30, 1997 or such later
date as shall be determined pursuant to the provisions of Section 2.23
with respect to non-Objecting Lenders.
"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
<PAGE> 97
15
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.
"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
<PAGE> 98
16
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).
SECTION 1.4 References. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement, and Article, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
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
<PAGE> 99
17
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
EPNGC, the Closing Date or (B) in each other case, the date the applicable
Subsidiary Borrower or Holding, as the case may be, became a Borrower
hereunder, (ii) be stated to mature on the second anniversary of the]
Termination Date, provided, that the Revolving Credit Advances made by
Objecting Lenders shall be repaid as provided in Section 2.23 and (iii) provide
for the payment of interest in accordance with this Agreement.
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, 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
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18
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 portion available to the Administrative Agent on the date of such
Borrowing in accordance with subsection (a) of this Section 2.3 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
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19
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, or the Company on behalf of 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 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 and the applicable
Borrower before 11:00 A.M. (New York City time) on the date which
<PAGE> 102
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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 and
the applicable Borrower 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:
(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 and the applicable Borrower
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 and
the applicable Borrower 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
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21
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;
(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).
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(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 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
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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 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 EPNGC, the Closing Date or (b) in each other case, the date the
applicable Subsidiary Borrower or Holding, as the case may be, 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 (i) for the
period from and including the date hereof to the Termination Date, computed at
a rate per annum of .08% on the average daily amount of the Commitment of such
Lender during the period for which payment is made and (ii) thereafter until
all Revolving Credit Advances of such Lender are paid in full, computed at a
rate per annum of .08% on the average daily amount of outstanding Revolving
Credit Advances of such Lender. Such facility fees shall be payable quarterly
in arrears on the last day of each March, June, September and December, on the
Termination Date or such earlier date on which the Commitments shall terminate
as provided herein, and on the second anniversary of the Termination Date or
such earlier date on which the
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24
Advances are repaid in full, commencing on the first of such dates to occur
after the date hereof.
(b) The Company agrees to pay to Chase Securities Inc.,
the Administrative Agent and the CAF Advance Agent the fees set forth in the
letter, dated May 7, 1996, from Chase Securities Inc. and Chemical to EPNGC.
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 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 second anniversary of the Termination Date the aggregate
principal amount of the Advances then owing to such Lender; provided that the
Revolving Credit Advances made by Objecting Lenders shall be repaid as provided
in Section 2.23(a).
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
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25
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 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).
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26
(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 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
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27
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 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); and provided, further, that no
Revolving Credit Advance may be converted into a Eurodollar Rate Advance after
the date that is one month prior to (a) in the case of a Revolving Credit
Advance made by an Objecting Lender, the second anniversary of such Objecting
Lender's Commitment Expiration Date, and (b) in the case of all Revolving
Credit Advances, the second anniversary of the Termination Date. 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
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28
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 "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
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29
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.
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
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30
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 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
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31
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 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
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32
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 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
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33
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").
(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
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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 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
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35
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 EPNGC's Revolving
Credit and Competitive Advance Facility Agreement, dated as of August 10, 1994.
SECTION 2.23 Extension of Stated Termination Date. (a) Not
less than 60 days and not more than 90 days prior to the Stated Termination
Date then in effect, provided that no Event of Default shall have occurred and
be continuing, EPNGC may request an extension of such Stated Termination Date
by submitting to the Administrative Agent an Extension Request containing the
information in respect of such extension specified in Exhibit N, which the
Administrative Agent shall promptly furnish to each Lender. Each Lender shall,
not less than 30 days and not more than 60 days prior to the Stated Termination
Date then in effect, notify such Borrower and the Administrative Agent of its
election to extend or not extend the Stated Termination Date as requested in
such Extension Request. Notwithstanding any provision of this Agreement to the
contrary, any notice by any Lender of its willingness to extend the Stated
Termination Date shall be revocable by such Lender in its sole and absolute
discretion at any time prior to the date which is 30 days prior to the Stated
Termination Date then in effect. If the Required Banks shall approve in
writing the extension of the Stated Termination Date requested in such
Extension Request, the Stated Termination Date shall automatically and without
any further action by any Person be extended for the period specified in such
Extension Request; provided that (i) each extension pursuant to this Section
2.23 shall be for a maximum of 364 days and (ii) the Commitment of any Lender
which does not consent in writing to such extension not less than 30 days and
not more than 60 days prior to the Stated Termination Date then in effect (an
"Objecting Lender") shall, unless earlier terminated in accordance with this
Agreement, expire on the Stated Termination Date in effect on the date of such
Extension Request (such Stated Termination Date, if any, referred to as the
"Commitment Expiration Date" with respect to
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36
such Objecting Lender). If, not less than 30 days and not more than 60 days
prior to the Stated Termination Date then in effect, the Required Banks shall
not approve in writing the extension of the Stated Termination Date requested
in an Extension Request, the Stated Termination Date shall not be extended
pursuant to such Extension Request. The Administrative Agent shall promptly
notify (y) the Lenders and the Company of any extension of the Stated
Termination Date pursuant to this Section 2.23 and (z) the Company and any
other Lender of any Lender which becomes an Objecting Lender.
(b) Revolving Credit Advances owing to any Objecting Lender
on the Commitment Expiration Date with respect to such Lender shall be repaid
in full on or before the date which is two years after such Commitment
Expiration Date.
(c) The Borrowers shall have the right, so long as no Event
of Default has occurred and is then continuing, upon giving notice to the
Administrative Agent and the Objecting Bank in accordance with Section 2.15, to
prepay in full the Revolving Credit Advances of the Objecting Lenders, together
with accrued interest thereon, any amounts payable pursuant to Sections 2.11,
2.12, 2.16, 2.17, 2.18, 2.20 and 9.4(b) and any accrued and unpaid facility fee
or other amounts payable to it hereunder and/or, upon giving not less than
three Business Days' notice to the Objecting Lenders and the Administrative
Agent, to cancel the whole or part of the Commitments of the Objecting Lenders.
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 EPNGC, the Administrative Agent and the CAF Advance Agent, (ii) the
Administrative Agent and EPNGC 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 June 30, 1996, 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 EPNGC, to the order of the Lenders,
respectively.
(b) Certified copies of the resolutions of the Board of
Directors of EPNGC approving the borrowings contemplated hereby and
authorizing the execution of this Agreement and the Notes, and of all
documents evidencing other necessary
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37
corporate action of EPNGC and governmental approvals to EPNGC, if any,
with respect to this Agreement and the Notes.
(c) A certificate of the Secretary or an Assistant Secretary
of EPNGC certifying the names and true signatures of the officers of
EPNGC authorized to sign this Agreement and the other documents to be
delivered by it hereunder.
(d) A favorable opinion of the General Counsel of EPNGC,
or the Associate General Counsel of EPNGC, 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 Jones, Day, Reavis & Pogue, New
York counsel to EPNGC, 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 EPNGC
and to forward forthwith all process received by it to EPNGC.
(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 agents under the Revolving Credit and
Competitive Advance Facility Agreement, dated as of August 10, 1994,
among EPNGC, the several financial institutions from time to time
parties thereto, and Chemical, as Administrative Agent and CAF Advance
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 June 30, 1996, this Agreement, and
all of the obligations of EPNGC, 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 June 30, 1996; 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 June 30, 1996, the Administrative Agent shall furnish written notice to
EPNGC 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 or Holding. The agreement of each Lender to make the
initial Advances to be made by it to any Borrowing Subsidiary or Holding is
subject to the Administrative
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38
Agent receiving the following, in form and substance satisfactory to the
Administrative Agent and (except for the Notes) in sufficient copies for each
Lender (provided that no Subsidiary of Holding which is not a Subsidiary of
EPNGC may become a Borrower hereunder unless Holding is a Borrower hereunder):
(a) A Joinder Agreement executed and delivered by such
Borrowing Subsidiary or Holding, as the case may be, conforming to the
requirements hereof.
(b) The Notes, dated the date such Borrowing Subsidiary or
Holding, as the case may be, executes and delivers its Joinder
Agreement, made by such Borrowing Subsidiary or Holding, as the case
may be, to the order of the Lenders, respectively.
(c) A certificate of the Secretary or an Assistant
Secretary of such Borrowing Subsidiary or Holding, as the case may be,
certifying the names and true signature of the officers of such
Borrowing Subsidiary or Holding, as the case may be, 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.
(e) A favorable opinion of Jones, Day, Reavis & Pogue 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 or Holding, as the case may be, and to forward
forthwith all process received by it to such Borrowing Subsidiary or
Holding, as the case may be.
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 applicable Borrower
or the Company on such
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39
Borrower's behalf 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:
(i) 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
(ii) 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 and each Restricted Affiliate is
duly incorporated, validly existing and in good standing in the
jurisdiction of its incorporation. The Company, each Principal
Subsidiary and each Restricted Affiliate possess all 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, delivery and performance by (i) each
Borrower of this Agreement, each Joinder Agreement, if any, to which it
is a party and its Notes (as applicable) and (ii) each Restricted
Affiliate of its Restricted Affiliate Guaranty are within such
Borrower's or Restricted Affiliate's, as the case may be, corporate
powers, have been duly authorized by all necessary corporate action,
and do not contravene (A) such Borrower's or Restricted Affiliate's, as
the case may be, charter or by-laws or (B) law or any contractual
restriction binding on or affecting such Borrower or Restricted
Affiliate, as the case may be.
(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 (i)
such Borrower of this Agreement, each Joinder Agreement, if any, to
which it is a
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40
party or its Notes (as applicable) or (ii) any Restricted Affiliate of
its Restricted Affiliate Guaranty, 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, its Notes and each Joinder
Agreement, if any, to which it is a party (as applicable) when
delivered hereunder shall constitute and its Restricted Affiliate
Guaranty when delivered hereunder shall constitute, the legal, valid
and binding obligations of each Borrower or Restricted Affiliate, as
the case may be, enforceable against such Borrower or Restricted
Affiliate, as the case may be, 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 EPNGC and its
consolidated Subsidiaries as at December 31, 1995, and the related
consolidated statements of income and cash flows of EPNGC and its
consolidated Subsidiaries for the fiscal year then ended, reported on
by Coopers & Lybrand LLP, 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 EPNGC and its consolidated Subsidiaries as at such date
and the consolidated results of the operations of EPNGC 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, 1995, there has been no material
adverse change in such condition or operations. The unaudited
consolidated balance sheet of EPNGC and its consolidated Subsidiaries
as of March 31, 1996, and the related consolidated statements of income
and cash flows of EPNGC and its consolidated Subsidiaries for the three
months then ended, certified by the chief financial officer of EPNGC,
copies of which have been furnished to the Administrative Agent and the
Lenders prior to the date hereof, fairly present the consolidated
results of operations of EPNGC and its consolidated Subsidiaries for
the three months then ended, all in accordance with generally accepted
accounting principles consistently applied (except as approved by the
chief financial officer of EPNGC and as disclosed therein) 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, any Principal Subsidiary or any Restricted Affiliate in any
court, or before any arbitrator
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41
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, each Principal Subsidiary and each
Restricted Affiliate 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, the appropriate
Subsidiary or the appropriate Restricted Affiliate.
(h) The Company, each Principal Subsidiary and each
Restricted Affiliate 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, such Subsidiary or such Restricted Affiliate 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 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
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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, 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 and each Restricted Affiliate 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).
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(b) Compliance with Laws, Etc. Comply, and, in the case
of the Company, cause each Principal Subsidiary and each Restricted
Affiliate 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, any of its Subsidiaries and any Restricted
Affiliate, and to discuss the affairs, finances and accounts of the
Company and any of its Subsidiaries and any Restricted Affiliate 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 and each Restricted Affiliate
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, each of its Subsidiaries and
each Restricted Affiliate, 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 and each Restricted Affiliate 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.
(f) Maintenance of Insurance. Maintain, and, in the case
of the Company, cause each Principal Subsidiary and each Restricted
Affiliate 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
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44
which the Company, such Subsidiary or such Restricted Affiliate
operates.
(g) Holding Guaranty. Once Holding is formed, cause (i)
Holding to execute and deliver a guaranty (in form and substance
reasonably satisfactory to the Administrative Agent) (the "Holding
Guaranty") in favor of the Administrative Agent, for the ratable
benefit of the Lenders, guaranteeing the prompt and complete payment by
each Borrower when due (whether at the stated maturity, by acceleration
or otherwise) of the Obligations owing by such Borrower and (ii) the
delivery to the Administrative Agent of legal opinions from the General
Counsel or the Associate General Counsel of Holding and from New York
counsel to Holding reasonably acceptable to the Administrative Agent,
which legal opinions shall be in form and substance reasonably
satisfactory to the Administrative Agent.
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 or any Restricted Affiliate 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 Restricted Affiliate (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, any
of its Subsidiaries or any Restricted Affiliate after February
11, 1992 to the extent that such Liens existed at the time of
such acquisition and were not placed
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45
thereon by or with the consent of the Company in contemplation
of such acquisition;
(C) Liens created by any Alternate Program or any
document executed by any Borrower or any Restricted Affiliate
in connection therewith;
(D) Liens on Margin Stock; and
(E) Liens for taxes, assessments or governmental
charges or levies not yet overdue.
(b) Consolidated Debt and Guarantees to Capitalization.
(i) Permit the ratio of (A) the sum of (1) the aggregate amount of
consolidated Debt of EPNGC and its consolidated Subsidiaries and all
Restricted Affiliates and their consolidated Subsidiaries (without
duplication and determined as to all of the foregoing entities on a
consolidated basis) plus (2) the aggregate amount of consolidated
Guaranties of EPNGC and its consolidated Subsidiaries and all
Restricted Affiliates and their consolidated Subsidiaries (without
duplication and determined as to all of the foregoing entities on a
consolidated basis) to (B) Capitalization of EPNGC and all Restricted
Affiliates (without duplication and determined as to all of the
foregoing entities on a consolidated basis) to exceed .7 to 1; and (ii)
from and after the date that Holding becomes a Borrower hereunder,
permit the ratio of (A) the sum of (1) the aggregate amount of
consolidated Debt of Holding and its consolidated Subsidiaries plus (2)
the aggregate amount of consolidated Guaranties of Holding and its
consolidated Subsidiaries to (B) Capitalization of Holding 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 paragraph (c): (A)
Debt, Guaranties or reimbursement obligations incurred by (x) Mojave or
(y) so long as it is a Borrower, EPNGC, (B) Debt, Guaranties or
reimbursement obligations arising under this Agreement, (C) Debt,
Guaranties or reimbursement obligations incurred by El Paso Field
Services
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46
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 EPNGC, Meridian Oil Holding
Inc., a Delaware corporation, and Burlington;
(ii) any sale of receivables and related
rights pursuant to 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;
(viii) any transfer permitted by Section
5.2(e); and
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47
(ix) any transfer to Holding or any of
its Subsidiaries of any stock or assets other than FERC
regulated assets (or stock or any other equity interest in an
entity owning FERC regulated assets) used in the mainline gas
transmission business; provided that (A) no Default or Event
of Default shall have occurred and be continuing before and
after giving effect to such transfer and (B) no Borrower may
be so transferred unless Holding is also a Borrower.
(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 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 each of EPNGC and, following its formation,
Holding, a consolidated balance sheet of each of EPNGC and, following
its formation, Holding
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48
and its respective consolidated subsidiaries as of the end of such
quarter, and consolidated statements of income and cash flows of each
of EPNGC and, following its formation, Holding and its respective
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 being fairly
stated in all material respects 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 each of EPNGC and,
following its formation, Holding, a copy of the annual report for such
year for each of EPNGC and, following its formation, Holding and its
respective 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 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
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49
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, any Principal
Subsidiary or any Restricted Affiliate sends to any of its security
holders and copies of all publicly available reports and registration
statements which the Company, any Principal Subsidiary or any
Restricted Affiliate 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, any Principal Subsidiary or any Restricted
Affiliate, 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 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
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50
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.
SECTION 5.4 Restrictions on Material Subsidiaries. Upon
Holding becoming a Borrower hereunder, Holding will not, and will not permit
any Material Subsidiary, to enter into any agreement or understanding pursuant
to which (a) any claim Holding may have against any Material Subsidiary would
be subordinate in any manner to the payment of any other obligation of such
Material Subsidiary or (b) by its terms limits or restricts the ability of such
Material Subsidiary to make funds available to Holding (whether by dividend or
other distribution, by replacement of any inter-company advance or otherwise)
if, in any such case referred to in this clause (b), there is, at the time any
such agreement is entered into, a reasonable likelihood that all such
agreements and understandings, considered together, would materially and
adversely affect the ability of Holding to meet its obligations as they become
due.
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51
ARTICLE VI
GUARANTEES
SECTION 6.1 Guarantees. (a) Subject to the provisions of
Section 6.1(b), each Borrower 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 other Borrower when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations owing by such other
Borrower.
(b) Anything in this Article VI to the contrary
notwithstanding, the maximum liability of each Borrower (other than a Borrower
which is guaranteeing the Obligations of its Subsidiaries) 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.
(c) Each Borrower agrees that the Obligations owing by any
other Borrower may at any time and from time to time exceed the amount of the
liability of such other Borrower under this Article VI without impairing the
guarantee of such Borrower under this Article VI or affecting the rights and
remedies of the Administrative Agent or any Lender under this Article VI.
(d) 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.
(e) 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.
SECTION 6.2 No Subrogation. Notwithstanding any payment or
payments made by any Borrower under this Article VI or any set-off or
application of funds of such Borrower by the Administrative Agent or any
Lender, such Borrower shall not be entitled to be subrogated to any of the
rights of the Administrative Agent or any Lender against any other Borrower or
against any collateral security or guarantee or right of offset held by the
Administrative Agent or any Lender for the payment of
<PAGE> 134
52
the Obligations, nor shall such Borrower seek or be entitled to seek any
contribution or reimbursement from any other Borrower in respect of payments
made by such Borrower hereunder, until all amounts owing to the Administrative
Agent and the Lenders by the other Borrowers on account of the Obligations are
paid in full and the Commitments are terminated. If any amount shall be paid
to any Borrower 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 Borrower in trust for the Administrative Agent and the Lenders, segregated
from other funds of such Borrower, and shall, forthwith upon receipt by such
Borrower, be turned over to the Administrative Agent in the exact form received
by such Borrower (duly indorsed by such Borrower 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.
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
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53
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 Borrower,
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
other Borrowers with respect to the Obligations. The guarantee 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
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54
obligations of the Borrowers 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.
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, any Principal Subsidiary or any
Restricted Affiliate shall fail to pay any Debt or Guaranty (excluding
Debt incurred pursuant hereto) of the Company, such Subsidiary or such
Restricted Affiliate (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
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55
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,
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, any Principal Subsidiary or any
Restricted Affiliate 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, any such Subsidiary or any such Restricted Affiliate
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,
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56
any such Subsidiary or any such Restricted Affiliate 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, any such Subsidiary or any such Restricted Affiliate 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,
any Principal Subsidiary or any Restricted Affiliate 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 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 EPNGC or Holding 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,
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57
EPNGC or Holding, a Subsidiary of EPNGC or Holding or any employee
benefit plan maintained for employees of EPNGC or Holding and/or any of
their respective 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 EPNGC or Holding entitled to vote
in elections for directors of EPNGC or Holding 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 EPNGC or
Holding following the completion of such tender offer more than half of
the directors of EPNGC or Holding consists of individuals who (1) were
not directors before the completion of such tender offer and (2) 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 Subsidiary or Restricted
Affiliate as the result of any change of control of the Company; or
(j) Any of (i) the guarantees contained in Article VI,
(ii) the Restricted Affiliate Guarantees or (iii) the Holding Guaranty
shall cease, for any reason, to be in full force and effect or any
Borrower, any Restricted Affiliate or Holding 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.
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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.
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,
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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 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
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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
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.
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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.
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 any Borrower, c/o the
Company at 1 Paul Kayser Center, 100 North Stanton Street, El Paso, Texas
79901, Attention: Executive 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; 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
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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 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
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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 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.
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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 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
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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 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
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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 EPNGC, the Closing Date and (B) in the case of
Notes made by any other Borrower, the date such other Borrower executes and
delivers its Joinder Agreement, and shall otherwise be in substantially the
form of Exhibits A and C.
(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 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
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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 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
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"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.
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
<PAGE> 151
69
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.
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.
<PAGE> 152
70
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 /s/ H. Brent Austin
-----------------------------
Title: Executive Vice President
CHEMICAL BANK, as Administrative
Agent, CAF Advance Agent and
Lender
By /s/ Peter Ling
-----------------------------
Title: Vice President
THE BANK OF NEW YORK
By /s/ Raymond J. Palmer
-----------------------------
Title: Vice President
CITIBANK, N.A.
By /s/ Areezo Jafari
-----------------------------
Title: Assistant Vice President
CREDIT LYONNAIS NEW YORK BRANCH
By /s/ Pascal Poupelle
-----------------------------
Title: Senior Vice President
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, NEW YORK BRANCH
By /s/ A. Yoshino
-----------------------------
Title: Executive Vice President
<PAGE> 153
71
KREDIETBANK N.V.,
GRAND CAYMAN BRANCH
By /s/ Robert Snauffer
-----------------------------
Title: Vice President
By /s/ Raymond F. Murray
-----------------------------
Title: Vice President
MELLON BANK, N.A.
By /s/ E. Marc Cuenod, Jr.
-----------------------------
Title: First Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ John Kowalczuk
-----------------------------
Title: Vice President
NATIONSBANK OF TEXAS, N.A.
By /s/ Dale T. Wilson
-----------------------------
Title: Vice President
ROYAL BANK OF CANADA
By /s/ J.D. Frost
-----------------------------
Title: Senior Manager
SOCIETE GENERALE
By /s/ Richard A. Gould
-----------------------------
Title: Vice President
THE SUMITOMO BANK, LIMITED
By /s/ Harumitsu Seki
-----------------------------
Title: General Manager
<PAGE> 154
72
TORONTO DOMINION (TEXAS), INC.
By /s/ Linda A. Lavin
-----------------------------
Title: Director
UNION BANK OF SWITZERLAND
By /s/ Evans Swann
-----------------------------
Title: Managing Director
By /s/ Kelly Boots
-----------------------------
Title: Assistant Treasurer
<PAGE> 155
SCHEDULE I
COMMITMENTS, ADDRESSES, ETC.
Name and Address of Lender Amount of Commitment
- -------------------------- --------------------
CHEMICAL BANK $10,000,000
270 Park Avenue
New York, NY 10017
Attention: John Gehebe
Telecopier: 212-270-4892
THE BANK OF NEW YORK $8,600,000
One Wall Street, 19th Floor
New York, NY 10288
Attention: Raymond Palmer
Telecopier: 212-835-7923
CITIBANK, N.A. $8,600,000
One Court Square - 7th Floor
Long Island City, NY 11102
Attention: Leena Caligiure
Telecopier: 718-248-4844
CREDIT LYONNAIS $8,600,000
NEW YORK BRANCH
1000 Louisiana, Suite 5360
Houston, TX 77002
Attention: Bernadette Archie
Telecopier: 713-751-0307
THE INDUSTRIAL BANK OF JAPAN, $4,000,000
LIMITED, NEW YORK BRANCH
245 Park Avenue, 23rd Floor
New York, NY 10167
Attention: Atsushi Kawai
Agnes Aberin
Telecopier: 212-557-3581/949-0134
with a copy to:
Three Allen Center
Suite 4850
333 Clay Street
Houston, TX 77002
Attention: Lynn Williford
Telecopier: 713-651-9209
<PAGE> 156
2
Name and Address of Lender Amount of Commitment
- -------------------------- --------------------
KREDIETBANK N.V., $4,000,000
GRAND CAYMAN BRANCH
c/o Kredietbank N.V.,
New York Branch
125 West 55th Street
New York, NY 100109
Attention: Lynda Resuma
Mayra Ramirez
Telecopier: 212-956-5580
MELLON BANK, N.A. $6,600,000
Three Mellon Bank Center
Room 2302
Pittsburgh, PA 15258
Attention: Andrew Plonsky
Telecopier: 412-234-5049
with a copy to:
1100 Louisiana, Suite 3600
Houston, TX 77002
Attention: Janet O'N Jenkins
Telecopier: 713-650-3409
MORGAN GUARANTY TRUST COMPANY $8,600,000
OF NEW YORK
60 Wall Street
New York, NY 10260-0060
Attention: Vernon M. Ford, Jr.
Telecopier: 212-648-5023
NATIONSBANK OF TEXAS, N.A. $8,600,000
303 West Wall Street
P.O. Box 1599
Midland, TX 79702-1599
Attention: Dale T. Wilson
Telecopier: 915-685-2009
ROYAL BANK OF CANADA $6,600,000
600 Wilshire Boulevard, Suite 800
Los Angeles, CA 90017
Attention: J.D. Frost
Telecopier: 213-955-5350
<PAGE> 157
3
Name and Address of Lender Amount of Commitment
- -------------------------- --------------------
SOCIETE GENERALE $4,000,000
2001 Ross Avenue, Suite 4800
Dallas, TX 75201
Attention: Tequlla English
Telecopier: 214-754-0171
with a copy to:
1111 Bagby, Suite 2020
Houston, TX 77002
Attention: Richard A. Gould
Telecopier: 713-650-0824
THE SUMITOMO BANK, LIMITED $6,600,000
700 Louisiana Street, Suite 1750
Houston, TX 77002
Attention: William R. McKown
Telecopier: 713-759-0020
TORONTO DOMINION (TEXAS), INC. $6,600,000
909 Fannin Street, 17th Floor
Houston, TX 77010
Attention: Lisa Allison
Telecopier: 713-951-9921
UNION BANK OF SWITZERLAND $8,600,000
1100 Louisana, Suite 4500
Houston, TX 77005
Attention: Evans Swann
Telecopier: 713-655-6555
with a copy to:
299 Park Avenue
New York, NY 10171-0026
Attention: James Broadus
Telecopier: 212-821-3259
<PAGE> 1
EXHIBIT 10.V.1
THIRD AMENDMENT TO
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
AGUAYTIA ENERGY, LLC
This THIRD AMENDMENT TO AMENDED AND RESTATED LIMITED LIABILITY
COMPANY AGREEMENT OF AGUAYTIA ENERGY, LLC (this "Amendment") is made and
entered into as of May 10, 1996, by and among The Maple Gas Development
Corporation, a Cayman Islands limited liability company ("Maple"), P.I.D.C.
