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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 COMMISSION FILE NO. 1-8157
PANHANDLE EASTERN CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE 74-2150460
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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5400 WESTHEIMER COURT
P.O. BOX 1642
HOUSTON, TEXAS 77251-1642
(Address, including zip code, of principal executive offices)
(713) 627-5400
(Telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $1.00 par value The New York Stock Exchange, Inc.
The Pacific Stock Exchange Inc.
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Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the 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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in any definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
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State the aggregate market value of the voting stock held by non-affiliates
of the Registrant. The aggregate market value is computed by reference to the
last sale price of the Registrant's Common Stock, on the Composite Tape -- New
York Stock Exchange Transactions, on February 29, 1996.
$4,314,499,490
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<CAPTION>
NUMBER OF SHARES OUTSTANDING
TITLE OF EACH CLASS AS OF FEBRUARY 29, 1996
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Common Stock, $1.00 par value 150,724,873
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DOCUMENTS INCORPORATED BY REFERENCE
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PART OF
FORM 10-K
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Part I Portions of the Annual Report to Stockholders of PanEnergy Corp for the year ended
December 31, 1995
Part II Portions of the Annual Report to Stockholders of PanEnergy Corp for the year ended
December 31, 1995
Part III Portions of the Definitive Proxy Statement, dated March 15, 1996, for the Annual
Meeting of Stockholders of Panhandle Eastern Corporation, to be held April 24, 1996
Part IV Portions of the Annual Report to Stockholders of PanEnergy Corp for the year ended
December 31, 1995
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TABLE OF CONTENTS
PART I
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Item 1. Business....................................................................... 1
General........................................................................ 1
Natural Gas Transmission Group................................................. 2
LNG Operations................................................................. 5
Energy Services Group.......................................................... 5
Investments.................................................................... 7
Regulation..................................................................... 8
Rates and Regulatory Proceedings............................................... 9
Competition.................................................................... 9
Capital Expenditures For Clean Air Act Amendments.............................. 10
General Matters................................................................ 10
Item 2. Properties..................................................................... 10
Item 3. Legal Proceedings.............................................................. 13
Item 4. Submission of Matters to a Vote of Security Holders............................ 13
Executive Officers of Registrant......................................................... 13
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.......... 14
Item 6. Selected Financial Data........................................................ 14
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations..................................................................... 14
Item 8. Financial Statements and Supplementary Data.................................... 14
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure..................................................................... 14
PART III
Item 10. Directors and Executive Officers of the Registrant............................. 14
Item 11. Executive Compensation......................................................... 14
Item 12. Security Ownership of Certain Beneficial Owners and Management................. 14
Item 13. Certain Relationships and Related Transactions................................. 14
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................ 15
Index to Financial Statements and Schedules.............................................. 21
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All gas volumes used herein are stated at 14.73 pounds per square inch, on
a dry basis, at 60 degrees Fahrenheit.
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PART I
ITEM 1. BUSINESS
GENERAL
Panhandle Eastern Corporation, d/b/a PanEnergy Corp ("PEC"), is a holding
company whose subsidiaries are primarily engaged in the interstate
transportation and storage of natural gas, in the gathering, processing,
marketing and intrastate transportation of natural gas, natural gas liquids
("NGLs") and crude oil, and in the marketing of electric power and
risk-management services. As used herein, and unless otherwise stated, "PEC"
refers to Panhandle Eastern Corporation, d/b/a PanEnergy Corp, and "Company"
refers to Panhandle Eastern Corporation, d/b/a PanEnergy Corp, and its
subsidiaries.
Services relating to the interstate transportation and storage of natural
gas are provided by the Company's natural gas transmission group. This group
includes four major interstate pipeline subsidiaries of PEC -- Texas Eastern
Transmission Corporation ("TETCO"), Algonquin Gas Transmission Company
("Algonquin"), Panhandle Eastern Pipe Line Company ("PEPL") and Trunkline Gas
Company ("Trunkline"). Together, these subsidiaries own and operate one of the
nation's largest gas transmission networks. This fully interconnected
22,000-mile system can receive natural gas from most major North American
producing regions for delivery to markets in the Mid-Atlantic, New England and
Midwest states.
Services relating to the gathering, processing, marketing, intrastate
transportation and storage of natural gas, NGLs and crude oil, as well as the
marketing of electric power and risk-management services, are provided by the
Company's energy services group. This group operates through PanEnergy Services,
Inc. and its subsidiaries.
PEC also owns other subsidiaries engaged in domestic and international
energy development, importation of liquefied natural gas ("LNG") from Algeria,
and the transportation, storage and regasification of LNG. In addition, PEC,
through subsidiaries, owns interests in a partnership operating a cogeneration
facility; in a joint venture that owns and operates a chemical-grade methanol
plant and an MTBE (methyl tertiary butyl ether) plant in Saudi Arabia; and in
master limited partnerships engaged in the transportation of natural gas in
interstate commerce and in the transportation and storage of petroleum products.
Financial information concerning the Company's business segments and
sources of revenues is set forth in Note 3 of Notes to Consolidated Financial
Statements on pages 43 and 44, and in the Consolidated Statement of Income on
page 37, of the 1995 Annual Report to Stockholders of PanEnergy Corp (the
"Annual Report"), filed as Exhibit 13, which are incorporated herein by
reference.
PEC is a Delaware corporation organized in 1981 in connection with the
corporate restructuring of PEPL, which was incorporated in 1929. Executive
offices of PEC are located at 5400 Westheimer Court, Houston, Texas 77056-5310,
and the telephone number is (713) 627-5400.
Certain Terms
Certain terms used in the description of the Company's business are
explained below.
Capacity Release Program: An arrangement that allows firm open-access
transportation or storage customers to assign pipeline capacity rights to third
parties pursuant to procedures prescribed by FERC.
Federal Energy Regulatory Commission ("FERC"): The agency that regulates
the transportation of natural gas in interstate commerce under the Natural Gas
Act of 1938 (the "NGA") and the Natural Gas Policy Act of 1978 (the "NGPA").
FERC's jurisdiction includes rate-making, construction of facilities and
authorization to provide service.
Firm Service: Transportation or storage of third-party gas, for which
customers pay a charge to reserve pipeline or storage capacity.
Gathering Systems: Pipeline, processing and related facilities that access
production and other sources of natural gas supplies for delivery to mainline
transportation systems.
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Interruptible Service: Transportation or storage of third-party gas
provided by pipelines on a capacity-available basis.
Local Distribution Company ("LDC"): A municipal or investor-owned utility
that sells or transports gas to local commercial, industrial and residential
consumers.
Merchant Service: Prior to FERC Order 636, traditional service volumes
aggregated by pipelines, under purchase contracts with producers, and
transported and resold to natural gas utilities and other customers at
FERC-approved rates.
Order 636: The FERC pipeline service restructuring rule that guided the
industry's transition to unbundled, open-access pipeline contract transportation
and related services, creating a more market-responsive environment.
Reservation Charge: The amount paid by firm transportation or storage
customers to reserve pipeline or storage capacity.
Straight Fixed-Variable ("SFV"): A rate design that assigns return on
equity, related taxes and other fixed costs to the reservation component of
rates.
Transition Costs: Those costs incurred as a result of the pipelines'
transition to unbundled services under Order 636. The disposition of natural gas
contracts tied to the former merchant function comprises the majority of such
costs.
Units of Measure:
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MMcf: Million cubic feet
MMcf/d: Million cubic feet per day
Bcf: Billion cubic feet
Bcf/d: Billion cubic feet per day
Tcf: Trillion cubic feet
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NATURAL GAS TRANSMISSION GROUP
General
The Company's interstate pipelines serve principal markets in the
Mid-Atlantic, New England and Midwest states. During 1995, the pipelines
delivered approximately 12% of natural gas consumed in the U.S.
Market and Supply Area Deliveries
Market-area natural gas deliveries by the Company's interstate pipelines
were 2.36 Tcf in 1995, up from the 2.22 Tcf delivered in 1994. Consolidated
pipeline deliveries totaled 2.63 Tcf, compared to 2.50 Tcf in 1994.
As used herein, "market area" with respect to each pipeline refers to those
portions of the pipeline that include primarily delivery points for natural gas
leaving the pipeline, and "supply area" with respect to each pipeline refers to
those portions of the pipeline that include primarily receipt points for gas
entering the pipeline. Market-area deliveries represent volumes of gas delivered
to the market area, while supply-area deliveries represent volumes of gas
delivered to the supply area. Generally, rates for supply-area service have
lower margins than rates for market-area service.
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Set forth below is information concerning throughput volumes for the
Company's interstate Natural Gas Transmission Group for 1995, 1994 and 1993
(volumes in Bcf).
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1995 % TOTAL 1994 % TOTAL 1993 % TOTAL
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Market Area
TETCO.............................. 1,069 41 1,014 41 960 40
Algonquin.......................... 322 12 279 11 238 10
PEPL............................... 620 24 579 23 560 23
Trunkline.......................... 390 15 434 17 455 19
Intercompany Eliminations.......... (43) (2) (87) (3) (120) (5)
----- --- ----- --- ----- ---
Total...................... 2,358 90 2,219 89 2,093 87
===== === ===== === ===== ===
Supply Area
TETCO.............................. 123 5 141 5 118 5
PEPL............................... 39 1 41 2 43 2
Trunkline.......................... 109 4 97 4 147 6
Intercompany Eliminations.......... -- -- -- -- (1) --
----- --- ----- --- ----- ---
Total...................... 271 10 279 11 307 13
----- --- ----- --- ----- ---
Total Volumes........................ 2,629 100 2,498 100 2,400 100
===== === ===== === ===== ===
Summary by Pipeline (Total Volumes)
TETCO.............................. 1,192 46 1,155 46 1,078 45
Algonquin.......................... 322 12 279 11 238 10
PEPL............................... 659 25 620 25 603 25
Trunkline.......................... 499 19 531 21 602 25
Intercompany Eliminations.......... (43) (2) (87) (3) (121) (5)
----- --- ----- --- ----- ---
Total...................... 2,629 100 2,498 100 2,400 100
===== === ===== === ===== ===
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Demand for gas transmission on the Company's pipeline systems is seasonal,
with the highest throughput occurring during the colder periods in the first and
fourth quarters -- the winter heating season. However, the SFV rate design
required by Order 636 has resulted in pipeline earnings generally being more
evenly distributed throughout the year.
Northeast Area
TETCO. TETCO's major customers are located in Pennsylvania, New Jersey and
New York, and include LDCs serving the Pittsburgh, Philadelphia, Newark and New
York City metropolitan areas. Total throughput increased 3% in 1995 as a result
of new expansion projects, including the Integrated Transportation Program
("ITP") and Flex-X, as well as more efficient utilization of the pipeline
system.
In the fall of 1995, the second portion of the ITP consisting of 45 MMcf/d
was placed in service. ITP utilizes the transportation services of all four of
the Company's interstate natural gas pipeline systems, with ultimate delivery by
TETCO and Algonquin. The final phase of this 200 MMcf/d project is scheduled to
be completed in 1996 with the addition of 25 MMcf/d of service. ITP provides
firm transportation service for five Northeast customers.
TETCO initiated 33 MMcf/d of firm service in November 1995 for PECO Energy
Company and UGI Utilities, Inc. under 20-year contracts pursuant to the
Company's Flex-X program. PEPL provides storage service for the project.
Negotiations are proceeding with customers for 64 MMcf/d of winter-seasonal
natural gas service through the WinterNet project. WinterNet, a proposed venture
by TETCO and Consolidated Natural Gas Company, would phase in new services for
Mid-Atlantic markets over four years beginning in 1997. The project is expected
to be filed with FERC in the second quarter of 1996.
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Algonquin. Algonquin's major customers include LDCs and electric power
generators located in the Boston, Hartford, New Haven, Providence and Cape Cod
areas.
Algonquin's total throughput for 1995 increased by 15% compared to 1994,
primarily as a result of increased natural gas usage by electric power
generators.
Algonquin placed its Chaplin, Connecticut, compressor station into service
in January 1995 to initiate 36 MMcf/d of additional firm transportation service
under a 20-year contract for New England Power Company's Manchester Street
Station electric-generating plant in Providence, Rhode Island.
Algonquin also is completing a four-mile lateral to deliver 75 MMcf/d of
firm transportation to the Canal Electric plant at Sandwich, Massachusetts.
Service is expected to begin in the second quarter of 1996.
Midwest Area
PEPL. PEPL's market volumes are concentrated among approximately 20
utilities located in the Midwest market area that encompasses large portions of
Michigan, Ohio, Indiana, Illinois and Missouri. PEPL's major customers serving
this market include utilities, producers and independent marketers. PEPL's total
deliveries increased 6% in 1995 as a result of larger contract quantities and
increased use of capacity release by customers.
In August 1995, PEPL transferred most of its Mid-Continent natural gas
gathering facilities to a non-FERC-regulated subsidiary of PEPL. The change in
ownership is expected to improve the value of these assets by allowing for more
effective competition with other non-FERC-regulated gathering companies.
During 1995, PEPL renegotiated contracts with six of its major customers to
provide 390 MMcf/d of transportation and storage service for the next several
years.
Trunkline. Trunkline's major customers include eight utilities located in
portions of Tennessee, Missouri, Illinois, Indiana and Michigan.
Trunkline's total throughput decreased 6% in 1995 as a result of warmer
weather during the first quarter, capacity constraints from South Texas due to
compressor outages and interruptible volumes lost to competitors' capacity
release programs.
In April 1995, Trunkline added 310 MMcf/d of firm and seasonal
transportation service to the Chicago market under five-year contracts with The
Peoples Gas Light and Coke Company ("Peoples"). These volumes are in addition to
60 MMcf/d of service to Peoples begun in 1993.
In late 1995, PEPL and Trunkline began to combine the two pipeline systems'
management and operations to create efficiencies by aligning marketing efforts
and standardizing services.
Storage
TETCO provides firm and interruptible open-access storage services. Since
the implementation of the Order 636 restructuring, storage is offered as a
stand-alone unbundled service or as part of a no-notice bundled service. TETCO's
storage services utilize two joint venture storage projects in Pennsylvania and
one wholly-owned and operated storage field in Maryland. TETCO also leases
storage capacity. TETCO's certificated working capacity in these three fields is
70 Bcf, and on December 31, 1995, the combined working gas in storage was 46
Bcf. Algonquin owns no storage fields.
PEPL owns and operates three underground storage fields located in
Illinois, Michigan and Oklahoma. Trunkline owns and operates one storage field
in Louisiana. The combined maximum working gas capacity is 44 Bcf. Additionally,
PEPL, through its Pan Gas Storage Company ("Pan Gas") subsidiary, is the owner
of a storage field in Kansas with an estimated maximum capacity of 26 Bcf. PEPL
is the operator of the field. Since the implementation of the Order 636
restructuring, PEPL, Trunkline and Pan Gas all offer firm and interruptible
storage on an open-access basis. In addition to owning storage fields, PEPL also
leases storage capacity. PEPL and Trunkline have retained the right to use up to
15 Bcf and 10 Bcf, respectively, of their storage capacity for system needs.
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LNG OPERATIONS
Subsidiaries of PEC entered into LNG import agreements with Sonatrach, the
national oil and gas company of Algeria, in April 1987. The agreements provide
for the importation of up to 3.3 Tcf of LNG over a period of up to 20 years. The
agreements impose no take-or-pay or ship-or-pay obligations upon the Company and
do not establish any minimum annual purchase volumes.
In 1989, Trunkline LNG Company ("Trunkline LNG") activated the LNG program
at its Lake Charles, Louisiana facility. Activation of the program was based
primarily on the agreements with Sonatrach, as well as a long-term contract with
Citrus Trading Corp. ("Citrus") that provides for the sale of up to 110 MMcf/d
of gas. This maximum volume decreased to 86 MMcf/d for the remaining term of the
contract beginning on September 1, 1995. Citrus can elect not to purchase gas in
any month if residual fuel oil prices during the previous month fall below a
specified level. However, in the event of such election, the Company has the
option to require Citrus to purchase nominated volumes at a contractually
determined reduced price. Therefore, volumes and prices under the Citrus
contract are not certain. In 1995, deliveries of gas to Citrus were made only
during the month of December, averaging 86 MMcf/d. In 1995, the Company sold 5.2
Bcf of regasified LNG.
The Company, through its PanEnergy Development Company subsidiary, is
advancing the EnergyPlus project, a proposed network of LNG facilities that will
provide Northeast customers highly individualized peak-winter service by
integrating existing transmission assets and a network of LNG satellite tanks
with a new LNG storage facility.
Algonquin LNG, Inc. ("Algonquin LNG"), a subsidiary of Algonquin, owns and
operates an LNG facility in Providence, Rhode Island. The facility provides LNG
handling services, including receipt, storage and redelivery.
ENERGY SERVICES GROUP
General
The Company's energy services group, through PanEnergy Services, Inc. and
its subsidiaries, is engaged in the gathering, processing, marketing, storage
and intrastate transportation of natural gas, NGLs and crude oil, as well as in
the marketing of electric power and risk-management services.
Field Services Group
The Company's Field Services Group, which operates mainly through PanEnergy
Field Services, Inc., achieved a 19% increase in volumes of natural gas gathered
to 1.9 Bcf/d in 1995. The Company owns and operates approximately 12,000 miles
of natural gas gathering systems, including intrastate pipelines, and 21 natural
gas processing plants in the United States.
The Company's gathering systems are located in nine central states (see map
under Item 2). These systems serve major gas-producing regions in the Rocky
Mountain, Mid-Continent and Gulf Coast areas. Included in the Company's
gathering operations are several intrastate pipeline systems and natural gas
storage facilities, including the Winnie Pipeline and Spindletop Storage
Facility purchased in 1994. In 1995, Field Services added significant processing
and gathering facilities in Colorado, New Mexico and Texas, totaling 215 MMcf/d
of capacity. In addition, Mid-Continent gathering facilities were transferred
from the Natural Gas Transmission Group to Field Services.
The Company's NGL processing operations involve the extraction of NGLs from
natural gas and, at certain facilities, the fractionation of the NGLs into their
individual components (ethane, propane, butane and natural gasoline). The
natural gas used in the Company's processing operations is generally gathered on
the Company's gathering system or, in the case of two facilities -- the National
Helium Corporation ("National Helium") plant in Liberal, Kansas and the Wilcox
plant in Goliad, Texas -- from the natural gas stream on the Company's
transmission system. NGLs are sold by the Company to a variety of customers
ranging from large multi-national petrochemical and refining companies to small
family-owned retail propane distributors.
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All NGL sales are made based upon current market-related prices. The Company
also provides, on a more limited basis, processing services to producers and
others for a stipulated fee. During 1995, NGL production at the Company's
facilities averaged approximately 54,800 barrels per day, an 11% increase over
1994. The Company also produces helium at the National Helium facility.
Gas and Power Services Group
The Company markets natural gas primarily to LDCs, electric power
generators, industrial end-users and gas marketing companies. During 1995,
PanEnergy Gas Services, Inc. ("Gas Services"), the Company's gas marketing
subsidiary, marketed an average of 3.5 Bcf/d of natural gas.
Marketing operations encompass both on-system and off-system sales. With
respect to on-system sales, the Company generally purchases natural gas from
producers at the wellhead, gathers and (if necessary) processes the gas in its
own facilities (see "Field Services Group" above) and delivers the gas to an
intrastate or interstate pipeline for redelivery to another customer. With
respect to off-system sales, the Company purchases natural gas from producers,
pipelines and other suppliers not connected with the Company's facilities for
resale to customers. The Company also provides energy-marketing services, such
as supply and market aggregation, dispatching, balancing, transportation,
storage, contract negotiation and administration, as well as risk-management
products and services.
The Company currently provides marketing services to customers transporting
gas on substantially all pipeline systems serving the lower 48 states and
Canada. In addition, the Company markets natural gas in the United Kingdom.
In 1995, Gas Services expanded its trading operations with the acquisition
of Continental Energy Company in Calgary, Alberta, bringing marketed volumes of
Canadian gas to approximately 1 Bcf/d at year-end.
The Company has a balanced portfolio of short-term and long-term gas sales
agreements with customers, the vast majority of which incorporate
market-sensitive pricing terms. Long-term gas purchase agreements with
producers, principally entered into in connection with on-system sales, also
generally include market-sensitive pricing provisions. Purchases and sales of
off-system supply are normally made under short-term contracts. Purchase and
sales commitments involving significant price and location risk are generally
hedged with commodity futures, swaps and options. For information concerning the
Company's risk-management activities, see Note 6 of Notes to Consolidated
Financial Statements on pages 46 through 48 of the Annual Report, which is
incorporated herein by reference.
The Company's power marketing and related operations are conducted through
PanEnergy Power Services, Inc. ("Power Services"). Formed in 1994, this
subsidiary traded over 513,000 megawatt hours in 1995. The strategy of Power
Services is to participate in the emerging open-access power supply business as
well as to work with other Company business units to provide electric power
services for Company facilities and for the units' customers.
Joint Marketing Undertaking/Asset Purchase
In January 1996, the Company signed a non-binding letter of intent with a
subsidiary of Mobil Corporation ("Mobil") for two transactions. The first
transaction would involve a purchase by Field Services of Mobil's interests in
gathering, processing and related facilities for approximately $300 million,
which would almost double the Company's production of NGL. The second
transaction would combine the marketing operations of the Company's Gas and
Power Services Group with those of Mobil. The resulting entity would be operated
by the Company and owned 60% by the Company and 40% by Mobil. The transactions
are expected to be completed by mid-1996.
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Crude Oil Group
The Company's crude oil group, which provides services through PanEnergy
Transport and Trading Company and its affiliates, operates approximately 1,300
miles of intrastate crude oil pipelines in the Mid-Continent and South Texas and
approximately 450 miles of NGL pipelines in the Texas Gulf Coast area.
The crude oil pipeline system provides gathering and mainline
transportation service, for a volumetric fee, based on published tariffs. In
1995, the group's throughput of crude oil averaged approximately 76,200 barrels
per day, a 47% increase over 1994. This group also purchases crude oil from
producers and markets it to end users.
The NGL transportation system transports NGLs received from 12 processing
plants in South Texas. During 1995, NGL throughput averaged approximately 16,500
barrels per day.
INVESTMENTS
Midland Cogeneration Venture
A Company subsidiary owns an approximate 14.3% equity interest in the
Midland Cogeneration Venture ("MCV"), which became operational in 1990. MCV
converted an incomplete nuclear power plant to a dual-purpose energy unit that
uses natural gas to generate electricity and produce industrial process steam.
PEPL and Trunkline provide 95 MMcf/d of firm transportation to MCV.
National Methanol Company
The Company owns a 25% interest in National Methanol Company ("National
Methanol"), a joint venture that owns and operates a chemical-grade methanol
plant and an MTBE (methyl tertiary butyl ether) plant in Jubail, Saudi Arabia.
The other partners are Hoechst Celanese Corporation, with a 25% interest, and
majority state-owned Saudi Basic Industries Corporation, with a 50% interest.
Northern Border Partners, L.P.
A PEPL subsidiary owns an 8.5% equity interest (a 32.5% voting interest) in
Northern Border Partners, L.P. ("Northern Border MLP"), consisting of general
partner and subordinated limited partner interests. Northern Border MLP owns a
70% interest in Northern Border Pipeline Company ("Northern Border Pipeline"),
which owns and operates a transmission system consisting of 969 miles of
pipeline extending from the Canadian border through Montana to Iowa. Northern
Border Pipeline transports natural gas both under traditional long-term
contracts and on an open-access basis. It has a certificated transport capacity
of 975 MMcf/d.
TEPPCO Partners, L.P.
A PEC subsidiary owns a 2% general partner interest and an 8.45% limited
partner interest in TEPPCO Partners, L.P. ("TEPPCO Partners"). TEPPCO Partners
owns and operates an approximate 4,300-mile refined petroleum products and
liquefied petroleum gases ("LPGs") pipeline system extending from southeast
Texas through the midwestern and central United States to the northeastern
United States. The pipeline system includes delivery terminals along the
pipeline for outloading product to tank trucks, rail cars or barges, as well as
storage capacity at Mont Belvieu, Texas, the largest LPG storage complex in the
United States, and at other locations. TEPPCO Partners also owns two marine
receiving terminals at Beaumont, Texas and Providence, Rhode Island. The TEPPCO
Partners pipeline system is the only pipeline that transports LPGs to the
Northeast.