Aguaytia, L.L.C., a Delaware limited liability company ("PanEnergy"), EPED
Aguaytia Company, a Cayman Islands company ("El Paso"), IGC Aguaytia Partners,
L.L.C.,a Cayman Islands limited liability company ("Illinova"), Scudder Latin
American Power I-P, L.D.C., a Cayman Islands limited duration company
("Scudder"), and PMDC Aguaytia, Ltd., a Cayman Islands limited life company
("PMDC"). In addition, Aguaytia Energy, LLC, a Delaware limited liability
company (the "Company"), Peru Energy Holdings, LLC, a Delaware limited
liability company ("Peru Energy"), and Aguaytia Energy del Peru S.R. Ltda., a
Peruvian sociedad comercial de responsibilidad limitada (the "Limitada"), join
herein for the limited purposes set forth in Section 9(g) below.
RECITALS
Effective as of November 30, 1995, The Maple Gas Corporation
del Peru Ltd., a British Virgin Islands corporation (the "Original Maple
Member"), The Maple Gas Corporation, a Delaware corporation, PanEnergy, El
Paso, Illinova, Scudder and PMDC entered into that certain Amended and Restated
Limited Liability Company Agreement of Aguaytia Energy, LLC (such agreement, as
amended and together with all attachments and exhibits thereto, being herein
referred to as the "LLC Agreement"), pursuant to which such parties formed the
Company.
Maple, as the successor to the interests of the Original Maple
Member in and to the Company, PanEnergy, El Paso, Illinova, Scudder and PMDC
desire to amend the LLC Agreement as herein provided.
AGREEMENT
NOW, THEREFORE, for and in consideration of the mutual
covenants, rights and obligations set forth herein, the benefits to be derived
therefrom, and other good and valuable consideration, the receipt and the
sufficiency of which each party hereto acknowledges and confesses, the parties
hereto agree as follows:
1. Definitions. Any capitalized term used herein but not
defined shall have the meaning given such term in the LLC Agreement.
2. Agreement Regarding Certain Capital Contributions to
be Made Prior to Closing. The Members hereby agree to amend Section 4.1 of the
LLC Agreement by inserting the following paragraph as a new paragraph (c) and
relettering the existing paragraphs (c) and (d) of Section 4.1 as paragraphs (d)
<PAGE> 2
and (e), respectively (and any references in the Agreement to Section 4.1(c)
or (d) or to Exhibit 4.1(d) shall be amended to constitute references to
Section 4.1(d) or (e) or to Exhibit 4.1(e), as applicable):
(c) In order to facilitate the qualification of
the Limitada under the Organic Hydrocarbons Law of Peru, the
Members agree to take such actions and execute such documents
and instruments as may be reasonably necessary to give effect
to the following agreements:
(i) On the first Business Day following
the date on which the condition referenced in Section
4.4(j)(vii) has been satisfied and without
increasing the Commitment of any Cash Member, each
Cash Member agrees to make a cash Capital
Contribution (as to each Cash Member, its "Special
Contribution") to the Company in the amount set forth
below, which Special Contribution shall be made
directly to the Limitada but shall be deemed to have
been contributed by the Cash Member to the Company
and then by the Company to the Limitada.
<TABLE>
<CAPTION>
Cash Member Amount Of Special Contribution
----------- ------------------------------
<S> <C>
PanEnergy $ 8,118,577.62
El Paso 8,118,577.62
Illinova 4,213,773.75
Scudder 5,335,297.26
PMDC 4,213,773.75
---------------
Total $ 30,000,000.00
</TABLE>
(ii) The Special Contributions of the
Cash Members shall be deposited directly into an
account (the "Special Account") established in the
name of the Limitada with Citibank N.A, New York
Branch (the "Bank"), and the Bank shall hold such
funds pursuant to an Escrow Agreement in the form
attached hereto as Exhibit 4.1(c)-1 to be entered
into among the Cash Members, the Limitada and the
Bank (the "Escrow Agreement"). Concurrently with the
execution of the Escrow Agreement, the Members agree
to take such actions as may be necessary cause the
partners of the Limitada to approve and adopt
resolutions in the form attached hereto as Exhibit
4.1(c)-2.
(iii) The funds on deposit in the Special
Account may not be used by the Members, the Company
or the Limitada for any purpose (except that such
funds may be invested as provided in the Escrow
Agreement) and may only be withdrawn from, or
transferred out of, the Special Account under the
circumstance described in clauses (vi), (vii), (viii)
and (ix) below. Each Cash member agrees not to
exercise its right under the Escrow Agreement to
withdraw any funds from, or transfer any funds out
of, the Special Account unless it has the right to do
so pursuant to the terms of this Section 4.1(c).
With respect to the funds deposited by a Cash Member
in the Special Account, any interest earned thereon
prior to the transfer or withdrawal by such Cash
Member of such funds from the Special Account shall,
upon the transfer out of the Special Account pursuant
to clause (vi) or (vii) below, be deemed to have been
contributed by such Cash Member to the Company and
then by the Company to the Limitada. Each Cash Member
agrees to reimburse the Limitada for the amount of
Peruvian income taxes, if any, payable by the
Limitada as a result of the receipt by the Limitada
of such interest, which reimbursement payment shall
be made within 10 Business Days following the receipt
by such Cash
-2-
<PAGE> 3
Member of an invoice from the Limitada that sets
forth the amount of tax owed by the Limitada and a
reasonably detailed calculation thereof (which
invoice shall be sent by the Limitada no sooner than
the 30th Business Day prior to the due date for such
taxes). Such reimbursement payment shall not result
in any adjustment to the Capital Account of such Cash
Members.
(iv) Pursuant to the terms of the Escrow
Agreement, immediately following the deposit of the
Special Contributions with the Bank, the Bank is
obligated to cause the Special Contributions to be
wire transferred to a new account established in the
name of the Limitada at the Bank's branch in Lima,
Peru, where it will be held for an agreed period of
time and then automatically wire transferred back to
the Special Account. Immediately following the wire
transfer by the Bank of such funds to its branch in
Lima, the Limitada shall cause such funds to be
registered with the Comision Nacional de Inversiones y
Tecnologia Extranjera (CONITE) as equity capital of
the Limitada and shall secure an audited balance sheet
from Price Waterhouse reflecting that the Limitada
has, as of the date of such balance sheet, equity
capital in an amount equal to the local currency
equivalent of at least $30,000,000.
(v) Once the events described in clause
(iv) immediately above have occurred, the Limitada
shall immediately present proof of the registration
of such equity capital and a copy of such balance
sheet to Perupetro S.A. as evidence that the Limitada
is "financially" qualified to hold an interest in the
License under the Organic Hydrocarbons Law of Peru.
(vi) If at any time during the period
between the second Business Day prior to Closing and
the Closing Date (A) all of the conditions to Closing
set forth in Section 4.4 have been satisfied or
waived (it being agreed that an unwaived condition
that has not been satisfied will be deemed to have
been satisfied for purposes of this sentence if the
only reason for the non-satisfaction of such
condition is the occurrence of events that will, in
the reasonable opinion of the Management Committee
(which determination shall be made without regard to
vote of the Representative appointed by Maple), take
place on the scheduled date for Closing) and (B) the
Limitada needs funds in order to provide the cash
collateral that will be required in order to produce
on the Closing Date the bank guaranty required under
Section 3.2 of the License, as amended, each Cash
Member agrees to immediately cause its pro rata
portion of the required funds to be transferred out
of the Special Account and wire transferred by the
Bank to the Limitada's account (the "Bank Guaranty
Account") at the bank in Lima that will be issuing
the bank guaranty. If a Cash Member fails to cause
any such amounts to be so transferred, it shall be
deemed to be in default of its obligation to make a
Capital Contribution of an equivalent amount.
Regardless of whether a Cash Member complies with its
obligation to cause such amounts to be so transferred,
no adjustment shall be made to its Capital Account
as a result thereof. The Members agree that the funds
on deposit in the Bank Guaranty Account may not be
used for any purpose prior to Closing other than the
collateralization of the bank guaranty. If for any
reason Closing does not occur within three Business
Days following the date on which the Cash Members
first became obligated to cause such funds to be
transferred to the Bank Guaranty Account, the Limitada
shall immediately wire transfer such funds back to the
Special Account and such funds shall be held by the
Bank pursuant to the terms of the Escrow Agreement.
With respect to the funds on deposit in the Bank
Guaranty Account, any interest earned
-3-
<PAGE> 4
thereon shall be deemed to have been contributed by
the Cash Members, on a pro rata basis, to the Company
and then by the Company to the Limitada. The Cash
Members, on a pro rata basis, agree to reimburse the
Limitada for the amount of Peruvian income taxes, if
any, payable by the Limitada as a result of the
receipt by the Limitada of such interest, which
reimbursement payment shall be made within 10
Business Days following the receipt by the Cash
Members of an invoice from the Limitada that sets
forth the amount of tax owed by the Limitada and a
reasonably detailed calculation thereof (which
invoice shall be sent by the Limitada no sooner than
the 30th Business Day prior to the due date for such
taxes). Such reimbursement payments shall not result
in any adjustments to the Capital Accounts of the
Cash Members.
(vii) Without in any way increasing the
Commitments of the Cash Members, the Members agree
that the Management Committee shall prepare and
issue (A) the notice required by Section 4.3(a)
setting forth the amount of each Cash Member's
Closing Date Capital Contribution and (B) Requests
for Capital Contributions pursuant to Section 4.3(b),
in each case as if the amount of any funds remaining
on deposit in the Special Account after giving
effect to the transactions contemplated by clause (vi)
preceding had not already been contributed by the
Cash Members to the Company. Each Cash Member agrees
that the Closing Date Capital Contribution required
to be made by such Cash Member pursuant to Section
4.3(a) and any subsequent Capital Contributions
required to be made by such Cash Member pursuant to
Section 4.3(b) shall be satisfied (1) first by such
Member causing the required funds to be transferred
out of the Special Account and wire transferred by
the Bank to the general operating account of the
Limitada (the "General Limitada Account") prior to
the due date for the applicable Capital Contribution
and (2) then by the making of cash Capital
Contributions to the Company as required by the terms
of this Agreement. If a Cash Member fails to cause
any such Special Account funds to be transferred to
the General Limitada Account as required pursuant to
this clause (vii), such Cash Member shall be deemed
to be in default of its obligation to make a Capital
Contribution of an equivalent amount. Regardless of
whether a Cash Member complies with its obligation to
cause any such amounts to be so transferred, no
adjustment shall be made to its Capital Account as a
result thereof.
(viii) If (A) the condition to Closing set
forth in Section 4.4(k) has been satisfied, (B) a
Supreme Decree relating thereto and signed by the
President of Peru and the Ministers of Economy and
Finance and Energy and Mines has been issued,
published in the Official Gazette, "El Peruano", and
is in full force and effect, (C) the Management
Committee has voted to cause the Limitada to execute
the License, as amended, or any preliminary form
thereof (a "Minuta"), and to provide the bank
guaranty required under Section 3.2 thereof (it being
agreed by the Members that, without the prior consent
of all Members, no such vote shall be taken unless at
least 1O Days' prior written notice of such Management
Committee meeting has been delivered to the
Representatives in accordance with the notice
provisions applicable to special meetings of the
Management Committee as specified in Section 6.1(d))
and (D) TCW Asset Management Co. will not be ready,
willing and able to make the initial funding under
the loan documents for the TCW Financing concurrently
with the execution of the License (it being agreed
that the determination set forth in this clause (D)
shall be made without regard to the effect that the
exercise by a Cash Member of its rights under this
clause (viii) may have thereon), each Cash Member
that voted against causing the Limitada to execute
the License under such circumstances shall have the
right, exercisable immediately following the vote
referred
-4-
<PAGE> 5
to in clause (C) above, to resign from the Company
(it being agreed that in order to exercise such right,
a Cash Member must do so prior to the conclusion of
the Management Committee meeting at which the vote
referred to in clause (C) above was considered, and
that the failure to exercise such right prior to such
time shall be deemed to constitute a waiver of the
right to exercise such right). In connection with the
vote referred to in clause (C) of the immediately
preceding sentence, the Members agree that a
Representative may, at the time that it casts its
vote, reserve the right to change its vote if any
Cash Member exercises its right to resign from the
Company as provided above. If a Cash Member exercises
its right to resign, a Member that reserved the right
to change its vote must do so immediately following
the exercise by such resigning Cash Member of such
resignation right; and if a Member so changes its
vote and the effect thereof is to reverse the outcome
of the vote referred to in clause (C) above, the
prior vote of the Management Committee referred to in
clause (C) above and the prior exercise by any Cash
Member of a right to resign shall be deemed to have
been automatically rescinded. In the event any Cash
Member exercises its right to resign and such
resignation is not rescinded, the Members agree that
the resigning Cash Member shall be entitled to
withdraw from the Special Account any funds over
which it has control pursuant to the terms of the
Escrow Agreement and that the Limitada shall not
execute the License, as amended, or any Minuta, or
provide the bank guaranty required thereunder, until
all resigning Cash Members have withdrawn such funds.
The funds withdrawn by such resigning Cash Member
shall be deemed to have been advanced by the Limitada
to the Company (which advance shall not bear interest
and shall be repayable on demand by the Limitada)
and distributed by the Company to such Cash Member.
In connection with such resignation, such Cash Member
shall not have any rights under Section 18-604 of
the Act. Any such resignation shall be effective
immediately following the conclusion of the
Management Committee meeting at which the resigning
Member exercised its right to resign. Subject to the
terms of the following sentence and concurrently with
the effectiveness of any such resignation, the
Company Interest of the resigning Member shall
terminate and shall cease to exist. It is further
agreed that in the event any Cash Member exercises
its right to resign under this clause (viii) at any
time after May 30, 1996, and such resignation is not
rescinded, provided that such Cash Member indicates
his desire to do so at the time that it exercises its
right to resign, such Cash Member may put its Company
Interest to Maple in exchange for the payment by
Maple to such Member of all Advanced Amounts paid by
such Member to the Company through the date of such
resignation. Within 10 days following such
resignation, such Cash Member shall execute and
deliver to Maple an assignment of its Company
Interest (the form of which shall be consistent with
the form of assignment contemplated by Section
4.6(a)) and Maple shall pay such Cash Member such
Advanced Amounts.
(ix) If Closing has not occurred on or
before June 30, 1996, each Cash Member shall have the
right, exercisable by the delivery of written notice
to every other Member at any time following such date,
to withdraw from the Special Account any funds over
which it has control pursuant to the terms of the
Escrow Agreement. The funds withdrawn by such Cash
Member shall be deemed to have been advanced by the
Limitada to the Company (which advance shall not bear
interest and shall be repayable on demand by the
Limitada) and distributed by the Company to such Cash
Member.
3. AGREEMENT REGARDING BANK GUARANTY. The Members
acknowledge that Section 3.2 of the License requires that the Limitada post a
bank guaranty in support of its obligations to complete the
-5-
<PAGE> 6
"minimum work program" required under the License. With respect to the
collateral that is required to be provided in order to cause the issuing bank
to issue such guaranty, the Members agree as follows:
(a) Maple shall be responsible for providing
collateral that is satisfactory to the issuing bank and which
constitutes a percentage of the total collateral (from a
dollar value standpoint as determined by the issuing bank)
required to be provided that is equal to Maple's initial
Sharing Ratio (i.e., the Sharing Ratio of Maple based on the
20,000 Units issued to it pursuant to the first sentence of
Section 4.1(a)), as adjusted to give effect to the purchase by
the Cash Members of additional Units as provided in Section 4
below; and
(b) the remaining collateral required to be
provided shall be provided by the Limitada out of the funds
made available to it by the Company as a result of the Special
Contributions of the Cash Members (it being agreed that as
such cash collateral is released from the guaranty pursuant to
the terms of the License, as amended, such funds shall be held
by the Limitada and used to satisfy capital costs contemplated
by the Budget).
The Members further agree that the documentation to be entered into between the
issuing bank, Maple and the Limitada shall require that (i) with respect to any
releases of collateral that are attributable to reduction in the amount of the
bank guaranty pursuant to the terms of the License, the benefit of such release
of collateral shall be enjoyed by Maple and the Limitada in the same ratio that
such entities provided collateral in support of the bank guaranty and (ii) in
connection with any realization by the issuing bank on the collateral securing
the bank guaranty, the issuing bank shall proceed against the collateral
provided by Maple and the Limitada on a pro rata basis according to the ratio
referred to in clause (i) immediately preceding. To the extent the issuing bank
is not willing to agree upon the restriction described in clause (ii)
immediately preceding, the Members agree to enter into such other arrangements
as may be necessary to achieve the result intended by such clause (ii).
4. AGREEMENT REGARDING COMMITMENTS OF CASH MEMBERS. The
Members acknowledge and agree that the total amount of the capital costs for
the Project that are reflected in the Capital Budget constituting a part of
Exhibit 2.8(b) attached hereto is $249,967,000 and $22,813,000 of additional
financing is required in order to fund said Capital Budget, as detailed in the
Variance Analysis included as a part of Exhibit 2.8(b) attached hereto (such
amount being referred to herein as the "Overrun Amount"). If as of the Closing
Date the equity commitments of the Cash Members and the commitments provided in
connection with the TCW Financing or any other financing secured by the Company
or the Limitada (provided that the terms of any such other financing are
reasonably acceptable to the Management Committee) are not sufficient to fully
fund the Overrun Amount (the amount of such deficiency being herein referred to
as the "Deficiency Amount"), the Cash Members hereby agree, immediately
following the Closing, to purchase, on a pro rata basis, additional Units from
the Company at a price of $1,000 per Unit, to the extent necessary to fund the
Deficiency Amount. In the event that the Cash Members become obligated to
purchase additional Units pursuant to this Section 4, the Company shall be
deemed to have immediately issued to each Cash Member the number of Units that
such Cash Member is obligated to purchase pursuant to this Section 4 and the
Commitment of each Cash Member shall be increased by an amount equal to the
total purchase price to be paid by such Cash Member for such Units; provided,
however, that to the extent Scudder is unable to purchase any such Units due to
the fact that its Commitment would exceed $25,000,000, such excess Units shall
be purchased by the other Cash Members on a pro rata basis. The Members agree
that the Units to be purchased by the Cash Members, if any, pursuant to this
Section 4 shall not be subject to the option granted to Maple pursuant to
Section 3.2 of the LLC Agreement and that, notwithstanding anything to the
contrary contained in the LLC Agreement, the maximum number of Units of each
Cash Member subject to the such option shall
-6-
<PAGE> 7
be as specified on Exhibit A. For illustrative purposes only and without
creating any obligations on the Members or the Company, if the Deficiency
Amount equals the full Overrun Amount, the number of Units that would be
purchased by each Cash Member and the resulting Commitment and ownership
interest of each Member is set forth on Schedule 4 hereto.
5. AMENDMENT OF SECTION 4.4(r). The Members agree that
Section 4.4(r) of the LLC Agreement is hereby amended and restated in its
entirety as follows:
(r) the capital costs that are, as of the Closing
Date, reasonably expected to be incurred in connection with
the Project shall not exceed by more than $5,000,000 an amount
equal to the sum of (i) $249,967,000 as shown on Exhibit
2.8(b) and (ii) any increases in the "Contract Price" under
any of the EPC Agreements that are attributable to (A) the
failure of the "Commencement Date" under any of the EPC
Agreements to occur prior to July 1, 1996, or (B) the exercise
by the Company of any options for additional work provided for
under the EPC Agreements.
6. AMENDMENT AND REPLACEMENT OF EXHIBITS 2.8(b), 4.1(b)
AND 4.4(k). The Members hereby agree that the Capital Budget attached to the
LLC Agreement as a part of Exhibit 2.8(b) thereto and Exhibits 4.1(b) and
4.4(k) to the LLC Agreement are hereby deleted and replaced in their entirety
with the forms of the Capital Budget and Exhibits 4.1(b) and 4.4(k) attached
to this Amendment.
7. ADDITIONAL AMENDMENTS OF LLC AGREEMENT. The Members
agree that the LLC Agreement shall be further amended as follows:
(a) The first sentence of Section 3.2 of the LLC
Agreement is hereby amended by deleting the phrase "the
quotient obtained by dividing $149,333,000 by the total number
of Units that are Outstanding on the Closing Date and owned by
the Cash Members" and replacing it with the phrase "$1,000 per
Unit."
(b) The first clause of the first sentence of
Section 3.4 of the LLC Agreement is hereby deleted and
replaced with the following clause:
Except as provided in Section 3.1(a) with respect to
the Organizational Member and in Section 4.1(c), a
Member does not have the right to Resign;
(c) The first sentence of Section 4.6(b) of the
LLC Agreement is hereby amended by (i) the deletion of the
phrase "the date that is six months following the date of this
Agreement" and the replacement thereof with the phrase "June
30, 1996" and (ii) the insertion of the phrase "provided that
such right is exercised on or before the Closing Date"
immediately following the first comma that appears in such
sentence.
(d) Section 10.1(a) of the LLC Agreement is
hereby deleted and replaced with the following:
(a) a Member shall dissolve, Resign in
violation of this Agreement or become a Bankrupt
Member; or
-7-
<PAGE> 8
(e) Attachment I is hereby amended to add thereto
the following defined terms:
Bank - Section 4.1(c).
General Limitada Account - Section 4.1(c).
Escrow Agreement - Section 4.1(c).
Special Contributions - Section 4.1(c).
Special Account - Section 4.1(c).
(f) All references in the LLC Agreement to (i)
the term "Panhandle" are hereby deleted and replaced with the
term "PanEnergy" and (ii) the phrase "El Paso Energy
Development Company" are hereby deleted and replaced with the
phrase "El Paso Energy International Company."
8. REPRESENTATIONS AND WARRANTIES. (a) Each Member
hereby represents and warrants to the Company and each other Member
that:
(i) It is a duly organized, validly existing
entity of the type described in the introduction to this
Amendment and is in good standing under the laws of the
jurisdiction of its formation. It has all requisite power and
authority to enter into and to perform its obligations under
this Amendment.
(ii) Its execution, delivery, and performance of
this Amendment have been duly authorized, and do not and will
not (A) violate any law, rule, regulation, order, or decree
applicable to it, (B) violate its organizational documents or
(C) contravene or constitute a default or breach under any
instrument, indenture, agreement or other obligation to which
it or one of its Affiliates is a party or by which it or such
Affiliate is bound.
(iii) This Amendment is a legal and binding
obligation of that Member, enforceable against that Member in
accordance with its terms, except to the extent enforceability
is modified by bankruptcy, reorganization and other similar
laws affecting the rights of creditors generally and by
general principles of equity.
(b) Maple hereby represents and warrants to the Company
and each other Member that, to the best of its knowledge and as of the
date of this Amendment, the Limitada is not a party to any contracts
or agreements other than those described on Schedule 8(b) attached
hereto, and except for the matter described in Exhibit 14.15(a)(iv) to
the LLC Agreement, there are no pending or threatened lawsuits, claims,
proceedings or investigations involving the Limitada.
9. MISCELLANEOUS
(a) Except to the extent amended by the terms of this
Amendment, the LLC Agreement is hereby ratified and confirmed
and, as hereby amended, shall remain in full force and effect
in accordance with its terms, conditions and provisions.
-8-
<PAGE> 9
(b) This Amendment may be executed in any number
of counterparts with the same effect as if all signing parties
had signed the same document. All counterparts shall be
construed together and constitute the same instrument.
(c) In connection with this Amendment and the
transactions contemplated hereby, each Member shall execute
and deliver any additional documents and instruments and
perform any additional acts that may be necessary or
appropriate to effectuate and perform the provisions of this
Amendment.
(d) This Amendment has been drafted and executed
in English, and the English version shall prevail over any
translations.
(e) The Representative of each Member joins
herein for the purpose of evidencing its adoption, execution
and agreement to the terms of this Amendment as required by
Section 14.5 of the LLC Agreement.
(f) All references herein to dollars ($) shall
mean dollars of the United States of America.
(g) The Company and Peru Energy join herein in
their capacity as the sole partners of the Limitada for the
sole purpose of approving the making by the Limitada of the
advances contemplated by Sections 4.1(c)(viii) and (ix) of the
LLC Agreement. In addition, the Limitada joins herein for the
sole purpose of agreeing to make the advances referred to in
the immediately preceding sentence under the circumstances
contemplated by the referenced Sections of the LLC Agreement.
(h) The Representatives, by their signatures
below, hereby approve on behalf of the Management Committee
the taking by each of the Company, Peru Energy and the
Limitada of (i) the actions expressly contemplated hereunder
as being taken by such entity and (ii) such other actions as
may be reasonable necessary to give legal effect to such
actions.
IN WITNESS WHEREOF, the Members and their respective
Representatives have executed this Amendment as of the date first set forth
above.
MEMBERS:
THE MAPLE GAS DEVELOPMENT CORPORATION
By: /s/ REX W. CANON
------------------------------------
Name: Rex W. Canon
----------------------------------
Title: Authorized Representative
---------------------------------
/s/ REX W. CANON
---------------------------------------
REX W. CANON
Management Committee Representative for
The Maple Gas Development Corporation
-9-
<PAGE> 10
P.I.D.C. AGUAYTIA, L.L.C.
By: /s/ JOHN T. SICKMAN
------------------------------------
Name: John T. Sickman
----------------------------------
Title: Vice President
---------------------------------
/s/ JOHN T. SICKMAN
---------------------------------------
JOHN T. SICKMAN
Management Committee Representative for
P.I.D.C. Aguaytia, L.L.C.
EPED AGUAYTIA COMPANY
By: /s/ JOHN R. CUNNINGHAM
------------------------------------
Name: John R. Cunningham
----------------------------------
Title: Authorized Representative
---------------------------------
/s/ JOHN R. CUNNINGHAM
---------------------------------------
JOHN R. CUNNINGHAM
Management Committee Representative for
EPED Aguaytia Company
IGC AGUAYTIA PARTNERS, L.L.C.
By: /s/ JON C. BANCKS
------------------------------------
Name: Jon C. Bancks
----------------------------------
Title: Authorized Representative
---------------------------------
/s/ JON C. BANCKS
---------------------------------------
JON C. BANCKS
Management Committee Representative for
IGC Aguaytia Partners, L.L.C.
SCUDDER LATIN AMERICAN POWER I-P, L.D.C.
By: /s/ J. SCOTT SWENSEN
------------------------------------
Name: J. Scott Swensen
----------------------------------
Title: Land Portfolio Manager
---------------------------------
-10-
<PAGE> 11
/s/ J. SCOTT SWENSEN
---------------------------------------
J. SCOTT SWENSEN
Management Committee Representative for
Scudder Latin American Power I-P, L.D.C.
PMDC AGUAYTIA, LTD.
By: /s/ PAUL T. CHAMPAGNE
------------------------------------
Name: Paul T. Champagne
----------------------------------
Title: Vice President
---------------------------------
/s/ PAUL T. CHAMPAGNE
---------------------------------------
PAUL T. CHAMPAGNE
Management Committee Representative for
PMDC Aguaytia, Ltd.
AGUAYTIA ENERGY, LLC
By: /s/ REX W. CANON
------------------------------------
Rex W. Canon
Authorized Representative
PERU ENERGY HOLDINGS, LLC
By: /s/ REX W. CANON
------------------------------------
Rex W. Canon
Authorized Representative
AGUAYTIA ENERGY DEL PERU S.R. LTDA.
By: /s/ RAFAEL GUILLERMO FERREYROS
------------------------------------
Rafael Guillermo Ferreyros
Adjunct General Manager
-11-
<PAGE> 1
EXECUTION COPY
================================================================================
REIMBURSEMENT AND LOAN AGREEMENT
Dated as of April 30, 1996
between
SAM II EQUITY FUNDING, L.L.C.
and
NATIONSBANK OF TEXAS, N.A.
RELATING TO THE SAMALAYUCA II PROJECT
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
LOAN FACILITY
SECTION 2.1. Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.2. Minimum Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.3. Optional Prepayment of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.4. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.5. Method of Electing Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.6. Payments and Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.7. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.8. Increased Cost and Reduced Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.9. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.10. Basis for Determining Interest Rate Inadequate or
Unfair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.11. Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.12. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.13. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.1. Conditions Precedent to the Initial Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Organization, Power and Status of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4.2. Authorization; Enforceability; Execution and Delivery . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
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SECTION 4.3. No Conflicts; Laws and Contracts; No Default . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 4.4. Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 4.5. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 4.6. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 4.7. Investment Company/PUHCA Status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 4.8. Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 4.9. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 4.10. Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE V
AFFIRMATIVE COVENANTS
SECTION 5.1. Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 5.2. Maintenance of Existence, Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 5.3. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 5.4. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 5.5. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VI
NEGATIVE COVENANTS
SECTION 6.1. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 6.2. Prohibition on Disposition of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 6.3. Prohibition on Fundamental Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 6.4. Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 6.5. Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 6.6. Interest Rate Protection Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
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ARTICLE VIII
INDEMNIFICATION
SECTION 8.1. Indemnification and Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE IX
EXPENSES
SECTION 9.1. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE X
LIMITATION ON RECOURSE
SECTION 10.1. Limitation on Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE XI
OBLIGATIONS ABSOLUTE
SECTION 11.1. Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XII
MISCELLANEOUS
SECTION 12.1. No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 12.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 12.3. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 12.4. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 12.5. Submission to Jurisdiction; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 12.6. Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 12.7. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 12.8. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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SECTION 12.9. Amendments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 12.10. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 12.11. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 12.12. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE XIII
EXTENDED MATURITY DATE
SECTION 13.1. Election to Extend Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 13.2. Conditions to Extension of Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
SCHEDULE I Definitions
EXHIBIT A Form of Note
EXHIBIT B Notice of Borrowing
iv
<PAGE> 6
REIMBURSEMENT AND LOAN AGREEMENT, dated as of April 30, 1996 (as
amended, modified or supplemented from time to time, this "Agreement"), made
between SAM II EQUITY FUNDING, L.L.C., a Delaware limited liability company
(together with its successors and permitted assigns, the "Borrower") and
NATIONSBANK OF TEXAS, N.A. (together with its successors and permitted assigns,
the "Bank").
WHEREAS, the Borrower, through certain Affiliates (as defined below),
is indirectly engaged in the acquisition, financing and construction of an
approximately 690 MW combined cycle power generation station to be located at
Samalayuca, Chihuaha, Mexico (the "Project");
WHEREAS, the Borrower has requested that the Bank make loans to the
Borrower for the purposes and on the terms and conditions specified in this
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and other valuable consideration, the sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Unless otherwise indicated, capitalized
terms used herein shall have the meanings set forth in Schedule I hereto.
SECTION 1.2. Rules of Construction. (a) All references to
Articles, Sections, Schedules and Exhibits shall be construed as references to
Articles and Sections of and Schedules and Exhibits to this Agreement;
(b) Except as specifically stated herein, all references to
agreements, documents or other instruments shall include all amendments,
modifications and supplements thereto and replacements thereof;
(c) Any provision requiring the approval or consent of any party
hereto shall be construed to mean an approval or consent in writing;
(d) All references to Persons or entities shall include their
successors and permitted assigns; and
(e) the words "include" or "including" shall be construed to mean
"including, but not limited to."
1
<PAGE> 7
ARTICLE II
LOAN FACILITY
SECTION 2.1. Loans.
(a) Availability. Subject to the terms and conditions of
this Agreement, during the period from the Closing Date to the
Maturity Date the Bank agrees to advance to Borrower such loans as may
be requested pursuant to the terms of this Agreement (each a "Loan")
in an aggregate principal amount not to exceed the Commitment of the
Bank.
(b) Initial Loan; Subsequent Loans. (i) On or not more
than two (2) Business Days prior to the Closing Date the Borrower
shall request a Loan (the "Initial Loan") by delivering to the Bank a
Notice of Borrowing substantially in the form of Exhibit B and
appropriately completed specifying (W) the principal amount of the
Initial Loan which shall not exceed $66,275,000, (X) the interest rate
and Interest Period applicable to such Initial Loan, (Y) the date such
requested Initial Loan is to be made which shall be a Business Day and
(Z) account information with respect to the deposit of the proceeds of
such Initial Loan.
(ii) Not less than two (2) Business Days prior to the last
Business Day of each Interest Period applicable to a Loan or at such
other time as is required under this Agreement, the Borrower shall, in
order to pay interest on outstanding Loans, fees due and payable under
this Agreement and amounts due and payable under an Interest Rate
Protection Agreement, request a Loan by delivering to the Bank a
Notice of Borrowing appropriately completed specifying (X) the
principal amount of the Loan, (Y) the interest rate and Interest
Period applicable to such Loan, and (Z) the date such requested Loan
is to be made which shall be a Business Day; provided, however, that
if the Borrower shall fail to so request such Loan, the Bank may make
a Loan to the extent necessary and apply the proceeds thereof to pay
amounts due under an Interest Rate Protection Agreement, interest on
outstanding Loans at the end of an Interest Period and fees due and
payable under this Agreement. The Bank promptly shall give Borrower
written notice of any Loans made by the Bank hereunder without
delivery by the Borrower of a Notice of Borrowing.
(c) Note. (i) The Loans made by the Bank shall be
evidenced by a Note of the Borrower in the form of Exhibit A hereto,
dated the Closing Date, payable to the order of the Bank in an
aggregate principal amount equal to the Commitment of the Bank and
otherwise duly completed.
(ii) The Bank shall record the date and amount of each
Loan made by it and the interest rate applicable thereto and the date
and amount of each payment and prepayment of principal made with
respect thereto, and prior to any transfer of the Note
2
<PAGE> 8
shall endorse on the schedule forming a part thereof appropriate
notations to evidence the foregoing information with respect to each
such Loan then outstanding; provided, that failure by the Bank to make
any such endorsement or any error therein shall not affect the
obligations of the Borrower hereunder or under the Note in respect of
the Loans evidenced thereby; provided, further, that in no event shall
the failure by the Bank to make any such endorsement or any error
therein obligate the Borrower to pay any amounts in excess of amounts
otherwise payable hereunder or under the Note. The Bank is hereby
irrevocably authorized by the Borrower to endorse the Note and to
attach to and make a part of the Note a continuation of such schedule
as and when required.
(d) Use of Proceeds. The proceeds of each Loan (other
than the Initial Loan) shall automatically be applied by the Bank to
the payment of interest and fees in accordance with this Agreement and
amounts due and payable under an Interest Rate Protection Agreement.
The proceeds of the Initial Loan shall be applied by the Borrower
toward the payment of a portion of the Project Costs relating to the
Project and certain fees and expenses relating to this Agreement.
(e) Repayment. The Borrower shall repay all outstanding
Loans on the Maturity Date, unless the Maturity Date is extended
pursuant to Section 13.1, whereupon the Borrower shall repay all
outstanding Loans on the Extended Maturity Date.
SECTION 2.2. Minimum Amounts. Anything in this Agreement to the
contrary notwithstanding, (a) the aggregate outstanding principal amount of CD
Rate Loans having the same Interest Period shall be at least equal to Two
Hundred Fifty Thousand Dollars ($250,000) and (b) the aggregate outstanding
principal amount of Eurodollar Rate Loans having the same Interest Period shall
be at least equal to Two Hundred Fifty Thousand Dollars ($250,000); provided,
however, that if the proceeds of any Loan advanced pursuant to Section 2.1(b)
will be used solely to pay interest and/or fees under this Agreement or amounts
due and payable under an Interest Rate Protection Agreement and such amounts
will not equal or exceed the minimum amounts specified in this Section 2.2, the
aggregate principal amount of such Loan shall not be subject to the minimum
amounts specified in this Section 2.2.
SECTION 2.3. Optional Prepayment of Loans. The Borrower may,
without premium or penalty, upon at least (a) five (5) Business Days' prior
written notice to the Bank in the case of a Fixed Rate Loan or (b) two (2)
Business Days' prior written notice to the Bank in the case of a Base Rate
Loan, prepay the outstanding amount of any Loan, in whole or ratably in part,
with accrued interest to the date of such prepayment on the amount prepaid;
provided that each partial prepayment shall be in an aggregate principal amount
not less than One Million Dollars ($1,000,000) or an integral multiple thereof
(or such lesser amount as shall equal the then aggregate outstanding amount of
such Loans). Loans that are prepaid may not be re-borrowed under this
Agreement.
3
<PAGE> 9
SECTION 2.4. Interest. (a) The Borrower shall pay interest on the
unpaid principal amount of each Loan from the date such Loan is made until the
principal amount of such Loan shall be paid in full, at one of the following
rates per annum:
(i) Base Rate Loans. If such Loan is a Base Rate Loan, a
rate per annum equal at all times to the Base Rate in effect from time
to time, payable quarterly in arrears on each Payment Date and on the
date that such Base Rate Loan shall be converted or repaid in full;
(ii) Eurodollar Rate Loans. If such Loan is a Eurodollar
Rate Loan, a rate per annum equal at all times during each Interest
Period for such Loan to the sum of the Eurodollar Rate for such
Interest Period for such Loan plus the Applicable Margin, payable on
the last day of such Interest Period or, if such Interest Period
exceeds three (3) months, at intervals of three (3) months from the
first day of such Interest Period;
(iii) CD Rate Loans. If such Loan is a CD Rate Loan, a
rate per annum equal at all times during each Interest Period for such
Loan to the sum of the CD Rate for such Interest Period for such Loan
plus the Applicable Margin, payable on the last day of such Interest
Period and, if such Interest Period exceeds ninety (90) days, on each
ninetieth day from the first day of such Interest Period;
provided that any Loan which is not paid when due (whether at stated maturity,
by acceleration or otherwise) shall bear interest, for each day from the date
on which such amount is due until such amount is paid in full, payable on
demand after the expiration of any cure period, at the Default Rate for such
day.
(b) For purposes of this Agreement, the "Applicable Margin" shall
be determined in accordance with the table set forth below:
Eurodollar Rate Loans: (i) from and including the Closing
Date to and including the original
Maturity Date, .35%;
(ii) subsequent to the original
Maturity Date to and including the
date which is 40 months subsequent
to the Closing Date (the "First
Step-up Date"), .40%; and
(iii) subsequent to the First Step-up
Date to and including the date which
is 60 months subsequent to the
Closing Date, .45%.
CD Rate Loans: (i) from and including the Closing
Date to and including the original
Maturity Date, .475%;
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(ii) subsequent to the original
Maturity Date to and including the
First Step- up Date, .525%; and
(iii) subsequent to the First Step-up
Date to and including the date which is
60 months subsequent to the Closing
Date, .575%.
The Bank shall determine each interest rate applicable to the Loans
hereunder. The Bank shall give prompt notice to the Borrower of each rate of
interest so determined, and its determination thereof shall be conclusive in
the absence of manifest error.
SECTION 2.5. Method of Electing Interest Rates. (a) Each Loan
shall bear interest initially based on the Eurodollar Rate, the CD Rate or the
Base Rate as the Borrower may elect in accordance with Section 2.1 or this
Section 2.5. If no such election is timely made with respect to a Loan, such
Loan shall initially bear interest at the Base Rate. Thereafter, the Borrower
may from time to time elect to change or continue the interest rate borne by
each Loan, subject to the conditions set forth below, as follows:
(i) if such Loans are Base Rate Loans, the Borrower may
elect to convert all or any portion of such Loans to Fixed Rate Loans
as of any Business Day;
(ii) if such Loans are CD Rate Loans, the Borrower may
elect to convert all or any portion of such Loans to Base Rate Loans
or Eurodollar Rate Loans or elect to continue such Loans as CD Rate
Loans for an additional Interest Period, in each case effective on the
last day of the then current Interest Period applicable to such Loans;
and
(iii) if such Loans are Eurodollar Rate Loans, the Borrower
may elect to convert all or any portion of such Loans to Base Rate
Loans or CD Rate Loans or elect to continue such Loans as Eurodollar
Rate Loans for an additional Interest Period, in each case effective
on the last day of the then current Interest Period applicable to such
Loans.
Each such election shall be made by delivering a notice (a "Notice of Interest
Rate Election") to the Bank (A) in the case of a conversion to or continuation
of a Eurodollar Rate Loan or a CD Rate Loan, not later than 12:00 noon (Dallas,
Texas time) on the third Business Day prior to the day on which such conversion
or continuation is to be effective or (B) in the case of a conversion to a Base
Rate Loan, at any time prior to the day on which such conversion is to be
effective. Each Notice of Interest Rate Election shall be in writing
(including facsimile transmission) or by voice, promptly confirmed in writing.
A Notice of Interest Rate Election may, if it so specifies, apply to only a
portion of the aggregate principal amount of the relevant Loan; provided that
both the portion to which such Notice applies, and the remaining portion to
which it does not apply, are sufficient to meet the minimum amounts specified
in Section 2.2.
(b) Each Notice of Interest Rate Election shall specify:
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<PAGE> 11
(i) the Loan (or portion thereof) to which such notice
applies;
(ii) the date on which the conversion or continuation
selected in such notice is to be effective, which shall comply with
the applicable clause of subsection (a) above;
(iii) if Loans are to be converted, the new type of Loans
and, if such new Loans are Fixed Rate Loans, the duration of the
initial Interest Period applicable thereto; and
(iv) if such Loans are to be continued as CD Rate Loans or
Eurodollar Rate Loans for an additional Interest Period, the duration
of such Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period. No conversion
into or continuation of a Fixed Rate Loan shall be permitted when a Default or
an Event of Default has occurred and is continuing, and if a Default or an
Event of Default has occurred and is continuing, each Fixed Rate Loan
automatically shall be converted into a Base Rate Loan on the last day of the
Interest Period applicable thereto.
(c) A Notice of Interest Rate Election shall not be revocable by
the Borrower. If the Borrower fails to deliver a timely Notice of Interest
Rate Election to the Bank for any Fixed Rate Loans, such Loans shall be
converted into Base Rate Loans on the last day of the then current Interest
Period applicable thereto.
(d) Anything to the contrary in this Agreement notwithstanding, at
no time shall there be outstanding more than six (6) different Interest Periods
applicable to the Loans.
SECTION 2.6. Payments and Computations. (a) The Borrower shall
make each payment of principal of, and interest on, the Loans and any fees
payable hereunder, not later than 12:00 Noon (Dallas, Texas time) on the day
when due in Dollars in immediately available funds to the Bank by wire or
electronic transfer at its offices at NationsBank of Texas, N.A., 901 Main
Street, 64th Floor, Dallas, Texas, 75283-0104 (ABA# 111000025), or such other
account as the Bank may from time to time specify in writing to the Borrower.
(b) All computations of interest and fees shall be made by the
Bank on the basis of a year of (i) 360 days for Eurodollar Rate Loans and CD
Rate Loans and (ii) 365 or 366 days, as the case may be, for Base Rate Loans,
and paid, in each case, for the actual number of days elapsed (including the
first day but excluding the last day).
(c) Whenever any payment of principal of, or interest on, the
Loans other than Eurodollar Rate Loans, or of any fees payable hereunder shall
be due on a day which is not a Business Day, such payment shall be made on the
next succeeding Business Day. Whenever any payment of principal of, or
interest on, a Eurodollar Rate Loan shall be due on a day which is not a
Business Day, such payment shall be made on the next succeeding Business Day
unless
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<PAGE> 12
such Business Day falls in another calendar month, in which case the date for
payment thereof shall be the next preceding Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
SECTION 2.7. Taxes. (a) Any and all payments by the Borrower
hereunder or under the Note shall be made free and clear of and without
deduction for any and all taxes, levies, imposts, deductions, charges or
withholdings actually imposed or assessed on payments made under the Note, and
all liabilities with respect thereto. If the Borrower shall be required by law
to withhold or deduct any Taxes (as hereinafter defined) from or in respect of
any sum payable hereunder or under the Note, (i) the sum payable shall be
increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
2.7) the Bank receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions and
(iii) the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law. In no event
shall the Borrower be required to pay taxes imposed on the net income of the
Bank (and franchise taxes imposed in lieu of net income taxes) by the
jurisdiction under the laws of which the Bank is organized or any political
subdivision thereof or any jurisdiction in which the Bank's principal office is
located (all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes").
(b) In addition, the Borrower agrees to pay any present or future
recordation, transfer, mortgage, stamp or documentary taxes or any other excise
or property taxes, charges or similar levies that arise under the laws of the
United States of America from any payment made hereunder or under the Note or
from the execution or delivery or otherwise with respect to this Agreement, the
Note or any other Loan Document (hereinafter referred to as "Other Taxes") and
reimburse the Bank for all Other Taxes paid by it.
(c) (i) To the extent permitted by law, without duplication of the
amounts paid by the Borrower under Section 2.7(a) or (b), the Borrower shall
indemnify the Bank for the full amount of Taxes and Other Taxes (including any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.7) paid by the Bank or any liability (including penalties, interest
and expenses) arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted. The Bank shall
promptly give written notice to the Borrower (but in no event later than ninety
(90) days) after the Bank has actual knowledge of the imposition of any Taxes
or Other Taxes. Payments by the Borrower pursuant to this indemnification
shall be made within thirty (30) days from the date the Bank makes written
demand therefor, which demand shall be accompanied by a certificate describing
in reasonable detail the basis thereof.
(ii) With respect to any payment request made by the Bank pursuant
to the tax indemnity set forth in clause (i) above, if the Borrower shall
request, the Bank shall in good faith contest the Governmental Authority's
imposition of or the amount of any such request amount, keep the Borrower fully
informed in respect thereof, consult in good faith with the
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<PAGE> 13
Borrower's counsel regarding such contest (provided that the Bank shall not be
required to share its tax records or returns with the Borrower or its counsel),
and shall not compromise or otherwise settle such contest without the
Borrower's consent; provided that the Bank may in its sole discretion select
the forum for such contest and determine whether any such contest shall be by
resisting payment of such amount, paying such amount under protest or paying
such amount and seeking a refund thereof; provided, further, that the Bank
shall not be required to contest any claim unless (x) after a request by the
Bank for an amount in excess of $200,000, the Borrower has delivered to the
Bank an opinion of independent tax counsel selected by the Borrower and
reasonably acceptable to the Bank to the effect that there is a reasonable
possibility of success, (y) the Bank shall have received from the Borrower, in
such form as the Bank shall deem reasonably satisfactory, indemnification and
security for any and all actual or anticipated liability, loss, cost or expense
arising out of or relating to such amount or the contest thereof, including all
reasonable legal and accountants' fees and expenses, penalties, interest and
additions to tax, and (z) if the contest shall be conducted in a manner
requiring the payment of all or part of such amount, the Borrower shall have
paid the amount required.
(d) Within 30 days after the date of any payment of Taxes or Other
Taxes by the Borrower, the Borrower shall furnish to the Bank the original or a
certified copy of a receipt evidencing payment thereof. The Borrower shall
compensate the Bank to the extent that the Bank is required to pay any Taxes or
Other Taxes as a result of any failure by the Borrower to so furnish such copy
of such receipt.
(e) Subject to the limitation set forth in clause (c) above,
without prejudice to the survival of any other agreement of the Borrower
hereunder, the agreements and obligations of the Borrower contained in this
Section 2.7 shall survive the satisfaction in full of the Borrower's
obligations hereunder.
SECTION 2.8. Increased Cost and Reduced Return. (a) If, on or
after the date hereof, the adoption of any applicable law, rule or regulation,
or any change therein, or any change in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by the
Bank with any request or directive (whether or not having the force of law) of
any such authority, central bank or comparable agency:
(i) shall subject the Bank to any tax, duty or other
charge (other than routine examination fees or Taxes or Other Taxes as
provided in Section 2.7 hereof) with respect to the Fixed Rate Loans,
the Note or its obligation to make Fixed Rate Loans, or shall change
the basis of taxation of payments to the Bank of the principal of or
interest on its Fixed Rate Loans or any other amounts due under this
Agreement in respect of its Fixed Rate Loans or its obligation to make
Fixed Rate Loans (except for changes in the rate of tax on the net
income of the Bank imposed by the federal, state or local
jurisdiction in which the Bank's principal executive office is
located); or
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<PAGE> 14
(ii) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including any such requirement
imposed by the Board of Governors, but excluding (A) with respect to
any CD Rate Loan any such requirement included in an applicable CD
Rate Reserve Percentage and (B) with respect to any Eurodollar Rate
Loan any such requirement provided in Section 2.8(b)) against assets
of, deposits with or for the account of, or credit extended by, the
Bank or shall impose on the Bank or on the United States market for
certificates of deposit or the London interbank market any other
condition affecting the Fixed Rate Loans, the Note or its obligation
to make Fixed Rate Loans;
and the result of any of the foregoing is to increase the cost to the Bank of
making or maintaining any Fixed Rate Loan, or to reduce the amount of any sum
received or receivable by the Bank under this Agreement or under the Note with
respect thereto by an amount deemed by the Bank to be material, then, the Bank
shall deliver to the Borrower as promptly as practicable a certificate setting
forth in reasonable detail the amount actually imposed or assessed on payments
made under the Note and the basis for the determination of such amount,
provided, that the Borrower shall not be obligated to compensate the Bank for
the amount of such increased cost incurred with respect to a period of time
prior to the date which is 90 days before the date on which the Bank first
notifies the Borrower that it intends to claim such compensation or that an
event had occurred which will entitle it to such compensation. Any such amount
claimed by the Bank shall, in the case of clause (i) above, be net of
applicable tax savings, if any, directly attributable thereto. Within thirty
(30) days after demand by the Bank, the Borrower shall pay to the Bank such
amount shown as due on any such certificate absent manifest error.
(b) In the event that the Bank shall determine (which
determination shall, absent manifest error, be final and conclusive and binding
on all the parties hereto) at any time that the Bank is required to maintain
reserves in respect of Eurocurrency Liabilities during any period during which
any Loan made by it bears interest based on the Eurodollar Rate (each such
period, for such Bank, a "Eurocurrency Reserve Period"), but only in respect of
any period during which any reserve shall actually be maintained by the Bank
for any Eurodollar Rate Loan as a result of a reserve requirement applicable to
it under Regulation D in connection with Eurocurrency Liabilities, then the
Bank shall promptly give notice to the Borrower of such determination, and the
Borrower shall directly pay to the Bank additional interest on the unpaid
principal amount of such Loan during such Eurocurrency Reserve Period at a rate
per annum which shall, during each monthly period applicable to such Loan, be
the amount by which (x) the Eurodollar Rate for such monthly period divided
(and rounded upward to the next whole multiple of 1/100 of 1%) by a percentage
equal to 100% minus the then stated maximum rate of all reserve requirements
(including any marginal, emergency, supplemental, special or other reserves)
applicable to the Bank in respect of Eurocurrency Liabilities exceeds (y) the
Eurodollar Rate for such monthly period. The Bank shall furnish along with
such notice a certificate setting forth in reasonable detail the cost actually
incurred to maintain such reserves and the basis for the determination of such
amount, provided that the Borrower shall not be obligated to compensate the
Bank for the amount of such increased cost incurred with respect to a period of
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<PAGE> 15
time prior to the date which is 90 days before the date on which the Bank first
notifies the Borrower that it intends to claim such compensation or that an
event has occurred which will entitle it to such compensation. Additional
interest payable pursuant to the immediately preceding sentence shall be paid
by the Borrower at the time that it is otherwise required to pay interest in
respect of such Loan or, if later demanded by the Bank, promptly on demand.
The Bank agrees that, if it gives notice to the Borrower of the existence of a
Eurocurrency Reserve Period, it shall promptly notify the Borrower of any
termination thereof, at which time the Borrower shall cease to be obligated to
pay additional interest to the Bank pursuant to the first sentence of this
paragraph until such time, if any, as a subsequent Eurocurrency Reserve Period
shall occur.
(c) The Bank will promptly notify the Borrower of any event of
which it has knowledge, occurring after the date hereof, which will entitle the
Bank to compensation pursuant to this Section and will designate a different
lending office if such designation will avoid the need for, or reduce the
amount of, such compensation and will not, in the sole judgment of such Bank,
be otherwise disadvantageous to the Bank.