Maritimes & Northeast Pipeline Project
A PEC subsidiary plans to manage and operate the U.S. portion of the
proposed 630-mile, 400 MMcf/d Maritimes & Northeast Pipeline Project, to be
owned in conjunction with three other sponsors. The proposed pipeline will link
approximately 3 Tcf of reserves offshore Nova Scotia with the Northeast pipeline
grid. The
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sponsors have filed for FERC approval for a 64-mile initial segment of the
pipeline to deliver 60 MMcf/d of domestic supply to New England markets as early
as 1997.
Aguaytia Project
The Company, through a subsidiary, owns a 25% equity interest in the
Aguaytia project, the first private, integrated energy project in Peru.
Facilities to generate and deliver electricity and process natural gas are
scheduled to be in service by late 1997.
REGULATION
TETCO, Algonquin, PEPL, Trunkline, Trunkline LNG, Algonquin LNG and Pan Gas
are "natural gas companies" under the NGA and NGPA and, as such, are subject to
the jurisdiction of FERC.
The NGA grants to FERC authority over the construction and operation of
pipeline and related facilities utilized in the transportation and sale of
natural gas in interstate commerce, including the extension, enlargement or
abandonment of such facilities. The Company's subsidiaries hold required
certificates of public convenience and necessity issued by FERC, authorizing
them to construct and operate the pipelines, facilities and properties now in
operation for which certificates are required, and to transport and store
natural gas in interstate commerce.
FERC also has authority to regulate rates and charges for natural gas
transported in or stored for interstate commerce or sold by a natural gas
company in interstate commerce for resale. The Company's subsidiaries file with
FERC applications for changes in transportation and storage rates and charges.
These changes are normally allowed to become effective after a suspension
period, subject to refund, until such time as FERC authorizes the actual level
of rates and charges.
TETCO, Algonquin, PEPL and Trunkline operate as open-access transporters of
natural gas. In 1992, FERC issued Order 636, which requires open-access
pipelines to provide firm and interruptible transportation services on an equal
basis for all gas supplies, whether purchased from the pipeline or from another
gas supplier. To implement this requirement, Order 636 provides, among other
things, for mandatory unbundling of services that have historically been
provided by pipelines into separate open-access transportation, sales and
storage services.
Order 636, which is on appeal to the courts, provides for the use of the
SFV rate design, which assigns return on equity, related taxes and other fixed
costs to the reservation component of rates. In addition, Order 636 allows
pipelines to recover eligible costs resulting from implementation of Order 636.
Recoverable transition costs include gas supply realignment costs, unrecovered
deferred gas purchase costs, other existing costs incurred in connection with
bundled sales services that cannot be assigned to customers of unbundled
services, and capital costs attributable to the restructuring.
On August 1, 1994, TETCO implemented a FERC-approved settlement that
resolved regulatory issues related primarily to Order 636 transition costs and a
number of other issues related to services prior to Order 636. TETCO's final and
nonappealable settlement provides for the recovery of certain transition costs
through volumetric and reservation charges through 2002 and beyond, if
necessary. Pursuant to the settlement, TETCO will absorb a certain portion of
the transition costs, the amount of which continues to be subject to change
dependent upon natural gas prices and deliverability levels. The Company has
established provisions to reflect the impact of the settlement. PEPL's
transition cost recoveries, which are subject to certain challenges pending
before FERC, will occur through 1998.
The Company's natural gas gathering activities are generally not subject to
regulation by FERC under the NGA and the NGPA. In this regard, in May 1994, FERC
issued orders announcing that it would not exercise jurisdiction over natural
gas gathering activities operated by affiliates of interstate pipeline
companies. Such orders are on appeal to the courts. FERC's orders are expected
to enable the Company to compete with non-regulated service providers, which
account for the majority of the sector's operations. With respect to the
Company's natural gas marketing activities, such activities may, in certain
circumstances, be subject to the jurisdiction of FERC. Current FERC policies
permit the Company's gas marketing entities subject to FERC
8
<PAGE> 11
jurisdiction to market natural gas at market-based rates pursuant to a blanket
certificate. The Company's electric power marketing operations are also subject
to the jurisdiction of FERC under the Federal Power Act. Current FERC policies
permit the Company's electric marketing entity to market electricity at
market-based rates.
Regulation of the importation and exportation of natural gas is vested in
the Secretary of Energy, who has delegated various aspects of this jurisdiction
to FERC and the Office of Fossil Fuels of the Department of Energy.
The Company's subsidiaries are subject to the Natural Gas Pipeline Safety
Act of 1968, which regulates gas pipeline and LNG plant safety requirements; the
Hazardous Liquid Pipeline Safety Act of 1979, which regulates oil and petroleum
pipelines; and to federal and state environmental legislation.
RATES AND REGULATORY PROCEEDINGS
When rate cases are pending final FERC approval, a portion of the revenues
collected by the Company's natural gas pipelines is subject to possible refunds.
A summary of the status of significant pending rate cases and related regulatory
matters involving TETCO, Algonquin, PEPL and Trunkline is contained in Note 4 of
the Notes to Consolidated Financial Statements on pages 44 and 45 of the Annual
Report, which are incorporated herein by reference.
COMPETITION
The Company's interstate pipeline subsidiaries compete with other
interstate and intrastate pipeline companies in the transportation and storage
of natural gas. The principal elements of competition among pipelines are rates,
terms of service, and flexibility and reliability of service. The Company's
pipelines continue to offer selective discounting to maximize revenues from
existing capacity.
In the Mid-Atlantic and Northeast markets, TETCO competes directly with
Transcontinental Gas Pipe Line Corporation, Tennessee Gas Pipeline Company
("TGPC"), Iroquois Gas Transmission System ("Iroquois"), CNG Transmission
Corporation and Columbia Gas Transmission Corporation. Algonquin competes
directly in certain market areas with TGPC and Iroquois. PEPL and Trunkline
compete directly with ANR Pipeline Company, Natural Gas Pipeline Company of
America and Texas Gas Transmission Corporation in the Midwest market area.
The Company's energy services group faces competition both in acquiring
natural gas supplies and in marketing natural gas, NGLs and crude oil.
Competition for natural gas supplies is primarily based on efficiency,
reliability, availability of transportation and ability to obtain a satisfactory
price for the producer's natural gas. Competition for customers is primarily
based upon reliability and price of delivered natural gas, NGLs and crude oil.
The Company's competitors for obtaining additional natural gas supplies, for
gathering and processing natural gas and for marketing and transporting natural
gas, NGLs and crude oil include major integrated oil companies, major interstate
pipelines and their marketing affiliates and national and local natural gas
gatherers, brokers, marketers and distributors of varying size, financial
resources and experience.
Natural gas competes with other forms of energy available to the Company's
customers and end users, including electricity, coal and fuel oils. The primary
competitive factor is price. Changes in the availability or price of natural gas
and other forms of energy, the level of business activity, conservation,
legislation and governmental regulations, the capability to convert to
alternative fuels, and other factors, including weather, affect the demand for
natural gas in the areas served by the Company.
Electric power marketing faces competition from other forms of energy, such
as natural gas, coal and fuel oil. Power Services also competes with electric
utilities and other electric power marketers. The independent electric power
market is still in the early stages of development and primarily regional in
nature.
9
<PAGE> 12
CAPITAL EXPENDITURES FOR CLEAN AIR ACT AMENDMENTS
The Company has submitted plans to the appropriate state agencies in order
to fully comply with the Clean Air Act Amendments of 1990 (the "Amendments").
Agency review of these plans is currently underway. In 1995, the Company made
capital expenditures of approximately $20 million related to the requirements of
the Amendments and associated state regulations, and further expenditures of
$1.5 million are projected for 1996. Management believes that the expenditures
related to compliance with the Amendments and the associated regulations will be
eligible for recovery in rates. The Company recently determined that no further
material expenditures are anticipated in connection with the present
requirements of the Amendments or the associated regulations.
For a discussion of other environmental matters involving the Company, see
Note 13 of the Notes to Consolidated Financial Statements on pages 51 and 52 of
the Annual Report, which are incorporated herein by reference.
GENERAL MATTERS
During 1995, no single customer accounted for 10% or more of the Company's
consolidated revenues.
While the Company does engage in some research and development activities,
no such activities conducted during the past three years have been material to
the Company's business, nor have there been any material customer-sponsored
research activities during that period relating to the Company's business
activities.
TETCO, Algonquin, PEPL and Trunkline are members of and provide support to
the Gas Research Institute ("GRI"), which plans and manages research and
development efforts for the gas industry. The funds used to support GRI are
derived from a surcharge on the pipelines' rates pursuant to FERC authorization.
Payments amounted to approximately $16.2 million, $22.1 million and $20.8
million in 1995, 1994 and 1993, respectively, for the four companies combined.
Foreign operations and export sales are not material to the Company's
business as a whole. As of January 1, 1996, the Company had approximately 5,000
employees.
ITEM 2. PROPERTIES
NATURAL GAS TRANSMISSION GROUP
TETCO's gas transmission system extends approximately 1,700 miles from
producing fields in the Gulf Coast region of Texas and Louisiana to Ohio,
Pennsylvania, New Jersey and New York. It consists of two parallel systems, one
consisting of three large-diameter parallel pipelines and the other consisting
of from one to three large-diameter pipelines over its length. TETCO's system,
including the gathering systems, has 73 compressor stations. The TETCO system
connects with the PEPL and Trunkline systems through the Lebanon Lateral.
The Lebanon Lateral is located between Grant County, Indiana, and Lebanon,
Ohio. TETCO owns the Indiana portion and a small segment of the Ohio portion of
this pipeline, while the rest of this pipeline in Ohio is jointly owned by TETCO
and another interstate gas pipeline company. The Indiana portion of the Lebanon
Lateral extends approximately 53 miles, while the Ohio portion of this pipeline
is 61 miles long.
Algonquin's transmission system connects with TETCO's facilities in
Lambertville and Hanover, New Jersey, and extends through New Jersey, New York,
Connecticut, Rhode Island and Massachusetts to the Boston area. The system
consists of approximately 250 miles of pipeline with six compressor stations.
PEPL's transmission system, which consists of four large-diameter parallel
pipelines and 13 mainline compressor stations, extends a distance of
approximately 1,300 miles from producing areas in the Anadarko Basin of Texas,
Oklahoma and Kansas through the states of Missouri, Illinois, Indiana and Ohio
into Michigan.
10
<PAGE> 13
Trunkline's transmission system extends approximately 1,400 miles from the
Gulf Coast areas of Texas and Louisiana through the states of Arkansas,
Mississippi, Tennessee, Kentucky, Illinois and Indiana to a point on the
Indiana-Michigan border near Elkhart, Indiana. The system consists principally
of three large-diameter parallel pipelines and 18 mainline compressor stations.
Trunkline also owns and operates two offshore Louisiana gas supply systems
consisting of 337 miles of pipeline extending approximately 81 miles into the
Gulf of Mexico. TETCO owns and operates two offshore Louisiana gas supply
systems, which extend over 100 miles into the Gulf of Mexico and consist of 490
miles of pipeline.
For information concerning natural gas storage properties, see "Natural Gas
Transmission Group -- Storage" under Item 1, which is incorporated herein by
reference.
LNG FACILITIES
Algonquin LNG owns and operates an LNG storage facility in Providence,
Rhode Island. This facility has a storage capacity of 600,000 barrels, which
approximates 2 Bcf, and a design output capacity of 100 MMcf/d.
Trunkline LNG owns a marine terminal, storage and regasification facility
for LNG located near Lake Charles, Louisiana. The Trunkline LNG facilities have
a design output capacity of approximately 700 MMcf/d and a storage capacity of
approximately 1.8 million barrels, which approximates 6 Bcf.
Lachmar, a partnership in which subsidiaries of PEC own all of the
partnership interests, owns two LNG ships, each with a transportation capacity
of 125,000 cubic meters of LNG. Both ships have been chartered through the first
quarter of 1996. The Company continues to examine opportunities to better
utilize its LNG assets, including the ships.
ENERGY SERVICES GROUP
For information regarding the properties of the Company's energy services
segment, see "Energy Services Group" under Item 1, which is incorporated herein
by reference.
OTHER
None of the other properties used in connection with the Company's other
business activities is considered material to the Company's operations as a
whole.
11
<PAGE> 14
[Map of Panhandle Eastern Corporation
Showing Pipelines, Storage Facilities,
Principal Supply Areas and Proposed Pipelines.]
12
<PAGE> 15
ITEM 3. LEGAL PROCEEDINGS
For information concerning material legal proceedings, see Notes 4, 13 and
14 on pages 44, 45, 51 and 52 of the Annual Report, which are incorporated
herein by reference.
With respect to the lawsuit filed against PEC, Texas Eastern Corporation
("TEC") and TETCO on August 30, 1995 containing class action allegations for
PCB-related injuries and damage described on page 52 of the Annual Report, the
plaintiffs, with court approval, recently dismissed the suit voluntarily but
retained the right to refile the action at a later date.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF REGISTRANT
<TABLE>
<CAPTION>
BECAME AN
AGE IN EXECUTIVE
NAME OFFICE 1996 OFFICER
---- ------ ------ ---------
<S> <C> <C> <C>
Dennis R. Hendrix(1).......... Chairman of the Board 56 1990
Paul M. Anderson(2)........... President and Chief Executive Officer 51 1991
George L. Mazanec(3).......... Vice Chairman of the Board 60 1989
James T. Hackett(4)........... Executive Vice President 42 1996
Carl B. King(5)............... Senior Vice President and General Counsel 53 1990
Paul F. Ferguson, Jr.(6)...... Senior Vice President and Chief Financial
Officer 47 1989
Sandra P. Meyer(7)............ Vice President and Controller 42 1993
James W. Hart, Jr.(8)......... Vice President, Public Affairs 60 1988
Vernell P. Ludwig(9).......... Vice President, Corporate Development 52 1993
Bruce A. Williamson(10)....... Treasurer 37 1995
</TABLE>
- ---------------
(1) Director and Chairman of the Board since November 1990; Chief Executive
Officer from November 1990 to April 1995; and President from November 1990
to December 1993.
(2) Chief Executive Officer since April 1995; President since December 1993;
Director since December 1992. Executive Vice President from March 1991 to
December 1993. Vice President, Finance and Chief Financial Officer, Inland
Steel Industries, Inc., 1990-1991.
(3) Director since December 1992 and Vice Chairman of the Board since December
1993; Executive Vice President from March 1991 to December 1993; and Group
Vice President from November 1989 to March 1991.
(4) Executive Vice President since January 1996. Senior Vice President of NGC
Corporation ("NGC"), 1990-1995, and President of NGC's Trident division,
1995. Member of NGC's management committee, 1993-1994.
(5) Senior Vice President and General Counsel since June 1990.
(6) Senior Vice President and Chief Financial Officer since September 1995.
Vice President, Finance and Accounting, from April 1992 to September 1995;
Vice President and Treasurer from July 1990 to April 1992 and Treasurer
from June 1994 until June 1995.
(7) Controller since September 1993 and Vice President since December 1994. An
officer or employee of PEC, or a subsidiary of PEC, for more than five
years.
(8) Vice President of the Company for more than five years.
(9) Vice President, Corporate Development, since January 1993; President of
Algonquin Energy Corporation and Algonquin Gas Transmission Corporation
from April 1991 and January 1991, respectively, to August 1993 and prior
thereto, Executive Vice President of those companies.
13
<PAGE> 16
(10) Treasurer and Assistant Secretary since June 1995. Assistant Treasurer,
Capital Markets, from 1993 to 1995, and Manager of E&P Risk Management from
1992 to 1993, both for Shell Oil Company. Vice President and Treasurer of
Shell Leasing Company from 1990 to 1992.
All officers of PEC are elected in April of each year at the organizational
meeting of the Board of Directors. There are no family relationships among any
directors or executive officers of PEC.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
See "PanEnergy Corp Common Stock Data by Quarters" on page 57 and Note 12
of the Notes to Consolidated Financial Statements on pages 50 and 51 of the
Annual Report, which are incorporated herein by reference. The Common Stock is
listed on the New York and Pacific Stock Exchanges. At February 29, 1996, there
were 26,607 holders of record of the Common Stock.
ITEM 6. SELECTED FINANCIAL DATA
See page 56 of the Annual Report, which is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
See pages 26 through 35 of the Annual Report, which are incorporated herein
by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to "Index -- Financial Statements" under Item 14(a)(1).
See the consolidated quarterly financial data on page 55 of the Annual
Report, which is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See pages 2 through 4 and page 6 of the Panhandle Eastern Corporation
Definitive Proxy Statement, dated March 15, 1996 ("Proxy Statement"), which are
incorporated herein by reference.
See list of "Executive Officers of Registrant" on pages 13 and 14, which is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
See pages 8 through 20 of the Proxy Statement, which are incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See pages 6 through 8 of the Proxy Statement, which are incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See pages 2 through 4, 7 and 8 of the Proxy Statement, which are
incorporated herein by reference.
14
<PAGE> 17
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K:
(a) The following documents are filed as a part of this report or
incorporated herein by reference:
(1) The Consolidated Financial Statements of Panhandle Eastern
Corporation and Subsidiaries are listed on the Index, page 21.
(2) Exhibits filed herewith are designated by an asterisk (*); all
exhibits not so designated are incorporated herein by reference to a prior
filing, as indicated. Items constituting management contracts or
compensatory plans or arrangements are designated by a double asterisk
(**).
<TABLE>
<CAPTION>
EXHIBIT FILE
NUMBER DESCRIPTION ORIGINALLY FILED AS EXHIBIT NUMBER
------- ----------- ---------------------------- ------
<S> <C> <C> <C>
*3.01 Amended and Restated
Certificate of Incorporation of
Panhandle Eastern Corporation,
including the Certificate of
Elimination of the
Participating Stock of
Panhandle Eastern Corporation
3.03 By-Laws of Panhandle Eastern 19(a) to Form 10-Q of PEC for 1-8157
Corporation, effective July 8, quarter ended September 30,
1986 1986
4.01 Indenture, dated as of November 4.03 to Form 10-K of PEC for 1-8157
1, 1994, between Panhandle year ended December 31, 1994
Eastern Corporation and The
First National Bank of Boston,
as Trustee
*4.02 Credit Agreement between
Panhandle Eastern Corporation,
d/b/a PanEnergy Corp, the
financial institutions
identified therein, and
Chemical Bank, as
Administrative Agent, dated as
of January 31, 1996
*4.03 Credit Agreement (Five Year
Facility) between Panhandle
Eastern Corporation, d/b/a
PanEnergy Corp, the financial
institutions identified
therein, and Chemical Bank, as
Administrative Agent, dated as
of January 31, 1996
**10.01 1977 Non-Qualified Stock Option 10(f) to Form 10-K of PEC for 1-8157
Plan of Panhandle Eastern year ended December 31, 1986
Corporation, as amended through
December 3, 1986 (and related
Agreement)
**10.02 1982 Key Employee Stock Option 10(g) to Form 10-K of PEC for 1-8157
Plan of Panhandle Eastern year ended December 31, 1986
Corporation, as amended through
December 3, 1986 (and related
Agreement)
**10.03 Panhandle Eastern 10(w) to Form 10-K of PEC for 1-8157
Corporation -- Nonemployee year ended December 31, 1985
Directors Retirement Plan (As
amended May 22, 1985)
</TABLE>
15
<PAGE> 18
<TABLE>
<CAPTION>
EXHIBIT FILE
NUMBER DESCRIPTION ORIGINALLY FILED AS EXHIBIT NUMBER
------- ----------- --------------------------- ------
<S> <C> <C> <C>
**10.04 Deferred Compensation Plan for 10.04 to Form 10-K of PEC for 1-8157
the Board of Directors of year ended December 31, 1989
Panhandle Eastern Corporation
(Adopted May 26, 1982; as
amended November 29, 1989)
**10.05 Amendment to Deferred 10.05 to Form 10-K of PEC for 1-8157
Compensation Plan for the Board year ended December 31, 1994
of Directors of Panhandle
Eastern Corporation dated
January 25, 1995
**10.06 Panhandle Eastern 10.05 to Form 10-K of PEC for 1-8157
Corporation -- Executive year ended December 31, 1989
Benefit Equalization Plan (As
amended November 29, 1989;
effective January 1, 1990)
**10.07 Panhandle Eastern Corporation 10.06 to Form 10-K of PEC for 1-8157
Retirement Benefit Equalization year ended December 31, 1993
Plan (Adopted December 20,
1993; effective January 1,
1994; amends and restates
Exhibit number 10.05)
**10.08 Panhandle Eastern 19(a) to Form 10-Q of PEC for 1-8157
Corporation -- Executive quarter ended September 30,
Severance Agreement 1988
10.09 Change in Control Severance Pay 19(c) to Form 10-Q of PEC for 1-8157
Plan of Panhandle Eastern quarter ended September 30,
Corporation and Affiliates 1986
(Adopted July 8, 1986)
**10.10 1989 Nonemployee Directors 28(a) to Form S-8 Registration 33-28912
Stock Option Plan (Adopted Statement of PEC
February 1, 1989)
10.11 Employees Savings Plan of 10.12 to Form 10-K of PEC for 1-8157
Panhandle Eastern Corporation year ended December 31, 1990
and Participating Affiliates
(Effective January 1, 1991)
10.12 Retirement Income Plan of 10.13 to Form 10-K of PEC for 1-8157
Panhandle Eastern Corporation year ended December 31, 1990
and Participating Affiliates
(Effective January 1, 1991)
**10.13 Panhandle Eastern Corporation 10.12 to Form 10-K of PEC for 1-8157
Key Executive Retirement year ended December 31, 1993
Benefit Equalization Plan
(Adopted December 20, 1993;
effective January 1, 1994)
**10.14 Panhandle Eastern Corporation 10.13 to Form 10-K of PEC for 1-8157
Key Executive Deferred year ended December 31, 1993
Compensation Plan (Adopted
December 20, 1993; effective
January 1, 1994)
**10.15 1990 Long Term Incentive Plan 10.14 to Form 10-K of PEC for 1-8157
(Adopted November 29, 1989) year ended December 31, 1990
10.16 Special Recognition Bonus Plan 10.15 to Form 10-K of PEC for 1-8157
(Adopted November 29, 1989) year ended December 31, 1990
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
EXHIBIT FILE
NUMBER DESCRIPTION ORIGINALLY FILED AS EXHIBIT NUMBER
------- ----------- --------------------------- ------
<S> <C> <C> <C>
10.17 Annual Cash Bonus Plan of 19.3 to Form 10-Q of PEC for 1-8157
Panhandle Eastern Corporation quarter ended September 30,
(Adopted October 25, 1989; 1989
effective January 1, 1990)
10.18 Texas Eastern Deferred Income 10.9 to Form 10-K of TEC for 1-7587
Program; First Amendment, dated years ended December 31, 1984
December 5, 1985; and Second and 1986; 8 to Schedule 14D-9
Amendment, dated August 15, of TEC, dated January 30, 1989
1988
**10.19 Panhandle Eastern Corporation 10.18 to Form 10-K of PEC for 1-8157
1994 Long Term Incentive Plan year ended December 31, 1993
**10.20 Agreement, dated November 1, 10.27 to Form 10-K of PEC for 1-8157
1989, between G. L. Mazanec and year ended December 31, 1990
Panhandle Eastern Corporation
**10.21 Amendment to Employment 10.17 to Form 10-K of PEC for 1-8157
Agreement, effective November year ended December 31, 1992
1, 1992, between G. L. Mazanec
and Panhandle Eastern
Corporation
**10.22 Agreement, dated November 12, 10.28 to Form 10-K of PEC for 1-8157
1990, between D. R. Hendrix and year ended December 31, 1990
Panhandle Eastern Corporation
**10.23 Amendment, dated March 12, 1993 10.19 to Form 10-K of PEC for 1-8157
to be effective as of February year ended December 31, 1992
24, 1993, to Agreement dated
November 12, 1990, between D.