SECTION 2.9. Illegality. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or administration thereof
by any Governmental Authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by the Bank with
any request or directive (whether or not having the force of law) of any such
Governmental Authority, central bank or comparable agency shall make it
unlawful or impossible for the Bank to make, maintain or fund its Eurodollar
Rate Loans, the Bank shall so notify the Borrower, whereupon until the Bank
notifies the Borrower that the circumstances giving rise to such suspension no
longer exist, the obligation of such Bank to make Eurodollar Rate Loans, or to
convert outstanding Loans into Eurodollar Rate Loans, shall be suspended.
Before giving any notice to the Borrower pursuant to this Section, the Bank
shall designate a different lending office for the Eurodollar Rate Loans if
such designation will avoid the need for giving such notice and will not, in
the sole judgment of the Bank, be otherwise disadvantageous to the Bank. If
such notice is given, each Eurodollar Rate Loan of the Bank then outstanding
shall either (i) be converted to a Base Rate Loan or CD Rate Loan at the option
of the Borrower on the last day of the then current Interest Period applicable
to such Eurodollar Rate Loan if the Bank may lawfully continue to maintain and
fund such Loan to such day or (provided that the Borrower gives the required
notice in accordance with Section 2.5; if such notice is not provided, the
Eurodollar Rate Loan will convert into a Base Rate Loan at the end of the
Interest Period), or (ii) be immediately converted to a Base Rate Loan if the
Bank shall determine that it may not lawfully continue to maintain and fund
such Loan to such day.
SECTION 2.10. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any CD Rate
Loan or Eurodollar Rate Loan:
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(a) the Bank determines, in its reasonable judgment, that
deposits in dollars (in the applicable amounts) are not being offered
to the Bank in the relevant market for such Interest Period, or
(b) the Bank, in its reasonable judgment, shall determine
that the CD Rate or the Eurodollar Rate, as the case may be, will not
adequately and fairly reflect the cost to the Bank of funding its CD
Rate Loans or Eurodollar Rate Loans, as the case may be, for such
Interest Period
the Bank shall forthwith give notice thereof (which notice shall describe in
reasonable detail the basis for such determination) to the Borrower, whereupon
until the Bank notifies the Borrower that the circumstances giving rise to such
suspension no longer exist, (i) the obligations of the Bank to make CD Rate
Loans or Eurodollar Rate Loans, as the case may be, or to convert outstanding
Loans into CD Rate Loans or Eurodollar Rate Loans, as the case may be, shall be
suspended and (ii) each outstanding CD Rate Loan or Eurodollar Rate Loan, as
the case may be, shall be converted into a Base Rate Loan on the last day of
the then current Interest Period applicable thereto.
SECTION 2.11. Capital Adequacy. If the Bank shall determine that,
after the date hereof, the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any Governmental Authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on capital
of the Bank or its holding company as a consequence of the Bank's obligations
hereunder to a level below that which the Bank could have achieved but for such
adoption, change, request or directive (taking into consideration its policies
with respect to capital adequacy) by an amount deemed by the Bank to be
material, then the Bank shall deliver to the Borrower as promptly as
practicable (but in no event later than one hundred twenty (120) days after the
Bank has actual knowledge of such claim for capital adequacy) a certificate
setting forth in reasonable detail the amount being charged by the Bank and the
basis for the determination of such amount. Within thirty (30) days after the
delivery of such certificates by the Bank, the Borrower shall pay to the Bank
the amount shown as due on any such certificate.
SECTION 2.12. Funding Losses. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is
converted to a Base Rate Loan on any day other than the last day of an Interest
Period applicable thereto, or if the Borrower fails to borrow or prepay any
Fixed Rate Loan after notice has been given to the Bank in accordance with the
terms hereof, the Borrower shall reimburse the Bank within thirty (30) days
after demand for any resulting loss or expense incurred by it, including any
loss incurred in obtaining, liquidating or employing deposits from third
parties. Without prejudice to the foregoing, the Borrower shall indemnify the
Bank against any direct (as opposed to consequential) loss or expense that the
Bank may sustain or incur as a consequence of the default
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<PAGE> 17
by the Borrower in payment of principal of, or interest on, any Fixed Rate
Loan, or any part thereof, including any interest, premium or penalty paid by
the Bank to lenders of funds borrowed by it or deposited with it for the
purpose of making or maintaining such Fixed Rate Loan. A certificate as to the
amount of any such loss or expense in reasonable detail (specifying the basis
of such loss or expense) shall be promptly submitted by the Bank to the
Borrower shall be conclusive and binding as to the amount thereof absent
manifest error.
SECTION 2.13. Fees. (a) On the Closing Date, the Borrower shall
pay the Bank, from a portion of the proceeds of the Initial Loan, a facility
fee in an amount described in a separate letter agreement among the Borrower
and the Bank.
(b) Commencing on the first Payment Date following the Closing
Date, the Borrower shall pay the Bank, from a portion of the proceeds of a
Subsequent Loan, quarterly in arrears on each Payment Date, a commitment fee of
.12% per annum on the average daily unutilized amount of the Bank's Commitment
for such quarter; provided that if the original Maturity Date or an Extended
Maturity Date is extended pursuant to Article XIII, from and after the original
Maturity Date such commitment fee shall equal .15% per annum on the average
daily unutilized amount of the Bank's Commitment from time to time in effect.
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.1. Conditions Precedent to the Initial Loan. The Bank
shall not have any obligation to make the Initial Loan hereunder unless the
following conditions precedent are satisfied, in form and substance
satisfactory to the Bank and its counsel, on or prior to the Closing Date:
(a) Evidence of Formation of the Borrower. The Bank
shall have received a copy of the Borrower's Certificate of Formation,
certified by the Secretary of State for the State of Delaware and a
copy of the Borrower's LLC Agreement.
(b) Evidence of Due Authorization. The Bank shall have
received certified copies of all authorizing action taken by or on
behalf of the Borrower authorizing the execution, delivery and
performance by the Borrower of this Agreement and each other Loan
Document to which the Borrower is or will be a party on the Closing
Date.
(c) Certificates of Incorporation and By-Laws. The Bank
shall have received a certified copy of the certificate of
incorporation for each Equity Provider and each Support Party and a
copy of the by-laws of each Equity Provider.
(d) Certificates of Good Standing and Tax Status. The
Bank shall have received a certificate issued by the relevant
Secretary of State or similar authority of the
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<PAGE> 18
relevant state of incorporation or formation, as the case may be, as
to the good standing of the Borrower, each Equity Provider and each
Support Party.
(e) Evidence of all Corporate Action. The Bank shall
have received certified copies of all corporate action taken by each
Equity Provider authorizing the execution, delivery and performance by
it of the applicable Equity Contribution Agreement and any other
agreement to be executed and delivered by it in connection with the
transactions contemplated hereby or thereby.
(f) Incumbency and Signature Certificates. The Bank
shall have received certificates signed by (i) an authorized
representative of the Borrower certifying the names and true
signatures of each individual authorized to sign this Agreement and
the other Loan Documents to which the Borrower is or will be a party
on the Closing Date and the other documents or certificates to be
delivered by the Borrower pursuant hereto or thereto, (ii) an
authorized officer of each Equity Provider certifying the names and
true signatures of each individual authorized to sign its Equity
Contribution Agreement and the other documents or certificates to be
delivered by it pursuant hereto or thereto and (iii) an authorized
officer of each Support Party, certifying the names and true
signatures of each individual authorized to sign each Support
Instrument to which it is a party and the other documents or
certificates to be delivered by it pursuant hereto or thereto.
(g) Loan Documents. The Bank shall have received duly
executed counterparts of this Agreement (including all Schedules and
Exhibits), the Note, the Interest Rate Protection Agreement and each
of the other Loan Documents from all parties hereto and thereto.
(h) Assignment of Contracts; Perfection of Liens. The
Bank shall have received (i) originals, each duly executed (and
acknowledged where appropriate) by the Borrower or PG&E Enterprises,
as the case may be, in a form sufficient for filing and recordation
and otherwise satisfactory to the Bank, of all financing statements
under the Uniform Commercial Code (and copies of Uniform Commercial
Code search reports with respect to the Borrower in each jurisdiction
in which such financing statements relating to the Borrower are to be
filed) to be filed (A) naming the Borrower as "debtor" in respect of
each Equity Contribution Agreement and (B) naming PG&E Enterprises as
"debtor" in respect of the PG&E Capital Infusion Agreement Assignment;
and (ii) evidence that such financing statements have been duly filed,
evidence that all filing fees have been paid in full and evidence that
such filings have been accepted and filed in all places wherein such
filings are necessary or, in the reasonable opinion of the Bank,
desirable to perfect the interests of the Bank in the collateral
secured by both such documents.
(i) Financial Statements; No Material Adverse Change.
The Bank shall have received a copy of the consolidated balance sheet
of each of Bechtel, El Paso and PG&E
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<PAGE> 19
Enterprises, together with a certificate of an authorized officer of
each such Person certifying that (i) such balance sheet fairly
presents the financial condition of such Person as at such date in
accordance with GAAP consistently applied, and (ii) since the date of
such balance sheet there has been no Material Adverse Change with
respect to such Person.
(j) Opinions of Counsel. The Bank shall have received
legal opinions from counsel for the Borrower, each Equity Provider and
each Support Party, as to such matters as the Bank may reasonably
request, each of such opinions to be dated as of the Closing Date.
(k) No Legal Proceedings. On the Closing Date, there
shall be no (i) injunction, writ, preliminary restraining order or any
order of any nature issued by an arbitrator, court or other
Governmental Authority directing that the transactions provided for
herein or in the other Loan Documents not be consummated as herein or
therein provided, or (ii) litigation, investigation or proceedings of
or before any arbitrator, court or other Governmental Authority
pending or, to the best of the Borrower's knowledge, threatened
against any party to any Loan Document (other than the Bank), or any
of its properties, revenues or assets, with respect to this Agreement
or the Loan Documents or any of the transactions contemplated hereby
or thereby.
(l) Defaults; Representations and Warranties. The Bank
shall have received a certificate of the Borrower, dated the Closing
Date, certifying that (i) no Default or Event of Default hereunder and
no default under any of the other Loan Documents shall have occurred
and be continuing or will occur upon the making of the Loan on such
Date and (ii) the representations and warranties of the Borrower under
each of the Loan Documents are true and correct on and as of the
Closing Date with the same force and effect as if made on and as of
such date. The representations and warranties made by each Equity
Provider and each Support Party under each of the Loan Documents to
which they are a party in each case shall be true and correct on and
as of the Closing Date with the same force and effect as if made on
and as of the same date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Bank as follows:
SECTION 4.1. Organization, Power and Status of the Borrower. The
Borrower (a) is a Delaware limited liability company, duly formed, validly
existing and in good standing under the laws of the State of Delaware and (b)
is duly authorized to do business in each other jurisdiction, if any, where the
character of its properties or the nature of its activities makes such
qualification necessary. The Borrower has not engaged in any business or
activity other than
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<PAGE> 20
in connection with the development, acquisition, construction and financing of
the Project. The Borrower has all requisite power and authority to own or hold
under lease and operate the property it purports to own or hold under lease and
to carry on its business as now being conducted and as proposed to be conducted
in respect of the Project.
SECTION 4.2. Authorization; Enforceability; Execution and
Delivery. (a) The Borrower has all necessary power and authority to execute,
deliver and perform this Agreement and each of the other Loan Documents to
which it is a party.
(b) All action on the part of the Borrower that is required for
the authorization, execution, delivery and performance of this Agreement and
each other Loan Document to which the Borrower is a party has been duly and
effectively taken and the execution, delivery and performance of this Agreement
and each such other Loan Document does not require the approval or consent of
any holder or trustee of any debt or other obligations of the Borrower.
(c) This Agreement and each other Loan Document to which the
Borrower is a party has been duly executed and delivered by the Borrower. This
Agreement and each other Loan Document to which the Borrower is a party
constitutes a legal, valid and binding obligation of the Borrower enforceable
against it in accordance with the terms thereof, except as such enforceability
may be limited by applicable bankruptcy, insolvency or similar laws from time
to time in effect that affect creditors' rights generally or by limitation upon
the availability of equitable remedies.
SECTION 4.3. No Conflicts; Laws and Contracts; No Default.
Neither the execution, delivery and performance of this Agreement and each
other Loan Document to which the Borrower is a party nor the consummation of
any of the transactions contemplated hereby or thereby nor performance of or
compliance with the terms and conditions hereof or thereof (i) contravenes any
material Requirement of Law applicable to the Borrower or the Collateral, (ii)
conflicts with, constitutes a default under or results in the violation of the
provisions of the Certificate of Formation or the LLC Agreement of the Borrower
or of any Contractual Obligation of the Borrower that could result in the
creation or imposition of any Liens (other than Permitted Liens) on any of the
Collateral under, or results in the acceleration of any obligation under, or in
a condition or event that constitutes (or that, upon notice of lapse of time or
both, would constitute) an event of default under, any material Contractual
Obligation of the Borrower.
SECTION 4.4. Governmental Approvals. The Borrower has obtained
all Governmental Approvals that are required to be obtained or made by the
Borrower in connection with the making of the Loans and granting of Liens
under, and the execution, delivery and performance by the Borrower of, the Loan
Documents.
SECTION 4.5. Litigation. There is no litigation, investigation or
proceedings of or before any arbitrator, court or other Governmental Authority
pending or, to the best of the Borrower's knowledge, threatened against any
party to any Loan Document (other than the
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Bank), or any of its properties, revenues or assets, with respect to this
Agreement or the Loan Documents or any of the transactions contemplated hereby
or thereby.
SECTION 4.6. Financial Statements. Each financial statement of
the Borrower and each Equity Provider delivered by the Borrower to the Bank is
prepared in accordance with GAAP and fairly presents the financial condition of
the Borrower and each Equity Provider as of the date of such financial
statement.
SECTION 4.7. Investment Company/PUHCA Status. The Borrower is not
an "investment company" or a company "controlled by" an "investment company"
within the meaning of the Investment Company Act of 1940. The Borrower is not
subject to financial, organizational or rate regulation as an "electric
utility", "electric corporation", "electrical company", "public utility",
"public utility holding company" or any similar entity under any existing law,
rule or regulation of any Governmental Authority.
SECTION 4.8. Collateral. (a) The Borrower has not sold or
otherwise transferred any of its rights to or interests in the Collateral.
There are no Liens upon or with respect the Collateral, other than Permitted
Liens.
(b) All filings, recordings, registrations and other actions have
been made, obtained and taken in all relevant jurisdictions that are necessary
to create and perfect the Liens on the Collateral provided for in each Equity
Contribution Agreement, and the Bank has the Liens on the Collateral provided
for in each Equity Contribution Agreement, and such Liens constitute a valid
first priority Lien on the Collateral, subject only to Permitted Liens.
SECTION 4.9. Taxes. As of the Closing Date, neither the execution
and delivery of this Agreement, the Note or any other Loan Document by the
Borrower, nor the consummation of any of the transactions contemplated hereby
or thereby, will result in any tax, levy, impost, duty, charge or withholding
imposed by the United States of America or any taxing authority thereof, on or
with respect to such execution, delivery or consummation, or upon or with
respect to the Bank.
SECTION 4.10. Margin Regulations. No part of the proceeds from the
Loans will be used, directly or indirectly, for the purpose of buying or
carrying any "margin stock" within the meaning of Regulation G or U of the
Board of Governors (12 C.F.R. Sections 207 and 221, respectively).
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ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower hereby covenants and agrees that, so long as this
Agreement is in effect, and until the Note, together with interest, and all
other obligations of the Borrower under any Loan Document are paid in full:
SECTION 5.1. Reporting Requirements. The Borrower shall furnish
to the Bank:
(a) within 120 days from the end of each fiscal year of
the Borrower, a balance sheet of the Borrower as of the end of such
year setting forth in comparative form the corresponding figures from
the preceding year;
(b) within 120 days from the end of each fiscal year of
each Equity Provider, a balance sheet of each Equity Provider as of
the end of such year setting forth in comparative form the
corresponding figures from the preceding year, accompanied by a
certificate of an authorized officer of such Equity Provider
certifying that such balance sheet fairly presents the financial
condition of such Equity Provider as of the end of such year in
accordance with GAAP consistently applied.
(c) each of the following items:
(i) written notice of any Default or Event of
Default, specifically stating that a Default or an Event of
Default, as the case may be, has occurred and describing such
Default or Event of Default and any action being taken with
respect to such Default or Event of Default; and
(ii) notice of the occurrence of a Material Adverse
Change with respect to any Equity Provider.
SECTION 5.2. Maintenance of Existence, Loan Documents. The
Borrower shall preserve and maintain its legal existence and form. The
Borrower shall perform in all respects all of its covenants and agreements
contained in any of the Loan Documents to which it is a party. The Borrower
shall do or cause to be done all things necessary to obtain and to maintain in
full force and effect all Governmental Approvals, if any, that are necessary
from time to time to perform its obligations under the Loan Documents.
SECTION 5.3. Compliance with Laws. The Borrower will do or cause
to be done all things necessary to comply in all material respects with all
Requirements of Law applicable to such Borrower in connection with the
performance of its obligations under the Loan Documents.
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SECTION 5.4. Use of Proceeds. The Borrower will use the proceeds
of the Loans solely to pay Project Costs and to pay interest and fees relating
to the Loans.
SECTION 5.5. Further Assurances. Upon notice from the Bank, the
Borrower shall take or cause to be taken all action required or, in the
reasonable opinion of the Bank, which is desirable to maintain and preserve any
of the Liens under the Equity Contribution Agreement and any other rights of
the Bank under the Equity Arrangements. The Borrower shall from time to time
execute or cause to be executed any and all further instruments (including
financing statements, continuation statements and similar statements with
respect to any of the Equity Arrangements) requested by the Bank for such
purposes.
ARTICLE VI
NEGATIVE COVENANTS
The Borrower hereby covenants and agrees that, so long as this
Agreement is in effect and until the Note, together with interest and all other
obligations of the Borrower under any Loan Document are paid in full:
SECTION 6.1. Liens. The Borrower shall not create or suffer to
exist or permit any Lien upon or with respect to any of the Collateral, except
for Liens specifically permitted by, or created by, this Agreement or any other
Loan Document (collectively, the "Permitted Liens").
SECTION 6.2. Prohibition on Disposition of Collateral. The
Borrower shall not sell or otherwise transfer any Collateral.
SECTION 6.3. Prohibition on Fundamental Changes. The Borrower
shall not enter into any transaction of merger or consolidation, change its
form of organization or liquidate or dissolve itself (or suffer any liquidation
or dissolution).
SECTION 6.4. Nature of Business. The Borrower shall not engage in
any business other than that relating, directly or indirectly through
Affiliates or otherwise, to the development, acquisition, construction and
financing of the Project.
SECTION 6.5. Debt. The Borrower shall not incur any Debt, other
than (i) Debt pursuant to this Agreement and the other Loan Documents or (ii)
Debt incurred on terms and conditions reasonably acceptable to the Bank.
SECTION 6.6. Interest Rate Protection Agreement. The Borrower
shall not terminate the Interest Rate Protection Agreement entered into on the
Closing Date prior to the termination date specified therein without the prior
written consent of the Bank, which such consent shall not be unreasonably
withheld; provided, however, that the Interest Rate Protection
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Agreement shall, from time to time, be subject to partial early termination in
accordance with its terms.