R. Hendrix and Panhandle
Eastern Corporation
**10.24 Second Amendment, dated 10.23 to Form 10-K of PEC for 1-8157
December 20, 1993, to Agreement year ended December 31, 1993
dated November 12, 1990,
between Dennis Hendrix and
Panhandle Eastern Corporation
**10.25 Agreement, dated November 12, 10.31 to Form 10-K of PEC for 1-8157
1990, between P. J. Burguieres year ended December 31, 1990
and Panhandle Eastern
Corporation
**10.26 Agreement, effective January 1, 10.32 to Form 10-K of PEC for 1-8157
1991, between P. J. Burguieres year ended December 31, 1990
and Panhandle Eastern
Corporation
**10.27 Agreement, effective March 1, 10.24 to Form 10-K of PEC for 1-8157
1991, between Paul M. Anderson year ended December 31, 1991
and Panhandle Eastern
Corporation
10.28 Settlement Agreement, dated 19.4 to Form 10-Q of PEC for 1-8157
July 21, 1986, among Sonatrach, quarter ended June 30, 1986
Panhandle Eastern Corporation,
Panhandle Eastern Pipe Line
Company and Trunkline LNG
Company
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
EXHIBIT FILE
NUMBER DESCRIPTION ORIGINALLY FILED AS EXHIBIT NUMBER
------- ----------- ---------------------------- ------
<S> <C> <C> <C>
10.29 Amendment, dated August 11, 19.5 to Form 10-Q of PEC for 1-8157
1986, to Settlement Agreement, quarter ended June 30, 1986
dated July 21, 1986, among
Sonatrach, Panhandle Eastern
Corporation, Panhandle Eastern
Pipe Line Company and Trunkline
LNG Company
10.30 Amendment No. 2, dated August 19(e) to Form 10-Q of PEC for 1-8157
1, 1988, to Settlement quarter ended June 30, 1988
Agreement, dated July 21, 1986,
among Sonatrach, International
Petroleum Investment
Partnership, Panhandle Eastern
Corporation, Panhandle Eastern
Pipe Line Company and Trunkline
LNG Company
10.31 Purchase Agreement, dated April 19(a) to Form 10-Q of PEC for 1-8157
26, 1987, between Sonatrading quarter ended March 31, 1987
Amsterdam B.V. and Trunkline
LNG Company
10.32 Mutual Assurances Agreement, 19(b) to Form 10-Q of PEC for 1-8157
dated April 26, 1987, among quarter ended March 31, 1987
Sonatrach, Sonatrading
Amsterdam B.V., Panhandle
Eastern Corporation and
Trunkline LNG Company
10.33 Tanker Utilization Agreement, 19(c) to Form 10-Q of PEC for 1-8157
dated April 26, 1987, between quarter ended March 31, 1987
Sonatrading Amsterdam B.V. and
Trunkline LNG Company
10.34 Transportation Agreement, dated 19(d) to Form 10-Q of PEC for 1-8157
April 26, 1987, between quarter ended March 31, 1987
Sonatrach and Trunkline LNG
Company
* **10.35 Letter Agreement constituting a
Contract of Employment between
James T. Hackett and Panhandle
Eastern Corporation, dated
December 19, 1995
* **10.36 Retirement Income Plan of
Panhandle Eastern Corporation
and Participating Affiliates,
as amended and restated
effective January 1, 1995
* **10.37 Amendment No. 1 to the
Retirement Income Plan of
Panhandle Eastern Corporation
and Participating Affiliates,
effective January 1, 1996
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT FILE
NUMBER DESCRIPTION ORIGINALLY FILED AS EXHIBIT NUMBER
------- ----------- ---------------------------- ------
<S> <C> <C> <C>
* **10.38 Amendment No. 2 to the
Retirement Income Plan of
Panhandle Eastern Corporation
and Participating Affiliates,
effective January 1, 1996
*13 PanEnergy Corp 1995 Annual
Report to Stockholders
21 List of Certain Subsidiaries of
the Registrant and state of
incorporation:
(a) Algonquin Energy, Inc.
(Delaware)
(b) Algonquin Gas Transmission
Company (Delaware)
(c) National Helium Corporation
(Delaware)
(d) PanEnergy Field Services,
Inc.
(Colorado)
(e) PanEnergy Gas Services,
Inc.
(Colorado)
(f) PanEnergy International
Development Corporation
(Delaware)
(g) PanEnergy Natural Gas
Corporation (Delaware)
(h) PanEnergy Power Services,
Inc. (Colorado)
(i) PanEnergy Risk Management
Services, Inc. (Delaware)
(j) PanEnergy Services, Inc.
(Delaware)
(k) PanEnergy Transport and
Trading Company (Colorado)
(l) Panhandle Eastern Pipe Line
Company (Delaware)
(m) Texas Eastern Arabian, Ltd.
(Bermuda)
(n) Texas Eastern (Bermuda),
Ltd. (Bermuda)
(o) Texas Eastern Corporation
(Delaware)
(p) Texas Eastern Products
Pipeline Company
(Delaware)
(q) Texas Eastern Transmission
Corporation (Delaware)
(r) Trunkline Gas Company
(Delaware)
*23 Consent of KPMG Peat Marwick LLP
*24 Powers of Attorney
*27 Financial Data Schedule for
December 31, 1995
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
EXHIBIT FILE
NUMBER DESCRIPTION ORIGINALLY FILED AS EXHIBIT NUMBER
------- ----------- --------------------------- ------
<S> <C> <C> <C>
*99 Definitive Proxy Statement,
dated March 15, 1996 for the
Annual Meeting of Stockholders
of Panhandle Eastern Corporation
</TABLE>
The total amount of securities of the Registrant or its subsidiaries
authorized under any instrument with respect to long-term debt not filed as an
Exhibit does not exceed 10% of the total assets of the Registrant and its
subsidiaries on a consolidated basis. The Registrant agrees, upon request of the
Securities and Exchange Commission, to furnish copies of any or all of such
instruments.
(b) Reports on Form 8-K -- No reports on Form 8-K were filed during the
fourth quarter of 1995.
20
<PAGE> 23
PANHANDLE EASTERN CORPORATION AND SUBSIDIARIES
INDEX
FINANCIAL STATEMENTS AND SCHEDULES
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report........................................................ 36*
Consolidated Statement of Income.................................................... 37*
Consolidated Balance Sheet.......................................................... 38-39*
Consolidated Statement of Common Stockholders' Equity............................... 40*
Consolidated Statement of Cash Flows................................................ 41*
Notes to Consolidated Financial Statements.......................................... 42-54*
</TABLE>
- ---------------
* Refers to the pages in the PanEnergy Corp 1995 Annual Report to Stockholders,
which are incorporated herein by reference.
All Schedules are omitted because they are not applicable, not required or
the information is included in the Consolidated Financial Statements or the
Notes thereto.
21
<PAGE> 24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PANHANDLE EASTERN CORPORATION
By /s/ ROBERT W. REED
---------------------------------
(Robert W. Reed, Secretary)
Date: March 28, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 28, 1996.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE
- --------------------------------------------- -----
<C> <S>
(i) Principal executive officer:*
/s/ PAUL M. ANDERSON President and Chief
- --------------------------------------------- Executive Officer
(Paul M. Anderson)
(ii) Principal financial officer:*
/s/ PAUL F. FERGUSON, JR. Senior Vice President and
- --------------------------------------------- Chief Financial Officer
(Paul F. Ferguson, Jr.)
(iii) Principal accounting officer:*
/s/ SANDRA P. MEYER Vice President and Controller
- ---------------------------------------------
(Sandra P. Meyer)
</TABLE>
(iv) Directors:*
PAUL M. ANDERSON
MILTON CARROLL
ROBERT CIZIK
CHARLES W. DUNCAN, JR.
HARRY E. EKBLOM
WILLIAM T. ESREY
ANN MAYNARD GRAY
DENNIS R. HENDRIX
HAROLD S. HOOK
LEO E. LINBECK, JR.
GEORGE L. MAZANEC
RALPH S. O'CONNER
* Signed on behalf of each of these
persons:
By /s/ ROBERT W. REED
----------------------------------
(Robert W. Reed,
Attorney-in-Fact)
22
<PAGE> 25
EXHIBIT INDEX
(a) The following documents are filed as a part of this report or
incorporated herein by reference:
(1) The Consolidated Financial Statements of Panhandle Eastern
Corporation and Subsidiaries are listed on the Index, page 21.
(2) Exhibits filed herewith are designated by an asterisk (*); all
exhibits not so designated are incorporated herein by reference to a prior
filing, as indicated. Items constituting management contracts or
compensatory plans or arrangements are designated by a double asterisk
(**).
<TABLE>
<CAPTION>
EXHIBIT FILE
NUMBER DESCRIPTION ORIGINALLY FILED AS EXHIBIT NUMBER
------- ----------- --------------------------- ------
<C> <S> <C> <C>
*3.01 Amended and Restated
Certificate of Incorporation of
Panhandle Eastern Corporation,
including the Certificate of
Elimination of the
Participating Stock of
Panhandle Eastern Corporation
3.03 By-Laws of Panhandle Eastern 19(a) to Form 10-Q of PEC for 1-8157
Corporation, effective July 8, quarter ended September 30,
1986 1986
4.01 Indenture, dated as of November 4.03 to Form 10-K of PEC for 1-8157
1, 1994, between Panhandle year ended December 31, 1994
Eastern Corporation and The
First National Bank of Boston,
as Trustee
*4.02 Credit Agreement between
Panhandle Eastern Corporation,
d/b/a PanEnergy Corp, and
Chemical Bank, as
Administrative Agent, dated as
of January 31, 1996
*4.03 Credit Agreement (Five Year
Facility) between Panhandle
Eastern Corporation, d/b/a
PanEnergy Corp, and Chemical
Bank, as Administrative Agent,
dated as of January 31, 1996
**10.01 1977 Non-Qualified Stock Option 10(f) to Form 10-K of PEC for 1-8157
Plan of Panhandle Eastern year ended December 31, 1986
Corporation, as amended through
December 3, 1986 (and related
Agreement)
**10.02 1982 Key Employee Stock Option 10(g) to Form 10-K of PEC for 1-8157
Plan of Panhandle Eastern year ended December 31, 1986
Corporation, as amended through
December 3, 1986 (and related
Agreement)
**10.03 Panhandle Eastern 10(w) to Form 10-K of PEC for 1-8157
Corporation -- Nonemployee year ended December 31, 1985
Directors Retirement Plan (As
amended May 22, 1985)
</TABLE>
<PAGE> 26
<TABLE>
<CAPTION>
EXHIBIT FILE
NUMBER DESCRIPTION ORIGINALLY FILED AS EXHIBIT NUMBER
------- ----------- --------------------------- -------
<S> <C> <C> <C>
**10.04 Deferred Compensation Plan for 10.04 to Form 10-K of PEC for 1-8157
the Board of Directors of year ended December 31, 1989
Panhandle Eastern Corporation
(Adopted May 26, 1982; as
amended November 29, 1989)
**10.05 Amendment to Deferred 10.05 to Form 10-K of PEC for 1-8157
Compensation Plan for the Board year ended December 31, 1994
of Directors of Panhandle
Eastern Corporation dated
January 25, 1995
**10.06 Panhandle Eastern 10.05 to Form 10-K of PEC for 1-8157
Corporation -- Executive year ended December 31, 1989
Benefit Equalization Plan (As
amended November 29, 1989;
effective January 1, 1990)
**10.07 Panhandle Eastern Corporation 10.06 to Form 10-K of PEC for 1-8157
Retirement Benefit Equalization year ended December 31, 1993
Plan (Adopted December 20,
1993; effective January 1,
1994; amends and restates
Exhibit number 10.05)
**10.08 Panhandle Eastern 19(a) to Form 10-Q of PEC for 1-8157
Corporation -- Executive quarter ended September 30,
Severance Agreement 1988
10.09 Change in Control Severance Pay 19(c) to Form 10-Q of PEC for 1-8157
Plan of Panhandle Eastern quarter ended September 30,
Corporation and Affiliates 1986
(Adopted July 8, 1986)
**10.10 1989 Nonemployee Directors 28(a) to Form S-8 Registration 33-28912
Stock Option Plan (Adopted Statement of PEC
February 1, 1989)
10.11 Employees Savings Plan of 10.12 to Form 10-K of PEC for 1-8157
Panhandle Eastern Corporation year ended December 31, 1990
and Participating Affiliates
(Effective January 1, 1991)
10.12 Retirement Income Plan of 10.13 to Form 10-K of PEC for 1-8157
Panhandle Eastern Corporation year ended December 31, 1990
and Participating Affiliates
(Effective January 1, 1991)
**10.13 Panhandle Eastern Corporation 10.12 to Form 10-K of PEC for 1-8157
Key Executive Retirement year ended December 31, 1993
Benefit Equalization Plan
(Adopted December 20, 1993;
effective January 1, 1994)
**10.14 Panhandle Eastern Corporation 10.13 to Form 10-K of PEC for 1-8157
Key Executive Deferred year ended December 31, 1993
Compensation Plan (Adopted
December 20, 1993; effective
January 1, 1994)
**10.15 1990 Long Term Incentive Plan 10.14 to Form 10-K of PEC for 1-8157
(Adopted November 29, 1989) year ended December 31, 1990
10.16 Special Recognition Bonus Plan 10.15 to Form 10-K of PEC for 1-8157
(Adopted November 29, 1989) year ended December 31, 1990
</TABLE>
<PAGE> 27
<TABLE>
<CAPTION>
EXHIBIT FILE
NUMBER DESCRIPTION ORIGINALLY FILED AS EXHIBIT NUMBER
------- ----------- --------------------------- ------
<S> <C> <C> <C>
10.17 Annual Cash Bonus Plan of 19.3 to Form 10-Q of PEC for 1-8157
Panhandle Eastern Corporation quarter ended September 30,
(Adopted October 25, 1989; 1989
effective January 1, 1990)
10.18 Texas Eastern Deferred Income 10.9 to Form 10-K of TEC for 1-7587
Program; First Amendment, dated years ended December 31, 1984
December 5, 1985; and Second and 1986; 8 to Schedule 14D-9
Amendment, dated August 15, of TEC, dated January 30, 1989
1988
**10.19 Panhandle Eastern Corporation 10.18 to Form 10-K of PEC for 1-8157
1994 Long Term Incentive Plan year ended December 31, 1993
**10.20 Agreement, dated November 1, 10.27 to Form 10-K of PEC for 1-8157
1989, between G. L. Mazanec and year ended December 31, 1990
Panhandle Eastern Corporation
**10.21 Amendment to Employment 10.17 to Form 10-K of PEC for 1-8157
Agreement, effective November year ended December 31, 1992
1, 1992, between G. L. Mazanec
and Panhandle Eastern
Corporation
**10.22 Agreement, dated November 12, 10.28 to Form 10-K of PEC for 1-8157
1990, between D. R. Hendrix and year ended December 31, 1990
Panhandle Eastern Corporation
**10.23 Amendment, dated March 12, 1993 10.19 to Form 10-K of PEC for 1-8157
to be effective as of February year ended December 31, 1992
24, 1993, to Agreement dated
November 12, 1990, between D.
R. Hendrix and Panhandle
Eastern Corporation
**10.24 Second Amendment, dated 10.23 to Form 10-K of PEC for 1-8157
December 20, 1993, to Agreement year ended December 31, 1993
dated November 12, 1990,
between Dennis Hendrix and
Panhandle Eastern Corporation
**10.25 Agreement, dated November 12, 10.31 to Form 10-K of PEC for 1-8157
1990, between P. J. Burguieres year ended December 31, 1990
and Panhandle Eastern
Corporation
**10.26 Agreement, effective January 1, 10.32 to Form 10-K of PEC for 1-8157
1991, between P. J. Burguieres year ended December 31, 1990
and Panhandle Eastern
Corporation
**10.27 Agreement, effective March 1, 10.24 to Form 10-K of PEC for 1-8157
1991, between Paul M. Anderson year ended December 31, 1991
and Panhandle Eastern
Corporation
10.28 Settlement Agreement, dated 19.4 to Form 10-Q of PEC for 1-8157
July 21, 1986, among Sonatrach, quarter ended June 30, 1986
Panhandle Eastern Corporation,
Panhandle Eastern Pipe Line
Company and Trunkline LNG
Company
</TABLE>
<PAGE> 28
<TABLE>
<CAPTION>
EXHIBIT FILE
NUMBER DESCRIPTION ORIGINALLY FILED AS EXHIBIT NUMBER
------- ----------- --------------------------- ------
<S> <C> <C> <C>
10.29 Amendment, dated August 11, 19.5 to Form 10-Q of PEC for 1-8157
1986, to Settlement Agreement, quarter ended June 30, 1986
dated July 21, 1986, among
Sonatrach, Panhandle Eastern
Corporation, Panhandle Eastern
Pipe Line Company and Trunkline
LNG Company
10.30 Amendment No. 2, dated August 19(e) to Form 10-Q of PEC for 1-8157
1, 1988, to Settlement quarter ended June 30, 1988
Agreement, dated July 21, 1986,
among Sonatrach, International
Petroleum Investment
Partnership, Panhandle Eastern
Corporation, Panhandle Eastern
Pipe Line Company and Trunkline
LNG Company
10.31 Purchase Agreement, dated April 19(a) to Form 10-Q of PEC for 1-8157
26, 1987, between Sonatrading quarter ended March 31, 1987
Amsterdam B.V. and Trunkline
LNG Company
10.32 Mutual Assurances Agreement, 19(b) to Form 10-Q of PEC for 1-8157
dated April 26, 1987, among quarter ended March 31, 1987
Sonatrach, Sonatrading
Amsterdam B.V., Panhandle
Eastern Corporation and
Trunkline LNG Company
10.33 Tanker Utilization Agreement, 19(c) to Form 10-Q of PEC for 1-8157
dated April 26, 1987, between quarter ended March 31, 1987
Sonatrading Amsterdam B.V. and
Trunkline LNG Company
10.34 Transportation Agreement, dated 19(d) to Form 10-Q of PEC for 1-8157
April 26, 1987, between quarter ended March 31, 1987
Sonatrach and Trunkline LNG
Company
***10.35 Letter Agreement constituting a
Contract of Employment between
James T. Hackett and Panhandle
Eastern Corporation, dated
December 19, 1995
***10.36 Retirement Income Plan of
Panhandle Eastern Corporation
and Participating Affiliates,
as amended and restated
effective January 1, 1995
***10.37 Amendment No. 1 to the
Retirement Income Plan of
Panhandle Eastern Corporation
and Participating Affiliates,
effective January 1, 1996
</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>
EXHIBIT FILE
NUMBER DESCRIPTION ORIGINALLY FILED AS EXHIBIT NUMBER
------- ----------- --------------------------- ------
<S> <C> <C> <C>
***10.38 Amendment No. 2 to the
Retirement Income Plan of
Panhandle Eastern Corporation
and Participating Affiliates,
effective January 1, 1996
*13 PanEnergy Corp 1995 Annual
Report to Stockholders
21 List of Certain Subsidiaries of
the Registrant and state of
incorporation: (Contained
within Part IV of the Form 10-K
for the Fiscal Year Ended
December 31, 1995)
*23 Consent of KPMG Peat Marwick
LLP
*24 Powers of Attorney
*27 Financial Data Schedule for
December 31, 1995
*99 Definitive Proxy Statement,
dated March 15, 1996 for the
Annual Meeting of Stockholders
of Panhandle Eastern
Corporation
</TABLE>
<PAGE> 1
EXHIBIT 3.01
CERTIFICATE OF ELIMINATION
of the
PARTICIPATING PREFERRED STOCK
(Par Value $1.00 Per Share)
of
PANHANDLE EASTERN CORPORATION
________________________________________________
Pursuant to Section 151(g) of the
General Corporation Law of the State of Delaware
________________________________________________
PANHANDLE EASTERN CORPORATION, a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Company"),
does hereby certify that the following resolutions were duly adopted by the
Board of Directors of the Company on February 16, 1996, and remains in full
force and effect:
ELIMINATION OF PARTICIPATING PREFERRED STOCK
WHEREAS, the Board of Directors of Panhandle Eastern
Corporation (the "Company") believes that it is in the best interest
of the Company to eliminate the 1,000,000 shares of Participating
Preferred Stock, par value $1.00, of the Company.
NOW, THEREFORE, IT IS HEREBY
RESOLVED, that, pursuant to the authority granted to and
vested in the Board of Directors and in accordance with the provisions
of the Restated Certificate of Incorporation of the Company filed with
the Office of the Secretary of State of the State of Delaware on April
13, 1990 (the "Certificate of Incorporation"), the Board hereby states
and declares that none of the 1,000,000 authorized shares of the
series of Preferred Stock of the Company designated as "Participating
Preferred Stock" is outstanding and none will be issued subject to the
Certificate of Incorporation or the certificate of designation and
terms previously filed with the Secretary of State of the State of
Delaware with respect to the Participating Preferred Stock and, when
the certificate of
<PAGE> 2
-2-
elimination, referred to below, setting forth this resolution becomes
effective, it shall have the effect of eliminating from the
Certificate of Incorporation and such certificate of designation and
terms all matters set forth therein with respect to the Participating
Preferred Stock; and
FURTHER RESOLVED, that, pursuant to the authority granted to
and vested in the Board of Directors, the Board of Directors hereby
authorizes the elimination in whole of the Participating Preferred
Stock, and any shares thereof previously reserved for issuance shall
automatically cease to be reserved for such purpose; and
FURTHER RESOLVED, that each officer of the Company is hereby
authorized, in the name and on behalf of the Company, to prepare,
execute and file, or cause to be prepared and filed, a certificate of
elimination relating to the Participating Preferred Stock
substantially in the form presented to the Board of Directors.
IN WITNESS WHEREOF, PANHANDLE EASTERN CORPORATION has caused this
Certificate of Elimination to be duly executed by its duly authorized officer,
this _________ day of March, 1996.
PANHANDLE EASTERN CORPORATION
By:
------------------------------
Robert W. Reed
Secretary
<PAGE> 1
EXHIBIT 4.02
[EXECUTION COPY]
================================================================================
PANHANDLE EASTERN CORPORATION
doing business as
PANENERGY CORP
___________________________________
$400,000,000
CREDIT AGREEMENT
dated as of January 31, 1996
___________________________________
CHEMICAL BANK
as Administrative Agent
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C> <C>
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2. AMOUNTS AND TERMS OF LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.1 Revolving Credit Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.2 Revolving Credit Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.3 Procedure for Revolving Credit Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.4 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.5 Issuance of Commercial L/Cs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.6 Issuance of Standby L/Cs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.7 Participating Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.8 Procedure for Opening Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.9 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.11 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.12 Letter of Credit Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.13 Competitive Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.14 Competitive Loan Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.15 Procedure for Competitive Loan Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.16 Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.17 Term Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.18 Procedure for Term Loan Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.19 Extension of Revolving Credit Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.20 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3. INTEREST RATE PROVISIONS, FEES, CONVERSIONS AND PAYMENTS . . . . . . . . . . . . . . . . . . . . . . 31
3.1 Interest Rates and Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.2 Facility and Other Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.3 Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.4 Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.5 Optional Prepayments of Revolving Credit Loans and Term Loans . . . . . . . . . . . . . . . . . . . 34
3.6 Reduction of Revolving Credit Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.7 Pro Rata Treatment and Payments; Lending Offices . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.8 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.9 Failure by Lenders to Make Funds Available . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.10 Conversion Options for Loans; Minimum Amount of Loans . . . . . . . . . . . . . . . . . . . . . . . 37
3.11 Inability to Determine Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.13 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.14 Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
i
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3.15 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.16 Lenders' Obligation to Mitigate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.17 Replacement of Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4. CONDITIONS OF LENDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.1 Conditions to the Initial Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.2 Conditions to the Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.3 Conditions to All Loans and All Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 5. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.1 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.2 Corporate Existence; Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.3 Corporate Power; Authorization; Enforceable Obligations . . . . . . . . . . . . . . . . . . . . . . 45
5.4 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.5 No Material Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.6 Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.7 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.8 Environmental Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.9 Investment Company Act, Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . 47
SECTION 6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.1 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.2 Certificates; Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.3 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.4 Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.5 Maintenance of Property; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.6 Inspection of Property; Books and Records; Discussions . . . . . . . . . . . . . . . . . . . . . . . 49
6.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
7.1 Maintenance of Consolidated Indebtedness to Consolidated Capitalization Percentage Ratio of the
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.2 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.3 Consolidation, Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.4 Principal Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.5 Lines of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.6 Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 8. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 9. THE ADMINISTRATIVE AGENT AND THE ISSUING LENDERS . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.3 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
</TABLE>
ii
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----
<S> <C> <C>
9.4 Reliance by Administrative Agent and the Issuing Lenders . . . . . . . . . . . . . . . . . . . . . . 55
9.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.6 Non-Reliance on Administrative Agent, Issuing Lenders and Other Lenders . . . . . . . . . . . . . . 56
9.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.8 Administrative Agent and Issuing Lenders in Their Individual Capacities . . . . . . . . . . . . . . 57
9.9 Successor Administrative Agent and Issuing Lenders . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.1 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.3 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.4 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.5 Payment of Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.6 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.7 Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.8 Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.9 Transfers of Competitive Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.10 Register, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
10.11 Adjustments; Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
10.12 Existing Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
10.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
10.14 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
10.15 Submission to Jurisdiction; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
10.16 Limitation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
10.17 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
</TABLE>
iii
<PAGE> 5
SCHEDULES
- ---------
1 Lending Offices
2 Revolving Credit Commitments
3 Excluded Sales of Assets
EXHIBITS
- --------
A Form of Competitive Loan Confirmation
B Form of Competitive Loan Offer
C Form of Competitive Loan Request
D Form of Letter of Credit Participation
Certificate
E Form of Revolving Credit Note
F-1 Form of Grid Competitive Loan Note
F-2 Form of Individual Competitive Loan Note
G Form of Term Note
H Form of Extension Request
I Form of Opinion of Sullivan & Cromwell
J Form of General Counsel's Opinion
K Form of Commitment Transfer Supplement
iv
<PAGE> 6
CREDIT AGREEMENT
Dated as of January 31, 1996
PANHANDLE EASTERN CORPORATION, a Delaware corporation doing business
as PanEnergy Corp (the "Company"), the several financial institutions from time
to time parties to this Agreement (collectively, the "Lenders" and
individually, a "Lender") and CHEMICAL BANK, a New York banking corporation
("Chemical"), as Administrative Agent, do hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms
have the following meanings:
"ABR Loans": Revolving Credit Loans or Term Loans at such time as
they are made and/or are being maintained at a rate of interest based upon the
Alternate Base Rate.
"Additional Lender": as defined in subsection 2.19(c).
"Adjusted CD Rate": with respect to each day during an Interest
Period for CD Rate Loans, a rate per annum determined for such day in
accordance with the following formula (rounded upward, if necessary, to the
next higher 1/100 of 1%):
CD Rate + Assessment Rate
----------------------------
1.00-CD Reserve Requirements
"Administrative Agent": Chemical, in its capacity as administrative
agent for the Lenders hereunder and its successors and assigns in such
capacity.
"Administrative Agent's Office": the office of the Administrative
Agent located at 270 Park Avenue, New York, New York 10017, or such other
office as the Administrative Agent may hereafter designate in writing as such
to the other parties hereto.
"Affiliate": of any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control
with, such Person. For purposes of this definition, control of a Person shall
mean the power, direct or indirect, to direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.
"Agreement": this Credit Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"AGTCO": Algonquin Gas Transmission Company, a Delaware corporation.
<PAGE> 7
"Alternate Base Rate": for any day, a rate per annum (rounded
upward, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the
Prime Rate in effect on such day or (b) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall
mean 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 not being intended to be the lowest rate of interest charged by
Chemical in connection with extensions of credit to debtors); and "Federal
Funds Effective Rate" shall mean, 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 on the next
succeeding 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 the day of such transactions received by the Administrative
Agent from three federal funds brokers of recognized standing selected by it.
If the Administrative Agent shall have determined that it is unable to
ascertain the Federal Funds Effective Rate, for any reason, including the
inability or failure of the Administrative Agent to obtain sufficient
quotations in accordance with the terms thereof (which determination shall be
prima facie evidence of such inability), the Alternate Base Rate shall be
determined without regard to clause (b) of the first sentence of this
definition, until the circumstances giving rise to such inability no longer
exist. Any change in the Alternate Base Rate due to a change in the Prime Rate
or the Federal Funds Effective Rate shall be effective as of the opening of
business on the effective date of such change in the Prime Rate or the Federal
Funds Effective Rate, respectively.
"Applicable Facility Fee Percentage": on any date, the applicable
percentage set forth below based upon the ratings applicable on such date to
the Company's senior, unsecured, non-credit-enhanced long-term indebtedness for
borrowed money ("Index Debt"):
<TABLE>
<CAPTION>
Percentage
----------
<S> <C>
CATEGORY 1
Rating
A- or higher by S&P
A3 or higher by Moody's .075%
CATEGORY 2
Rating
BBB+ by S&P
Baa1 by Moody's .09%
CATEGORY 3
Rating
BBB by S&P
Baa2 by Moody's .10%
</TABLE>
-2-
<PAGE> 8
<TABLE>
<CAPTION>
Percentage
----------
<S> <C>
CATEGORY 4
Rating
BBB- by S&P
Baa3 by Moody's .125%
CATEGORY 5
Rating
BB+ or lower by S&P
Ba1 or lower by Moody's .175%
</TABLE>
For purposes of the foregoing, (i) if the ratings for Index Debt established or
deemed to have been established by S&P and Moody's shall fall within different
Categories, the Applicable Facility Fee Percentage shall be determined by
reference to the numerically lower of such Categories (i.e., the Category
corresponding to the higher rating); (ii) if S&P or Moody's shall not have in
effect a rating for Index Debt (other than for a reason not related to the
creditworthiness of the Company or to any act or failure to act on the part of
the Company, or because such rating agency shall no longer be in the business
of rating corporate debt obligations), then the rating of such agency shall be
deemed to fall within Category 5; and (iii) if any rating established or deemed
to have been established by S&P or Moody's shall be changed (other than as a
result of a change in the rating system of S&P or Moody's), such change shall
be effective as of the date on which it is first announced by the applicable
rating agency. Each change in the Applicable Facility Fee Percentage shall
apply during the period commencing on the effective date of such change and
ending on the date immediately preceding the effective date of the next such
change. If the rating system of S&P or Moody's shall change, or if either such
rating agency shall no longer have in effect a rating for Index Debt (other
than for one of the reasons referred to in clause (ii) above), the Company and
the Lenders, acting through the Administrative Agent, shall negotiate in good
faith to amend the references to specific ratings in this definition to reflect
such changed rating system or the non-availability of ratings from such rating
agency.
"Applicable Index Rate": in respect of any Index Rate Competitive
Loan of a specified maturity requested pursuant to an Index Rate Competitive
Loan Request, the London interbank offered rate for deposits in Dollars for the
period commencing on the date of such Index Rate Competitive Loan and ending on
the maturity date thereof which appears on Telerate Page 3750 as of 11:00 A.M.,
London time, two Working Days prior to the beginning of such period.
"Applicable L/C Fee Percentage": on any date, the applicable
percentage set forth below based upon the ratings applicable on such date to
the Index Debt:
-3-
<PAGE> 9
<TABLE>
<CAPTION>
Percentage
----------
<S> <C>
CATEGORY 1
Rating
A- or higher by S&P
A3 or higher by Moody's .20%
CATEGORY 2
Rating
BBB+ by S&P
Baa1 by Moody's .235%
CATEGORY 3
Rating
BBB by S&P
Baa2 by Moody's .275%
CATEGORY 4
Rating
BBB- by S&P
Baa3 by Moody's .325%
CATEGORY 5
Rating
BB+ or lower by S&P
Ba1 or lower by Moody's .45%
</TABLE>
For purposes of the foregoing, (i) if the ratings for Index Debt established or
deemed to have been established by S&P and Moody's shall fall within different
Categories, the Applicable L/C Fee Percentage shall be determined by reference
to the numerically lower of such Categories (i.e., the Category corresponding
to the higher rating); (ii) if S&P or Moody's shall not have in effect a rating
for Index Debt (other than for a reason not related to the creditworthiness of
the Company or to any act or failure to act on the part of the Company, or
because such rating agency shall no longer be in the business of rating
corporate debt obligations), then the rating of such rating agency shall be
deemed to fall within Category 5; and (iii) if any rating established or deemed
to have been established by S&P or Moody's shall be changed (other than as a
result of a change in the rating system of S&P or Moody's), such change shall
be effective as of the date on which it is first announced by the applicable
rating agency. Each change in the Applicable L/C Fee Percentage shall apply
during the period commencing on the effective date of such change and ending on
the date immediately preceding the effective date of the next such change. If
the rating system of S&P or Moody's shall change, or if either such rating
agency shall no longer have in effect a rating for Index Debt (other than for
one of the reasons referred to in clause (ii) above), the Company and the
-4-
<PAGE> 10
Lenders, acting through the Administrative Agent, shall negotiate in good faith
to amend the references to specific ratings in this definition to reflect such
changed rating system or the non-availability of ratings from such rating
agency.
"Applicable Margin": on any date, for CD Rate Loans and Eurodollar
Loans, the applicable percentage set forth below based upon the ratings
applicable on such date to the Index Debt:
<TABLE>
<CAPTION>
EURODOLLAR
CD RATE LOAN LOAN
Percentage Percentage
------------ ----------
<S> <C> <C>
CATEGORY 1
Rating
A- or higher by S&P
A3 or higher by Moody's .325% .20%
CATEGORY 2
Rating
BBB+ by S&P
Baa1 by Moody's .36% .235%
CATEGORY 3
Rating
BBB by S&P
Baa2 by Moody's .40% .275%
CATEGORY 4
Rating
BBB- by S&P
Baa3 by Moody's .45% .325%
CATEGORY 5
Rating
BB+ or lower by S&P
Ba1 or lower by Moody's .575% .45%
</TABLE>
For purposes of the foregoing, (i) if the ratings for Index Debt established or
deemed to have been established by S&P and Moody's shall fall within different
Categories, the Applicable Margin shall be determined by reference to the
numerically lower of such categories (i.e., the Category corresponding to the
higher rating); (ii) if S&P or Moody's shall not have in effect a rating for
Index Debt (other than for a reason not related to the creditworthiness of the
Company or to any act or failure to act on the part of the Company, or because
such rating agency shall no longer be in the business of rating corporate debt
obligations), then the rating
-5-
<PAGE> 11
of such rating agency shall be deemed to fall within Category 5; and (iii) if
any rating for Index Debt established or deemed to have been established by S&P
or Moody's shall be changed (other than as a result of a change in the rating
system of S&P or Moody's), such change shall be effective as of the date on
which it is first announced by the applicable rating agency. Each change in
the Applicable Margin shall apply during the period commencing on the effective
date of such change and ending on the date immediately preceding the effective
date of the next such change. If the rating system of S&P or Moody's shall
change, or if either such rating agency shall no longer have in effect a rating
for Index Debt (other than for one of the reasons referred to in clause (ii)
above), the Company and the Lenders, acting through the Administrative Agent,
shall negotiate in good faith to amend the references to specific ratings in
this definition to reflect such changed rating system or the non-availability
of ratings from such rating agency.
"Assessment Rate": for each Interest Period for CD Rate Loans, the
net annual assessment rate (rounded upward, if necessary, to the next higher
1/100 of 1%) estimated by Chemical at the beginning of such Interest Period to
be the current annual assessment rate payable by Chemical to the Federal
Deposit Insurance Corporation (or any successor) for insuring time deposits
made in Dollars at offices of Chemical in the United States.
"Asset Sale": any sale, transfer, lease or other disposition of any
property or asset of the Company or any Subsidiary of the Company except a
sale, transfer, lease or other disposition (a) of cash, (b) of temporary cash
investments, (c) of trade receivables or other rights to receive money (whether
absolute or contingent, or matured or unmatured), (d) of inventories of gas and
materials and supplies other than (i) in connection with a sale, transfer,
lease or other disposition of property, plant and equipment or (ii) for the
primary purpose of financing the purchase, storage or transportation of such
gas or materials and supplies by the Company or a Subsidiary of the Company,
(e) by the Company to a Subsidiary of the Company or by a Subsidiary of the
Company to the Company or to another Subsidiary of the Company (but if the
sale, transfer, lease or other disposition is by one of the Principal
Subsidiaries, then only to another of the Principal Subsidiaries), (f) of other
assets in the ordinary course of business or (g) of other assets listed on
Schedule 3 hereto.
"Borrowing Date": any Business Day or Working Day, as applicable,
specified in a notice pursuant to subsection 2.3, 2.5, 2.6, 2.15 or 2.18 as a
date on which the Lenders are to make Loans or an Issuing Lender is to issue a
Letter of Credit pursuant to such notice.
"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized or required by
law to close.
"Capital Lease": as to any Person, (a) any lease of property, real
or personal, the obligations under which are capitalized on a balance sheet of
such Person and (b) any other such lease to the extent that the then present
value of the minimum rental commitment thereunder should, in accordance with
GAAP, be capitalized on a balance sheet of the lessee.
-6-
<PAGE> 12
"Cash Equivalents": (i) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having the highest rating obtainable
from either S&P or Moody's; (iii) commercial paper maturing no more than one
year from the date of creation thereof and, at the time of acquisition, having
the highest rating obtainable from either S&P or Moody's; (iv) certificates of
deposit or banker's acceptances maturing within one year from the date of
acquisition thereof issued by (x) any Lender, (y) any commercial bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia having combined capital and surplus of not less than
$250,000,000 or (z) any bank which has a short-term commercial paper rating
meeting the requirements of clause (iii) above (any such Lender or bank, a
"Qualifying Lender"); (v) eurodollar time deposits having a maturity of less
than one year purchased directly from any Lender (whether such deposit is with
such Lender or any other Lender hereunder) or issued by any Qualifying Lender;
and (vi) repurchase agreements and reverse repurchase agreements with a term of
not more than one year with any Qualifying Lender relating to marketable direct
obligations issued or unconditionally guaranteed by the United States.
"CD Rate": with respect to each day during an Interest Period for CD
Rate Loans, the rate per annum equal to the average (rounded upward, if
necessary, to the next higher of 1/100 of 1%) of the respective rates notified
to the Administrative Agent by each of the Reference Lenders as the average
rate per annum bid by New York certificate of deposit dealers of recognized
standing for the purchase at face value from the Reference Lenders of their
certificates of deposit in The City of New York at or about 10:00 A.M., New
York City time, on the first day of such Interest Period for the number of days
comprised therein and in an amount comparable to the amount of the CD Rate
Loans of such Reference Lender to be outstanding during such Interest Period.
"CD Rate Loans": Revolving Credit Loans or Term Loans at such time
as they are made and/or are being maintained at a rate of interest based upon
the Adjusted CD Rate.
"CD Reserve Requirements": with respect to any day during an
Interest Period for CD Rate Loans, 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) for determining the reserve
requirement for a member bank of the Federal Reserve System in The City of New
York with deposits exceeding $1,000,000,000 in respect of new non-personal time
deposits in Dollars in The City of New York having a maturity comparable to
such Interest Period and in an amount of $100,000 or more.
"Chemical": Chemical Bank.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
-7-
<PAGE> 13
"Commercial L/C": a commercial letter of credit in a face amount of
not less than $500,000, payable in Dollars, issued by an Issuing Lender in
accordance with subsections 2.4 and 2.5 for the account of the Company for the
purchase of goods in the ordinary course of business, in which the
Participating Lenders participate pursuant to subsection 2.7.
"Commercial L/C Application": as defined in subsection 2.5(a).
"Commitments": the collective reference to the Revolving Credit
Commitments and the Term Loan Commitments.
"Commitment Percentage": as to any Lender, the percentage of the
aggregate Commitments constituted by such Lender's Commitments (or, at any time
after the Commitments shall have expired or terminated, the ratio, expressed as
a percentage, which the aggregate principal amount of such Lender's Loans then
outstanding bears to the aggregate principal amount of all Loans then
outstanding).
"Commitment Transfer Supplement": as defined in subsection 10.8.
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Company within the meaning
of Section 4001 of ERISA.
"Company": Panhandle Eastern Corporation, a Delaware corporation,
doing business as PanEnergy Corp.
"Competitive Loan": each loan made pursuant to subsection 2.13.
"Competitive Loan Assignee": as defined in subsection 10.9(a).
"Competitive Loan Assignment": any assignment by a Competitive Loan
Lender to a Competitive Loan Assignee of a Competitive Loan and related
Individual Competitive Loan Note; any such Competitive Loan Assignment to be
registered in the Register must set forth, in respect of the Competitive Loan
Assignee thereunder, the full name of such Competitive Loan Assignee, its
address for notices, its lending office address (in each case with telephone
and facsimile transmission numbers) and payment instructions for all payments
to such Competitive Loan Assignee, and must contain an agreement by such
Competitive Loan Assignee to comply with the provisions of subsections 3.12,
3.16 and 10.9.
"Competitive Loan Borrowing Period": the period from and including
the Effective Date until the date which is seven days prior to the Revolving
Credit Termination Date or, if earlier, the date on which the Revolving Credit
Commitments shall terminate as provided herein.
"Competitive Loan Confirmation": each confirmation by the Company of
its acceptance of Competitive Loan Offers, which Competitive Loan Confirmation
shall be substantially in the form of Exhibit A and shall be delivered to the
Administrative Agent in writing or by facsimile transmission.
-8-
<PAGE> 14
"Competitive Loan Lender": each Lender that has agreed to offer to
make Competitive Loans hereunder.
"Competitive Loan Maturity Date": as to any Competitive Loan, the
date specified by the Company pursuant to subsection 2.15(d)(ii) in its
acceptance of the related Competitive Loan Offer.
"Competitive Loan Note": a Grid Competitive Loan Note or an
Individual Competitive Loan Note.
"Competitive Loan Offer": each offer of a Competitive Loan Lender to
make Competitive Loans pursuant to a Competitive Loan Request, which
Competitive Loan Offer shall contain the information specified in Exhibit B and
shall be delivered to the Administrative Agent by telephone, immediately
confirmed by facsimile transmission.
"Competitive Loan Request": each request by the Company for
Competitive Loan Lenders to submit bids to make Competitive Loans, which
request shall contain the information in respect of such requested Competitive
Loans specified in Exhibit C and shall be delivered to the Administrative Agent
in writing or by facsimile transmission, or by telephone, immediately confirmed
by facsimile transmission.
"Consolidated Capitalization": at a particular date, the sum of (a)
Consolidated Net Worth at such date, (b) the amount of Consolidated
Indebtedness at such date and (c) the aggregate amounts payable upon
involuntary liquidation (other than accrued dividends) to holders of shares of
any classes of preferred stock (other than preferred stock subject to mandatory
redemption or repurchase) of the Company and its Subsidiaries at such date.
"Consolidated Indebtedness": at a particular date, all Indebtedness
of the Company and its Subsidiaries determined on a consolidated basis in
accordance with GAAP.
"Consolidated Net Worth": at a particular date, all amounts which
would be included under common stockholders' equity on a consolidated balance
sheet of the Company and its Subsidiaries determined on a consolidated basis in
accordance with GAAP.
"Consolidated Tangible Assets": at a particular date, the total
assets appearing on the consolidated balance sheet of the Company and its
consolidated Subsidiaries most recently delivered to each Lender pursuant to
subsection 5.1, 6.1(a) or 6.1(b), as the case may be, less intangible assets.
As used herein "intangible assets" means the value (net of applicable reserves)
as shown on or reflected in such balance sheet of goodwill, deferred charges,
patents and trademarks.
"Continuing Lenders": as defined in subsection 2.19.
"Contractual Obligations": as to any Person, any provision of any
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.
-9-
<PAGE> 15
"Credit Availability Amount": at any time, (a) the then aggregate
amount of the Revolving Credit Commitments less (b) the then Extensions of
Credit.
"Credit Documents": as defined in subsection 9.1.
"Credit Exposure": as defined in subsection 10.7.
"Default": any of the events specified in Section 8, whether or not
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, event or act, has been satisfied.
"Determining Lenders": (a) Lenders whose Commitment Percentages
aggregate at least 40% and (b) after the Commitments have expired or
terminated, Lenders whose outstanding Loans represent in the aggregate at least
40% of all outstanding Loans.
"Dollars" and "$": the lawful currency of the United States of
America.
"Domestic Lending Office": initially, the office of each Lender
designated as such and set forth on Schedule 1, and thereafter, such other
office of such Lender, if any, of which such Lender shall notify the
Administrative Agent and the Company in writing.
"Effective Date": the earliest date (but not later than March 31,
1996) on which all of the conditions precedent to the initial Loans set forth
in Section 4 shall have occurred (or shall have been waived in accordance with
subsection 10.1).
"ERISA": as defined in subsection 5.7.
"Eurocurrency Reserve Requirements": with respect to each day during
an Interest Period for Eurodollar Loans, the aggregate (without duplication) of
the rates (expressed as a decimal) of reserve requirements in effect on such
day (including, without limitations, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors of the
Federal Reserve System or other Governmental Authority having jurisdiction with
respect thereto), dealing with reserve requirements prescribed for eurocurrency
funding (currently referred to as "Eurocurrency liabilities" in Regulation D of
such Board) maintained by a member bank of such System.
"Eurodollar Base Rate": with respect to each day during an Interest
Period for Eurodollar Loans, the rate per annum equal to the average (rounded
upward, if necessary, to the next higher 1/16 of 1%) of the respective rates
notified to the Administrative Agent by each of the Reference Lenders as the
rate at which its Eurodollar Lending Office is offered Dollar deposits two
Working Days prior to the beginning of such Interest Period in the interbank
eurodollar market where the eurodollar and foreign currency and exchange
operations of such Eurodollar Lending Office are customarily conducted at or
about 10:00 A.M., New York City time, for delivery on the first day of such
Interest Period for the number of days comprised therein and in an amount
comparable to the amount of the Eurodollar Loans of such Reference Lender to be
outstanding during such Interest Period.
-10-
<PAGE> 16
"Eurodollar Lending Office": initially, the office of each Lender
designated as such and set forth on Schedule 1, and thereafter, such other
office of such Lender, if any, of which such Lender shall notify the
Administrative Agent and the Company in writing.
"Eurodollar Loans": Revolving Credit Loans or Term Loans at such
time as they are made and/or are being maintained at a rate of interest based
upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during an Interest
Period for Eurodollar Loans, a rate per annum determined for such day in
accordance with the following formula (rounded upward, if necessary, to the
next higher 1/16 of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Event of Default": any of the events specified in Section 8;
provided that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, event or act, has been satisfied.
"Exchange Act": the Securities Exchange Act of 1934, as amended.
"Existing Facilities": (a) the Credit Agreement, dated as of
December 1, 1994, among the Company, the financial institutions parties thereto
and Chemical Bank, as administrative agent, (b) the Credit Agreement, dated as
of December 1, 1994, among TETCO, the financial institutions parties thereto
and Chemical Bank, as administrative agent, and (c) the Credit Agreement, dated
as of December 1, 1994, among PEPL, the financial institutions parties thereto
and Chemical Bank, as administrative agent.
"Extension Effective Date": as defined in subsection 2.19(a).
"Extension Request": as defined in subsection 2.19(a).
"Extensions of Credit": at any particular time, the sum of (a) the
aggregate principal amount of Loans then outstanding and (b) the aggregate
Letter of Credit Obligations (excluding interest, fees and indemnities thereon)
then outstanding.
"Facility Fee": as defined in subsection 3.2(a).
"Fixed Rate Competitive Loan Request": any Competitive Loan Request
requesting the Competitive Loan Lenders to offer to make Fixed Rate Competitive
Loans.
"Fixed Rate Competitive Loans": Competitive Loans the rate of
interest applicable to which is equal to a fixed percentage rate per annum
specified by the Competitive Loan Lender making such Loan in its Competitive
Loan Offer (as opposed to a rate composed of the Applicable Index Rate plus or
minus a margin).
"GAAP": generally accepted accounting principles in the United
States of America as in effect from time to time.
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"Governmental Authority": any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Grid Competitive Loan Notes": as defined in subsection 2.14(a).
"Indebtedness": of a Person, at a particular date, the sum (without
duplication) at such date of (a) indebtedness for borrowed money or for the
deferred purchase price of property or services in respect of which such Person
is liable as obligor or arising under any conditional sales contract or other
title retention agreement with respect to property acquired by such Person
(even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (b) obligations of such Person under Capital Leases, (c) the face
amount available or to be available to be drawn under all letters of credit
issued for the account of such Person (excluding any amount relating to
Indebtedness included in the definition of Indebtedness under another clause of
this definition) and, without duplication, the unreimbursed amount of all
drafts drawn thereunder, (d) any obligations (in the nature of principal or
interest) of such Person in respect of acceptances or similar obligations
issued or created for the account of such Person, (e) Indebtedness referred to
in clause (a), (b), (c) or (d) above or (f) or (g) below secured by any Lien on
any property or asset owned or held by such Person regardless of whether the
Indebtedness secured thereby shall have been assumed by or is a primary
liability of such Person (but in any event not exceeding the fair market value
of such property or asset), (f) all direct guarantees by such Person of
Indebtedness referred to in clause (a), (b), (c), (d) or (e) above of another
Person and (g) all amounts payable in connection with mandatory redemptions or
repurchases of preferred stock of such Person.
"Index Debt": as defined in the definition of "Applicable Facility
Fee Percentage".
"Index Rate Competitive Loans": Competitive Loans bearing interest
at a rate equal to the Applicable Index Rate plus or minus a margin bid.
"Index Rate Competitive Loan Request": any Competitive Loan Request
requesting the Competitive Loan Lenders to offer to make Index Rate Competitive
Loans.
"Individual Competitive Loan Notes": as defined in subsection
2.14(b).