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.1. Events of Default. If any of the following events
(each an "Event of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of the
Note when the same becomes due and payable, whether by scheduled
maturity or required prepayment or by acceleration or otherwise; or
(b) (i) The Borrower shall fail to pay any interest on
any Note or any fees due hereunder, or (ii) the Borrower shall fail to
pay any other amount payable hereunder, under any Interest Rate
Protection Agreement or under the other Loan Documents and, in each
case, such default shall continue for three (3) Business Days; or
(c) Any material representation or warranty made by the
Borrower herein, or any material representation, warranty or statement
in any certificate or financial statement furnished to the Bank by or
on behalf of the Borrower shall prove to have been false or misleading
in any material respect as of the time made, confirmed or furnished,
and such inaccuracy either is not susceptible of being remedied or
shall continue unremedied for more than 30 days after the Borrower has
actual knowledge of such inaccuracy or receives notice of such
inaccuracy from the Bank; provided, however, that if (i) such
inaccuracy cannot be remedied within such 30 day period, (ii) such
inaccuracy is susceptible of being remedied, and (iii) the Borrower is
diligently attempting to remedy such inaccuracy, then such 30-day
period shall be extended to such date, not to exceed a total of 90
days from the date the Borrower has knowledge of the inaccuracy or
receives notice from the Bank, as shall be necessary for the Borrower
or such Equity Provider to remedy such inaccuracy; or
(d) The Borrower shall fail to perform any of its
covenants or agreements contained in the first sentence of Section 5.2
or Sections 5.5, 6.1, 6.2, 6.3, 6.4, 6.5 or 6.6; or
(e) The Borrower shall fail to perform or observe any
other covenant or agreement contained in any Loan Document (other than
those referred to in paragraphs (a) through (e) above) and such
failure shall continue uncured for thirty (30) or more days after the
Borrower has actual knowledge of such failure or receives notice of
such failure from the Bank; provided, however, that if (i) such
failure cannot be remedied within such 30 day period, (ii) such
failure is susceptible of being remedied, and (iii) the
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Borrower is diligently attempting to remedy such failure, then such
30-day period shall be extended to such date, not to exceed a total of
90 days from the date the Borrower has knowledge of such failure or
receives notice from the Bank, as shall be necessary for the Borrower
to remedy such failure; or
(f) The Borrower shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its
property, (ii) admit in writing its inability, or be generally unable,
to pay its debts as such debts become due, (iii) make a general
assignment for the benefit of its creditors, (iv) commence a voluntary
case under the Federal Bankruptcy Code, (v) file a petition seeking to
take advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or readjustment of debts,
(vi) fail to controvert in a timely and appropriate manner, or
acquiesce in writing to, any petition filed against such Person in an
involuntary case under the Federal Bankruptcy Code, or (vii) take any
corporate or other action for the purpose of effecting any of the
foregoing; or
(g) A proceeding or case shall be commenced without the
application or consent of the Borrower in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization,
dissolution, winding-up, or the composition or readjustment of debts,
(ii) the appointment of a trustee, receiver, custodian, liquidator or
the like of such Person under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment
of debts, and such proceeding or case shall continue undismissed, or
any order, judgment or decree approving or ordering any of the
foregoing shall be entered and continue unstayed and in effect, for a
period of sixty (60) or more consecutive days, or any order for relief
against such Person shall be entered in an involuntary case under the
Federal Bankruptcy Code (each event or occurrence described in
subsection (f) or (g) of this Section 7.1 is hereinafter referred to
as a "Bankruptcy Event"); or
(h) Palo Verde shall fail to perform any of its covenants
or agreements set forth in Section 2, 5(a)(i), 5(d) or 5(e) of the
Palo Verde Equity Contribution Agreement; Palo Verde shall fail to
maintain any Cash Deposit required to be on deposit in any Support
Account in accordance with the provisions of the Palo Verde Equity
Contribution Agreement; or Palo Verde shall fail to perform its
covenant contained in Section 10(e) of the Palo Verde Equity
Contribution Agreement; or
(i) Any material representation or warranty made by Palo
Verde in the Palo Verde Equity Contribution Agreement, or any material
representation, warranty or statement in any certificate, financial
statement or other document furnished to the Bank by or on behalf of
Palo Verde in or pursuant to any Loan Document, shall prove to have
been false or misleading in any material respect as of the time made,
confirmed or furnished, and such inaccuracy either is not susceptible
of being remedied or shall continue unremedied for more than 30 days
after Palo Verde has actual knowledge of
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such inaccuracy or receives notice of such inaccuracy from the Bank;
provided, however, that if (i) such inaccuracy cannot be remedied
within such 30 day period, (ii) such inaccuracy is susceptible of
being remedied, and (iii) Palo Verde is diligently attempting to
remedy such inaccuracy, then such 30-day period shall be extended to
such date, not to exceed a total of 90 days from the date Palo Verde
has knowledge of the inaccuracy or receives notice from the Bank, as
shall be necessary for the Palo Verde to remedy such inaccuracy; or
(j) A Bankruptcy Event in respect of Palo Verde or any
Support Party providing a Support Instrument under the Palo Verde
Equity Contribution Agreement shall have occurred and be continuing;
or
(k) The Palo Verde Equity Contribution Agreement shall at
any time for any reason cease to be valid and binding and in full
force and effect or the validity or enforceability thereof shall be
contested by any party thereto or any party thereto (other than the
Bank) shall deny that it has any liability or obligation under such
Agreement; or
(l) The Palo Verde Equity Contribution Agreement shall
cease to be effective to grant a perfected Lien to the Bank on the
Collateral described therein with the priority purported to be created
thereby; or
(m) If any Substitute Support Instrument delivered
pursuant to the Palo Verde Equity Contribution Agreement is scheduled
to expire in less than 10 Business Days; or
(n) EPED shall fail to perform any of its covenants or
agreements set forth in Section 2, 5(a)(i), 5(d) or 5(e) of the EPED
Equity Contribution Agreement; EPED shall fail to maintain any Cash
Deposit required to be on deposit in any Support Account in accordance
with the provisions of the EPED Equity Contribution Agreement; or EPED
shall fail to perform its covenant contained in Section 10(e) of the
EPED Equity Contribution Agreement; or
(o) Any material representation or warranty made by EPED
in the EPED Equity Contribution Agreement, or any material
representation, warranty or statement in any certificate, financial
statement or other document furnished to the Bank by or on behalf of
EPED in or pursuant to any Loan Document, shall prove to have been
false or misleading in any material respect as of the time made,
confirmed or furnished, and such inaccuracy either is not susceptible
of being remedied or shall continue unremedied for more than 30 days
after EPED has actual knowledge of such inaccuracy or receives notice
of such inaccuracy from the Bank; provided, however, that if (i) such
inaccuracy cannot be remedied within such 30 day period, (ii) such
inaccuracy is susceptible of being remedied, and (iii) EPED is
diligently attempting to remedy such inaccuracy, then such 30-day
period shall be extended to such date, not to exceed a total of 90
days from
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the date EPED has knowledge of the inaccuracy or receives notice from
the Bank, as shall be necessary for the EPED to remedy such
inaccuracy; or
(p) A Bankruptcy Event in respect of EPED or any Support
Party providing a Support Instrument under the EPED Equity
Contribution Agreement shall have occurred and be continuing; or
(q) The EPED Equity Contribution Agreement shall at any
time for any reason cease to be valid and binding and in full force
and effect or the validity or enforceability thereof shall be
contested by any party thereto or any party thereto (other than the
Bank) shall deny that it has any liability or obligation under such
Agreement; or
(r) The EPED Equity Contribution Agreement shall cease to
be effective to grant a perfected Lien to the Bank on the Collateral
described therein with the priority purported to be created thereby;
or
(s) If any Substitute Support Instrument delivered
pursuant to the EPED Equity Contribution Agreement is scheduled to
expire in less than 10 Business Days; or
(t) Gannet shall fail to perform any of its covenants or
agreements set forth in Section 2, 5(a)(i), 5(d) or 5(e) of the Gannet
Equity Contribution Agreement; Gannet shall fail to maintain any Cash
Deposit required to be on deposit in any Support Account in accordance
with the provisions of the Gannet Equity Contribution Agreement; or
Gannet shall fail to perform its covenant contained in Section 10(e)
of the Gannet Equity Contribution Agreement; or
(u) Any material representation or warranty made by
Gannet in the Gannet Equity Contribution Agreement, or any material
representation, warranty or statement in any certificate, financial
statement or other document furnished to the Bank by or on behalf of
Gannet in or pursuant to any Loan Document, shall prove to have been
false or misleading in any material respect as of the time made,
confirmed or furnished, and such inaccuracy either is not susceptible
of being remedied or shall continue unremedied for more than 30 days
after Gannet has actual knowledge of such inaccuracy or receives
notice of such inaccuracy from the Bank; provided, however, that if
(i) such inaccuracy cannot be remedied within such 30 day period, (ii)
such inaccuracy is susceptible of being remedied, and (iii) Gannet is
diligently attempting to remedy such inaccuracy, then such 30-day
period shall be extended to such date, not to exceed a total of 90
days from the date Gannet has knowledge of the inaccuracy or receives
notice from the Bank, as shall be necessary for the Gannet to remedy
such inaccuracy; or
(v) A Bankruptcy Event in respect of Gannet or any
Support Party providing a Support Instrument under the Gannet Equity
Contribution Agreement shall have occurred and be continuing; or
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(w) The Gannet Equity Contribution Agreement shall at any
time for any reason cease to be valid and binding and in full force
and effect or the validity or enforceability thereof shall be
contested by any party thereto or any party thereto (other than the
Bank) shall deny that it has any liability or obligation under such
Agreement; or
(x) The Gannet Equity Contribution Agreement shall cease
to be effective to grant a perfected Lien to the Bank on the
Collateral described therein with the priority purported to be created
thereby; or
(y) If any Substitute Support Instrument delivered
pursuant to the Gannet Equity Contribution Agreement is scheduled to
expire in less than 10 Business Days;
then at any time thereafter if an Event of Default shall then be continuing,
the Bank may, by notice to the Borrower, take any or all of the following
actions, without prejudice to the rights of the Bank to enforce its claims
against the Borrower: (i) in respect of an Event of Default set forth in
Section 7.1(a) through (g), (a) declare the principal of and any accrued
interest in respect of the Note and all other amounts payable under this
Agreement to be, whereupon the same shall become, forthwith due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower, (b) proceed to enforce or cause to be
enforced any remedies provided under any of the Loan Documents, (c) exercise
any other remedies available at law or in equity, (d) declare all Equity
Contributions to be immediately due and payable; provided, that upon the
occurrence of any Event of Default referred to in sections 7.1(f) and 7.1(g)
with respect to the Borrower then (without prejudice to any other rights and
remedies specified herein) automatically, without notice, demand or any other
act by the Bank, to the extent permitted by law, the principal of and any
accrued interest in respect of the Note and all other amounts payable under
this Agreement shall become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived, anything contained in this Agreement to the contrary notwithstanding;
(ii) in respect of an Event of Default set forth in Section 7.1(h) through (m),
(a) declare Palo Verde's Proportionate Share of the principal of and any
accrued interest in respect of the Note and all other amounts payable under
this Agreement to be, whereupon the same shall become, forthwith due and
payable without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Borrower, (b) proceed to enforce or cause to
be enforced against Palo Verde any remedies provided under any of the Loan
Documents, (c) exercise any other remedies against Palo Verde available at law
or in equity, (d) declare Palo Verde's Proportionate Share of Equity
Contributions to be immediately due and payable; provided, that upon the
occurrence of any Event of Default referred to in Section 7.1(j) then (without
prejudice to any other rights and remedies specified herein) automatically,
without notice, demand or any other act by the Bank, to the extent permitted by
law, Palo Verde's Proportionate Share of the principal of and any accrued
interest in respect of the Note and all other amounts payable under this
Agreement shall become immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived,
anything contained in this Agreement to the contrary notwithstanding; (iii) in
respect
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of an Event of Default set forth in Section 7.1(n) through (s), (a) declare
EPED's Proportionate Share of the principal of and any accrued interest in
respect of the Note and all other amounts payable under this Agreement to be,
whereupon the same shall become, forthwith due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower, (b) proceed to enforce or cause to be enforced against EPED any
remedies provided under any of the Loan Documents, (c) exercise any other
remedies against EPED available at law or in equity, (d) declare EPED's
Proportionate Share of Equity Contributions to be immediately due and payable;
provided, that upon the occurrence of any Event of Default referred to in
Section 7.1(p) then (without prejudice to any other rights and remedies
specified herein) automatically, without notice, demand or any other act by the
Bank, to the extent permitted by law, EPED's Proportionate Share of the
principal of and any accrued interest in respect of the Note and all other
amounts payable under this Agreement shall become immediately due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived, anything contained in this Agreement to the
contrary notwithstanding; and (iv) in respect of an Event of Default set forth
in Section 7.1(t) through (y), (a) declare Gannet's Proportionate Share of the
principal of and any accrued interest in respect of the Note and all other
amounts payable under this Agreement to be, whereupon the same shall become,
forthwith due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Borrower, (b) proceed to
enforce or cause to be enforced against Gannet any remedies provided under any
of the Loan Documents, (c) exercise any other remedies against Gannet available
at law or in equity, (d) declare Gannet's Proportionate Share of Equity
Contributions to be immediately due and payable; provided, that upon the
occurrence of any Event of Default referred to in Section 7.1(v) then (without
prejudice to any other rights and remedies specified herein) automatically,
without notice, demand or any other act by the Bank, to the extent permitted by
law, Gannet's Proportionate Share of the principal of and any accrued interest
in respect of the Note and all other amounts payable under this Agreement shall
become immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived, anything contained
in this Agreement to the contrary notwithstanding.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1. Indemnification and Contribution. If, in connection
with this Agreement or any other Loan Document or the transactions contemplated
hereby or thereby, the Bank becomes involved in any capacity in any action or
legal proceeding, the Borrower agrees (a) to reimburse the Bank, its affiliates
and their respective directors, officers, employees, agents and controlling
persons (each, an "Indemnified Party") promptly upon request for all expenses
(including the reasonable fees and disbursements of legal counsel and the
reasonable cost of investigation and preparation) as they are incurred, and (b)
to indemnify and hold harmless each Indemnified Party against all direct, as
opposed to consequential, losses, claims, damages or liabilities, joint or
several, to which such Indemnified Party may become subject in connection
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with this Agreement or any other Loan Document or the transactions contemplated
hereby or thereby including without limitation the use by the Borrower of the
proceeds of the Loans; provided, however, that the Borrower shall not be liable
under this Section 8.1 in respect of any expense, loss, claim, damage or
liability to the extent that the Borrower obtains a final judgment, not subject
to appeal, that such expense, loss, claim, damage or liability resulted from
the willful misconduct or gross negligence of such Indemnified Party.
ARTICLE IX
EXPENSES
SECTION 9.1. Expenses. All statements, reports, certificates,
opinions and other documents or information required to be furnished by the
Borrower to the Bank under this Agreement or any other Loan Document shall be
supplied without cost to the Bank. The Borrower shall pay, within thirty (30)
days after demand therefor, all reasonable out-of- pocket costs and expenses of
the Bank (including the reasonable fees and disbursements of special counsel to
the Bank), incurred in connection with (i) the negotiation, preparation,
execution and delivery of the Loan Documents or any waiver or amendment of, or
supplement or modification to, the Loan Documents and (ii) the review of any of
the other agreements, instruments or documents referred to in this Agreement or
relating to the transactions contemplated hereby. In addition, the Borrower
shall pay all reasonable out-of-pocket costs and expenses of the Bank
(including the reasonable fees and disbursements of special counsel to the
Bank), incurred in connection with an exercise of the Bank's remedies under the
Loan Documents following the occurrence of an Event of Default under this
Agreement.
ARTICLE X
LIMITATION ON RECOURSE
SECTION 10.1. Limitation on Recourse. The Bank agrees that, except
as hereinafter set forth, its rights in respect of the Loans and any claim or
liability under any Loan Document asserted against the Borrower by the Bank
shall be limited to satisfaction out of, and enforcement against, the Equity
Contributions made by the Equity Providers and the Support Instruments provided
by the Support Parties. Notwithstanding anything to the contrary contained
herein, in any Loan Document or in any other document, certificate or
instrument executed or to be executed by the Borrower pursuant hereto or
thereto, the Bank hereby acknowledges and agrees that neither the Borrower, any
Member or any of their respective Affiliates nor any past, present or future
officers, directors, employees, shareholders, agents or representatives of the
Borrower, any Member or any of their respective Affiliates (collectively, the
"Nonrecourse Parties") shall have any liability to the Bank (such liability,
including such as may arise by operation of law, being hereby expressly waived)
for the payment of any sums now or hereafter owing by the Borrower under this
Agreement or any other Loan Document or for the
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performance of any of the obligations of the Borrower contained herein or
therein (the "Non-Recourse Obligations") or shall otherwise be liable or
responsible with respect thereto, except as set forth in this Section 10.1.
The Bank irrevocably waives its right to have any Non-Recourse Obligation
treated as a recourse obligation against the Borrower under Section 1111(b) of
the United States Bankruptcy Code; provided, however, that notwithstanding such
waiver, nothing herein shall be construed to waive any of the Bank's rights in
respect of the Equity Contributions and the Support Instruments in accordance
with the terms of the Loan Documents. If any Event of Default shall occur and
be continuing or if any claim of the Bank against the Borrower or alleged
liability to the Bank of the Borrower shall be asserted under this Agreement or
any other Loan Document, the Bank agrees that, except as hereinafter set forth,
it shall not have the right to proceed directly or indirectly against the
Nonrecourse Parties or against their respective properties and assets (other
than the Equity Arrangements) for the satisfaction of any Loan or of any such
claim or liability or for any deficiency judgment (except to the extent
enforceable out of the Equity Arrangements) in respect of the Loans or any such
claim or liability. The foregoing acknowledgments, agreements and waivers
shall be enforceable by any Nonrecourse Party. Notwithstanding any of the
foregoing, it is expressly understood and agreed, however, that nothing
contained in this Section 10.1 shall be deemed to (a) release any Nonrecourse
Party from liability for its fraudulent actions or fraudulent
misrepresentations or willful misconduct or (b) limit in any respect the
enforceability of any of the Equity Contribution Agreements or any Support
Instrument in accordance with the terms thereof.
ARTICLE XI
OBLIGATIONS ABSOLUTE
SECTION 11.1. Obligations Absolute. The obligations of the
Borrower under this Agreement shall be absolute, unconditional and irrevocable,
and shall be performed strictly in accordance with the terms of this Agreement
under all circumstances whatsoever, including the following circumstances:
(a) any amendment or waiver of or any consent to
departure from all or any of the Loan Documents; and
(b) the existence of any claim, setoff, defense or other
rights which the Borrower may have at any time against any beneficiary
or any transferee of the Bank (other than the defense that payment to
the Bank has been made in accordance with the terms of this Agreement)
or any other person or entity, whether in connection with this
Agreement, the Loan Documents or any unrelated transaction.
26
<PAGE> 32
ARTICLE XII
MISCELLANEOUS
SECTION 12.1. No Waiver; Remedies Cumulative. No failure to
exercise and no delay in exercising on the part of the Bank of any right, power
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right, power or privilege preclude any other or
further exercise thereof, or the exercise of any other right, power or
privilege. Subject to Section 10.1, the rights and remedies herein provided
are cumulative and not exclusive of any rights or remedies provided by law.
SECTION 12.2. Notices. Except as otherwise specified herein, all
notices, requests, demands, consents, instructions or other communications
hereunder ("notices") shall be duly given or made if sent in writing or by
tested or otherwise authenticated telex, telegram or cable and shall be deemed
to have been duly given or made upon the transmittal thereof by facsimile
transmission or telex or the delivery thereof to the telegraph office, or on
the fifth Business Day following the deposit thereof in the mails, postage
prepaid, or upon receipt thereof if delivered by courier, in each case
addressed to the party to which such notice is requested or permitted to be
given or made hereunder, if to the Bank or the Borrower at the address
specified below, or at such other address of which such Person shall have
notified in writing the party giving such notice.
Borrower:
SAM II Equity Funding, L.L.C.
c/o CT Corporation
1209 Orange Street
Wilmington, Delaware 19901
with a copy to:
EPED SAM Holdings Company
c/o El Paso Natural Gas Company
100 North Stanton
El Paso, TX 79978
Attn: President
(telephone) (915) 541-3565
(fax) (915) 541-3155
and
27
<PAGE> 33
Gannet Power Corporation
c/o PG&E Enterprises
444 Market Street
San Francisco, CA 94111
Attn: President
(telephone) (415) 291-5400
(fax) (415) 291-6498
and
Palo Verde Power Corporation
c/o Bechtel Enterprises, Inc.
50 Beale Street
San Francisco, CA 94015
Attn: President
(telephone) (415) 768-1234
(fax) (415) 768-6054
Bank:
NationsBank of Texas, N.A.
P.O. Box 830104
901 Main Street, 64th Floor
Dallas, Texas 75283-0104
Attn: Energy Banking Group
(telephone) (214) 508-1261
(fax) (214) 508-1285
SECTION 12.3. 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.
SECTION 12.4. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Borrower and the Bank and their
respective successors and permitted assigns.
SECTION 12.5. Submission to Jurisdiction; Waivers. (a) To the
extent permitted by law, the Borrower hereby severally, irrevocably and
unconditionally:
(i) submits in any legal action or proceeding relating to
this Agreement or any other Loan Document to which it is a party, or
for recognition and enforcement of any judgment in respect hereof or
thereof, to the non-exclusive general jurisdiction of the
28
<PAGE> 34
courts of the State of New York and the courts of the United States of
America for the Southern District of New York, and the appellate
courts from any thereof;
(ii) consents that any such action or proceeding may be
brought in such courts, and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form and mail), postage
prepaid, to such Borrower at its address as provided in Section 12.2;
and
(iv) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction.
(b) The 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 the Borrower and its
property, service of copies of the summons and complaint and any process which
may be served in any such suit, action or proceeding. If for any reason such
agent shall cease to be available to act as such, the Borrower agrees to
designate a new designee, appointee and agent in New York City on the terms and
for the purposes of this Section satisfactory to the Bank. Such service may be
made by mailing or delivering a copy of such process to the Borrower in care of
the Process Agent at the Process Agent's above address and the Borrower hereby
irrevocably authorizes and directs the Process Agent to accept such service on
its behalf. The Borrower further irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the Borrower at its address as provided in Section 12.2.
SECTION 12.6. Assignments. Neither party hereto may assign or
otherwise transfer all or any part of its rights or obligations hereunder
without the prior written consent of the other party.
SECTION 12.7. Severability. Any provision hereof that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction
and to the fullest extent permitted by applicable law, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof and without affecting the validity or
enforceability of any provision in any other jurisdiction.
SECTION 12.8. Headings. The headings of the various Articles,
Sections and paragraphs of this Agreement are for convenience of reference
only, do not constitute a part hereof and shall not affect the meaning or
construction of any provision hereof.
29
<PAGE> 35
SECTION 12.9. Amendments, Etc. No amendment or waiver of any
provision of this Agreement, the Note or any other Loan Document, nor consent
to any departure by any Equity Provider or Support Party therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Borrower, the Bank, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
SECTION 12.10. Survival. Without prejudice to the survival of any
other agreement of the Borrower hereunder, the agreements and obligations of
the Borrower contained in Sections 2.7, Article VIII and Article IX and the
provisions of Article X hereof shall survive the payment in full of the Loans
and the Note and termination of this Agreement and any assignment pursuant to
Section 12.6.
SECTION 12.11. Governing Law. THIS AGREEMENT, THE NOTE AND THE
EQUITY LETTER OF CREDIT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAW
PROVISIONS OF SUCH LAWS.
SECTION 12.12. Waiver of Jury Trial. EACH OF THE BANK AND THE
BORROWER HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
ARTICLE XIII
EXTENDED MATURITY DATE
SECTION 13.1. Election to Extend Maturity Date. From time to time
upon the Bank's receipt from the Borrower of a written notice at least two (2)
months prior to the original Maturity Date or one (1) month prior to any
Extended Maturity Date setting forth an Extended Maturity Date or a new
Extended Maturity Date, the Banks shall, if the conditions set forth in Section
13.2 are satisfied, extend the original Maturity Date or the then current
Extended Maturity Date to the date (which shall be a Business Day) set forth in
such notice; provided, however, that in no case may any Extended Maturity Date
fall on date that is more than sixty (60) months subsequent to the date on
which the Closing Date occurs.
SECTION 13.2. Conditions to Extension of Maturity Date. The Bank
shall not have any obligation to extend the Maturity Date hereunder unless the
following conditions precedent are satisfied, in form and substance reasonably
satisfactory to the Bank and its counsel, on or prior to the current Maturity
Date:
30
<PAGE> 36
(a) Amendment to this Agreement and Loan Documents. The
Bank and the Borrower shall have agreed on any required amendments to
the Loan Documents and this Agreement, including the increase in the
Commitment of the Bank.
(b) Additional Support Instruments. The Bank shall have
received Substitute Support Instruments that reflect the amendments to
the Loan Documents and the increase in the Commitment of the Bank.
Upon receipt of such Substitute Support Instruments, the Bank shall
return to the applicable Support Party the Support Instruments
previously in place.
(c) Evidence of Due Authorization. The Bank shall have
received certified copies of all authorizing action taken by or on
behalf of the Borrower authorizing the execution, delivery and
performance by the Borrower of the amendments set forth above in
Section 13.2(a) to this Agreement and each other Loan Document to
which the Borrower is a party.
(d) Evidence of all Corporate Action. The Bank shall
have received certified copies of all corporate action taken by each
Equity Provider authorizing the execution, delivery and performance by
it of the applicable Equity Contribution Agreement and any other
agreement to be executed and delivered by it in connection with the
transactions contemplated hereby or thereby.
(e) Opinions of Counsel. The Bank shall have received
legal opinions from counsel for the Borrower, each Equity Provider and
each Support Party, as to such matters as the Bank may reasonably
request.
(f) No Event of Default. No Event of Default shall have
occurred and be continuing, or will occur on such date by the
consummation of the transactions contemplated by this Section 13.2.
(g) Work Fee. The Bank shall have received a work fee as
follows: (i) if the original Maturity Date is to be extended pursuant
to this Article XIII to a date occurring on or prior to the First
Step-up Date, $25,000; (ii) for each extension of an Extended Maturity
Date pursuant to this Article XIII (other than as set forth in clause
(i) or (iii) of this Section 13.2(g)), $50,000; and (iii) if the
original Maturity Date is to be extended to a date occurring after the
First Step-up Date, $75,000.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
31
<PAGE> 37
IN WITNESS WHEREOF, the duly authorized officers of the Borrower
hereto have each caused this Agreement to be executed on the date first above
written.
SAM II EQUITY FUNDING, L.L.C., a
Delaware limited liability company
By: /s/ FRANK J. CAIN
-------------------------------------
Name:
Board of Control Member
By: /s/ JOHN HUSHON
-------------------------------------
Name: John Hushon
Board of Control Member
By: /s/ TONY F. DISTEFANO
-------------------------------------
Name: Tony F. DiStefano
Board of Control Member
NATIONSBANK OF TEXAS, N.A.
By: /s/ DENISE ASHFORD SMITH
-------------------------------------
Name: Denise Ashford Smith
Title: Senior Vice President
[REIMBURSEMENT AND LOAN AGREEMENT]
<PAGE> 38
EXHIBIT A
PROMISSORY NOTE
U.S. $______________
New York, New York
__________ __, 1996
SAM II EQUITY FUNDING, L.L.C., a Delaware limited liability company
(the "Borrower"), FOR VALUE RECEIVED, hereby promises to pay to the order of
NATIONSBANK OF TEXAS, N.A. (the "Bank"), at its offices at, 901 Main Street,
64th Floor, Dallas, Texas, 75283-0104, the principal sum of
____________________ ($__________), or if less, the aggregate unpaid principal
amount of all Loans under this Note made by the Bank to the Borrower, at the
times and in the manner provided in the Reimbursement Agreement referred to
below.
The Borrower promises also to pay interest on the unpaid principal
amount hereof in United States Dollars at said office until paid at the rates
per annum which shall be determined in accordance with the provisions of
Article II of the Reimbursement and Loan Agreement, dated as of April 30, 1996
(as amended, modified and supplemented in accordance therewith, the
"Reimbursement Agreement"), between the Borrower and the Bank, said interest to
be payable at the times provided for in the Reimbursement Agreement (all
capitalized terms used herein and not otherwise defined herein shall have the
meaning specified in the Reimbursement Agreement). All Loans made by the Bank
and all payments and prepayments made on account of the principal thereof,
shall be recorded by the Bank on the schedule (or a continuation thereof)
attached hereto, it being understood that failure by the Bank to make any such
endorsement or any error therein shall not affect the obligations of the
Borrower hereunder; provided that in no event shall the failure of the Bank to
make any such endorsement or any error therein obligate the Borrower to pay any
amounts in excess of amounts otherwise payable by the Borrower hereunder.
This note is the Note referred to in the Reimbursement Agreement and
is entitled to the benefits thereof and of the other Loan Documents referred to
therein. As provided in the Reimbursement Agreement, this Note is subject to
prepayment, in whole or in part. In case an Event of Default (as defined in
the Reimbursement Agreement) shall occur and be continuing, the principal of
and accrued interest on this Note may be declared to be due and payable in
certain circumstances in whole and in certain circumstances in part and in the
manner and with the effect provided in the Reimbursement Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
This Note shall be construed in accordance with and be governed by the
laws of New York without giving effect to any conflicts of law provisions of
such laws.
Exhibit A - 1
<PAGE> 39
Any rights in respect of the Loans and any claim or liability under
this Note asserted against the Borrower by the Bank shall be limited to
satisfaction out of, and enforcement against, the Equity Contributions made by
the Equity Providers and the Support Instruments provided by the Support
Parties. Notwithstanding anything to the contrary contained herein, neither
the Borrower, any Member or any of their respective Affiliates nor any past,
present or future officers, directors, employees, shareholders, agents or
representatives of the Borrower, any Member or any of their respective
Affiliates (collectively, the "Nonrecourse Parties") shall have any liability
to the Bank (such liability, including such as may arise by operation of law,
being hereby expressly waived) for the payment of any sums now or hereafter
owing by the Borrower hereunder or for the performance of any of the
obligations of the Borrower contained herein (the "Non-Recourse Obligations")
or shall otherwise be liable or responsible with respect thereto, except as set
forth in this paragraph. If any Event of Default shall occur and be continuing
or if any claim of the Bank against the Borrower or alleged liability to the
Bank of the Borrower shall be asserted under this Note, except as hereinafter
set forth, the Bank shall not have the right to proceed directly or indirectly
against the Nonrecourse Parties or against their respective properties and
assets (other than the Equity Contribution Agreements or the Support
Instruments in accordance with the terms thereof) for the satisfaction of any
Loan or of any such claim or liability or for any deficiency judgment (except
to the extent enforceable out of the Equity Contribution Agreements or the
Support Instruments in accordance with the terms thereof) in respect of the
Loans or any such claim or liability. The foregoing acknowledgments,
agreements and waivers shall be enforceable by any Nonrecourse Party.
Notwithstanding any of the foregoing, nothing contained in this paragraph shall
be deemed to (a) release any Nonrecourse Party from liability for its
fraudulent actions or fraudulent misrepresentations or willful misconduct or
(b) limit in any respect the enforceability of any of the Equity Contribution
Agreements or any Support Instrument in accordance with the terms thereof.
SAM II EQUITY FUNDING, L.L.C.
By:
------------------------------
Name:
Board of Control Member
By:
------------------------------
Name:
Board of Control Member
By:
------------------------------
Name:
Board of Control Member
Exhibit A - 2
<PAGE> 40
<TABLE>
<CAPTION>
=========================================================================================================
LOANS, MATURITIES AND PAYMENTS OF PRINCIPAL
- ---------------------------------------------------------------------------------------------------------
AMOUNT OF
TYPE APPLICABLE PRINCIPAL UNPAID
AMOUNT OF INTEREST CONVERSION PAID OR PRINCIPAL NOTATION
DATE OF LOAN LOAN PERIOD OF LOAN PREPAID BALANCE MADE BY
=========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
=========================================================================================================
</TABLE>
Exhibit A - 3
<PAGE> 41
EXHIBIT B
NOTICE OF BORROWING
[Date - [Not less than two days prior
to end of Interest Period]
NationsBank of Texas, N.A.
901 Main Street
64th Floor
Dallas, TX 75283-0104
Attention: Energy Finance re: Samalayuca Equity Loan
Gentlemen:
Pursuant to the Reimbursement and Loan Agreement, dated as of April 30, 1996 by
and among SAM II Equity Funding, L.L.C. (the "Borrower"), and NationsBank of
Texas, N.A. (the "Bank") (as the same may be amended, modified or supplemented
from time to time, the "Reimbursement Agreement") (capitalized terms used
herein, unless otherwise noted, shall have the meanings ascribed to them in the
Reimbursement Agreement). The Borrower hereby requests that the Bank make
available to the Borrower on _______ __, 199_, the following amount:
Funds required by the Borrower to pay
Project Costs [FOR INITIAL LOAN ONLY] $______________
Funds required by the Borrower to pay
interest and fees under the Reimbursement
Agreement or for amounts due and payable
under an Interest Rate Protection Agreement
[FOR INITIAL AND SUBSEQUENT LOANS] $______________
This Borrowing shall bear interest at [choose rate as specified in Section 2.1
and 2.4 of the Reimbursement Agreement] [specify Interest Period applicable to
Borrowing]
[FOR INITIAL LOAN OR SUBSEQUENT LOANS TO BE APPLIED TO INTEREST RATE PROTECTION
AGREEMENT PAYMENTS] We request that the funds representing the
Exhibit B - 1
<PAGE> 42
requested Loan be transferred by wire transfer in immediately available funds
to the following account:
[Account Number]
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Exhibit B - 2
<PAGE> 43
In connection with this request for a Loan, the Borrower further certifies that
the proceeds of the Loan being requested herein are to be applied for the uses
permitted by the Reimbursement Agreement.
SAM II EQUITY FUNDING, L.L.C.
By:
--------------------------------
Name:
Board of Control Member
By:
--------------------------------
Name:
Board of Control Member
By:
--------------------------------
Name:
Board of Control Member
[NOTICE OF BORROWING]
<PAGE> 44
Schedule I
Definitions
"Affiliate" shall mean (i) with respect to any designated Person, each
Person that, directly or indirectly, controls or is controlled by or is under
common control with such designated Person. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
"Applicable Margin" shall mean, with respect to interest payable on any
Fixed Rate Loan, the margin applicable thereto as determined in accordance with
Section 2.4(b).
"Assessment Rate" shall mean for any Interest Period the net annual
assessment rate (rounded upward, if necessary, to the next higher 1/100th of
1%) actually incurred by the Bank to the Federal Deposit Insurance Corporation
(or any successor) for such Corporation's (or such successor's) insuring time
deposits at offices of the Bank in the United States during the most recent
period for which such rate has been determined prior to the commencement of
such Interest Period.
"Bankruptcy Event" shall have the meaning ascribed thereto in Section
7.1(g).
"Base Rate" shall mean, at any time, the higher of (a) the Lender Base
Rate or (b) the sum or (i) the Overnight Federal Funds Rate plus (ii) one half
of one percent (.50%) per annum. Each change in any interest rate provided for
herein based upon the Base Rate resulting from a change in the Lender Base Rate
or the Overnight Federal Funds Rate shall take effect at the time of such
change in the Lender Base Rate or the Overnight Federal Funds Rate, as the case
may be.
"Base Rate Loan" shall mean a Loan that bears interest based upon the
Base Rate.
"Bechtel" shall mean Bechtel Enterprises, Inc., a Delaware corporation.
"Board of Governors" shall mean the Board of Governors of the Federal
Reserve System or any successor thereto.
"Business Day" shall mean any day, which is not a Saturday or Sunday,
on which commercial banks are open for business in New York, New York, and, if
such day relates to a borrowing of, a payment or prepayment of principal of, or
a conversion of or into, or an Interest Period for, a Eurodollar Rate Loan or a
notice by the Borrower with respect to any such
1
<PAGE> 45
borrowing, payment, prepayment, conversion or Interest Period, which day is
also a day on which dealings in Dollar deposits are carried out in the London
interbank market.
"Cash Deposit", in respect of each Equity Provider, shall have the
meaning set forth in the applicable Equity Contribution Agreement.
"CD Base Rate" shall mean, for any Interest Period with respect to a CD
Rate Loan, a rate of interest determined by the Bank to be the arithmetic
average (rounded upward if necessary to the next higher 1/100 of 1%) of the
prevailing rates per annum bid at 10:00 a.m. (New York City time) (or as soon
thereafter as practicable) on the first day of such Interest Period by two or
more New York certificate of deposit dealers of recognized standing for the
purchase at face value from the Bank of its certificates of deposit in an amount
comparable to the principal amount of the CD Rate Loan to which such Interest
Period applies and having maturity comparable to such Interest Period.
"CD Rate" shall mean, for any Interest Period with respect to a CD Rate
Loan, an interest rate per annum equal at all times during such Interest Period
to the sum of (1) the rate per annum (rounded upward, if necessary, to the next
higher 1/100 of 1%) obtained by dividing (a) the CD Base Rate by (b) 1.00 minus
the CD Rate Reserve Percentage for such Interest Period, plus (2) the
Assessment Rate for such Interest Period with respect to the Bank.
"CD Rate Loan" shall mean a Loan that bears Interest based upon the
CD Rate.
"CD Rate Reserve Percentage" shall mean for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors for determining the maximum reserve requirement (including
any basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding Five Billion Dollars
($5,000,000,000) in respect of new non-personal time deposits in dollars in New
York City having a maturity comparable to the related Interest Period and in an
amount of One Hundred Thousand Dollars ($100,000) or more. The CD Rate shall be
adjusted automatically on and as of the effective date of any change in the CD
Rate Reserve Percentage.
"Closing Date" shall mean the date (which shall be a Business Day) on
which the conditions precedent to the Initial Loan set forth in Section 3.1
are satisfied.
"Collateral" shall have the meaning ascribed thereto in the applicable
Equity Contribution Agreement.
"Commitment" shall mean $79,885,000.
"Contractual Obligation" shall mean, as to any Person, any provision
of any debt or equity security issued by such Person or of any agreement,
instrument or undertaking to which such Person is a party or by which it or
any of its property is bound.
2
<PAGE> 46
"Debt" shall mean, in respect of any Person, (i) indebtedness for
borrowed money or the deferred purchase price of property or services
(excluding obligations under agreements for the purchase price of goods and
services in the normal course of business which are not more than 90 days past
due), (ii) obligations as lessee under leases that shall have been or should
be, in accordance with GAAP, recorded as capital leases, (iii) obligations
(whether matured or contingent) with respect to any letters of credit issued
for the account of such Person and (iv) obligations under direct or indirect
guaranties or other similar contingent liabilities in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise assure a creditor against loss in respect of indebtedness or
obligations of others of the kinds referred to in clause (i), (ii) or (iii)
above.
"Default" shall mean the occurrence of any of the events specified in
Section 7.1 of this Agreement whether or not any requirement for the giving of
notice or lapse of time, or both, has been satisfied. A Default shall be deemed
to continue to exist during any period allowed for cure hereunder or until
cured or waived in writing by the Bank.
"Default Rate" shall mean an interest rate equal to the Base Rate plus
two percent (2%).
"Dollars" and "$" shall mean lawful money of the United States of
America.
"El Paso" shall mean El Paso Natural Gas Company, a Delaware company.
"EPED" shall mean EPED SAM Holdings Company, a Delaware company.
"EPED Equity Contribution Agreement" shall mean the Equity Contribution
Agreement, dated as of April 30, 1996, among EPED, the Bank and the Borrower.
"Equity Arrangements" shall mean each of the Equity Contribution
Agreements and the Support Instruments issued thereunder.
"Equity Contribution", in respect of each Equity Provider, shall have
the meaning set forth in the applicable Equity Contribution Agreement.
"Equity Contribution Agreement" shall mean each of the Palo Verde
Equity Contribution Agreement, the EPED Equity Contribution Agreement and the
Gannet Equity Contribution Agreement, as the context requires.
"Equity Provider" shall mean each of Palo Verde, EPED and Gannet, as
the context requires.
"Eurocurrency Liabilities" shall have the meaning ascribed thereto in
Regulation D of the Board of Governors, as in effect from time to time.
3
<PAGE> 47
"Eurodollar Rate" shall mean, for any Interest Period with respect to a
Eurodollar Rate Loan, a rate of interest determined by the Bank to be the rate
per annum at which deposits in Dollars are offered to the Bank (or its
Affiliate) in the London interbank market at approximately 11:00 A.M. (London
time) two (2) Business Days before the first day of such Interest Period in an
amount approximately equal to the principal amount of the Eurodollar Rate Loan
to which such Interest Period is to apply and for a period of time comparable
to such Interest Period. If the Bank is unable to furnish a quotation of the
applicable rate for any Interest Period in accordance with the immediately
preceding sentence, "Eurodollar Rate" for such Interest Period shall instead
mean the rate per annum equal to the average (rounded upwards, if necessary, to
the nearest 1/100 of 1%) of the offered rates which appear on the Telerate Page
3750, British Bankers Association Interest Settlement Rates (or such other
system for the purpose of displaying rates of leading reference banks in the
London interbank market, as designated by the Bank) as of 11:00 a.m. (London
time) for deposits in Dollars on the day two (2) Business Days prior to the
first day of such Interest Period in an amount approximately equal to the
principal amount of the Eurodollar Rate Loan to which such Interest Period is
to apply and for a period of time comparable to such Interest Period.
"Eurodollar Rate Loan" shall mean a Loan that bears interest based upon
the Eurodollar Rate.
"Event of Default" shall have the meaning ascribed thereto in Section
7.1.
"Extended Maturity Date" shall mean the date (which shall be a Business
Day), if any, to which the Maturity Date has been extended from time to time in
accordance with Section 13.1.
"First Step-up Date" shall have the meaning ascribed thereto in Section
2.4(b).
"Fixed Rate Loans" shall mean CD Rate Loans or Eurodollar Rate Loans,
or both, as the context requires.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
"Gannet" shall mean Gannet Power Corporation, a California corporation.
"Gannet Equity Contribution Agreement" shall mean the Equity
Contribution Agreement, dated as of April 30, 1996, among Gannet, the Bank and
the Borrower.
"Governmental Approvals" shall mean any authorization, consent,
approval, license, franchise, lease, ruling, permit, tariff, rate,
certification, exemption, filing or registration by or with any Governmental
Authority.
4
<PAGE> 48
"Governmental Authority" shall mean any nation or federal government,
any state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any other governmental entity with authority over
any of the parties to any of the Loan Documents.
"Indemnified Party" shall have the meaning ascribed thereto in
Section 8.1.
"Initial Loan" shall have the meaning ascribed thereto in
Section 2.1(b).
"Interest Period" shall mean (a) with respect to each Eurodollar Rate
Loan, a period commencing on the date specified in the applicable Notice of
Interest Rate Election and ending one (1), two (2), three (3), six (6) or, if
funds in the Eurodollar market are, in the sole judgment of the Bank, available
to the Bank for such period, nine (9) or twelve (12) calendar months
thereafter, as the Borrower may elect in the applicable Notice; provided that:
(i) any Interest Period which would otherwise end on a day
which is not a Business Day shall be extended to the next succeeding
Business Day unless such Business Day falls in another calendar month,
in which case such Interest Period shall end of the next preceding
Business Day; and
(ii) any Interest Period which begins on the last Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month; and
(b) with respect to each CD Rate Loan, the period commencing on the
date specified in the applicable Notice of Interest Rate Election and ending
thirty (30), sixty (60), ninety (90) or, if funds are, in the sole judgment of
the Bank, available to the Bank for such Period, one hundred eighty (180) or
three hundred sixty (360) days thereafter, as the Borrower may elect in the
applicable Notice; provided that any Interest Period which would otherwise end
on a day which is not a Business Day shall be extended to the next succeeding
Business Day.
"Interest Rate Protection Agreement" shall mean the agreement or
agreements pursuant to International Swaps and Derivative Association, Inc.
Master Agreement (and all related schedules thereto and confirmations thereof)
between the Borrower and the Bank or an Affiliate of the Bank or another
counter-party reasonably acceptable to the Bank, providing for a swap, ceiling
rates, ceiling and floor rates, contingent participating or other hedging
mechanisms with respect to interest payable on the Loans and having terms
reasonably acceptable to the Bank and the Borrower.
"Law" shall mean any federal, state, local or other statute, law, rule,
regulation, ordinance, order, code, policy or rule of common law, now or
hereafter in effect, and any judicial or administrative interpretation thereof
by a Governmental Authority or otherwise, including any judicial or
administrative order, consent decree or judgment.
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<PAGE> 49
"Lender Base Rate" shall mean the rate of interest publicly announced by
the Bank from time to time as its base rate; the Lender Base Rate to change when
and as such base rate changes. The Lender Base Rate is a reference rate and does
not necessarily represent the lowest or best rate actually charged to any
customer. The Bank may make commercial advances or other loans at rates of
interest at, above or below the Lender Base Rate.
"Lien" shall mean any mortgage, pledge, security interest,
hypothecation, collateral assignment, encumbrance, lien (statutory or other),
or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any conditional sale or
other title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing, and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction).
"LLC Agreement" shall mean the Limited Liability Company Agreement of
SAM II Equity Funding, L.L.C., dated as of December 29, 1995, by and among Palo
Verde, EPED and Gannet.
"Loan" shall have the meaning ascribed thereto in Section 2.1(a).
"Loan Documents" shall mean this Agreement, the Note, the Equity
Contribution Agreements, the Support Instruments and any Interest Rate
Protection Agreement.
"Material Adverse Change" shall mean a change in the status of the
business, results of operations, condition (financial or otherwise) or property
of any Person which could reasonably be expected to have a material and adverse
effect on such Person's ability to perform its obligations under any Loan
Document to which it is a party.
"Maturity Date" shall mean the date which is thirty-three (33) months
subsequent to the date on which the Closing Date occurs; provided that if such
Date is not a Business Day, the Maturity Date shall be the next succeeding
Business Day; provided, further, that if the conditions set forth in Section 13
are satisfied, the Maturity Date shall be the Extended Maturity Date elected in
accordance with Section 13.1.
"Member" shall mean each of Palo Verde, EPED and Gannet and each other
Person admitted as a Member of the Borrower pursuant to the terms of the LLC
Agreement.
"Non-Recourse Parties" shall have the meaning ascribed thereto in
Section 10.1.
"Notice of Borrowing" shall mean a written notice of the Borrower,
submitted in accordance with, and containing the information required by,
Section 2.1(b).
"Notice of Interest Rate Election" shall have the meaning ascribed
thereto in Section 2.5(a).
6
<PAGE> 50
"Overnight Federal Funds Rate" shall mean, for any day, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) equal to
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day; provided that (a) if such day is not a Business Day,
the Federal Funds Rate for such day shall be such rate on such transactions on
the immediately preceding Business Day as so published on the next succeeding
Business Day and (b) if no such rate is so published on such next succeeding
Business Day, the Federal Funds Rate for such day shall be the average of the
rates quoted by three Federal funds brokers to the Bank on such day on such
transactions.
"Palo Verde" shall mean Palo Verde Power Corporation, a Delaware
corporation.
"Palo Verde Equity Contribution Agreement" shall mean the Equity
Contribution Agreement, dated as of April 30, 1996, among Palo Verde, the Bank
and the Borrower.
"Payment Dates" shall mean the 15th day of each March, June, September
and December (or the next succeeding Business Day if such date is not a
Business Day).
"Permitted Liens" shall have the meaning ascribed thereto in Section
6.1.
"Person" shall mean an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"PG&E" shall mean Pacific Gas and Electric Company, a California
corporation.
"PG&E Capital Infusion Agreement" shall mean the Capital Infusion
Agreement dated as of April 30, 1996, between PG&E and PG&E Enterprises.
"PG&E Capital Infusion Agreement Assignment" shall mean the Assignment
Agreement, dated as of April 30, 1996, between PG&E Enterprises and the Bank.
"PG&E Consent and Agreement" shall mean the PG&E Consent and Agreement,
dated as of April 30, 1996, between PG&E Enterprises and the Bank.
"PG&E Enterprises" shall mean PG&E Enterprises, a California
corporation.
"Process Agent" shall have the meaning ascribed thereto in Section
13.5(b).
"Project" shall have the meaning ascribed thereto in the first recital
of this Agreement.
"Project Costs" shall mean all costs and expenses paid, incurred or to
be incurred by the Borrower or any Affiliate thereof in connection with the
development, financing, design,
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<PAGE> 51
engineering, acquisition, construction, assembly, inspection, testing,
completion and start-up of the Project by Affiliates of the Borrower or
otherwise, including all direct and indirect development, financing and
construction costs howsoever incurred or to be incurred. Project costs shall
include fees and interest on the Loans under this Agreement and all expenses
incurred in connection with the execution, delivery and performance of the Loan
Documents.
"Proportionate Share" shall mean (a) in respect of Palo Verde, 20%, (b)
in respect of EPED, 60% and (c) in respect of Gannet, 20%.
"Requirement of Law" shall mean, as to any Person, (i) the certificate
of incorporation and by-laws or partnership agreement or other organizational
or governing documents of such Person and (ii) any federal, state, local or
other statute, law, rule, regulation, ordinance, order, code, policy or rule of
common law, now or hereafter in effect, and any judicial or administrative
interpretation thereof by a Governmental Authority or otherwise, including any
judicial or administrative order, consent decree or judgment applicable to or
binding upon such Person or any of its properties or to which such Person or
any of its properties is subject.
"Substitute Support Instrument" shall have the meaning set forth in the
applicable Equity Contribution Agreement.
"Support Account" shall have the meaning set forth in the applicable
Equity Contribution Agreement.
"Support Instruments" shall have the meaning set forth in the
applicable Equity Contribution Agreement.
"Support Party" shall mean, as applicable, Bechtel, El Paso and PG&E
Enterprises.
8
<PAGE> 52
EXECUTION COPY
EL PASO
GUARANTY
GUARANTY, made and delivered as of April 30, 1996 (the "Guaranty"), by
El Paso Natural Gas Company, a Delaware corporation (the "Guarantor").
RECITALS
A. EPED SAM Holdings Company, a Delaware corporation (the
"Obligor") and an indirect subsidiary of the Guarantor is, along with Palo
Verde Power Corporation and Gannet Power Corporation, a Member in SAM II Equity
Funding, L.L.C., a Delaware limited liability company (the "Borrower").
B. The Borrower and NationsBank of Texas, N.A. (the "Guaranteed
Party"), have entered into a Reimbursement and Loan Agreement dated as of even
date herewith (as the same may be amended, supplemented or otherwise modified
from time to time, the "Reimbursement Agreement") pursuant to which the
Guaranteed Party will make certain loans to the Borrower, the proceeds of which
loans will be used in accordance with the Reimbursement Agreement.
C. The Borrower, the Obligor and the Guaranteed Party have
entered into an EPED Equity Contribution Agreement dated as of even date
herewith (as the same may be amended, supplemented or otherwise modified from
time to time, the "EPED Equity Contribution Agreement"), pursuant to which
Obligor has agreed to make certain contributions of capital to the Borrower in
the manner provided therein (the obligation of Obligor to make such
contributions being hereinafter referred to as the "Guaranteed Obligation").
D. In order to secure the Obligor's obligations under the EPED
Equity Contribution Agreement, the parties hereto have entered into this
Guaranty.
E. Unless otherwise defined herein all terms used herein which
are defined in the EPED Equity Contribution Agreement shall have their
respective meanings as therein defined.
AGREEMENT
In consideration of the foregoing and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Guarantor hereby agrees for the benefit of the Guaranteed Party as follows:
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<PAGE> 53
1. Guaranty. The Guarantor hereby unconditionally and
irrevocably guarantees, as the primary obligor and not merely as surety, to and
for the benefit of the Guaranteed Party, punctual and full payment by the
Obligor of the Guaranteed Obligations as and when the same shall become due and
payable in accordance with the terms of the EPED Equity Contribution Agreement
by acceleration, as scheduled or otherwise. The guaranty contained herein, is
an absolute, unconditional, present and continuing guaranty of payment, and not
of collection, is in no way conditioned or contingent upon any attempt to
collect from or enforce payment by the Obligor or upon any other event,
contingency or circumstance whatsoever, and shall be binding upon and against
the Guarantor without regard to the validity or enforceability of the EPED
Equity Contribution Agreement. If, for any reason whatsoever, the Obligor
shall fail or be unable duly, punctually and fully to pay any Guaranteed
Obligation as and when the same shall become due and payable, the Guarantor
shall forthwith pay or cause to be paid such Guaranteed Obligation to the
Guaranteed Party. Notwithstanding any provision in this Guaranty or the EPED
Equity Contribution Agreement to the contrary, the maximum aggregate amount of
Guarantor's liability hereunder shall not exceed an amount equal to
$51,286,170.
2. Obligations Absolute and Unconditional, Continuing, Etc. The
Guarantor agrees that the obligations of the Guarantor set forth in this
Guaranty shall be direct obligations of the Guarantor, and such obligations
shall be absolute and unconditional, shall not be subject to any counterclaim,
set-off, deduction, diminution, abatement, recoupment, suspension, deferment,
reduction or defense (other than full and strict compliance by the Guarantor
with its obligations hereunder) based upon any claim the Guarantor or any other
Person may have against the Guaranteed Party, Obligor or the Borrower, and
shall remain in full force and effect without regard to, and shall not be
released, discharged or in any way affected or impaired by, any circumstance or
condition whatsoever (whether or not the Guarantor shall have any knowledge or
notice thereof), including, without limitation: (i) any amendment or
modification of or supplement to or other change in the EPED Equity
Contribution Agreement or any other Loan Document (as defined in the
Reimbursement Agreement); (ii) any failure, omission or delay on the part of
the Obligor or the Guaranteed Party to conform or comply with any term of the
EPED Equity Contribution Agreement; (iii) any waiver, consent, extension,
indulgence, compromise, release or other action or inaction under or in respect
of the EPED Equity Contribution Agreement or any obligation or liability of the
Obligor or the Guaranteed Party, or any exercise or non-exercise of any right,
remedy, power or privilege under or in respect to any such instrument or
agreement or any such obligation or liability; (iv) any bankruptcy, insolvency,
reorganization, arrangement, readjustment, liquidation or similar proceeding
with respect to the Borrower, the Obligor or the Guaranteed Party or any of
their respective properties, or any action taken by any trustee or receiver or
by any court in any such proceeding; (v) any discharge, termination,
cancellation, frustration, irregularity, invalidity or unenforceability, in
whole or in part, of the EPED Equity Contribution Agreement or any term or
provision thereof; (vi) any merger or consolidation of the Obligor or the
Guarantor into or with any other corporation or any sale, lease or transfer of
all or any of the assets of the Obligor or the Guarantor to any other Person;
(vii) any change in the ownership of the Obligor; (viii) to the extent as may
be waived by applicable law, the benefit of all principles or provisions of
law, statutory or otherwise, which may be in conflict with the terms hereof; or
(ix) to the extent
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<PAGE> 54
permitted under applicable law, any other occurrence or circumstance
whatsoever, whether similar or dissimilar to the foregoing, which might
otherwise constitute a legal or equitable defense or discharge of the
liabilities of a guarantor or surety or which might otherwise limit recourse
against the Guarantor. The obligations of the Guarantor set forth herein
constitute the full recourse obligations of the Guarantor enforceable against
it to the full extent of all its assets and properties. Without limiting the
generality of the foregoing, the Guarantor agrees that (a) repeated and
successive demands may be made and recoveries may be had hereunder as and when,
from time to time, the Obligor shall default under or fail to comply with the
terms of the EPED Equity Contribution Agreement and that notwithstanding the
recovery hereunder for or in respect of any given default or failure to so
comply by the Obligor under the EPED Equity Contribution Agreement, this
Guaranty shall remain in force and effect and shall apply to each and every
subsequent default, and (b) in the event that any Guaranteed Obligation is paid
by the Obligor, and thereafter all or any part of such payment is recovered
from the Guaranteed Party to whom paid, as a preferential or fraudulent
transfer under the Federal Bankruptcy Code, any applicable State insolvency
law, or any other similar Federal or State law now or hereafter in effect, the
liability of the Guarantor hereunder with respect to such Guaranteed Obligation
so paid and recovered shall continue and remain in full force and effect as if,
to the extent of such recovery, such payment had not been made. If (X) an
event permitting the exercise of remedies under the EPED Equity Contribution
Agreement shall at any time have occurred and be continuing and (Y) such
exercise, or any consequences thereof provided in the EPED Equity Contribution
Agreement shall at any time be prevented by reason of the pendency against the
Obligor of a case or proceeding under the bankruptcy or insolvency law, the
Guarantor agrees that, solely for purposes of this Guaranty and its obligations
hereunder, the EPED Equity Contribution Agreement shall be deemed to have been
declared in default and all amounts thereunder shall be deemed to be due and
payable, with all the attendant consequences as provided in the EPED Equity
Contribution Agreement as if declaration of default and the consequence thereof
had been accomplished in accordance with the terms thereof, and the Guarantor
shall forthwith pay any amounts guaranteed hereunder.
3. Waiver of Demands, Notices, Etc. The Guarantor hereby
unconditionally waives, to the extent permitted by applicable law, (i) notice
of any of the matters referred to in Section 2 hereof; (ii) all notices which
may be required by statute, rule of law or otherwise, now or hereafter in
effect, to preserve any rights against the Guarantor hereunder, including,
without limitation, any demand, proof or notice of non-payment of any
Guaranteed Obligation; (iii) any right to the enforcement, assertion or
exercise of any right, remedy, power or privilege under or in respect of the
EPED Equity Contribution Agreement; (iv) notice of acceptance of this Guaranty,
demand, protest, presentment, notice of default and any requirement of
diligence; (v) any requirement to exhaust any remedies or to mitigate any
damages resulting from default by the Obligor under the EPED Equity
Contribution Agreement; and (vi) any other circumstance whatsoever which might
otherwise constitute a legal or equitable discharge, release or defense of a
guarantor or surety, or which might otherwise limit recourse against the
Guarantor.
4. Waiver of Subrogation Rights By the Guarantor. The Guarantor
hereby acknowledges and agrees that under no circumstances shall the Guarantor
be entitled to be
3
<PAGE> 55
subrogated to any rights of the Guaranteed Party in respect of a Guaranteed
Obligation made or performed by the Guarantor hereunder or otherwise, and the
Guarantor hereby expressly and irrevocably waives each and every such right of
subrogation and any claims, reimbursement, right or right of action relating
thereto (howsoever arising). The Guarantor hereby further acknowledges and
agrees that no payment or performance hereunder by the Guarantor shall give
rise to any claim of the Guarantor against the Guaranteed Party.