"Interest Payment Date": (a) as to any ABR Loan, the last day of
each March, June, September and December to occur while such ABR Loan is
outstanding, commencing on March 31, 1996, and each date principal is due with
respect to such ABR Loan; (b) as to any Eurodollar Loan in respect of which the
Company has selected an Interest Period of one, two or three months and any CD
Rate Loan in respect of which the Company has selected an Interest Period of
30, 60 or 90 days, the last day of such Interest Period; (c) as to any
Eurodollar Loan and any CD Rate Loan in respect of which the Company has
selected a longer Interest Period than the periods described in clause (b), the
last day of each March, June, September and December falling within such
Interest Period and the last day of such Interest Period; (d) as to any Fixed
Rate Competitive Loan, each interest payment date specified by the Company for
such Loan in the related Competitive Loan Request (including,
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in any event, the Competitive Loan Maturity Date in respect of such Loan); and
(e) as to any Index Rate Competitive Loan, (i) the Competitive Loan Maturity
Date in respect of such Loan and (ii) each date (if any) occurring prior to
such Competitive Loan Maturity Date which is three months, or a whole multiple
thereof, after the Borrowing Date in respect of such Loan.
"Interest Period": (a) with respect to any Eurodollar Loan:
(i) initially, the period commencing on the borrowing or conversion
date, as the case may be, with respect to such Eurodollar Loan and ending
one, two, three or six months (or nine months, to the extent funds are
available for such nine-month period) thereafter, as selected by the
Company in its notice of borrowing as provided in subsection 2.3, or its
notice of conversion as provided in subsection 3.10, as the case may be;
and
(ii) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurodollar Loan and ending
one, two, three or six months (or nine months, to the extent funds are
available for such nine-month period) thereafter, as selected by the
Company by irrevocable notice to the Administrative Agent not less than
three Working Days prior to the last day of the then current Interest
Period with respect to such Eurodollar Loan; and
(b) with respect to any CD Rate Loan:
(i) initially, the period commencing on the borrowing or conversion
date, as the case may be, with respect to such CD Rate Loan and ending 30,
60, 90, 120 or 180 days (or 360 days, to the extent funds are available
for such 360-day period) thereafter, as selected by the Company in its
notice of borrowing as provided in subsection 2.3, or its notice of
conversion as provided in subsection 3.10, as the case may be; and
(ii) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such CD Rate Loan and ending 30,
60, 90, 120 or 180 days (or 360 days, to the extent funds are available
for such 360-day period) thereafter, as selected by the Company by
irrevocable notice to the Administrative Agent not less than two Business
Days prior to the last day of the then current Interest Period with
respect to such CD Rate Loan.
All of the foregoing provisions relating to Interest Periods are
subject to the following:
(A) if any Interest Period for Eurodollar Loans would otherwise end
on a day which is not a Working Day, that Interest Period shall be extended to
the next succeeding Working Day unless the result of such extension would be to
carry such Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Working Day;
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(B) if any Interest Period for CD Rate Loans would otherwise end on
a day which is not a Business Day, such Interest Period shall be extended to
the next succeeding Business Day;
(C) the Company shall have no right to elect an Interest Period with
respect to Revolving Credit Loans which would extend beyond the Revolving
Credit Termination Date or an Interest Period with respect to Term Loans which
would extend beyond the Term Loan Maturity Date;
(D) if the Company shall fail to give notice as provided above, the
Company shall be deemed to have selected an ABR Loan to replace the affected
Eurodollar Loans or CD Rate Loans;
(E) any Interest Period for Eurodollar Loans that begins on the last
Working 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 Working Day of a calendar month;
(F) the Company shall select Interest Periods so that there shall be
no more than eight Tranches with respect to the Revolving Credit Loans or Term
Loans in existence at any one time; and
(G) for purposes of determining the availability of a nine-month
Interest Period for Eurodollar Loans, or a 360-day Interest Period for CD Rate
Loans, such Interest Period shall be deemed available if (a) each of the
Reference Banks quotes a rate to the Administrative Agent as provided in the
definition of "Eurodollar Base Rate" or "CD Rate", as the case may be, and (b)
the Determining Lenders shall not have advised the Administrative Agent that
the Eurodollar Rate or the Adjusted CD Rate, as the case may be, determined by
the Administrative Agent on the basis of such quotes will not adequately and
fairly reflect the cost to such Lenders of maintaining or funding their
Eurodollar Loans or CD Rate Loans, as the case may be, for such Interest
Period.
"Issuing Lender": with respect to Letters of Credit, Chemical or
such other Lenders as the Company may from time to time designate as an Issuing
Lender (and which shall accept such designation) and notify the Administrative
Agent of such designation, each in its capacity as issuer of such Letters of
Credit.
"L/C Participating Interest": with respect to any Letter of Credit,
(a) in the case of the Issuing Lender, its interest in such Letter of Credit
and the Letter of Credit Application relating thereto after giving effect to
the granting of any participating interests therein pursuant to subsection 2.7
and (b) in the case of each Participating Lender, its undivided participating
interest in such Letter of Credit and the Letter of Credit Application relating
thereto.
"Lenders": as defined in the preamble to this Agreement, which term
includes Lenders originally executing this Agreement and, thereafter, from the
date upon which the conditions referred to in subsection 10.8 are satisfied,
the Purchasing Lenders.
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"Letter of Credit Applications": the collective reference to
Commercial L/C Applications and Standby L/C Applications.
"Letter of Credit Obligations": at any particular time, all
liabilities of the Company with respect to Letters of Credit, whether or not
any such liability is contingent, including without duplication, the sum of (a)
the then outstanding Reimbursement Obligations plus (b) the then aggregate
undrawn face amount of the Letters of Credit.
"Letter of Credit Participation Certificate": a certificate in
substantially the form of Exhibit D.
"Letters of Credit": the collective reference to Commercial L/Cs and
Standby L/Cs.
"Lien": any mortgage, pledge, hypothecation, security interest,
encumbrance, charge or lien (statutory or otherwise) (including, without
limitation, any conditional sale or other title retention agreement and any
Capital Lease having substantially the same economic effect as any of the
foregoing) or the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction in respect of any of the
foregoing.
"Loan": any Revolving Credit Loan, Term Loan or Competitive Loan
made pursuant to this Agreement.
"Moody's": Moody's Investors Service, Inc.
"Note": any Revolving Credit Note, Term Note or Competitive Loan
Note.
"Obligations": the unpaid principal amount of, and interest on, the
Notes and all other obligations and liabilities of the Company to the
Administrative Agent and the Lenders (including, without limitation,
Reimbursement Obligations), 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, whether on account of
principal, interest, fees, indemnities, costs, expenses (including, without
limitation, all fees and disbursements of counsel to the Administrative Agent)
or otherwise.
"Participants": as defined in subsection 10.7.
"Participating Lender": each Lender (other than the Issuing Lender),
with respect to its L/C Participating Interest in each Letter of Credit.
"PENGC": PanEnergy Natural Gas Corporation, a Delaware corporation.
"PEPL": Panhandle Eastern Pipe Line Company, a Delaware corporation.
"Person": an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
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"PES": PanEnergy Services, Inc., a Delaware corporation.
"Principal Subsidiaries": TETCO, PEPL, AGTCO, PENGC and PES.
"Purchasing Lender": as defined in subsection 10.8.
"Reference Lenders": Chemical, Morgan Guaranty Trust Company of New
York and NationsBank of Texas, N.A.
"Refunding Extension of Credit": Loans or issuances of Letters of
Credit hereunder which, after application of the proceeds thereof, result in no
net increase in the aggregate outstanding Extensions of Credit with respect to
any Lender.
"Register": as defined in subsection 10.10(a).
"Reimbursement Obligation": the obligation of the Company to
reimburse an Issuing Lender in accordance with the terms of this Agreement and
the related Letter of Credit Application for any payment made by an Issuing
Lender under any Letter of Credit.
"Required Lenders": (a) Lenders whose Commitment Percentages
aggregate at least 50.1% and (b) after the Commitments have expired or
terminated, Lenders whose outstanding Loans represent in the aggregate at least
50.1% of all outstanding Loans.
"Requirements of Law": as to any Person, the articles or certificate
of incorporation and bylaws (or other organizational or governing documents) of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person
or any of its property is subject.
"Responsible Officer": as to any Person, the chief executive
officer, president or any vice-president of such Person or, with respect to
financial matters, the chief financial officer, treasurer or controller or any
assistant treasurer, of such Person or any other officer authorized by such
Person to deliver documents with respect to financial matters pursuant to this
Agreement. Unless otherwise qualified, all references to a "Responsible
Officer" in this Agreement shall refer to a Responsible Officer of the Company.
"Revolving Credit Commitments": as defined in subsection 2.1(a).
"Revolving Credit Loans": as defined in subsection 2.1(a).
"Revolving Credit Notes": as defined in subsection 2.2.
"Revolving Credit Termination Date": the date 364 days after the
Effective Date (or the extension of such date pursuant to subsection 2.19).
"S&P": Standard & Poor's Ratings Group.
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"SEC Reports": the Company's (a) Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 and (b) Quarterly Reports on Form 10-Q for
the quarters ended March 31, 1995, June 30, 1995 and September 30, 1995.
"Significant Subsidiary": any Subsidiary of the Company that, in
terms of total assets or the investment therein, would be a "significant
subsidiary" as defined in Rule 1-02 of Regulation S-X under the Securities Act
of 1933 and the Exchange Act.
"Standby L/C": an irrevocable letter of credit in a face amount of
not less than $500,000, payable in Dollars, issued in accordance with
subsections 2.4 and 2.6 by an Issuing Lender in Dollars for the account of the
Company in respect of obligations of the Company and its Subsidiaries incurred
pursuant to contracts made or performances undertaken or to be undertaken or
like matters relating to contracts to which the Company or any Subsidiary
thereof is or proposes to become a party in the ordinary course of the
Company's or such Subsidiary's, as the case may be, business, including,
without limiting the foregoing, for insurance purposes.
"Standby L/C Application": as defined in subsection 2.6(a).
"Subsidiary": a corporation of which shares of stock having ordinary
voting power (other than stock having such power only by reason of the
happening of a contingency) to elect a majority of the board of directors or
other managers of such corporation are at the time owned, or the management of
which is otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by the Company.
"Term Loan Commitments": as defined in subsection 2.16(a).
"Term Loan Maturity Date": as defined in subsection 2.17.
"Term Loans": as defined in subsection 2.16(a).
"Term Notes": as defined in subsection 2.17.
"Terminating Lender": as defined in subsection 2.19(b).
"TETCO": Texas Eastern Transmission Corporation, a Delaware
corporation.
"Tranche": Eurodollar Loans or CD Rate Loans, in either case whose
Interest Periods each begin on the same day and end on the same day.
"Transferee": as defined in subsection 10.10(e).
"Type": (a) as to any Revolving Credit Loan or Term Loan, its nature
as an ABR Loan, a Eurodollar Loan or a CD Rate Loan and (b) as to any
Competitive Loan, its nature as a Fixed Rate Competitive Loan or an Index Rate
Competitive Loan .
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"Uniform Customs": the Uniform Customs and Practice for Documentary
Credits (1993 Version), International Chamber of Commerce Publication No. 500
and any amendments or revisions thereof.
"Wholly-Owned Subsidiary": a corporation of which all of the shares
of stock having ordinary voting power (other than stock having such power only
by reason of the happening of a contingency) to elect a majority of the Board
of Directors or other managers of such corporation are at the time owned,
directly or indirectly through one or more intermediaries, or both, by the
Company.
"Working Day": any Business Day on which dealings in foreign
currencies and exchange between banks may be carried on in London, England and
in The City of New York.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
herein, all terms defined in this Agreement or any other Credit Document shall
have the defined meanings when used in any certificate or other document made
or delivered pursuant hereto.
(b) As used herein or in any certificate or document made or
delivered pursuant hereto, accounting terms relating to the Company and its
Subsidiaries not defined in subsection 1.1 and accounting terms partly defined
in subsection 1.1, to the extent not defined, shall have the respective
meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement, or any other certificate or
document made or delivered pursuant hereto shall refer to this Agreement or
such other certificate or document, as the case may be, as a whole and not to
any particular provision thereof, and Section, subsection, Schedule and Exhibit
references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNTS AND TERMS OF LOANS
2.1 Revolving Credit Commitments. (a) Subject to the terms and
conditions hereof, each Lender severally, and not jointly, agrees to make
revolving credit loans (collectively, the "Revolving Credit Loans") to the
Company from time to time during the period from the Effective Date to, but not
including, the Revolving Credit Termination Date in an aggregate principal
amount at any one time outstanding not to exceed the amount set forth under the
heading "Revolving Credit Commitment" opposite the name of such Lender on
Schedule 2 hereto, as such amount may be reduced or increased from time to time
pursuant to subsection 2.19 or 3.6 hereof (collectively, the "Revolving Credit
Commitments"). The Company may use the Revolving Credit Commitments by
requesting the Lenders to make Revolving Credit Loans, prepaying Revolving
Credit Loans in whole or in part and reborrowing, all in accordance with the
terms and conditions hereof; provided that the Revolving Credit Loans made as
part of any one borrowing shall not exceed the Credit
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Availability Amount on the Borrowing Date, after giving effect to the use and
application of the proceeds thereof.
(b) Subject to the terms and conditions hereof, the Revolving Credit
Loans may be (i) ABR Loans, (ii) Eurodollar Loans, (iii) CD Rate Loans or (iv)
any combination thereof, as determined by the Company and notified to the
Administrative Agent in accordance with subsection 2.3.
2.2 Revolving Credit Notes. The Revolving Credit Loans made by each
Lender pursuant hereto shall be evidenced by a promissory note of the Company,
substantially in the form of Exhibit E (collectively, the "Revolving Credit
Notes"), with appropriate insertions therein as to principal amount, payable to
the order of such Lender and representing the obligation of the Company to pay
a principal amount equal to the lesser of (a) such Lender's Revolving Credit
Commitment and (b) the aggregate unpaid principal amount of all Revolving
Credit Loans made by such Lender, with interest thereon as prescribed in
subsection 3.1. Each Lender is hereby authorized to record the date, Type and
amount of each Revolving Credit Loan made by such Lender and the date and
amount of each payment or prepayment of principal thereof and, with respect to
Eurodollar Loans and CD Rate Loans, the length of the Interest Period and the
Eurodollar Rate or CD Rate applicable 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 in the absence of manifest error; provided that failure by any Lender
to make any such recordation on such Revolving Credit Note shall not affect any
of the obligations of the Company under such Revolving Credit Note or this
Agreement. The Revolving Credit Note of each Lender shall (i) be dated the
Effective Date, (ii) bear interest, payable as specified in subsection 3.1, for
the period from the date thereof on the unpaid principal amount thereof from
time to time outstanding at the interest rate per annum specified in subsection
3.1 until paid in full and (iii) be stated to mature on the Revolving Credit
Termination Date.
2.3 Procedure for Revolving Credit Borrowings. The Company may
borrow pursuant to subsection 2.1 hereof on any Working Day if the borrowing
(or any portion thereof) consists of Eurodollar Loans or on any Business Day if
the borrowing consists entirely of ABR Loans and/or CD Rate Loans by the
Company giving the Administrative Agent irrevocable written notice (or
telephonic notice promptly confirmed in writing) prior to 11:45 A.M., New York
City time, on, in the case of ABR Loans, two Business Days prior to, in the
case of CD Rate Loans, and three Working Days prior to, in the case of
Eurodollar Loans, the proposed Borrowing Date specifying (a) the amount to be
borrowed, (b) the requested Borrowing Date, (c) whether the borrowing is to be
a Eurodollar Loan, a CD Rate Loan, an ABR Loan, or a combination thereof and
(d) if the borrowing is to be entirely or partly a Eurodollar Loan or a CD Rate
Loan, the length of the Interest Period(s) thereof. Each borrowing shall be in
an aggregate principal amount of the lesser of (i) $10,000,000 or a whole
multiple of $5,000,000 in excess thereof and (ii) the then Credit Availability
Amount. Upon receipt of such notice from the Company, the Administrative Agent
shall promptly notify each Lender thereof. Not later than 1:00 P.M., New York
City time, on the Borrowing Date specified in such notice, each Lender shall
make available to the Administrative Agent at the Administrative Agent's Office
for the account of the Company an amount in immediately available funds equal
to the amount of the Revolving Credit Loan to
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be made by such Lender. The proceeds of such Revolving Credit Loans will then
be made available to the Company by the Administrative Agent at the
Administrative Agent's Office by crediting the account of the Company on the
books of the Administrative Agent's Office with the aggregate of the amounts
made available to the Administrative Agent by the Lenders and in like funds as
received by the Administrative Agent.
2.4 Letters of Credit. Subject to the terms and conditions hereof,
the Issuing Lenders agree to issue, and each Participating Lender agrees to
purchase an L/C Participating Interest in, Letters of Credit in the form of
Commercial L/Cs or Standby L/Cs from time to time during the period from the
Effective Date to, but not including, the Revolving Credit Termination Date;
provided that (i) the aggregate face amount of the Letters of Credit issued on
any Borrowing Date shall not exceed the Credit Availability Amount on such
Borrowing Date and (ii) on the date of the issuance of any Letter of Credit,
and after giving effect to the issuance of such Letter of Credit, the aggregate
Letter of Credit Obligations outstanding at such time shall not exceed 50% of
the aggregate Revolving Credit Commitments at such time.
2.5 Issuance of Commercial L/Cs. (a) The Company may request an
Issuing Lender to issue a Commercial L/C in favor of sellers of goods to the
Company or any of its Subsidiaries on any Business Day during the period from
the Effective Date to, but not including, the Revolving Credit Termination Date
by delivering to the Issuing Lender, through the Administrative Agent at its
address specified in subsection 10.2, a commercial letter of credit application
and security agreement in such Issuing Lender's then customary form (as such
form may be agreed to be modified, the "Commercial L/C Application"), completed
to the satisfaction of such Issuing Lender, and such other certificates,
documents and other papers and information as such Issuing Lender may
reasonably request. The Company hereby agrees to observe and perform its
covenants, duties and obligations under each Commercial L/C Application.
(b) Each Commercial L/C issued hereunder shall, among other things,
(i) provide for the payment of sight drafts when presented for honor
thereunder, in accordance with the terms thereof and when accompanied by the
documents described therein or when such documents are presented, as the case
may be, (ii) have an expiry date occurring not later than 180 days after the
date of issuance of such Commercial L/C and in no event occurring later than
the Revolving Credit Termination Date and (iii) have a minimum face amount of
$500,000. Each Commercial L/C Application and each Commercial L/C shall be
subject to the Uniform Customs and, to the extent not inconsistent therewith,
the laws of the State of New York.
2.6 Issuance of Standby L/Cs. (a) The Company may request an
Issuing Lender to issue a Standby L/C on any Business Day during the period
from the Effective Date to, but not including, the Revolving Credit Termination
Date by delivering to such Issuing Lender, through the Administrative Agent at
its address specified in subsection 10.2, a standby letter of credit
application in such Issuing Lender's then customary form (as such form may be
agreed to be modified, the "Standby L/C Application"), completed to the
satisfaction of such Issuing Lender together with the proposed form of such
letter of credit (which shall comply with the applicable requirements of
paragraph (b) below) and such other certificates, documents and other papers
and information as such Issuing Lender may reasonably request.
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The Company hereby agrees to observe and perform its covenants, duties and
obligations under each Standby L/C Application.
(b) Each Standby L/C issued hereunder shall, among other things, (i)
be in such form requested by the Company as shall be acceptable to the relevant
Issuing Lender in its sole discretion, (ii) have an expiry date occurring not
later than the Revolving Credit Termination Date and (iii) have a minimum face
amount of $500,000. Each Standby L/C Application and each Standby L/C shall be
subject to the Uniform Customs and, to the extent not inconsistent therewith,
the laws of the State of New York.
2.7 Participating Interests. Effective in the case of each Letter
of Credit as of the date of the issuance thereof, each Issuing Lender agrees to
allot and does allot, to itself and each Participating Lender, and each
Participating Lender severally and irrevocably agrees to take and does take, an
L/C Participating Interest in such Letter of Credit and the related Letter of
Credit Application in a percentage equal to such Participating Lender's
Commitment Percentage. Each Participating Lender hereby agrees that its
obligation to participate in each Letter of Credit issued by such Issuing
Lender hereunder and the drafts drawn thereunder shall be irrevocable and
unconditional.
2.8 Procedure for Opening Letters of Credit. Upon receipt of any
Letter of Credit Application from the Company, the relevant Issuing Lender will
promptly notify each Lender thereof through the Administrative Agent, but in no
event shall such notice to each Lender be given later than the date three
Business Days following receipt of such Letter of Credit Application or the
date such Issuing Lender issues the Letter of Credit, whichever is earlier.
Subject to the terms and conditions hereof, upon such receipt, such Issuing
Lender will process such Letter of Credit Application, and the other
certificates, documents and other papers delivered to such Issuing Lender in
connection therewith, in accordance with its customary procedures and, subject
to fulfillment of the applicable conditions specified in subsection 4.3, shall
promptly open such Letter of Credit (but in no event shall such Issuing Lender
be required to open any Letter of Credit earlier than three Business Days after
receipt by such Issuing Lender of the Letter of Credit Application relating
thereto) by issuing the original of such Letter of Credit to the beneficiary
thereof and by furnishing a copy thereof to the Company and to the other
Lenders.
2.9 Payments. (a) In the event of any request for drawing under
any Letter of Credit by the beneficiary thereof, the relevant Issuing Lender
shall immediately notify the Company and the Administrative Agent, and the
Company shall reimburse such Issuing Lender on the day on which such drawing is
honored in an amount in same day funds equal to the amount of such drawing, and
otherwise in accordance with the terms of the Letter of Credit Application
relating thereto; provided that anything contained in this Agreement to the
contrary notwithstanding, (i) unless the Company shall have notified the
Administrative Agent and such Issuing Lender prior to 11:00 A.M., New York City
time, on the date of such drawing that the Company intends to reimburse such
Issuing Lender for the amount of such drawing with funds other than the
proceeds of Revolving Credit Loans, the Company shall be deemed to have given
notice pursuant to subsection 2.3 to the Administrative Agent requesting the
Lenders to make Revolving Credit Loans on the date on which such drawing is
honored in an amount equal to the amount of such drawing, and (ii) subject to
satisfaction or
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waiver of the applicable conditions specified in subsections 4.1 and 4.3, the
Lenders shall, on the date of such drawing, make Revolving Credit Loans that
are ABR Loans in the amount of such drawing, the proceeds of which shall be
applied directly by the Administrative Agent to reimburse such Issuing Lender
for the amount of such drawing, and provided further that if for any reason the
Company does not cause the proceeds of Revolving Credit Loans to be received by
such Issuing Lender on such date in an amount equal to the amount of such
drawing, the Company shall reimburse such Issuing Lender, on the Business Day
immediately following the date of such drawing, in an amount in same day funds
equal to the excess of the amount of such drawing over the amount of such
Revolving Credit Loans, if any, which are so received, plus accrued interest on
such amount at the rate per annum equal to 2% above the Alternate Base Rate.
(b) If the Company shall fail to reimburse an Issuing Lender as
provided in subsection 2.9(a) in an amount equal to the amount of any drawing
honored by such Issuing Lender under a Letter of Credit issued by it, such
Issuing Lender shall promptly notify each Participating Lender through the
Administrative Agent of the unreimbursed amount of such drawing and of such
Participating Lender's respective participation therein based on such
Participating Lender's Commitment Percentage. Forthwith upon its receipt of
any such notice, each Participating Lender will transfer to such Issuing Lender
in immediately available funds an amount equal to such Participating Lender's
Commitment Percentage of the unreimbursed portion of such payment. Upon its
receipt from such Participating Lender of such amount, such Issuing Lender will
complete, execute and deliver to such Participating Lender a Letter of Credit
Participation Certificate dated the date of such receipt and in such amount.
If any Participating Lender fails to make available to such Issuing Lender the
amount of such Participating Lender's Commitment Percentage of such drawing as
provided in this subsection 2.9(b), such Issuing Lender shall be entitled to
recover such amount on demand from such Participating Lender together with
interest at the rate per annum equal to 1/2 of 1% above the then applicable
Federal funds rate for three Business Days and thereafter at the rate per annum
equal to 2% above the Alternate Base Rate.
(c) Whenever, at any time after an Issuing Lender has made a payment
under any Letter of Credit and has received from any Participating Lender such
Participating Lender's Commitment Percentage of the unreimbursed portion of
such payment, such Issuing Lender receives any reimbursement on account of such
unreimbursed portion or any payment of interest on account thereof, such
Issuing Lender will transfer such amount to the Administrative Agent in
immediately available funds, and the Administrative Agent will promptly and in
no event later than one Business Day after it receives such payment, distribute
to each Participating Lender its Commitment Percentage thereof in like funds as
received by the Administrative Agent; provided that in the event that the
receipt by an Issuing Lender of such reimbursement or such payment of interest
(as the case may be) is required to be returned, such Participating Lender will
return to such Issuing Lender any portion thereof previously distributed by
such Issuing Lender to it, and provided further that any payment by the Company
on account of such unreimbursed portion or interest thereon to such Issuing
Lender shall be deemed to satisfy the Company's obligations to such Issuing
Lender and any Participating Lenders with respect to such payment upon receipt
thereof by such Issuing Lender.