5. Certain Rights and Powers of Guaranteed Party. The Guaranteed
Party shall have all of the rights and remedies available under applicable law
and may proceed by appropriate court action to enforce the terms hereof and to
recover damages for the breach hereof. Each and every remedy of the Guaranteed
Party shall, to the extent permitted by law, be cumulative and shall be in
addition to any other remedy now or hereafter existing at law or in equity. At
the option of the Guaranteed Party and upon notice to the Guarantor, the
Guarantor may be joined in any action or proceeding commenced by such
Guaranteed Party against the Obligor in respect of any Guaranteed Obligation,
and recovery may be had against the Guarantor in such action or proceeding or
in any independent action or proceeding against the Guarantor, without any
requirement that such Guaranteed Party first assert, prosecute or exhaust any
remedy or claim against the Obligor.
6. Representations, Warranties. The Guarantor represents and
warrants to the Guaranteed Party, on and as of the date hereof:
(a) The Guarantor is duly organized and validly existing
in good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to enter into and perform its
obligations under this Guaranty;
(b) No governmental action is required to be taken, given
or obtained, as the case may be, by or from any Governmental Authority
and no filing, recording, publication or registration in any public
office or any other place, is necessary to authorize the execution,
delivery and performance by the Guarantor of this Guaranty or for the
legality, validity, binding effect or enforceability hereof;
(c) The execution and delivery of this Guaranty by the
Guarantor and the performance of its obligations hereunder will not
contravene any applicable law, or any judgment or order applicable to
or binding on it, or contravene or result in any breach of, or
constitute any default under, its certificate of incorporation or
by-laws or any indenture, mortgage, contract, agreement or instrument
to which the Guarantor is a party or by which any of its properties
may be bound;
(d) The execution, delivery and performance of this
Guaranty by the Guarantor has been duly authorized by all necessary
corporate action; this Guaranty has been duly executed and delivered
by the Guarantor and constitutes the legal, valid and binding
obligation of the Guarantor enforceable against the Guarantor in
accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency,
4
<PAGE> 56
reorganization, fraudulent conveyance, liquidation or similar laws
affecting creditors' rights generally and by general principles of
equity; and
(e) There is no action, suit or proceeding pending or, to
the knowledge of the Guarantor, threatened against the Guarantor
before or by any government authority that questions the validity or
enforceability of this Guaranty or the ability (financial or
otherwise) of the Guarantor to perform its obligations hereunder.
7. Corporate Existence, Etc. Guarantor agrees that, so long as
this Guaranty is in effect, Guarantor shall (i) preserve and maintain its
corporate existence; (ii) preserve and maintain all of its material rights,
privileges and franchises, except where the failure to preserve and maintain
any such right, privilege or franchise would not materially and adversely
affect the ability of Guarantor to perform its obligations under this Guaranty;
and (iii) comply with all the requirements of all applicable laws, rules,
regulations and orders of governmental or regulatory authorities except where
the failure to comply with any such requirement would not materially and
adversely affect the ability of Guarantor to perform its obligations under this
Guaranty.
8. Payments. Guarantor shall make all payments of amounts owing
pursuant to this Guaranty by wire transfer of immediately available funds to
NationsBank of Texas, N.A. (ABA# 111000025), or to such other account as the
Guaranteed Party may specify from time to time by notice to Guarantor, by not
later than Noon (New York time) on the due date for such payment.
9. Financial Statements. Guarantor agrees that, so long as this
Guaranty is in effect, Guarantor shall deliver to the Guaranteed Party:
(a) as soon as available and in any event within 90 days
after the end of the first three fiscal quarterly periods of each
fiscal year of Guarantor, the condensed consolidated balance sheet for
Guarantor and its consolidated subsidiaries for such period and the
related condensed consolidated statements of income and cash flows,
for the respective three, six or nine months then ended, set forth in
Guarantor's quarterly reports on Form 10-Q (or any other report
substituted therefor that contains substantially the information
required to be contained in such reports on the date hereof),
accompanied by a certificate of a senior financial officer of
Guarantor which certificate shall state that said financial statements
present fairly, in all material respects, the consolidated financial
position, results of operations and cash flows of Guarantor and its
consolidated subsidiaries in conformity with generally accepted
accounting principles, as at the end of, and for, such period (subject
to normal year-end audit adjustments and provided that certain
footnote disclosure and other details required to be included in
financial statements prepared in conformity with generally accepted
accounting principles but not normally included in interim, unaudited
financial statements need not be included in such interim financial
statements);
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<PAGE> 57
(b) as soon as available and in any event within 120 days
after the end of each fiscal year of Guarantor, statements of
consolidated income, cash flows and common stock equity and preferred
stock of Guarantor and its consolidated subsidiaries for such year and
the related consolidated balance sheet and the statement of
consolidated capitalization as at the end of such year, setting forth
in each case in comparative form the corresponding figures for the
preceding fiscal year, and accompanied by an opinion thereon of
independent certified public accountants of recognized national
standing;
(c) promptly upon their becoming available, copies of all
documents filed by Guarantor with the U.S. Securities and Exchange
Commission (or any governmental person or entity substituted therefor)
pursuant to Section 13 of the Securities Exchange Act of 1934 (or any
other reports substituted therefor that contain substantially the
information required to be contained in such reports on the date
hereof) issued after the date of this Guaranty; and
(d) promptly upon the mailing thereof to the shareholders
of Guarantor generally, copies of all financial statements, reports
and proxy statements so mailed.
10. Miscellaneous.
(a) Notices. All notices and other communications
required or permitted under the terms and provisions hereof shall be
given to the Guarantor in writing, addressed to Guarantor at 100 North
Stanton, El Paso, Texas 79978, Attention: President, or at such
other address as the Guarantor may provide from time to time in
writing to the Guaranteed Party.
(b) Amendments, Waiver, Assignment, etc. Neither this
Guaranty nor any of the terms hereof may be terminated, amended,
supplemented, waived or modified orally but only by an instrument in
writing signed by the Guarantor and the Guaranteed Party. The
obligations of the Guarantor under this Guaranty may not be assigned
or otherwise transferred without the prior written consent of the
Guaranteed Party.
(c) Section Headings, etc. The headings of the various
sections of this Guaranty are for the convenience of reference only
and shall not modify, define, expand or limit any of the terms or
provisions hereof.
(d) Severability of Provisions. Any provision of this
Guaranty which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
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(e) Successor and Assigns. This Guaranty shall be binding
upon the Guarantor and its successors and assigns and shall inure to
the benefit of the Guaranteed Party and its successors and assigns.
This Guaranty shall not be deemed to create any right in any Person
other than the Guaranteed Party and its successors and assigns and
shall not be construed in any respect to be a contract in whole or in
part for the benefit of any Person other than the Guaranteed Party and
its successors and assigns.
(f) Governing Law. THIS GUARANTY SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK.
(g) Entire Agreement. This Guaranty constitutes the entire
agreement and supersedes all prior agreements and understandings,
both written and oral, between the Guarantor and the Guaranteed Party
with respect to the subject matter hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 59
IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be
executed, all as of the day and year first above written.
EL PASO NATURAL GAS COMPANY, a
Delaware corporation
By: /s/ BRENT AUSTIN
-----------------------------------
Name: H. Brent Austin
Title: Executive Vice President
and Chief Financial Officer
[EL PASO GUARANTY]
<PAGE> 1
EL PASO ENERGY CORPORATION
STRATEGIC STOCK PLAN
EFFECTIVE AS OF JUNE 19, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1 PURPOSES........................................1
SECTION 2 DEFINITIONS 1
2.1 Beneficiary.....................................1
2.2 Board of Directors..............................1
2.3 Cause...........................................1
2.4 Change in Control...............................2
2.5 Code............................................3
2.6 Common Stock....................................3
2.7 Company.........................................3
2.8 Exchange Act....................................3
2.9 Fair Market Value...............................3
2.10 Good Reason.....................................4
2.11 Management Committee............................4
2.12 Option..........................................5
2.13 Option Price....................................5
2.14 Participant.....................................5
2.15 Performance Goals...............................5
2.16 Performance Period..............................5
2.17 Permanent Disability or Permanently Disabled....5
2.18 Plan Administrator..............................6
2.19 Restricted Stock................................6
2.20 Rule 16b-3......................................6
2.21 Section 16 Insider..............................6
2.22 Subsidiary......................................6
2.23 Total Shareholder Return........................6
SECTION 3 ADMINISTRATION..................................7
SECTION 4 ELIGIBILITY.....................................7
SECTION 5 SHARES AVAILABLE FOR THE PLAN...................8
SECTION 6 STOCK OPTIONS...................................8
SECTION 7 STOCK APPRECIATION RIGHTS......................12
SECTION 8 LIMITED STOCK APPRECIATION RIGHTS..............14
SECTION 9 RESTRICTED STOCK...............................15
SECTION 10 REGULATORY APPROVALS AND LISTING...............16
</TABLE>
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El Paso Energy Corporation i Table of Contents
Strategic Stock Plan
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 11 EFFECTIVE DATE AND TERM OF PLAN................17
SECTION 12 GENERAL PROVISIONS.............................17
SECTION 13 COMPLIANCE WITH RULE 16b-3.....................19
SECTION 14 AMENDMENT, TERMINATION OR DISCONTINUANCE
OF THE PLAN....................................20
</TABLE>
- --------------------------------------------------------------------------------
El Paso Energy Corporation ii Table of Contents
Strategic Stock Plan
<PAGE> 4
EL PASO ENERGY CORPORATION
STRATEGIC STOCK PLAN
SECTION 1 PURPOSES
The purposes of the El Paso Energy Corporation Strategic Stock Plan (the
"Plan") are to promote the interests of the Company (as defined below) and its
stockholders by strengthening its ability to attract and retain officers and
key management employees in the employ of the Company and its Subsidiaries (as
defined below) by furnishing suitable recognition of their ability and industry
which contributes materially to the success of the Company in strategic
transactions and to align the interests and efforts of the Company's officers
and key management employees to the long-term interests of the Company's
stockholders. The Plan provides for the grant of stock options, limited stock
appreciation rights, stock appreciation rights and restricted stock in
accordance with the terms and conditions set forth below.
SECTION 2 DEFINITIONS
Unless otherwise required by the context, the following terms when used in
the Plan shall have the meanings set forth in this Section 2:
2.1 BENEFICIARY
The person or persons designated by the Participant pursuant to Section
6.2(f) of this Plan to whom payments are to be paid pursuant to the terms of
the Plan in the event of the Participant's death.
2.2 BOARD OF DIRECTORS
The Board of Directors of the Company.
2.3 CAUSE
The Company may terminate the Participant's employment for Cause. A
termination for Cause is a termination evidenced by a resolution adopted in
good faith by the Management Committee (or by two-thirds (2/3) of the Board of
Directors in the case of a Management Committee member) that the Participant
(i) willfully and continually failed to substantially perform the Participant's
duties with the Company (other than a failure resulting from the Participant's
incapacity due to physical or mental illness) which failure continued for a
period of at least thirty (30) days after a written notice of demand for
substantial performance has been delivered to the Participant specifying the
manner in which the Participant has failed to substantially perform or (ii)
willfully engaged in conduct which is demonstrably and materially injurious to
the Company, monetarily or otherwise; provided, however, that no termination of
the Participant's employment shall be for Cause
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as set forth in clause (ii) above until (A) there shall have been delivered to
the Participant a copy of a written notice setting forth that the Participant
was guilty of the conduct set forth in clause (ii) above and specifying the
particulars thereof in detail and (B) the Participant shall have been provided
an opportunity to be heard by the Board of Directors (with the assistance of
the Participant's counsel if the Participant so desires). No act, nor failure
to act, on the Participant's part shall be considered "willful" unless the
Participant has acted, or failed to act, with an absence of good faith and
without a reasonable belief that the Participant's action or failure to act was
in the best interest of the Company. Notwithstanding anything contained in the
Plan to the contrary, no failure to perform by the Participant after notice of
termination is given by the Participant shall constitute Cause.
2.4 CHANGE IN CONTROL
As used in the Plan, a Change in Control shall be deemed to occur (i) if
any person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange
Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 of the
Exchange Act), directly or indirectly, of securities of the Company
representing twenty percent (20%) or more of the combined voting power of the
Company's then outstanding securities, (ii) upon the first purchase of the
Common Stock pursuant to a tender or exchange offer (other than a tender or
exchange offer made by the Company), (iii) upon the approval by the Company's
stockholders of a merger or consolidation, a sale or disposition of all or
substantially all of the Company's assets or a plan of liquidation or
dissolution of the Company, or (iv) if, during any period of two (2)
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors cease for any reason to constitute at least a majority
thereof, unless the election or nomination for the election by the Company's
stockholders of each new director was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who were directors at the beginning
of the period. Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur if the Company either merges or consolidates with or into
another company or sells or disposes of all or substantially all of its assets
to another company, if such merger, consolidation, sale or disposition is in
connection with a corporate restructuring wherein the stockholders of the
Company immediately before such merger, consolidation, sale or disposition own,
directly or indirectly, immediately following such merger, consolidation, sale
or disposition at least eighty percent (80%) of the combined voting power of
all outstanding classes of securities of the company resulting from such merger
or consolidation, or to which the Company sells or disposes of its assets, in
substantially the same proportion as their ownership in the Company immediately
before such merger, consolidation, sale or disposition. The acquisition and
merger of Tenneco Inc. shall not constitute a Change in Control under this
Plan.
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2.5 CODE
The Internal Revenue Code of 1986, as amended and in effect from time to
time, and the temporary or final regulations of the Secretary of the U.S.
Treasury adopted pursuant to the Code.
2.6 COMMON STOCK
The Common Stock of the Company, $3 par value per share, or such other
class of shares or other securities as may be applicable pursuant to the
provisions of Section 5.
2.7 COMPANY
El Paso Energy Corporation or El Paso Natural Gas Company, which ever
entity is publicly held.
2.8 EXCHANGE ACT
The Securities Exchange Act of 1934, as amended.
2.9 FAIR MARKET VALUE
As applied to a specific date, Fair Market Value shall be deemed to be the
mean between the highest and lowest quoted selling prices at which Common Stock
is sold on such date as reported in the NYSE-Composite Transactions by The Wall
Street Journal on such date, or if no Common Stock was traded on such date, on
the next preceding day on which Common Stock was so traded. Notwithstanding
the foregoing, upon the exercise,
(a) during the thirty (30) day period following a Change in Control,
of a limited stock appreciation right or stock appreciation right granted
in connection with an option more than six (6) months prior to a Change
in Control, or
(b) during the seven (7) month period following a Change in Control,
of a limited stock appreciation right or of a stock appreciation right
granted in connection with an option less than six (6) months prior to a
Change in Control,
On or after a Change in Control, Fair Market Value on the date of
exercise shall be deemed to be the greater of (i) the highest price per
share of Common Stock as reported in the NYSE-Composite Transactions by
The Wall Street Journal during the sixty (60) day period ending on the
day preceding the date of exercise of the stock appreciation right or
limited stock appreciation right, as the case may be, and (ii) if the
Change in Control is one described in clause (ii) or (iii) of Section
2.4, the highest price per share paid for Common Stock in connection with
such Change in Control.
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2.10 GOOD REASON
Good Reason shall mean the occurrence of any of the following events or
conditions, after a Change in Control:
(a) a change in the Participant's status, title, position or
responsibilities (including reporting responsibilities) which, in the
Participant's reasonable judgment, represents a substantial reduction of
the status, title, position or responsibilities as in effect immediately
prior thereto; the assignment to the Participant of any duties or
responsibilities which, in the Participant's reasonable judgment, are
inconsistent with such status, title, position or responsibilities; or
any removal of the Participant from or failure to reappoint or reelect
the Participant to any of such positions, except in connection with the
termination of the Participant's employment for Cause, for Permanent
Disability or as a result of his or her death, or by the Participant
other than for Good Reason;
(b) a reduction in the Participant's annual base salary;
(c) the Company's requiring the Participant (without the consent of
the Participant) to be based at any place outside a thirty-five (35) mile
radius of his or her place of employment prior to a Change in Control,
except for reasonably required travel on the Company's business which is
not materially greater than such travel requirements prior to the Change
in Control;
(d) the failure by the Company to (i) continue in effect any
material compensation or benefit plan in which the Participant was
participating at the time of the Change in Control or (ii) provide the
Participant with compensation and benefits at least equal (in terms of
benefit levels and/or reward opportunities) to those provided for under
each employee benefit plan, program and practice as in effect immediately
prior to the Change in Control (or as in effect following the Change in
Control, if greater);
(e) any material breach by the Company of any provision of the Plan;
or
(f) any purported termination of the Participant's employment for
Cause by the Company which does not otherwise comply with the terms of
the Plan.
2.11 MANAGEMENT COMMITTEE
A committee consisting of the Chief Executive Officer and such other
senior officers as the Chief Executive Officer shall designate. The Chief
Executive Officer may
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from time to time remove members from, or add members to, the Management
Committee.
2.12 OPTION
An option which is not intended to meet the requirements of an Incentive
Stock Option as defined in Section 422 of the Code.
2.13 OPTION PRICE
The price per share of Common Stock at which each option is exercisable.
2.14 PARTICIPANT
An eligible employee to whom an option, limited stock appreciation right,
stock appreciation right or Restricted Stock is granted under the Plan as set
forth in Section 4.
2.15 PERFORMANCE GOALS
The Plan Administrator shall establish one or more performance goals
("Performance Goals") for each Performance Period in writing. Each Performance
Goal selected for a particular Performance Period shall be a relative or
absolute measure of any one or more of the following (or such other measures as
the Plan Administrator may determine): Total Shareholder Return, operating
income, pre-tax profit, earnings per share, cash flow, return on capital,
return on equity, return on net assets, net income, debt reduction, safety,
return on investment or revenues. The foregoing terms shall have the same
meaning as used in the Company's financial statements, or if the terms are not
used in the Company's financial statements, they shall have the meaning
generally applied pursuant to general accepted accounting principles, or as
used in the industry, as applicable.
2.16 PERFORMANCE PERIOD
That period of time during which Performance Goals are measured to
determine the vesting or granting of options, limited stock appreciation
rights, stock appreciation rights or Restricted Stock, as the Plan
Administrator may determine.
2.17 PERMANENT DISABILITY OR PERMANENTLY DISABLED
A Participant shall be deemed to have become Permanently Disabled for
purposes of the Plan if the Plan Administrator shall find upon the basis of
medical evidence satisfactory to the Plan Administrator that the Participant is
totally disabled, whether due to physical or mental condition, so as to be
prevented from engaging in further employment by the Company or any of its
Subsidiaries, and that such disability will be permanent and continuous during
the remainder of the Participant's life; provided, that
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with respect to Section 16 Insiders such determination shall be made by the
Board of Directors, or the Compensation Committee thereof, if required.
2.18 PLAN ADMINISTRATOR
The Management Committee (or the Board of Directors or a committee thereof
in the case of Section 16 Insiders, if required), pursuant to Section 3, shall
administer the Plan.
2.19 RESTRICTED STOCK
Common Stock granted under the Plan that is subject to the requirements of
Section 9 and such other restrictions as the Plan Administrator deems
appropriate.
2.20 RULE 16B-3
Rule 16b-3 of the General Rules and Regulations under the Exchange Act.
2.21 SECTION 16 INSIDER
Any person who is selected by the Plan Administrator to receive options,
limited stock appreciation rights, stock appreciation rights and/or Restricted
Stock pursuant to the Plan and who is subject to the requirements of Section 16
of the Exchange Act, and the rules and regulations promulgated thereunder.
2.22 SUBSIDIARY
An entity that is designated by the Plan Administrator as a subsidiary for
purposes of the Plan and that is a corporation (or other form of business
association that is treated as a corporation for tax purposes) of which shares
(or other ownership interests) having more than fifty percent (50%) of the
voting power are owned or controlled, directly or indirectly, by the Company so
as to qualify as a "subsidiary corporation" (within the meaning of Section
424(f) of the Code).
2.23 TOTAL SHAREHOLDER RETURN
The sum of (i) the appreciation or depreciation in the price of a share of
a company's common stock, and (ii) the dividends and other distributions paid
and/or declared during the applicable Performance Period, expressed as a
percentage basis of the Fair Market Value of such share on the first day of the
applicable Performance Period, as calculated in a manner determined by the Plan
Administrator.
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SECTION 3 ADMINISTRATION
3.1 The Plan shall be administered by the Management Committee, unless the
Board of Directors shall otherwise determine the administrator of the Plan.
3.2 Except for the terms and conditions explicitly set forth in the Plan,
the Plan Administrator shall have full authority to construe and interpret the
Plan, to establish, amend and rescind rules and regulations relating to the
Plan, to select persons eligible to participate in the Plan, to grant options,
limited stock appreciation rights, stock appreciation rights and Restricted
Stock thereunder, to administer the Plan, to make recommendations to the Board
of Directors, to take all such steps and make all such determinations in
connection with the Plan and the options, limited stock appreciation rights,
stock appreciation rights and Restricted Stock granted thereunder as it may
deem necessary or advisable, which determination shall be final and binding
upon all Participants. The Plan Administrator shall cause the Company at its
expense to take any action related to the Plan which may be required or
necessary to comply with the provisions of any federal or state law or any
regulations issued thereunder.
3.3 Each member of the Management Committee acting as Plan Administrator,
while serving as such, shall be considered to be acting in his or her capacity
as an officer of the Company. Members of the Management Committee acting under
the Plan shall be fully protected in relying in good faith upon the advice of
counsel and shall incur no liability except for gross negligence or willful
misconduct in the performance of their duties.
SECTION 4 ELIGIBILITY
To be eligible for selection by the Plan Administrator to participate in
the Plan, an individual must be an officer or key management employee of the
Company, or of any Subsidiary, as of the date on which the Plan Administrator
grants to such individual an option, limited Stock appreciation right, stock
appreciation right or Restricted Stock or a person who, in the judgment of the
Plan Administrator, holds a position of responsibility and is able to
contribute substantially to the Company's continued success. Notwithstanding
the foregoing, the Plan Administrator may make a grant under this Plan to
individuals who are not officers or key management employees, provided that the
effectiveness of such grant shall be conditioned upon such individual becoming
an officer or key management employee of the Company or any Subsidiary.
Members of the Board of Directors of the Company who are full-time salaried
officers shall be eligible to participate. Members of the Board of Directors
who are not employees are not eligible to participate in this Plan.
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SECTION 5 SHARES AVAILABLE FOR THE PLAN
5.1 Subject to Section 5.2, the maximum number of shares that may be
issued for which options, limited stock appreciation rights, stock appreciation
rights and Restricted Stock may at any time be granted under the Plan is one
million (1,000,000) shares of Common Stock, from shares held in the Company's
treasury or out of the authorized but unissued shares of the Company, or partly
out of each, as shall be determined by the Plan Administrator.
5.2 In the event of a recapitalization, stock split, stock dividend,
exchange of shares, merger, reorganization, change in corporate structure or
shares of the Company or similar event, the Board of Directors, upon the
recommendation of the Plan Administrator, may make appropriate adjustments in
the number of shares authorized for the Plan and, with respect to outstanding
options, limited stock appreciation rights, stock appreciation rights, and
Restricted Stock, the Plan Administrator may make appropriate adjustments in
the number of shares and the Option Price.
SECTION 6 STOCK OPTIONS
6.1 Options may be granted to eligible employees in such number, and at
such times during the term of the Plan as the Plan Administrator shall
determine, the Plan Administrator taking into account the duties of the
respective employees, their present and potential contributions to the success
of the Company, and such other factors as the Plan Administrator shall deem
relevant in accomplishing the purposes of the Plan. The granting of an option
shall take place when the Plan Administrator by resolution, written consent or
other appropriate action determines to grant such an option to a particular
Participant at a particular price. Each option shall be evidenced by a written
instrument delivered by or on behalf of the Company containing provisions not
inconsistent with the Plan.
6.2 All options granted under the Plan shall be subject to the following
terms and conditions:
(a) Option Price
The Option Price shall be the Fair Market Value of the Common Stock
on the date the option is granted, unless otherwise determined by the
Plan Administrator.
(b) Duration of Options
Options shall be exercisable at such time and under such conditions
as set forth in the option grant, but in no event shall any option be
exercisable later than the tenth anniversary of the date of its grant.
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(c) Exercise of Options
Subject to Section 6.2(j), a Participant may not exercise an option
until the Participant has completed one (1) year of continuous employment
with the Company or any of its Subsidiaries from and including the date
on which the option is granted, or such shorter or longer period as the
Plan Administrator may determine in a particular case. This requirement
is waived in the event of death or Permanent Disability of a Participant
before such period of continuous employment is completed and may be
waived or modified in the agreement evidencing the option or by written
notice to the Participant from the Plan Administrator. Thereafter,
shares of Common Stock covered by an option may be purchased at one time
or in such installments over the balance of the option period as may be
provided in the option grant. Any shares not purchased on the applicable
installment date may be purchased thereafter at any time prior to the
final expiration of the option. To the extent that the right to purchase
shares has accrued thereunder, options may be exercised from time to time
by written notice to the Company setting forth the number of shares with
respect to which the option is being exercised.
(d) Payment
The purchase price of shares purchased under options shall be paid
in full to the Company upon the exercise of the option by delivery of
consideration equal to the product of the Option Price and the number of
shares purchased (the "Purchase Price"). Such consideration may be
either (i) in cash or (ii) at the discretion of the Plan Administrator,
in Common Stock already owned by the Participant for at least six (6)
months, or any combination of cash and Common Stock. The Fair Market
Value of such Common Stock as delivered shall be valued as of the day
prior to delivery. The Plan Administrator can determine at the time the
option is granted that additional forms of payment will be permitted. To
the extent permitted by the Plan Administrator and applicable laws and
regulations (including, but not limited to, federal tax and securities
laws, regulations and state corporate law), an option may also be
exercised by delivery of a properly executed exercise notice together
with irrevocable instructions to a broker to promptly deliver to the
Company the amount of sale or loan proceeds to pay the Purchase Price. A
Participant shall have none of the rights of a stockholder until the
shares of Common Stock are issued to the Participant.