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2.10 Further Assurances. The Company hereby agrees, from time to
time, to do and perform any and all acts and to execute any and all further
instruments reasonably requested by an Issuing Lender more fully to effect the
purposes of this Agreement and the issuance of the Letters of Credit opened
hereunder.
2.11 Obligations Absolute. The payment obligations of the Company
under subsection 2.9 shall be unconditional and irrevocable and shall be paid
strictly in accordance with the terms of this Agreement under all
circumstances, including, without limitation, the following circumstances:
(a) the existence of any claim, set-off, defense or other right
which the Company may have at any time against any beneficiary, or any
transferee, of any Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), any Issuing Lender or any
Participating Lender, or any other Person, whether in connection with this
Agreement, the transactions contemplated herein, or any unrelated transaction;
provided, however, that nothing herein shall prevent the assertion of any such
right by separate suit or compulsory counterclaim;
(b) any statement or any other document presented under any Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;
(c) payment by any Issuing Lender under any Letter of Credit against
presentation of a draft or certificate which does not comply with the terms of
such Letter of Credit, except payment resulting from the gross negligence or
willful misconduct of such Issuing Lender; or
(d) any other circumstances or happening whatsoever, whether or not
similar to any of the foregoing, except circumstances or happenings resulting
from the gross negligence or willful misconduct of such Issuing Lender.
2.12 Letter of Credit Application. The provisions of any Letter of
Credit Application related to any Letter of Credit are supplemental to, and not
in derogation of, any rights and remedies of each Issuing Lender and the
Participating Lenders under this Section 2 and applicable law. The Company
acknowledges and agrees that all rights of each Issuing Lender under any Letter
of Credit Application and this Agreement (other than those pursuant to
subsections 3.3(b) and (c)) shall inure to the benefit of each Participating
Lender to the extent of its Commitment Percentage as fully as if such
Participating Lender was a party to such Letter of Credit Application.
2.13 Competitive Loans. Subject to the terms and conditions of this
Agreement, the Company may borrow Competitive Loans from time to time during
the Competitive Loan Borrowing Period on any Business Day (in the case of Fixed
Rate Competitive Loans) or Working Day (in the case of Index Rate Competitive
Loans), provided that in no event may Competitive Loans exceed the Credit
Availability Amount on the Borrowing Date, after giving effect to the use and
application of the proceeds thereof. Within the limits and on the conditions
hereinafter set forth with respect to Competitive Loans, the Company from time
to time may borrow, repay and reborrow Competitive Loans.
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2.14 Competitive Loan Notes. (a) The Competitive Loans made by each
Competitive Loan Lender pursuant hereto shall be evidenced by a promissory note
of the Company, substantially in the form of Exhibit F-1 (collectively, the
"Grid Competitive Loan Notes"), with appropriate insertions therein as to
principal amount, payable to the order of such Lender and representing the
obligation of the Company to pay a principal amount equal to the lesser of (i)
the aggregate Revolving Credit Commitments and (ii) the aggregate unpaid
principal amount of all Competitive Loans made by such Competitive Loan Lender,
with interest thereon as prescribed in subsection 3.1. Each Competitive Loan
Lender is hereby authorized to record the date, amount, interest rate, Interest
Payment Dates and Competitive Loan Maturity Date of each Competitive Loan made
by such Competitive Loan Lender and each payment of principal with respect
thereto on the schedule annexed to and constituting a part of its Grid
Competitive Loan Note, and any such recordation shall constitute prima facie
evidence of the accuracy of the information so recorded; provided that failure
by any Lender to make any such recordation on such Grid Competitive Loan Note
shall not affect any of the obligations of the Company under such Grid
Competitive Loan Note or this Agreement. Each Grid Competitive Loan Note shall
be dated the Effective Date and each Competitive Loan evidenced thereby shall
bear interest, payable as specified in subsection 3.1, for the period from the
date thereof on the unpaid principal amount thereof from time to time
outstanding at the interest rate per annum specified in subsection 3.1 until
paid in full.
(b) Amounts advanced by a Competitive Loan Lender pursuant to
subsection 2.13 on a Borrowing Date which have the same maturity date and
interest rate shall be deemed to constitute one Competitive Loan so long as
such amounts remain evidenced by the Grid Competitive Loan Note of such
Competitive Loan Lender; any such Competitive Loan Lender that wishes such
amounts to constitute more than one Competitive Loan and to have each such
Competitive Loan evidenced by a separate promissory note payable to such
Competitive Loan Lender, substantially in the form of Exhibit F-2 with
appropriate insertions as to Borrowing Date, principal amount and interest rate
(an "Individual Competitive Loan Note"), shall notify the Administrative Agent
and the Company by facsimile transmission of the respective principal amounts
of the Competitive Loans (which principal amounts shall not be less than
$5,000,000 for any of such Competitive Loans) to be evidenced by each such
Individual Competitive Loan Note. Not later than three Business Days after
receipt of such notice, the Company shall deliver to such Competitive Loan
Lender an Individual Competitive Loan Note payable to the order of such
Competitive Loan Lender in the principal amount of each such Competitive Loan
and otherwise conforming to the requirements of this Agreement. Upon receipt
of such Individual Competitive Loan Note, such Competitive Loan Lender shall
endorse on the schedule attached to its Grid Competitive Loan Note the transfer
of such Competitive Loan from such Grid Competitive Loan Note to such
Individual Competitive Loan Note.
2.15 Procedure for Competitive Loan Borrowing. (a) The Company
shall request Competitive Loans by delivering a Competitive Loan Request to the
Administrative Agent, not later than 12:00 Noon (New York City time) four
Working Days prior to the proposed Borrowing Date (in the case of an Index Rate
Competitive Loan Request), and not later than 10:00 A.M., New York City time,
one Business Day prior to the proposed Borrowing Date (in the case of a Fixed
Rate Competitive Loan Request). Each Competitive Loan Request in respect of
any Borrowing Date may solicit bids for Competitive Loans in an aggregate
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principal amount of $10,000,000 or an integral multiple of $5,000,000 in excess
thereof and having not more than three alternative Competitive Loan Maturity
Dates. The Competitive Loan Maturity Date for each Fixed Rate Competitive Loan
shall be not less than seven days nor more than 360 days after the Borrowing
Date therefor and the Competitive Loan Maturity Date for each Index Rate
Competitive Loan shall be one, two, three, six or nine months after the
Borrowing Date therefor, and in any event shall be no later than the Revolving
Credit Termination Date. The Administrative Agent shall notify each
Competitive Loan Lender promptly by facsimile transmission of the contents of
such Competitive Loan Request received by the Administrative Agent.
(b) In the case of an Index Rate Competitive Loan Request, upon
receipt of notice from the Administrative Agent of the contents of such
Competitive Loan Request, each Competitive Loan Lender may elect, in its sole
discretion, to offer irrevocably, subject to Section 4, to make one or more
Competitive Loans at the Applicable Index Rate plus or minus a margin
determined by such Competitive Loan Lender in its sole discretion for each such
Competitive Loan. Any such irrevocable offer shall be made by delivering a
Competitive Loan Offer to the Administrative Agent, before 10:30 A.M., New York
City time, on the day that is three Working Days before the proposed Borrowing
Date, setting forth:
(i) the maximum amount of Competitive Loans for each Competitive
Loan Maturity Date and the aggregate maximum amount of Competitive Loans
for all Competitive Loan Maturity Dates which such Competitive Loan Lender
would be willing to make (which amounts may, subject to subsection 2.13,
exceed such Competitive Loan Lender's Revolving Credit Commitment); and
(ii) the margin above or below the Applicable Index Rate at which
such Competitive Loan Lender is willing to make each such Competitive
Loan.
The Administrative Agent shall advise the Company before 11:00 A.M., New York
City time, on the date which is three Working Days before the proposed
Borrowing Date of the contents of each such Competitive Loan Offer received by
it. If the Administrative Agent, in its capacity as a Competitive Loan Lender,
shall elect, in its sole discretion, to make any such Competitive Loan Offer,
it shall advise the Company of the contents of its Competitive Loan Offer
before 10:15 A.M., New York City time, on the date which is three Working Days
before the proposed Borrowing Date.
(c) In the case of a Fixed Rate Competitive Loan Request, upon
receipt of notice from the Administrative Agent of the contents of such
Competitive Loan Request, each Competitive Loan Lender may elect, in its sole
discretion, to offer irrevocably, subject to Section 4, to make one or more
Competitive Loans at a rate of interest determined by such Competitive Loan
Lender in its sole discretion for each such Competitive Loan. Any such
irrevocable offer shall be made by delivering a Competitive Loan Offer to the
Administrative Agent before 9:30 A.M., New York City time, on the proposed
Borrowing Date, setting forth:
(i) the maximum amount of Competitive Loans for each Competitive
Loan Maturity Date and the aggregate maximum amount of Competitive Loans
for all
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Competitive Loan Maturity Dates, which such Competitive Loan Lender would
be willing to make (which amounts may, subject to subsection 2.13, exceed
such Competitive Loan Lender's Revolving Credit Commitment); and
(ii) the rate of interest at which such Competitive Loan Lender is
willing to make each such Competitive Loan.
The Administrative Agent shall advise the Company before 10:00 A.M., New York
City time, on the proposed Borrowing Date of the contents of each such
Competitive Loan Offer received by it. If the Administrative Agent, in its
capacity as a Competitive Loan Lender, shall elect, in its sole discretion, to
make any such Competitive Loan Offer it shall advise the Company of the
contents of its Competitive Loan Offer before 9:15 A.M., New York City time, on
the proposed Borrowing Date.
(d) Before 11:30 A.M., New York City time, three Working Days before
the proposed Borrowing Date (in the case of Index Rate Competitive Loans) and
before 10:30 A.M., New York City time, on the proposed Borrowing Date (in the
case of Fixed Rate Competitive Loans), the Company, in its absolute discretion,
shall:
(i) cancel such Competitive Loan Request by giving the
Administrative Agent telephone notice to that effect, or
(ii) by giving telephone notice to the Administrative Agent
(immediately confirmed by delivery to the Administrative Agent of a
Competitive Loan Confirmation in writing) (1) subject to the provisions of
subsection 2.15(e), accept one or more of the offers made by any
Competitive Loan Lender or Competitive Loan Lenders pursuant to subsection
2.15(b) or subsection 2.15(c), as the case may be, of the amount of
Competitive Loans for each relevant maturity date and (2) reject any
remaining offers made by Competitive Loan Lenders pursuant to subsection
2.15(b) or subsection 2.15(c), as the case may be.
(e) The Company's acceptance of Competitive Loans in response to any
Competitive Loan Request shall be subject to the following limitations:
(i) The amount of Competitive Loans accepted for each Competitive
Loan Maturity Date specified by any Competitive Loan Lender in its
Competitive Loan Offer shall not exceed the maximum amount for such
Competitive Loan Maturity Date specified in such Competitive Loan Offer;
(ii) the aggregate amount of Competitive Loans accepted for all
Competitive Loan Maturity Dates specified by any Competitive Loan Lender
in its Competitive Loan Offer shall not exceed the aggregate maximum
amount specified in such Competitive Loan Offer for all such Competitive
Loan Maturity Dates;
(iii) the Company may not accept offers for Competitive Loans for any
Competitive Loan Maturity Date in an aggregate principal amount in excess
of the maximum principal amount requested in the related Competitive Loan
Request; and
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(iv) if the Company accepts any of such offers, (1) it must accept
such offers based solely upon pricing for such relevant Competitive Loan
Maturity Date (including any amounts which shall be payable to the
relevant Competitive Loan Lender in respect of the relevant Competitive
Loans pursuant to subsection 3.14) and upon no other criteria whatsoever
and (2) if two or more Competitive Loan Lenders submit offers for any
Competitive Loan 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 subsection 2.13 or in this subsection 2.15,
cannot) borrow the total amount offered by such Competitive Loan Lenders
with such identical pricing, the Company shall accept offers from all of
such Competitive Loan Lenders in amounts allocated among them pro rata
according to the amounts offered by such Competitive Loan Lenders (or as
nearly pro rata as shall be practicable after giving effect to the
requirement that Competitive Loans made by a Competitive Loan Lender on a
Borrowing Date for each relevant Competitive Loan 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 Competitive Loan
Lenders that submit offers for any Competitive Loan Maturity Date at
identical pricing is such that, after the Company accepts such offers pro
rata in accordance with the foregoing, the Competitive Loans to be made by
any such Competitive Loan Lender would be less than $5,000,000 principal
amount, the number of such Competitive Loan Lenders shall be reduced by
the Administrative Agent by lot until the Competitive Loans to be made by
each such remaining Competitive Loan Lender 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 Administrative Agent that a
Competitive Loan Request is cancelled pursuant to subsection 2.15(d)(i), the
Administrative Agent shall give prompt telephone notice thereof to the
Competitive Loan Lenders.
(g) If the Company accepts pursuant to subsection 2.15(d)(ii) one or
more of the offers made by any one or more Competitive Loan Lenders, the
Administrative Agent promptly shall notify each Competitive Loan Lender which
has made such a Competitive Loan Offer of (i) the aggregate amount of such
Competitive Loans to be made on such Borrowing Date for each Competitive Loan
Maturity Date and (ii) the acceptance or rejection of any offers to make such
Competitive Loans made by such Competitive Loan Lender. Before 12:00 Noon, New
York City time, on the Borrowing Date specified in the applicable Competitive
Loan Request, each Competitive Loan Lender whose Competitive Loan Offer has
been accepted shall make available to the Administrative Agent at the
Administrative Agent's Office the amount of Competitive Loans to be made by
such Competitive Loan Lender, in immediately available funds. The
Administrative Agent will make such funds available to the Company as soon as
practicable on such date at the Administrative Agent's Office. As soon as
practicable after each Borrowing Date, the Administrative Agent shall notify
each Lender of the aggregate amount of Competitive Loans advanced on such
Borrowing Date and the respective maturity dates thereof.
(h) Nothing in subsection 2.13 or this subsection 2.15 shall be
construed as a right of first offer in favor of the Lenders or to otherwise
limit the ability of the Company to request and accept credit facilities from
any Person (including any of the Lenders).
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(i) A Competitive Loan Request may request offers for Competitive
Loans to be made on not more than one Borrowing Date and to mature on not more
than three Competitive Loan Maturity Dates. No Competitive Loan Request may be
submitted earlier than five Business Days after submission of any other
Competitive Loan Request.
(j) The Company shall pay to the Administrative Agent, for the
account of each Lender which has made a Competitive Loan, on the applicable
Competitive Loan Maturity Date the then unpaid principal amount of such
Competitive Loan. The Company shall not have the right to prepay any principal
amount of any Competitive Loan.
2.16 Term Loans. (a) Subject to the terms and conditions hereof,
each Lender severally, and not jointly, agrees to make a term loan
(collectively, the "Term Loans") to the Company on the Revolving Credit
Termination Date, in a principal amount not to exceed the principal amount of
the Revolving Credit Loans of such Lender outstanding on the Revolving Credit
Termination Date (collectively, the "Term Loan Commitments").
(b) Subject to the terms and conditions hereof, the Term Loans may
be (i) ABR Loans, (ii) Eurodollar Loans, (iii) CD Rate Loans or (iv) any
combination thereof, as determined by the Company and notified to the
Administrative Agent in accordance with subsection 2.18.
2.17 Term Notes. The Term Loan made by each Lender pursuant hereto
shall be evidenced by a promissory note of the Company, substantially in the
form of Exhibit G (collectively, the "Term Notes"), with appropriate insertions
therein as to principal amount, payable to the order of such Lender and
representing the obligation of the Company to pay a principal amount equal to
the lesser of (a) the amount of the Term Loan Commitment of such Lender and (b)
the aggregate unpaid principal amount of the Term Loan made by such Lender,
with interest thereon as prescribed in subsection 3.1. Each Lender is hereby
authorized to record the date, amount and Type of the Term Loan made by such
Lender,the date and amount of each payment or prepayment of principal thereof,
and, with respect to each Term Loan being maintained as a Eurodollar Loan or CD
Rate Loan, the length of each Interest Period and the Eurodollar Rate or CD
Rate applicable thereto on the schedule annexed to and constituting a part of
its Term Note, and any such recordation shall constitute prima facie evidence
of the accuracy of the information so recorded in the absence of manifest
error; provided that failure by any Lender to make any such recordation on its
Term Note shall not affect any of the obligations of the Company under such
Term Note or this Agreement. The Term Note of each Lender shall (i) be dated
the Revolving Credit Termination Date, (ii) bear interest, payable as specified
in subsection 3.1, for the period from the date thereof on the unpaid principal
amount thereof at the applicable interest rate per annum specified in
subsection 3.1 and (iii) be stated to mature on the date which is one year from
the Revolving Credit Termination Date (the "Term Loan Maturity Date").
2.18 Procedure for Term Loan Borrowing. The Company shall give the
Administrative Agent irrevocable written notice (or telephonic notice promptly
confirmed in writing) prior to 10:00 A.M., New York City time, two Business
Days prior to the Revolving Credit Termination Date requesting that the Lenders
make the Term Loans on the Revolving Credit Termination Date and specifying the
principal amount of the Term Loans and the Term
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Loan Maturity Date. The Term Loans made on the Revolving Credit Termination
Date shall initially be ABR Loans unless, treating the borrowing of the Term
Loans as if it were a conversion of Loans pursuant to subsection 3.10, the
Company shall have given notice with respect to Loans of another Type in
accordance with subsection 3.10. Upon receipt of such notice, the Agent shall
promptly notify each Lender thereof. Not later than 12:00 noon, New York City
time, on the Revolving Credit Termination Date, each Lender shall make
available to the Administrative Agent at the Administrative Agent's Office for
the account of the Company an amount in immediately available funds equal to
the amount of the Term Loan to be made by such Lender. The proceeds of such
Loans will then be made available to the Company by the Administrative Agent at
the Administrative Agent's Office by crediting the account of the Company on
the books of the Administrative Agent's Office with the aggregate of the
amounts made available to the Administrative Agent by the Lenders and in like
funds as received by the Administrative Agent.
2.19 Extension of Revolving Credit Termination Date. (a) The Company
may request, in a notice substantially in the form of Exhibit H (an "Extension
Request") given as herein provided to the Administrative Agent not less than 45
days and not more than 60 days prior to the Revolving Credit Termination Date,
that the Revolving Credit Termination Date be extended, which notice shall
specify that the requested extension is to be effective (the "Extension
Effective Date") on the Revolving Credit Termination Date, and that the new
Revolving Credit Termination Date to be in effect following such extension (the
"Requested Revolving Credit Termination Date") is to be the date 364 days after
the Extension Effective Date. The Administrative Agent shall forthwith
transmit such Extension Request to the Lenders. Each Lender shall, not less
than 30 days and not more than 45 days prior to the Extension Effective Date,
notify the Company and the Administrative Agent of its election to extend or
not to extend the Revolving Credit Termination Date with respect to its
Revolving Credit Commitment. The Company may, not later than 30 days prior to
the Extension Effective Date, revoke its request to extend the Revolving Credit
Termination Date. Notwithstanding any provision of this Agreement to the
contrary, any notice by any Lender of its willingness to extend the Revolving
Credit Termination Date with respect to its Revolving Credit Commitment 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 Extension Effective Date. If
on the date 30 days prior to the Extension Effective Date Lenders having at
least 75% of the aggregate amount of the Revolving Credit Commitments elect to
extend the Revolving Credit Termination Date with respect to their Revolving
Credit Commitments and the Company has not revoked its request to extend the
Revolving Credit Termination Date, then, subject to the provisions of this
subsection 2.19, the Revolving Credit Termination Date shall be extended for
364 days. Any Lender which shall not notify the Company and the Administrative
Agent of its election to extend the Revolving Credit Termination Date on or
prior to the date 30 days prior to the Extension Effective Date shall be deemed
to have elected not to extend the Revolving Credit Termination Date with
respect to its Revolving Credit Commitment.
(b) Provided that Lenders having at least 75% of the aggregate
amount of the Revolving Credit Commitments shall have elected to extend their
Revolving Credit Commitments as provided in this subsection 2.19, if any Lender
shall timely notify the Company and the Administrative Agent pursuant to
subsection 2.19(a) of its election not to extend its Revolving Credit
Commitment or its revocation of any extension, or shall be
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deemed to have elected not to extend its Revolving Credit Commitments (any such
Lender being called a "Terminating Lender"), then the remaining Lenders (the
"Continuing Lenders") or any of them shall have the right (but not the
obligation), upon irrevocable notice to the Company and the Administrative
Agent not later than 15 Business Days preceding the Extension Effective Date to
increase their Revolving Credit Commitments, by an amount up to in the
aggregate the Revolving Credit Commitments of any Terminating Lenders. If
Continuing Lenders have elected to increase their Revolving Credit Commitments
pursuant to the preceding sentence by an aggregate amount which exceeds the
aggregate Revolving Credit Commitments of the Terminating Lenders, then the
proposed increase in the Revolving Credit Commitment of each such Continuing
Lender (as specified in the notice referred to in the preceding sentence) shall
be decreased pro rata so that the aggregate increase in the Revolving Credit
Commitments of such Continuing Lenders is equal to the aggregate Revolving
Credit Commitments of the Terminating Lenders. Each increase in the Revolving
Credit Commitment of a Continuing Lender shall be evidenced by a written
instrument executed by such Continuing Lender, the Company and the
Administrative Agent, and shall take effect on the Extension Effective Date.
(c) In the event the aggregate Revolving Credit Commitments of any
Terminating Lenders shall exceed the aggregate amount by which the Continuing
Lenders have agreed to increase their Revolving Credit Commitments pursuant to
subsection 2.19(b), the Company may, with the approval of the Administrative
Agent (which will not be unreasonably withheld), designate one or more other
banking institutions willing to extend Revolving Credit Commitments until the
Requested Revolving Credit Termination Date in an aggregate amount not greater
than such excess. Any such banking institution (an "Additional Lender") shall,
on or prior to the Extension Effective Date, execute and deliver to the Company
and the Administrative Agent a Commitment Transfer Supplement, satisfactory to
the Company and the Administrative Agent, setting forth the amount of such
Additional Lender's Revolving Credit Commitment and containing its agreement to
become, and to perform all the obligations of, a Lender hereunder, and the
Revolving Credit Commitment of such Additional Lender shall become effective on
the Extension Effective Date.
(d) The Company shall deliver to each Continuing Lender whose
Revolving Credit Commitment is being increased pursuant to this subsection 2.19
and to each Additional Lender, on the Extension Effective Date, in exchange for
the Revolving Credit Notes held by such Lender, new Revolving Credit Notes,
maturing on the Requested Revolving Credit Termination Date, in the principal
amount of such Lender's Revolving Credit Commitment after giving effect to the
adjustments made pursuant to this subsection 2.19.
(e) If the Lenders having at least 75% of the aggregate amount of
the Revolving Credit Commitments shall have elected to extend their Revolving
Credit Commitments as provided in this subsection 2.19 and the Company has not
revoked its request to extend the Termination Date as provided in this
subsection 2.19, then (i) the Revolving Credit Commitments of the Continuing
Lenders and any Additional Lenders shall continue until the Requested Revolving
Credit Termination Date specified in the notice from the Company, and as to
such Lenders the terms "Revolving Credit Termination Date", as used herein
shall mean such Requested Revolving Credit Termination Date; (ii) the Revolving
Credit Commitments of any Terminating Lender shall continue until the Extension
Effective Date, and shall then
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terminate (as to any Terminating Lender, the term "Revolving Credit Termination
Date", as used herein, shall mean the Extension Effective Date) and any such
Terminating Lender shall receive payment in full of the outstanding principal
amount, together with accrued interest to such date and any other amounts owed
by the Company to such Terminating Lender pursuant to any Credit Document, of
the Revolving Credit Loans of such Terminating Lender; and (iii) from and after
the Extension Effective Date, the term "Lenders" shall be deemed to include the
Additional Lenders and (except with respect to subsection 3.15 and 10.5 to the
extent the rights under such subsections arise after the Revolving Credit
Termination Date in respect of Terminating Lenders) to exclude the Terminating
Lenders.
2.20 Use of Proceeds. The proceeds of the Revolving Credit Loans
and the Competitive Loans shall be used to finance working capital requirements
and investments, and to support commercial paper programs of, the Company and
its Subsidiaries. The proceeds of the Term Loans shall be used solely to
refinance the Revolving Credit Loans. The Letters of Credit shall be used to
secure performance and other bonds and provide credit support for general
corporate purposes.
SECTION 3. INTEREST RATE PROVISIONS, FEES, CONVERSIONS AND PAYMENTS
3.1 Interest Rates and Payment Dates. (a) Each ABR Loan shall bear
interest for the period from and including the date thereof until maturity or
conversion on the unpaid principal amount thereof at a fluctuating rate per
annum equal to the Alternate Base Rate.
(b) Each Eurodollar Loan shall bear interest for each Interest
Period with respect thereto on the unpaid principal amount thereof at a rate
per annum equal to the Eurodollar Rate determined for such Interest Period plus
the Applicable Margin.
(c) Each CD Rate Loan shall bear interest for each Interest Period
with respect thereto on the unpaid principal amount thereof at a rate per annum
equal to the Adjusted CD Rate for such Interest Period plus the Applicable
Margin.
(d) Each Competitive Loan shall bear interest for each day from the
applicable Borrowing Date to (but excluding) the applicable Competitive Loan
Maturity Date at the rate of interest specified in the Competitive Loan Offer
accepted by the Company in connection with such Competitive Loan.
(e) If all or a portion of the principal amount of any of the
Eurodollar Loans or CD Rate Loans shall not be paid when due (whether at the
stated maturity, by acceleration or otherwise), each such Eurodollar Loan or CD
Rate Loan shall be converted to an ABR Loan at the end of the last applicable
Interest Period therefor for which the Administrative Agent shall have
determined, on or prior to the date such unpaid principal amount became due, a
Eurodollar Rate or an Adjusted CD Rate, as the case may be. Any overdue
principal amount of any Loan and, to the extent permitted by law, any interest
payable thereon which shall not be paid when due shall bear interest from the
due date thereof until payment in full thereof (as
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well after judgment as before judgment) at a rate per annum equal to 2% above
the rate otherwise applicable.
(f) Interest payable under subsection 3.1(a), 3.1(b), 3.1(c) or
3.1(d) shall be payable in arrears on each Interest Payment Date. Interest
payable under subsection 3.1(e) shall be payable on demand.
3.2 Facility and Other Fees. (a) The Company agrees to pay to the
Administrative Agent for the account of each Lender a facility fee (a "Facility
Fee") from the Effective Date to, but not including, the Revolving Credit
Termination Date (or, if the Company shall borrow Term Loans, until the Term
Loan Maturity Date) or such earlier date upon which the Revolving Credit
Commitments shall terminate or be reduced to zero or the Term Loans shall be
repaid in full as provided herein, computed at a rate per annum equal to the
Applicable Facility Fee Percentage from time to time in effect (i) until the
Revolving Credit Termination Date, on the amount of the Revolving Credit
Commitment of such Lender from time to time in effect, whether used or unused
(including the portion of such Revolving Credit Commitment represented by such
Lender's L/C Participating Interest in outstanding Letters of Credit) and (ii)
thereafter, on the unpaid principal amount of such Lender's Term Loan
outstanding from time to time. Such Facility Fee shall be payable quarterly in
arrears on the last Business Day of each March, June, September and December,
commencing March 31, 1996 (such fee to be calculated through the last day of
such quarter) on the Revolving Credit Termination Date and on the Term Loan
Maturity Date or such earlier date as the Revolving Credit Commitments shall
terminate or be reduced to zero as provided herein or the Term Loans shall be
repaid in full.
(b) The Company agrees to pay to the Administrative Agent for its
own account the fees in the amounts and on the dates previously agreed to in
writing by the Company and the Administrative Agent. Each Lender acknowledges
that the Administrative Agent is being paid certain other fees for its own
account in connection with this Agreement in addition to the fees described
herein.
3.3 Letter of Credit Fees. (a) In lieu of any letter of credit
commissions and fees provided for in any Commercial L/C Application or Standby
L/C Application (other than standard administration, amendment, transfer and
negotiation fees referred to in clause (c) below), the Company agrees to pay
the Administrative Agent, for the account of the relevant Issuing Lender and
the Participating Lenders in accordance with their respective Commitment
Percentages, (i) with respect to Standby L/Cs, a non-refundable Letter of
Credit fee computed at a rate per annum equal to the Applicable L/C Fee
Percentage from time to time in effect on the amount from time to time
available to be drawn under all outstanding Standby L/Cs during the period for
which payment is made, commencing on the respective dates of issuance thereof
until the last day a drawing may be made thereunder, payable quarterly in
advance commencing on the date of opening of each Standby L/C and thereafter on
each Interest Payment Date for ABR Loans and (ii) with respect to each
Commercial L/C, a non-refundable Letter of Credit fee equal to .25 of 1% of the
amount drawn on such Commercial L/C from time to time, payable upon each
drawing thereon.
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(b) In addition to the fees set forth in subsection 3.3(a), the
Company agrees to pay each Issuing Lender, for such Issuing Lender's own
account, (i) with respect to Standby L/Cs, a Letter of Credit fee equal to .175
of 1% per annum of the amount from time to time available to be drawn under all
outstanding Standby L/Cs issued by it during the period for which payment is
made, commencing on the respective dates of issuance thereof until the last day
a drawing may be made thereunder, payable quarterly in advance commencing on
the date of opening each Standby L/C and thereafter on each Interest Payment
Date for ABR Loans and (ii) with respect to each Commercial L/C, a
non-refundable Letter of Credit fee equal to .0625 of 1% of the face amount of
such Commercial L/C payable upon issuance thereof.
(c) The Company agrees to pay each Issuing Lender for its own
account the customary administration, amendment, transfer and negotiation fees
charged by such Issuing Lender in connection with its issuance and
administration of Letters of Credit.
3.4 Computation of Interest and Fees. (a) Interest on ABR Loans
and all fees shall be calculated on the basis of a year of 365 days (or 366
days, as the case may be) for the actual days elapsed. Interest on Eurodollar
Loans, CD Rate Loans and Competitive Loans shall be calculated on the basis of
a year of 360 days for the actual days elapsed. The Administrative Agent shall
as soon as practicable notify the Company and the Lenders of each determination
of a Eurodollar Rate and of an Adjusted CD Rate. Any change in the interest
rate on a Loan resulting from a change in the Alternate Base Rate, the
Eurocurrency Reserve Requirements or the CD Reserve Requirements, as the case
may be, shall become effective as of the opening of business on the day on
which such change in the Alternate Base Rate is announced or such change in the
Eurocurrency Reserve Requirements or the CD Reserve Requirements shall become
effective, as the case may be. The Administrative Agent shall as soon as
practicable notify the Company and the Lenders of the effective date and the
amount of each such change.
(b) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall constitute prima facie
evidence of the rate so determined in the absence of manifest error.
(c) If any Reference Lender's Revolving Credit Commitment shall
terminate (otherwise than on termination of all the Revolving Credit
Commitments), or all of its Loans shall be assigned for any reason whatsoever,
such Reference Lender shall thereupon cease to be a Reference Lender and, if as
a result of the foregoing, there shall only be one Reference Lender remaining,
then the Administrative Agent (after consultation with the Lenders and with the
consent of the Company) 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.
(d) Each Reference Lender shall use its best efforts to furnish
quotations of rates to the Administrative Agent as contemplated hereby. If any
of the Reference Lenders shall be unable or otherwise fails to supply such
rates to the Administrative Agent upon its request, the rate of interest shall
be determined on the basis of the quotations of the remaining Reference Lenders
or Reference Lender.
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3.5 Optional Prepayments of Revolving Credit Loans and Term Loans.
The Company may from time to time prepay any Revolving Credit Loans or Term
Loans, in whole or in part, without premium or penalty, by giving irrevocable
notice to the Administrative Agent and making such prepayment (i) if the
Revolving Credit Loans or Term Loans to be prepaid are ABR Loans, prior to
11:00 A.M., New York City time, on any Business Day or, if such notice and
prepayment are not so given and made prior to 11:00 A.M., upon at least one
Business Day's irrevocable notice to the Administrative Agent, (ii) if the
Revolving Credit Loans or Term Loans to be prepaid are CD Rate Loans, upon at
least three Business Days' irrevocable notice to the Administrative Agent or
(iii) if the Revolving Credit Loans or Term Loans to be prepaid are Eurodollar
Loans, upon at least three Working Days' irrevocable notice to the
Administrative Agent, in each case specifying the date and amount of prepayment
and whether such Revolving Credit Loans or Term Loans are ABR Loans, CD Rate
Loans or Eurodollar Loans or a combination thereof, and if of a combination
thereof, the amount of prepayment allocable to each and if Eurodollar Loans or
CD Rate Loans are to be prepaid, the Tranche to be prepaid. Upon receipt of
such notice, the Administrative Agent shall promptly notify each Lender
thereof. If such notice is given, the Company shall make such prepayment, and
the payment amount specified in such notice shall be due and payable on the
date specified therein, together with accrued interest to such date on the
amount prepaid. Partial prepayments pursuant to this subsection 3.5 shall be
in an aggregate principal amount of $10,000,000 or a whole multiple of
$5,000,000 in excess thereof. Amounts prepaid in respect of Term Loans may not
be reborrowed.
3.6 Reduction of Revolving Credit Commitments. (a) The Company
shall have the right, upon not less than three Business Days' notice to the
Administrative Agent, from time to time, to reduce the amount of the Revolving
Credit Commitments provided that any such reduction shall be in an amount not
less than $25,000,000 or a whole multiple of $1,000,000 in excess thereof; and
provided further that no such reduction of the Revolving Credit Commitments
shall be permitted if, after giving effect to prepayments of Revolving Credit
Loans, replacements of Letters of Credit and deposits of cash collateral
pursuant to subsection 3.6(b), the aggregate Extensions of Credit outstanding
would exceed the aggregate Revolving Credit Commitments, as so reduced, or the
aggregate Letter of Credit Obligations outstanding would exceed 50% of the
aggregate Commitments, as so reduced. Upon receipt of any notice pursuant to
this subsection 3.6(a), the Administrative Agent shall promptly notify each
Lender thereof.
(b) Any reduction of the Revolving Credit Commitments pursuant to
subsection 3.6(a) shall (i) reduce permanently the amount of the Revolving
Credit Commitments then in effect, (ii) be accompanied by (A) a prepayment of
Revolving Credit Loans outstanding in an amount equal to the excess, if any, of
the aggregate Extensions of Credit outstanding over the aggregate Revolving
Credit Commitments, as so reduced, and (B) a replacement of outstanding Letters
of Credit such that after giving effect to such replacement, the aggregate
Letter of Credit Obligations outstanding are less than or equal to 50% of the
aggregate Commitments, as so reduced. To the extent that the aggregate
Extensions of Credit exceed the aggregate Revolving Credit Commitments, as
reduced, after Revolving Credit Loans have been prepaid in accordance with the
immediately preceding sentence, the Company shall (i) replace outstanding
Letters of Credit such that, after giving effect to such replacement, the
aggregate Extensions of Credit are less than or equal to the
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aggregate Revolving Credit Commitments, as reduced, and/or (ii) deposit in a
cash collateral account with the Administrative Agent on terms and conditions
satisfactory to the Administrative Agent and as cash collateral for the
liability of the Issuing Lender (whether direct or contingent) under any Letter
of Credit outstanding, an amount which shall be equal to the amount by which
the aggregate Extensions of Credit exceed the aggregate Revolving Credit
Commitments, as reduced. Any amounts deposited in any cash collateral account
may be withdrawn by the Administrative Agent at any time to pay Obligations
when due. The Administrative Agent shall use its best efforts to invest any
amounts so deposited in United States Treasury bills or other Cash Equivalents
designated by the Company; provided that the Administrative Agent shall not be
liable to the Company for failure to so invest or for any losses suffered as a
result of any such investment or withdrawal. The unused portion of any amounts
deposited by the Company in any such cash collateral account pursuant to this
subsection 3.6(b), and any earnings from investments of amounts on deposit
therein, shall be paid to the Company after sufficient Letters of Credit have
expired undrawn so that the aggregate Extensions of Credit shall no longer
exceed the aggregate Revolving Credit Commitments as then reduced.
3.7 Pro Rata Treatment and Payments; Lending Offices. (a) Each
borrowing by the Company of Revolving Credit Loans and Term Loans hereunder,
each conversion or continuation of a Revolving Credit Loan or Term Loan under
subsection 3.10, each payment (including each prepayment) by the Company on
account of principal of or interest on Revolving Credit Loans or Term Loans,
each payment by the Company on account of fees and other amounts hereunder
(except fees and other amounts referred to in subsections 3.2(b), 3.3(b),
3.3(c), 3.8, 3.12, 3.13, 3.14 and 3.15) and any reduction of the Revolving
Credit Commitments hereunder shall be made pro rata according to the respective
Commitment Percentages of the Lenders. All payments (including prepayments) to
be made by the Company on account of principal, interest, fees and other
amounts shall be made without set-off or counterclaim to the Administrative
Agent, for the account of the Lenders (except with respect to the fees and
other amounts referred to in subsections 3.2(b), 3.3(b), 3.3(c), 3.8, 3.12,
3.13, 3.14 and 3.15), at the Administrative Agent's Office, in Dollars and in
immediately available funds. The Administrative Agent shall promptly
distribute each such payment to each Lender in like funds as received. If any
payment hereunder (other than payments on the Eurodollar Loans or Index Rate
Competitive Loans) becomes due and payable on a day other than a Business Day,
such payment shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension. If any payment on a Eurodollar Loan or
Index Rate Competitive Loan becomes due and payable on a day other than a
Working Day, the maturity thereof shall be extended to the next succeeding
Working Day (and, with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension) unless the result
of such extension would be to extend such payment into another calendar month
in which event such payment shall be made on the immediately preceding Working
Day.
(b) Eurodollar Loans and Index Rate Competitive Loans shall be made
by each Lender at its Eurodollar Lending Office and ABR Loans, CD Rate Loans
and Fixed Rate Competitive Loans shall be made by each Lender at its Domestic
Lending Office.
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3.8 Capital Adequacy. In the event that any Lender shall have
reasonably determined that the applicability of any law, rule, regulation or
guideline adopted pursuant to or arising out of the July 1988 report of the
Basle Committee on Banking Regulations and Supervisory Practices entitled
"International Convergence of Capital Measurement and Capital Standards" or the
adoption after the date of this Agreement of any other law, rule, regulation or
guideline regarding capital adequacy, or any change therein or in the
interpretation or application thereof after the date of this Agreement or
compliance by such Lender with any request or directive regarding capital
adequacy (whether or not having the force of law) from any central bank or
governmental authority does or shall have the effect of reducing the rate of
return on such Lender's capital as a consequence of the Letters of Credit or
its unused Revolving Credit Commitment hereunder to a level below that which
such Lender could have achieved but for such applicability, adoption, change or
compliance (taking into consideration such Lender's policies with respect to
capital adequacy) by an amount related to such Letters of Credit or unused
Revolving Credit Commitment which is reasonably deemed by such Lender to be
material, then from time to time, promptly after submission by such Lender to
the Company (with a copy to the Administrative Agent) of a written request
therefor, the Company shall pay to such Lender such additional amount or
amounts as will compensate such Lender for such reduction. This covenant shall
survive the termination of this Agreement and payment in full of the
Obligations.
3.9 Failure by Lenders to Make Funds Available. Unless the
Administrative Agent shall have been notified in writing by any Lender prior to
a Borrowing Date that such Lender will not make that amount which would
constitute its share of such borrowing on such Borrowing Date available to the
Administrative Agent, the Administrative Agent may assume that such Lender has
made such amount available to the Administrative Agent on such Borrowing Date,
and the Administrative Agent may, in reliance upon such assumption, make
available to the Company a corresponding amount. If such amount is made
available to the Administrative Agent on a date after such Borrowing Date, such
Lender shall pay to the Administrative Agent on demand an amount equal to the
product of (i) 1/2 of 1% above the daily average Federal funds rate during such
period as quoted by the Administrative Agent, times (ii) such Lender's share of
such borrowing, times (iii) a fraction the numerator of which is the number of
days that elapse from and including such Borrowing Date to the date on which
such Lender's share of such borrowing shall have become immediately available
to the Administrative Agent and the denominator of which is 360. A certificate
of the Administrative Agent submitted to any Lender with respect to any amounts
owing under this subsection 3.9 shall be conclusive in the absence of manifest
error. If such Lender's share of such borrowing is not in fact made available
to the Administrative Agent by such Lender within three Business Days of such
Borrowing Date, the Administrative Agent shall be entitled to recover such
amount, on demand, from the Company with interest thereon at the rate
applicable to the Loans made on such Borrowing Date.
3.10 Conversion Options for Loans; Minimum Amount of Loans. (a)
The Company may elect from time to time to convert (i) Eurodollar Loans to ABR
Loans, CD Rate Loans or a combination thereof, by giving the Administrative
Agent at least one Business Day's prior irrevocable notice of such election if
electing one or more ABR Loans or at least two Business Days' prior irrevocable
notice if electing one or more CD Rate Loans; (ii) CD Rate Loans to Eurodollar
Loans, ABR Loans or a combination thereof, by giving the Administrative Agent
at least three Working Days' prior irrevocable notice of such election if
electing one or more Eurodollar Loans or at least one Business Day's prior
irrevocable notice of such election if electing one or more ABR Loans; or (iii)
ABR Loans to Eurodollar Loans, CD Rate Loans or a combination thereof, by
giving the
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Administrative Agent at least three Working Days' prior irrevocable notice of
such election if electing one or more Eurodollar Loans or at least two Business
Days' prior irrevocable notice if electing one or more CD Rate Loans; provided
that any such conversion of Eurodollar Loans or CD Rate Loans shall only be
made on the last day of the Interest Period with respect thereto. Upon receipt
of such notice, the Administrative Agent shall promptly notify each Lender
thereof. All or any part of outstanding Eurodollar Loans, CD Rate Loans and
ABR Loans may be converted in accordance with the terms hereof; provided that
(i) no Loan may be converted into a CD Rate Loan or a Eurodollar Loan when any
Event of Default has occurred and is continuing, (ii) partial conversions shall
be in an aggregate principal amount of $10,000,000 or a whole multiple of
$5,000,000 in excess thereof and (iii) any such conversion may only be made if,
after giving effect thereto, subsection 3.10(c) shall not have been
contravened.
(b) Any Eurodollar Loans or CD Rate Loans may be continued as such
upon the expiration of an Interest Period with respect thereto by compliance by
the Company with the notice provisions contained in subsection 3.10(a)
applicable with respect to each Type of Loan; provided that no Eurodollar Loans
or CD Rate Loans may be continued as such when any Event of Default has
occurred and is continuing, but shall be automatically converted to ABR Loans
on the last day of the last Interest Period for which a Eurodollar Rate or an
Adjusted CD Rate, as the case may be, was determined by the Administrative
Agent on or prior to the Administrative Agent's obtaining knowledge of such
Event of Default. The Administrative Agent shall notify the Lenders promptly
that such automatic conversion contemplated by this subsection 3.10(b) will
occur.
(c) All borrowings, conversions, payments and prepayments hereunder
shall be in such amounts and be made pursuant to such elections so that, after
giving effect thereto, the aggregate principal amount of any Tranche shall not
be less than $10,000,000.
3.11 Inability to Determine Interest Rate. (a) In the event that
the Administrative Agent or the Required Lenders shall have determined (which
determination shall be conclusive and binding upon the Company) that by reason
of circumstances affecting the interbank eurodollar market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for any
requested Interest Period with respect to (i) proposed Loans that the Company
has requested be made as Eurodollar Loans, (ii) Eurodollar Loans that will
result from the requested conversion of ABR Loans or CD Rate Loans into
Eurodollar Loans or (iii) the continuation of Eurodollar Loans beyond the
expiration of the then current Interest Period with respect thereto, the
Administrative Agent shall forthwith give telephonic notice of such
determination (promptly confirmed thereafter in writing) to the Company and the
Lenders at least two Working Days prior to, as the case may be, the requested
Borrowing Date for such Eurodollar Loans, the conversion date of such ABR Loan
or CD Rate Loan, as the case may be, or the last day of such Interest Period.
If such notice is given (A) any requested Eurodollar Loans shall be made as ABR
Loans, (B) any ABR Loans or CD Rate Loans that were to have been converted to
Eurodollar Loans shall be continued as or converted to ABR Loans or CD Rate
Loans, as the case may be, and (C) any outstanding
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Eurodollar Loans shall be converted, on the last day of the then current
Interest Period with respect thereto, to ABR Loans. Until such notice has been
withdrawn by the Administrative Agent, no further Eurodollar Loans shall be
made, and the Company shall not have the right to convert ABR Loans or CD Rate
Loans to Eurodollar Loans.
(b) In the event that the Administrative Agent or the Required
Lenders shall have determined (which determination shall be conclusive and
binding upon the Company) that by reason of circumstances affecting the
domestic certificate of deposit market, adequate and reasonable means do not
exist for ascertaining the CD Rate for any requested Interest Period with
respect to (i) proposed Loans that the Company has requested be made as CD Rate
Loans, (ii) CD Rate Loans that will result from the requested conversion of ABR
Loans or Eurodollar Loans into CD Rate Loans or (iii) the continuation of CD
Rate Loans beyond the expiration of the then current Interest Period with
respect thereto, the Administrative Agent shall forthwith give telephonic
notice of such determination (promptly confirmed thereafter in writing) to the
Company and the Lenders at least one Business Day prior to, as the case may be,
the requested Borrowing Date for such CD Rate Loans, the conversion date of
such ABR Loan or Eurodollar Loan, as the case may be, or the last day of such
Interest Period. If such notice is given, (A) any requested CD Rate Loans
shall be made as ABR Loans, (B) any ABR Loans or Eurodollar Loans that were to
have been converted to CD Rate Loans shall be continued as or converted to ABR
Loans or Eurodollar Loans, as the case may be, and (C) any outstanding CD Rate
Loans shall be converted, on the last day of the then current Interest Period
with respect thereto, to ABR Loans. Until such notice has been withdrawn by
the Administrative Agent, no further CD Rate Loans shall be made, and the
Company shall not have the right to convert ABR Loans or Eurodollar Loans to CD
Rate Loans.
3.12 Taxes. (a) Except as otherwise required by law, all payments
made by the Company hereunder shall be made free and clear of, and without
reduction for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding income and franchise taxes imposed (a) by the
United States of America or any political subdivision or taxing authority
thereof or therein (including Puerto Rico) or (b) by any jurisdiction in which
such Lender's Eurodollar Lending Office is located or any political subdivision
or taxing authority thereof or therein (such non-excluded taxes being called
"Foreign Taxes"). If any Foreign Taxes are required to be withheld from any
amounts payable to any Lender hereunder or under the Notes, the amounts so
payable to such Lender shall be increased to the extent necessary to yield to
such Lender (after payment of all Foreign Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement and its Note(s). Whenever any Foreign Tax is payable by the Company,
as promptly as possible thereafter, the Company shall send to the
Administrative Agent, for the account of such Lender, a certified copy of an
original official receipt showing payment thereof. If the Company fails to pay
any Foreign Taxes when due to the appropriate taxing authority or fails to
remit to the Administrative Agent, for the account of the Lenders, the required
receipts or other required documentary evidence, in either case for any reason
other than any Lender's failure to comply with subsection 3.12(b), the Company
shall indemnify the Lenders for any incremental taxes, interest or penalties
that may become payable by any Lender as a result of any such failure.
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(b) Prior to the first Interest Payment Date each Lender that is not
incorporated under the laws of the United States of America or a state thereof
agrees that it will deliver to the Company and the Administrative Agent (i) two
duly completed copies of United States Internal Revenue Service Form 1001 or
4224 or successor applicable form, as the case may be, certifying in each case
that such Lender is entitled to receive payments under this Agreement and the
Notes payable to it, without deduction or withholding of any United States
federal income taxes, and (ii) an Internal Revenue Service Form W-8 or W-9 or
successor applicable form, as the case may be, to establish an exemption from
United States backup withholding tax. Each Lender which delivers to the
Company and the Administrative Agent a Form 1001 or 4224 and Form W-8 or W-9
pursuant to the next preceding sentence further undertakes to deliver to the
Company and the Administrative Agent two further copies of the said Form 1001
or 4224 and Form W-8 or W-9, or successor applicable forms, or other manner of
certification, as the case may be, on or before the date that any such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form previously delivered by it to the Company and
the Administrative Agent, and such extensions or renewals thereof as may
reasonably be requested by the Company or the Administrative Agent, certifying
in the case of a Form 1001 or 4224 that such Lender is entitled to receive
payments under this Agreement without deduction or withholding of any United
States federal income taxes, unless in any such cases an event (including
without limitation any change in treaty, law or regulation) has occurred prior
to the date on which any such delivery would otherwise be required which
renders all such forms inapplicable or which would prevent such Lender from
duly completing and delivering any such form with respect to it and such Lender
advises the Company that it is not capable of receiving payments without any
deduction or withholding of United States federal income tax, and in the case
of a Form W-8 or W-9, establishing an exemption from United States backup
withholding tax.