If specifically authorized in the option grant, a Participant may
elect to pay all or a portion of the Purchase Price by having shares of
Common Stock with a Fair Market Value equal to all or a portion of the
Purchase Price be withheld from the shares issuable to the Participant
upon the exercise of the option. The Fair Market Value of such Common
Stock as is withheld shall be determined as of the same day as the
exercise of the option. In the event an option grant to a Section 16
Insider provides that the Purchase Price may be paid in whole or in part
by
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having shares with a Fair Market Value equal to all or a portion of the
Purchase Price withheld from the shares issuable to the Participant upon
the exercise of the option, the following restrictions shall apply. To
the extent required for compliance with Rule 16b-3, the withholding of
shares issuable upon the exercise of an option to pay the Purchase Price
by a Section 16 Insider must be approved by the Plan Administrator and
must be made (x) pursuant to an irrevocable election made six (6) months
in advance of the transaction, (y) during the period beginning on the
third business day following the date of release for publication of the
quarterly or annual summary statements of sales and earnings of the
Company and ending on the twelfth business day following such date, or
(z) otherwise in accordance with Rule 16b-3 and interpretations
thereunder.
(e) Restrictions
The Plan Administrator shall determine and reflect in the option
grant, with respect to each option, the nature and extent of the
restrictions, if any, to be imposed on the shares of Common Stock which
may be purchased thereunder, including, but not limited to, restrictions
on the transferability of such shares acquired through the exercise of
such options for such periods as the Plan Administrator may determine
and, further, that in the event a Participant's employment by the
Company, or a Subsidiary, terminates during the period in which such
shares are nontransferable, the Participant shall be required to sell
such shares back to the Company at such prices as the Plan Administrator
may specify in the option.
(f ) Nontransferability of Options
During a Participant's lifetime, an option may be exercisable only
by the Participant. Options granted under the Plan and the rights and
privileges conferred thereby shall not be subject to execution,
attachment or similar process and may not be transferred, assigned,
pledged or hypothecated in any manner (whether by operation of law or
otherwise) other than by will or by the applicable laws of descent and
distribution. Notwithstanding the foregoing, to the extent permitted by
applicable law and Rule 16b-3, the Plan Administrator may permit a
recipient of an option to designate in writing during the Participant's
lifetime a Beneficiary to receive and exercise the Participant's options
in the event of such Participant's death (as provided in Section 6.2(i)).
If any Participant attempts to transfer, assign, pledge, hypothecate or
otherwise dispose of any option under the Plan or of any right or
privilege conferred thereby, contrary to the provisions of the Plan, or
suffers the sale or levy or any attachment or similar process upon the
rights and privileges conferred hereby, all affected options held by such
Participant shall be immediately forfeited.
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(g) Purchase for Investment
The Plan Administrator shall have the right to require that each
Participant or other person who shall exercise an option under the Plan,
and each person into whose name shares of Common Stock shall be issued
pursuant to the exercise of an option, represent and agree that any and
all shares of Common Stock purchased pursuant to such option are being
purchased for investment only and not with a view to the distribution or
resale thereof and that such shares will not be sold except in accordance
with such restrictions or limitations as may be set forth in the option.
This Section 6.2(g) shall be inoperative during any period of time when
the Company has obtained all necessary or advisable approvals from
governmental agencies and has completed all necessary or advisable
registrations or other qualifications of shares of Common Stock as to
which options may from time to time be granted.
(h) Termination of Employment
Upon the termination of a Participant's employment for any reason
other than death or Permanent Disability, the Participant's option shall
be exercisable only to the extent that it was then exercisable and,
unless the term of the options expires sooner, such options shall expire
according to the following schedule; provided, that the Plan
Administrator may at any time determine in a particular case that
specific limitations and restrictions under the Plan shall not apply:
(i) Retirement
The option shall expire, unless exercised, thirty-six (36)
months after the Participant's retirement from the Company or any
Subsidiary.
(ii) Disability
The option shall expire, unless exercised, thirty-six (36)
months after the Participant's Permanent Disability.
(iii) Termination
Subject to subparagraph (iv) below, the option shall expire,
unless exercised, thirty-six (36) months after a Participant
resigns or is terminated as an employee of the Company or any of
its Subsidiaries, unless the Plan Administrator shall have
determined in a specific case that the option should expire sooner
or should terminate when the Participant's employment status
ceases.
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(iv) Termination Following a Change in Control
The option shall expire, unless exercised, thirty-six (36)
months after a Participant's termination of employment (other than
a termination by the Company for Cause or a voluntary termination
by the Participant other than for Good Reason) following a Change
in Control, provided that said termination of employment occurs
within two (2) years following a Change in Control.
(v) All Other Terminations
Notwithstanding subparagraphs (iii) and (iv) above, the
option shall expire upon termination of employment for Cause.
(i) Death of Participant
Upon the death of a Participant, whether during the Participant's
period of employment or during the thirty-six (36) month period referred
to in Sections 6.2(h)(i), (ii) and (iii), the option shall expire, unless
the original term of the option expires sooner, twelve (12) months after
the date of the Participant's death, unless the option is exercised
within such twelve (12) month period by the Participant's Beneficiary,
legal representatives, estate or the person or persons to whom the
deceased's option rights shall have passed by will or the laws of descent
and distribution; provided, that the Plan Administrator shall determine
in a particular case that specific limitations and restrictions under the
Plan shall not apply. Notwithstanding any other Plan provisions
pertaining to the times at which options may be exercised, no option
shall continue to be exercisable, pursuant to Section 6.2(h) or this
Section 6.2(i), at a time that would violate the maximum duration of
Section 6.2(b).
(j) Change in Control
Notwithstanding other Plan provisions pertaining to the times at
which options may be exercised, all outstanding options, to the extent
not then currently exercisable, shall become exercisable in full upon the
occurrence of a Change in Control. In addition, no option shall continue
to be exercisable at a time that would violate the maximum duration of
Section 6.2(b).
SECTION 7 STOCK APPRECIATION RIGHTS
7.1 The Plan Administrator may grant stock appreciation rights to
Participants in connection with any option granted under the Plan, either at
the time of the grant of such option or at any time thereafter during the term
of the option. Such stock appreciation rights shall cover the same shares
covered by the options (or such lesser
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number of shares of Common Stock as the Plan Administrator may determine) and
shall, except as provided in Section 7.3, be subject to the same terms and
conditions as the related options and such further terms and conditions not
inconsistent with the Plan as shall from time to time be determined by the Plan
Administrator.
7.2 Each stock appreciation right shall entitle the holder of the related
option to surrender to the Company unexercised the related option, or any
portion thereof, and to receive from the Company in exchange therefor an amount
equal to the excess of the Fair Market Value of one share of Common Stock on
the date the right is exercised over the Option Price per share times the
number of shares covered by the option, or portion thereof, which is
surrendered. Payment shall be made in shares of Common Stock valued at Fair
Market Value as of the date the right is exercised, or in cash, or partly in
shares and partly in cash, at the discretion of the Plan Administrator;
provided, however, that payment shall be made solely in cash with respect to a
stock appreciation right which is exercised within seven (7) months following a
Change in Control. Notwithstanding the foregoing and to the extent required by
Rule 16b-3, a payment, in whole or in part, of cash upon exercise of a stock
appreciation right by a Section 16 Insider may be made only if the Plan
Administrator approves such election to receive cash and the right is exercised
during the period beginning on the third business day following the date of
release for publication of the quarterly or annual summary statements of sales
and earnings of the Company and ending on the twelfth business day following
such date. Stock appreciation rights may be exercised from time to time upon
actual receipt by the Company of written notice stating the number of shares of
Common Stock with respect to which the stock appreciation right is being
exercised. The value of any fractional shares shall be paid in cash.
7.3 Stock appreciation rights are subject to the following restrictions:
(a) Each stock appreciation right shall be exercisable at such time
or times as the option to which it relates shall be exercisable, or at
such other times as the Plan Administrator may determine; provided,
however, that such right shall not be exercisable until the Participant
shall have completed a six (6) month period of continuous employment with
the Company or any of its Subsidiaries immediately following the date on
which the stock appreciation right is granted. In the event of death or
Permanent Disability of a Participant during employment but before the
Participant has completed such period of continuous employment, such
stock appreciation right shall be exercisable; but only within the period
specified in the related option. In the event of a Change in Control,
the requirement that a Participant shall have completed a six (6) month
period of continuous employment is waived with respect to a Participant
who is employed by the Company at the time of the Change in Control but
who, within the six (6) month period, voluntarily terminates employment
for Good Reason or is terminated by the Company other than for Cause.
Notwithstanding the foregoing, a stock appreciation right may not be
exercised for cash by a Section 16 Insider under any circumstances until
the expiration of the six (6) month period required under Rule 16b-3.
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(b) Except in the event of a Change in Control, the Plan
Administrator in its sole discretion may approve or deny in whole or in
part a request to exercise a stock appreciation right. Denial or
approval of such request shall not require a subsequent request to be
similarly treated by the Plan Administrator.
(c) The right of a Participant to exercise a stock appreciation
right shall be canceled if and to the extent the related option is
exercised. To the extent that a stock appreciation right is exercised,
the related option shall be deemed to have been surrendered unexercised
and canceled.
(d) A holder of stock appreciation rights shall have none of the
rights of a stockholder until shares of Common Stock, if any, are issued
to such holder pursuant to such holder's exercise of such rights.
(e) The acquisition of Common Stock pursuant to the exercise of a
stock appreciation right shall be subject to the same restrictions as
would apply to the acquisition of Common Stock acquired upon acquisition
of the related option, as set forth in Section 6.2.
SECTION 8 LIMITED STOCK APPRECIATION RIGHTS
8.1 The Plan Administrator may grant limited stock appreciation rights to
Participants in connection with any options granted under the Plan, either at
the time of the grant of such option or at any time thereafter during the term
of the option. Such limited stock appreciation rights shall cover the same
shares covered by the options (or such lesser number of shares of Common Stock
as the Plan Administrator may determine) and shall, except as provided in
Section 8.3, be subject to the same terms and conditions as the related options
and such further terms and conditions not inconsistent with the Plan as shall
from time to time be determined by the Plan Administrator.
8.2 Each limited stock appreciation right shall entitle the holder of the
related option to surrender to the Company the unexercised portion of the
related option and to receive from the Company in exchange therefor an amount
in cash equal to the excess of the Fair Market Value of one (1) share of Common
Stock on the date the right is exercised over the Option Price per share times
the number of shares covered by the option, or portion thereof, which is
surrendered.
8.3 Limited stock appreciation rights are subject to the following
restrictions:
(a) Each limited stock appreciation right shall be exercisable in
full for a period of seven (7) months following the date of a Change in
Control regardless of whether the holder is employed by the Company or
any of its Subsidiaries on the date the right is exercised; provided,
however, that limited stock appreciation rights may not be exercised
under any circumstances until the expiration of the six
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El Paso Energy Corporation Page 14
Strategic Stock Plan
<PAGE> 18
(6) month period required under Rule 16b-3. Limited stock appreciation
rights shall be exercisable only to the same extent and subject to the
same conditions as the options related thereto are exercisable, as
provided in Section 6.2(j).
(b) The right of a Participant to exercise a limited stock
appreciation right shall be canceled if and to the extent the related
option is exercised. To the extent that a limited stock appreciation
right is exercised, the related option shall be deemed to have been
surrendered unexercised and canceled.
SECTION 9 RESTRICTED STOCK
9.1 Restricted Stock may be granted to Participants in such number and at
such times during the term of the Plan as the Plan Administrator shall
determine, the Plan Administrator taking into account the duties of the
respective Participants, their present and potential contributions to the
success of the Company, and such other factors as the Plan Administrator shall
deem relevant in accomplishing the purposes of the Plan. The granting of
Restricted Stock shall take place when the Plan Administrator by resolution,
written consent or other appropriate action determines to grant such Restricted
Stock to a particular Participant. Each grant shall be evidenced by a written
instrument delivered by or on behalf of the Company containing provisions not
inconsistent with the Plan. The Participant receiving a grant of Restricted
Stock shall be recorded as a stockholder of the Company. Each Participant who
receives a grant of Restricted Stock shall have all the rights of a stockholder
with respect to such shares (except as provided in the restrictions on
transferability), including the right to vote the shares and receive dividends
and other distributions; provided, however, that no Participant awarded
Restricted Stock shall have any right as a stockholder with respect to any
shares subject to the Participant's Restricted Stock grant prior to the date of
issuance to the Participant of a certificate or certificates for such shares,
or before the effective date of any book entry form, as applicable.
9.2 A grant of Restricted Stock shall entitle a Participant to receive, on
the date or dates designated by the Plan Administrator, upon payment to the
Company of the par value of the Common Stock in a manner determined by the Plan
Administrator, the number of shares of Common Stock selected by the Plan
Administrator. The Plan Administrator may require, under such terms and
conditions as it deems appropriate or desirable, that the certificates for
Restricted Stock delivered under the Plan may be held in custody by a bank or
other institution, or that the Company may itself hold such shares in custody
until the Restriction Period (as defined in Section 9.3) expires or until
restrictions thereon otherwise lapse, and may require, as a condition of any
issuance of Restricted Stock that the Participant shall have delivered a stock
power endorsed in blank relating to the shares of Restricted Stock.
9.3 During a period of years following the date of grant, as determined by
the Plan Administrator, which shall in no event be less than one (1) year
and/or until the required Performance Goals are achieved, if applicable (the
"Restriction Period"), the
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El Paso Energy Corporation Page 15
Strategic Stock Plan
<PAGE> 19
Restricted Stock may not be sold, assigned, transferred, pledged, hypothecated
or otherwise encumbered or disposed of by the recipient, except in the event of
death or Permanent Disability, the transfer to the Company as provided under
the Plan or the Plan Administrator's waiver or modification of such
restrictions in the agreement evidencing the grant of Restricted Stock, or by
resolution of the Plan Administrator adopted at any time.
9.4 Except as provided in Section 9.5 or 9.6, or as determined by the Plan
Administrator, if a Participant terminates employment with the Company for any
reason before the expiration of the Restriction Period, all shares of
Restricted Stock still subject to restriction shall be forfeited by the
Participant to the Company. In addition, in the event of any attempt by the
Participant to sell, exchange, transfer, pledge or otherwise dispose of shares
of Restricted Stock in violation of the terms of the Plan, such shares shall be
forfeited to the Company.
9.5 The Restriction Period for any Participant shall be deemed to end and
all restrictions on shares of Restricted Stock shall lapse, upon the
Participant's death or Permanent Disability or any termination of employment
determined by the Plan Administrator to end the Restriction Period.
9.6 The Restriction Period for any Participant shall be deemed to end and
all restrictions on shares of Restricted Stock shall terminate immediately upon
a Change in Control.
9.7 When the restrictions imposed by Section 9.3 expire or otherwise lapse
with respect to one or more shares of Restricted Stock, the Company shall
deliver to the Participant (or the Participant's legal representative,
Beneficiary or heir) one (1) share of Common Stock for each share of Restricted
Stock. At that time, the agreement referred to in Section 9.1, as it relates
to such shares, shall be terminated.
9.8 Subject to Section 9.2, a Participant entitled to receive Restricted
Stock under the Plan shall be issued a certificate for such shares. Such
certificate shall be registered in the name of the Participant, and shall bear
an appropriate legend reciting the terms, conditions and restrictions, if any,
applicable to such shares and shall be subject to appropriate stop-transfer
orders.
SECTION 10 REGULATORY APPROVALS AND LISTING
10.1 The Company shall not be required to issue any certificate for shares
of Common Stock upon the exercise of an option or a stock appreciation right
granted under the Plan, with respect to a grant of Restricted Stock:
(a) obtaining any approval or ruling from the Securities and
Exchange Commission, the Internal Revenue Service or any other
governmental agency
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El Paso Energy Corporation Page 16
Strategic Stock Plan
<PAGE> 20
which the Company, in its sole discretion, shall determine to be
necessary or advisable;
(b) listing of such shares on any stock exchange on which the Common
Stock may then be listed; or
(c) completing any registration or other qualification of such
shares under any federal or state laws, rulings or regulations of any
governmental body which the Company, in its sole discretion, shall
determine to be necessary or advisable.
All certificates for shares of Common Stock delivered under the Plan shall
also be subject to such stop-transfer orders and other restrictions as the Plan
Administrator may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which Common Stock is then listed and any applicable federal or State
securities laws, and the Plan Administrator may cause a legend or legends to be
placed on any such certificates to make appropriate reference to such
restrictions. The foregoing provisions of this paragraph shall not be
effective if and to the extent that the shares of Common Stock delivered under
the Plan are covered by an effective and current registration statement under
the Securities Act of 1933, as amended, or if and so long as the Plan
Administrator determines that application of such provisions as no longer
required or desirable. In making such determination, the Plan Administrator
may rely upon an opinion of counsel for the Company.
SECTION 11 EFFECTIVE DATE AND TERM OF PLAN
The Plan shall be effective as of June 19, 1996 provided that the Plan is
adopted by the Board. Subject to the foregoing condition, options, limited
stock appreciation rights, stock appreciation rights and Restricted Stock may
be granted pursuant to the Plan from time to time within the period commencing
upon adoption of the Plan by the Board of Directors and ending ten (10) years
after the of such adoption. Options, limited stock appreciation rights, stock
appreciation rights and Restricted Stock theretofore granted may extend beyond
that date and the terms and conditions of the Plan shall continue to apply
thereto and to shares of Common Stock acquired thereunder. To the extent
required for compliance with Rule 16b-3, shares of Common Stock underlying
options, limited stock appreciation rights, stock appreciation rights,
Restricted Stock and Common Stock granted to Section 16 Insiders may not be
sold until a date at least six (6) months after the date of such grant.
SECTION 12 GENERAL PROVISIONS
12.1 Nothing contained in the Plan, or in any option, limited stock
appreciation right, stock appreciation right or Restricted Stock granted
pursuant to the Plan, shall
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El Paso Energy Corporation Page 17
Strategic Stock Plan
<PAGE> 21
confer upon any employee any right with respect to continuance of employment by
the Company or a Subsidiary, nor interfere in any way with the right of the
Company or a Subsidiary to terminate the employment of such employee at any
time with or without assigning any reason therefor.
12.2 Grants, vesting or payment of stock options, limited stock
appreciation rights, stock appreciation rights or Restricted Stock shall not be
considered as part of a Participant's salary or used for the calculation of any
other pay, allowance, pension or other benefit unless otherwise permitted by
other benefit plans provided by the Company or its Subsidiaries, or required by
law or by contractual obligations of the Company or its Subsidiaries.
12.3 The right of a Participant or Beneficiary to the payment of any
compensation under the Plan may not be assigned, transferred, pledged or
encumbered, nor shall such right or other interests be subject to attachment,
garnishment, execution or other legal process.
12.4 Leaves of absence for such periods and purposes conforming to the
personnel policy of the Company, or of its Subsidiaries, as applicable, shall
not be deemed terminations or interruptions of employment, unless a Participant
commences a leave of absence from which he or she is not expected to return to
active employment with the Company or its Subsidiaries.
12.5 In the event a Participant is transferred from the Company to a
Subsidiary, or vice versa, or is promoted or given different responsibilities,
the stock options, limited stock appreciation rights, stock appreciation rights
and Restricted Stock granted to the Participant prior to such date shall not be
affected. Notwithstanding the foregoing or any other provision in this Plan,
in the event a Participant becomes an officer or director of the Company
subject to Section 16(b) of the Exchange Act, the Plan Administrator may take
any and all action necessary to prevent any violation of Section 16(b),
including, but not limited to, accelerating the vesting of options, rights or
Restricted Stock, canceling any unvested options, rights or Restricted Stock
and/or requiring the Participant to exercise any and all vested options or
rights at such times as the Plan Administrator may determine.
12.6 The Plan shall be construed and governed in accordance with the laws
of the State of Texas, except that it shall be construed and governed in
accordance with applicable federal law in the event that such federal law
preempts state law.
12.7 Appropriate provision shall be made for all taxes required to be
withheld in connection with the exercise, grant or other taxable event with
respect to options, limited stock appreciation rights, stock appreciation
rights and Restricted Stock under the applicable laws or regulations of any
governmental authority, whether federal, state or local and whether domestic or
foreign. Unless otherwise provided in the grant, a Participant is permitted to
deliver shares of Common Stock (including shares acquired pursuant to the
exercise of an option or stock appreciation right other than the option or
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El Paso Energy Corporation Page 18
Strategic Stock Plan
<PAGE> 22
stock appreciation right currently being exercised, to the extent permitted by
applicable regulations) for payment of withholding taxes on the exercise of an
option, stock appreciation right, or limited stock appreciation right, upon the
grant or vesting of Restricted Stock. At the election of the Plan
Administrator or, subject to approval of the Plan Administrator at its sole
discretion, at the election of a Participant, shares of Common Stock may be
withheld from the shares issuable to the Participant upon the exercise of an
option or stock appreciation right or upon the vesting of the Restricted Stock
to satisfy tax withholding obligations. The Fair Market Value of Common Stock
as delivered pursuant to this Section 12.7 shall be valued as of the day prior
to delivery, and shall be calculated in accordance with Section 2.9. The
withholding of shares of Common Stock to pay tax obligations in connection with
the exercise of an option or stock appreciation right or the vesting of
Restricted Stock by a Section 16 Insider must be approved by the Plan
Administrator and must occur (i) pursuant to an irrevocable election made six
(6) months in advance of the transaction, (ii) during the period beginning on
the third business day following the date of release for publication of the
quarterly or annual summary statements of sales and earnings of the Company and
ending on the twelfth business day following such date, or (iii) otherwise in
accordance with the provisions of Rule 16b-3 and interpretations thereunder.
In the event Section 16 of the Exchange Act and rules thereunder, including
Rule 16b-3, is amended or interpreted to permit shares of Common Stock to be
withheld to pay tax obligations outside the periods described in clause (i) or
(ii) of the preceding sentence, or without Plan Administrator approval, the
Plan Administrator may determine that such provisions shall no longer apply to
Section 16 Insiders.
Any Participant that makes a Section 83(b) election under the Code shall,
within ten (10) days of making such election, notify the Company in writing of
such election and shall provide the Company with a copy of such election form
filed with the Internal Revenue Service.
Tax advice should be obtained by the Participant prior to the
Participant's (i) entering into any transaction under or with respect to the
Plan, (ii) designating or choosing the times of distributions under the Plan,
or (iii) disposing of any shares of Common Stock issued under the Plan.
SECTION 13 COMPLIANCE WITH RULE 16B-3
The Company's intention is that, so long as any of the Company's equity
securities are registered pursuant to Section 12(b) or 12(g) of the Exchange
Act, with respect to awards granted to or held by Section 16 Insiders, the Plan
shall comply in all respects with Rule 16b-3, or with any other exemption
available pursuant to Section 16 of the Exchange Act or rules thereunder, and,
if any Plan provision is later found not to be in compliance with Rule 16b-3,
that provision shall be deemed modified as necessary to meet the requirements
of Rule 16b-3.
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El Paso Energy Corporation Page 19
Strategic Stock Plan
<PAGE> 23
Notwithstanding anything in the Plan to the contrary, the Board of
Directors, in its absolute discretion, may bifurcate the Plan so as to
restrict, limit or condition the use of any provision of the Plan to
Participants who are Section 16 Insiders without so restricting, limiting or
conditioning the Plan with respect to other Participants.
SECTION 14 AMENDMENT, TERMINATION OR DISCONTINUANCE
OF THE PLAN
14.1 Subject to the Board of Directors and Section 14.2, the Plan
Administrator may from time to time make such amendments to the Plan as it may
deem proper and in the best interest of the Company, including, but not limited
to, any amendment necessary to ensure that the Company may obtain any
regulatory approval referred to in Section 10; provided, however, that no
change in any option, limited stock appreciation right, stock appreciation
right or Restricted Stock theretofore granted may be made without the consent
of the Participant which would impair the right of the Participant to acquire
or retain Common Stock or cash that the Participant may have acquired as a
result of the Plan.
14.2 The Board of Directors may at any time suspend the operation of or
terminate the Plan with respect to any shares of Common Stock or rights which
are not at that time subject to option, limited stock appreciation right, stock
appreciation right or grant of Restricted Stock.
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El Paso Energy Corporation Page 20
Strategic Stock Plan
<PAGE> 1
EL PASO NATURAL GAS COMPANY
EARNINGS PER COMMON SHARE
Form 10-Q, Exhibit 11
<TABLE>
<CAPTION>
Second Quarter Six Months
------------- ------------- ----------- -----------
1996 1995 1996 1995
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Income available for common stock dividends $ 24,425,000 $ 20,200,000 -$10,823,000 $42,170,000
Fully diluted average common shares outstanding 36,282,392 35,037,981 36,067,908 35,222,724
Fully diluted earnings per common share $ 0.6732 $ 0.5765 -$0.3001 $1.1972
</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
------------- ------------- ----------- -----------
1996 1995 1996 1995
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Total primary earnings per common share $ 0.6885 $ 0.5805 -$0.3069 $1.2057
Fully diluted earnings per common share
(includes stock options) $ 0.6732 $ 0.5765 -$0.3001 $1.1972
Percent dilution 2.2222% 0.6891% 2.2157% 0.7050%
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 50,144
<SECURITIES> 0
<RECEIVABLES> 366,823
<ALLOWANCES> 0<F1>
<INVENTORY> 35,298
<CURRENT-ASSETS> 494,980
<PP&E> 1,989,134
<DEPRECIATION> 0<F1>
<TOTAL-ASSETS> 2,763,962
<CURRENT-LIABILITIES> 1,020,339
<BONDS> 669,540
<COMMON> 112,106
0
0
<OTHER-SE> 576,047
<TOTAL-LIABILITY-AND-EQUITY> 2,763,962
<SALES> 0
<TOTAL-REVENUES> 1,192,919
<CGS> 0
<TOTAL-COSTS> 1,164,245
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,955
<INCOME-PRETAX> (17,772)
<INCOME-TAX> (6,949)
<INCOME-CONTINUING> (10,823)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,823)
<EPS-PRIMARY> (0.31)
<EPS-DILUTED> 0
<FN>
<F1>Not separately identified in the Consolidated Financial Statements or
accompanying notes thereto.
</FN>
</TABLE>