(c) The agreements in this subsection 3.12 shall survive the
termination of this Agreement and the payment of the Notes and all other
amounts payable hereunder.
(d) The Company shall not be required to pay any increased amount on
account of Foreign Taxes pursuant to this subsection 3.12 to any Lender to the
extent that such Foreign Taxes would not have been payable if such Lender had
furnished a form (properly and accurately completed in all material respects)
which it was otherwise required to furnish in accordance with this subsection
3.12, unless such failure results from any event subsequent to the date hereof
(including without limitation any change in treaty, law or regulation)
specified in the final sentence of subsection 3.12(b) and such Lender so
notifies the Company.
3.13 Illegality. Notwithstanding any other provisions herein, if,
after the date hereof, any change in any Requirement of Law or in the
interpretation or application thereof, shall make it unlawful for any Lender to
make or maintain Eurodollar Loans or Index Rate Competitive Loans as
contemplated by this Agreement, (a) the commitment of such Lender hereunder to
make or maintain Eurodollar Loans or convert ABR Loans or CD Rate Loans to
Eurodollar Loans shall forthwith be suspended, (b) such Lender's Loans then
outstanding as Eurodollar Loans, if any, shall be converted automatically to
ABR Loans on the respective next succeeding Interest Payment Dates for such
Loans or within such earlier period as required by law and (c) the Company
shall, with respect to any Index Rate Competitive Loan of such Lender, take
such action as such Lender may reasonably request. Promptly upon
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becoming aware that any such illegality with respect to Eurodollar Loans ceases
to exist, such Lender shall notify the Company and the Administrative Agent
thereof and, after such notice, such suspension shall cease to exist. The
Company hereby agrees promptly to pay any Lender, upon its demand, any
additional amounts necessary to compensate such Lender for any costs incurred
by such Lender in making any conversion in accordance with this subsection 3.13
(such Lender's notice of such costs, as certified to the Company through the
Administrative Agent, to be prima facie evidence of such costs in the absence
of manifest error).
3.14 Requirements of Law. (a) In the event that any change in any
Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority after
the date hereof (or, in the case of Index Rate Competitive Loans, made
subsequent to acceptance by the Company of such Loans):
(i) does or shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement, any Note or any Loans made by
it, or change the basis of taxation of payments to such Lender of
principal, commitment or facility fee, interest or any other amount
payable hereunder (except for changes in the rate of tax on the overall
net income of such Lender or its applicable Lending Office imposed by the
jurisdiction in which such Lender's principal executive office or the
applicable Lending Office is located);
(ii) does or shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, or deposits or other liabilities in or for the account of,
advances or loans by, or other credit extended by, or any other
acquisition of funds by, any office of such Lender which are not otherwise
included in the determination of the Eurodollar Rate, the Adjusted CD Rate
or the Applicable Index Rate, as the case may be; or
(iii) does or shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender
of making, renewing or maintaining advances or extensions of credit or to
reduce any amount receivable hereunder, in each case, in respect of its
Eurodollar Loans, CD Rate Loans or Index Rate Competitive Loans, then, in any
such case, the Company shall promptly pay such Lender, upon its demand, any
additional amounts necessary to compensate such Lender for such additional cost
or reduced amount receivable which such Lender deems to be material as
reasonably determined by such Lender with respect to such Eurodollar Loans, CD
Rate Loans or Index Rate Competitive Loans.
(b) (i) In the event that any change in any Requirement of Law
shall either (A) impose, modify, deem or make applicable any reserve, special
deposit, assessment or similar requirement against Letters of Credit issued by
or participated in by any Lender or (B) impose on any Lender any other
condition regarding this Agreement or any Letter of Credit, and the result of
any event referred to in clause (A) or (B) above shall be to increase the cost
to such Lender of issuing, maintaining or participating in any Letter of
Credit, then
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the Company agrees, upon demand by such Lender, to promptly pay to such Lender,
from time to time as specified by such Lender, additional amounts which shall
be sufficient to compensate such Lender for such increased cost.
(ii) The Company agrees that the provisions of the foregoing
paragraph (b)(i) and the provisions of each Letter of Credit Application
providing for reimbursement or payment to the Issuing Lender in the event of
the imposition or implementation of, or increase in, any reserve, special
deposit or similar requirement in respect of the Letter of Credit relating
thereto shall apply equally to each Participating Lender in respect of its L/C
Participating Interest in such Letter of Credit.
(c) If a Lender or the Administrative Agent becomes entitled to
claim any additional amounts pursuant to this subsection 3.14 or subsection
3.15, it shall promptly notify the Company, through the Administrative Agent,
of the event by reason of which it has become so entitled. A certificate
submitted by such Lender, through the Administrative Agent, to the Company
shall be delivered to the Company at least three Business Days prior to the
date of any requested payment and shall be prima facie evidence of such amounts
in the absence of manifest error. This covenant shall survive the termination
of this Agreement and payment of the outstanding Obligations. Notwithstanding
the foregoing, no Lender shall be entitled to request compensation under this
subsection 3.14 with respect to any Index Rate Competitive Loan if it shall
have obtained actual knowledge of the change giving rise to such request at the
time of submission of such Lender's Competitive Loan Offer pursuant to which
such Competitive Loan shall have been made, unless notice of such Lender's
entitlement to such compensation shall have been furnished to the Company at or
prior to such time.
3.15 Indemnity. The Company agrees to indemnify each Lender and to
hold such Lender harmless from any loss (excluding loss of profits) or expense
which such Lender may sustain or incur as a consequence of (a) default by the
Company in payment of the principal of or interest on any Eurodollar Loans , CD
Rate Loans or Competitive Loans of such Lender, (b) default by the Company in
making a borrowing, continuation or conversion after the Company has given a
notice in accordance with subsection 2.3, 2.15, 2.18 or 3.10, as the case may
be, (c) default by the Company in making any prepayment after the Company has
given a notice in accordance with the provisions of this Agreement and (d) a
prepayment or conversion of a Eurodollar Loan, CD Rate Loan or Competitive Loan
on a day which is not the last day of an Interest Period or the applicable
Competitive Loan Maturity Date, as the case may be, with respect thereto, in
each of clauses (a) through (d) including, but not limited to, any such loss or
expense arising from interest or fees payable by such Lender to lenders of
funds obtained by it in order to maintain its Eurodollar Loans, CD Rate Loans
or Competitive Loans, as the case may be, hereunder. This covenant shall
survive termination of this Agreement and payment in full of the Obligations.
3.16 Lenders' Obligation to Mitigate. Each Lender agrees that, as
promptly as practicable after it becomes aware that it has been or will be
affected by the occurrence of an event or the existence of a condition
described under subsection 3.12, 3.13 or 3.14(a), it will, to the extent not
inconsistent with such Lender's generally applicable internal policies, use its
best efforts to make, fund or maintain the affected Eurodollar Loans, CD Rate
Loans or Competitive Loans, as the case may be, of such Lender through another
lending office of such Lender if as a result thereof the additional moneys
which would otherwise be required to be paid in respect of such Loans pursuant
to subsection 3.12, 3.13 or 3.14(a) would be materially reduced or the
illegality or other adverse circumstances which would otherwise require such
payment pursuant to subsection 3.12, 3.13 or 3.14(a) would cease to exist and
if, as determined by such Lender, in its sole discretion, the making, funding
or maintaining of such Loans through such other lending office would not
otherwise adversely affect such Loans or such Lender. The Company hereby
agrees to pay all reasonable expenses incurred by any Lender in utilizing
another lending office of such
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Lender pursuant to this subsection 3.16 if, upon being notified by such Lender
of its intention to change lending offices in accordance with the preceding
sentence, the Company requests such Lender to take the steps specified in this
subsection 3.16. If the Company fails to make a request upon being so
notified, such Lender shall have no obligations under this subsection 3.16.
3.17 Replacement of Lender. If the Company is required to make a
payment to any Lender pursuant to subsection 3.8, 3.12 or 3.14, or the
obligation of any Lender to make Eurodollar Loans is suspended pursuant to
subsection 3.13, the Company may, with the prior written consent of the
Required Lenders (which consent may not be unreasonably withheld) and upon not
less than 15 Business Days' prior notice to the Administrative Agent,
immediately terminate the Revolving Credit Commitment of such Lender and prepay
such Lender's Loans, together with accrued interest thereon and all other
amounts payable with respect thereto. Such termination shall not relieve the
Company of its Obligations to such Lender under subsection 3.15 or 10.5 in
respect of periods prior to such termination. The Required Lenders shall not
withhold their consent to any such termination if the Company, on terms and
conditions reasonably satisfactory to the Required Lenders, shall have located
a banking institution, reasonably satisfactory to the Required Lenders, which
shall have agreed to be substituted for such Lender on such terms and
conditions as a Lender under this Agreement.
SECTION 4. CONDITIONS OF LENDING
4.1 Conditions to the Initial Loans. The obligation of each Lender
to make its initial Loan and the obligation of the relevant Issuing Lender to
issue the initial Letter of Credit on or after the Effective Date shall be
subject to the satisfaction of the following conditions precedent:
(a) Agreement; Revolving Credit Notes and Competitive Loan Notes.
The Administrative Agent shall have received (i) a counterpart of this
Agreement for each Lender, duly executed by a Responsible Officer and (ii) an
appropriate Revolving Credit Note and Grid Competitive Loan Note, for each
Lender, conforming to the requirements hereof and duly executed by a
Responsible Officer.
(b) Corporate Proceedings. The Administrative Agent shall have
received, with a copy for each Lender, a copy of the resolutions of the Board
of Directors of the Company (or duly authorized committee thereof) authorizing
the execution, delivery and performance of this Agreement, the Notes and the
borrowings provided for herein. Such resolutions shall be certified by the
Secretary or an Assistant Secretary of the Company, which certifications shall
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state that the resolutions thereby certified have not been amended, modified,
revoked or rescinded and are in full force and effect as of such date.
(c) Legal Opinions. The Administrative Agent shall have received,
with a copy for each Lender, legal opinions, dated the Effective Date, of
Sullivan & Cromwell and the General Counsel of the Company or other counsel
satisfactory to the Lenders, substantially in the form of Exhibits I and J.
(d) Cancellation of Existing Facilities. The Administrative Agent
shall have received a copy of written irrevocable notices from the Company,
PEPL and TETCO terminating the Commitments (as defined in each of the Existing
Facilities) and directing the Agent (as so defined) to prepay by wire transfer,
in immediately available funds, in full any loans and other extensions of
credit then outstanding thereunder, together with accrued interest thereon, and
any unpaid facility fees then accrued and all other amounts then due, upon
receipt of the proceeds from the Loans or other funds available to or provided
by the Company, PEPL and/or TETCO (which in the aggregate shall be in an amount
at least sufficient to make all payments referred to in this subsection (d)).
(e) Additional Matters. The Administrative Agent shall have
received, with a copy for each Lender, such other certificates, opinions,
documents and instruments relating to the transactions contemplated hereby as
may have been reasonably requested by any Lender, and all corporate and other
proceedings, and all documents, instruments and other legal matters in
connection with the transactions contemplated by this Agreement shall be
reasonably satisfactory in form and substance to the Administrative Agent and
the Required Lenders and their respective counsel.
4.2 Conditions to the Term Loans. The obligation of each Lender to
make its Term Loan on the Revolving Credit Termination Date shall be subject to
the satisfaction of the condition that the Administrative Agent shall have
received an appropriate Term Note, for each Lender, conforming to the
requirements hereof and duly executed by a Responsible Officer.
4.3 Conditions to All Loans and All Letters of Credit. The
obligation of each Lender to make any Loan, other than a conversion or
continuation of a Loan under subsection 3.10, or of the relevant Issuing Lender
to issue a Letter of Credit (including, without limitation, its initial Loans
requested to be made by it and, in the case of such Issuing Lender, its
obligation to issue the initial Letter of Credit), is subject to the
satisfaction of the following conditions precedent as of the date such Loan is
made or such Letter of Credit is issued:
(a) Non-Refunding Extensions of Credit. In the case of any Loan or
Letter of Credit which does not involve a Refunding Extension of Credit:
(i) the representations and warranties made by the Company in this
Agreement shall be true and correct in all material respects on and as of
such date immediately prior to and after giving effect to such Extension
of Credit as if made on and as of such date,
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except to the extent such representations and warranties relate solely to
an earlier date or period;
(ii) no Default or Event of Default shall have occurred and be
continuing on such date or shall occur after giving effect to the Loans
requested to be made or the Letters of Credit requested to be issued; and
(iii) with respect to the issuance of any Letter of Credit, the
relevant Issuing Lender shall have received a Letter of Credit
Application, completed to the satisfaction of such Issuing Lender, and
such other certificates, documents and other papers and information as
such Issuing Lender may reasonably request.
(b) Refunding Extensions of Credit. In the case of any Loan or
Letter of Credit involving solely a Refunding Extension of Credit:
(i) no Event of Default shall have occurred and be continuing on
such date or shall occur after giving effect to the Loans requested to be
made or the Letter of Credit requested to be issued; and
(ii) with respect to the issuance of any Letter of Credit, the
relevant Issuing Lender shall have received a Letter of Credit
Application, completed to the satisfaction of such Issuing Lender, and
such other certificates, documents and other papers and information as
such Issuing Lender may reasonably request.
Each borrowing of Loans, other than a conversion or continuation of a Loan
under subsection 3.10, or issuance of a Letter of Credit under this Agreement,
shall constitute a representation or warranty by the Company hereunder as of
the date of such borrowing or such issuance that the conditions in clauses
(a)(i) and (ii) or in clause (b)(i) of this subsection 4.3 applicable thereto
have been satisfied. Each conversion of a Loan into a Eurodollar Loan or CD
Rate Loan under subsection 3.10 shall constitute a representation and warranty
by the Company hereunder as of the date of such conversion that no Event of
Default shall have occurred and be continuing on such date.
SECTION 5. REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this Agreement and to
make the Loans and to induce the Issuing Lenders to issue, and the
Participating Lenders to participate in, the Letters of Credit as herein
provided, the Company hereby represents and warrants to the Administrative
Agent and to each Lender that:
5.1 Financial Condition. The consolidated balance sheet of the
Company and its Subsidiaries as at December 31, 1994 and the related
consolidated statements of income, common stockholders' equity, and cash flows
for the year then ended, certified by KPMG Peat Marwick LLP, copies of which
have been heretofore furnished to each Lender, present fairly the consolidated
financial position of the Company and its Subsidiaries as at such date, and the
consolidated results of their operations and cash flows for the year then
ended, in
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accordance with GAAP. The unaudited consolidated balance sheet of the Company
and its Subsidiaries as of September 30, 1995, together with unaudited
consolidated statements of income and cash flows for the nine months ended
September 30, 1994 and 1995, included in the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1995, present fairly the consolidated
financial position of the Company and its Subsidiaries as of September 30, 1995
and the consolidated results of their operations and cash flows for the nine
months ended September 30, 1994 and 1995, in conformity with GAAP applicable to
Reports on Form 10-Q. Since September 30, 1995, there has been no change in
the consolidated financial position or results of operations of the Company and
its Subsidiaries which is reasonably likely to have a material adverse effect
on the ability of the Company to repay the principal of and interest on the
Loans and all other amounts payable under this Agreement in accordance with the
terms of this Agreement and the Notes, except as set forth in, or contemplated
by the disclosures contained in, the SEC Reports.
5.2 Corporate Existence; Qualification. The Company (i) is a
corporation duly organized, validly existing and in good standing under the
laws of Delaware, (ii) has the corporate power and authority to own and operate
its properties, to lease the properties it operates as lessee and to conduct
the business in which it is currently engaged and (iii) is duly qualified as a
foreign corporation and is in good standing under the laws of each jurisdiction
where its ownership, lease or operation of property or the conduct of its
business requires such qualification and where the failure to be so qualified
and in good standing would have a material adverse effect on the business of
the Company and its Subsidiaries taken as a whole.
5.3 Corporate Power; Authorization; Enforceable Obligations. (a)
The Company has the corporate power and authority to execute, deliver and
perform this Agreement and the Notes. The Company has the corporate power and
authority to borrow hereunder and has taken all necessary corporate action to
authorize the borrowings on the terms and conditions of this Agreement and the
Notes. The Company has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement and the Notes prior to
the execution and delivery thereof.
(b) No consent or authorization of, or filing with or other act by
or in respect of, any Person (including, without limitation, any Governmental
Authority) is required in connection with the borrowings hereunder or with the
execution, delivery, performance, validity or enforceability of this Agreement
or the Notes or the consummation of the transactions contemplated hereby or
thereby, except (i) for consents, authorizations and filings which have been
obtained or made, as the case may be, and are in full force and effect, (ii)
which are not required to be obtained or made prior to the date on which this
representation is made or deemed made or (iii) the failure of which to obtain
or make (x) would not have a material adverse effect on the business of the
Company and its Subsidiaries taken as a whole or (y) would not materially
adversely affect the ability of the Company to perform its obligations under
this Agreement or the Notes.
(c) This Agreement has been duly executed and delivered by the
Company and constitutes a valid and legally binding obligation of the Company
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or similar laws of general
applicability relating to or affecting creditors' rights
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and to general equity principles. The Notes have been duly authorized by the
Company and, when executed, issued and delivered pursuant hereto, will
constitute valid and legally binding obligations of the Company, enforceable in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
5.4 No Legal Bar. The execution, delivery and performance by the
Company of this Agreement and the Notes, the borrowings hereunder and the use
of the proceeds thereof will not violate any Requirement of Law or Contractual
Obligation of the Company except for such violations which would not have a
material adverse effect on the business of the Company and its Subsidiaries
taken as a whole, and will not result in, or require, the creation or
imposition of, any Lien on any of its properties or revenues pursuant to any
Requirement of Law or Contractual Obligation.
5.5 No Material Litigation. No litigation or proceeding of or
before any arbitrator or Governmental Authority is pending or, to the best
knowledge of the Company, threatened by or against the Company or any of its
Subsidiaries which is reasonably likely to have a material adverse effect on
the ability of the Company to repay the principal of and interest on the Loans
and all other amounts payable under this Agreement in accordance with the terms
of this Agreement and the Notes, except as set forth in, or contemplated by the
disclosures contained in, the SEC Reports.
5.6 Margin Regulations. No part of the proceeds of any Loans
hereunder will be used for any purpose which violates the provisions of
Regulation U of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect. The Company is not engaged nor will it
engage, principally, or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms under said
Regulation U.
5.7 ERISA. (i) No employee benefit plan established or maintained,
or to which contributions have been made, by the Company or any Commonly
Controlled Entity which is subject to Part 3 of Subtitle B of Title I of the
Employee Retirement Income Security Act of 1974 ("ERISA"), had an accumulated
funding deficiency as of the last day of the most recent fiscal year of such
plan ended prior to the date hereof, (ii) no material liability to the Pension
Benefit Guarantee Corporation has been incurred with respect to any such plan
by the Company and (iii) neither any such plan nor any trustee or administrator
of any such plan has engaged in a prohibited transaction which could subject
any such plan, or any such trustee or administrator, or any party dealing with
any such plan, to the tax or penalty on prohibited transactions imposed by
Section 4975 of the Code, except in any such case referred to in clause (i),
(ii) or (iii) which would not, individually or in the aggregate, have a
material adverse effect on the business of the Company and its Subsidiaries
taken as a whole. As used in this Agreement, the term "accumulated funding
deficiency" has the meaning assigned to such term in ERISA and the term
"prohibited transaction" shall have the meaning assigned to such term in said
Section 4975.
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5.8 Environmental Regulations. Except as set forth in, or
contemplated by the disclosures contained in, the SEC Reports, each of the
Company and its Subsidiaries is in compliance with all Requirements of Law
relating to pollution and environmental control in all jurisdictions in which
it is presently doing business, except to the extent that the failure to comply
therewith would not, individually or in the aggregate, have a material adverse
effect on the business of the Company and its Subsidiaries taken as a whole.
5.9 Investment Company Act, Public Utility Holding Company Act. The
Company is not an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended. The Company is not subject to any duty, obligation or liability as
a "holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
SECTION 6. AFFIRMATIVE COVENANTS
The Company agrees that, so long as the Commitments remain in effect,
any Loans or any Letter of Credit Obligations remain outstanding and unpaid or
any other amount is owing to any Lender or the Administrative Agent hereunder,
the Company shall, and, except in the case of the agreements set forth in
subsections 6.1, 6.2 and 6.7, shall cause each of its Significant Subsidiaries
to:
6.1 Financial Statements. Furnish to each Lender:
(a) within 120 days after the end of each fiscal year of the
Company, a copy of the audited consolidated balance sheet of the Company and
its consolidated Subsidiaries as at the end of such year and the related
consolidated statements of income and stockholders' equity and cash flows for
such year, setting forth in comparative form the figures for the previous year,
reported on without qualification arising out of the scope of the audit by
independent certified public accountants of nationally recognized standing
selected by the Company; and
(b) within 60 days after the end of each of the first three
quarterly periods of each fiscal year of the Company, a copy of the unaudited
consolidated balance sheets of the Company and its consolidated Subsidiaries as
at the end of each such quarter, the related unaudited consolidated statements
of income of the Company and its consolidated Subsidiaries for such quarter and
the portion of the fiscal year through such date and the related unaudited
consolidated statements of cash flows of the Company and its consolidated
Subsidiaries for the portion of the fiscal year through such date, setting
forth in each case in comparative form the figures for the corresponding prior
year-to- date period (subject to normal year-end audit adjustments).
The Company covenants and agrees that all such financial statements shall be
prepared in accordance with GAAP (subject, in the case of interim statements,
to normal year-end audit adjustments and except that such interim statements
may be prepared in accordance with
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GAAP applicable to Reports on Form 10-Q) applied consistently throughout the
periods reflected therein (except as disclosed therein).
6.2 Certificates; Other Information. Furnish to each Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsections 6.1(a) and (b), a certificate of a Responsible
Officer (i) stating that such Responsible Officer has obtained no knowledge of
any Default or Event of Default, except as specified in such certificate, (ii)
stating, to the best of such Responsible Officer's knowledge, that all such
financial statements have been prepared in accordance with GAAP (subject, in
the case of interim statements, to normal year-end audit adjustments and except
that such interim statements may have been prepared in accordance with GAAP
applicable to Reports on Form 10-Q) applied consistently throughout the periods
reflected therein (except as disclosed therein) and (iii) showing in detail the
calculations supporting such statements in respect of subsection 7.1;
(b) promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available
generally and all regular and periodic reports (other than on Form 11-K) and
all final registration statements (other than on Form S-8) and final
prospectuses, if any, filed by the Company with any securities exchange or with
the Securities and Exchange Commission or any Governmental Authority succeeding
to any of its functions; and
(c) promptly, such additional financial and other information as any
Lender may from time to time reasonably request through the Administrative
Agent.
6.3 Payment of Taxes. Pay and discharge, or cause the payment and
discharge of, all federal and all other material taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits,
or upon any properties belonging to it, prior to the date on which penalties
attach thereto, and all lawful claims which, if unpaid, might become a Lien
upon any properties of the Company or any of its Significant Subsidiaries;
provided that neither the Company nor any of its Significant Subsidiaries shall
be required to pay any such tax, assessment, charge, levy or claim which is
being contested in good faith and (if necessary) by proper proceedings if it
has maintained adequate reserves (in the good faith judgment of management of
the Company or the relevant Significant Subsidiary, as the case may be) with
respect thereto in accordance with GAAP.
6.4 Maintenance of Existence. Preserve, renew and keep in full
force and effect its corporate existence and take all reasonable action to
maintain all material rights, privileges and franchises necessary or desirable
in the normal conduct of its business (provided that the foregoing shall not
prevent (i) any merger or consolidation of any Subsidiary with, or any sale or
other disposition by any Subsidiary of any property or assets to, the Company
or a Wholly-Owned Subsidiary or (ii) the taking of, or failure to take, any
action which, in the opinion of the chief executive officer or chief financial
officer of the Company, will not materially adversely affect the ability of the
Company to perform its obligations hereunder); and comply with all Requirements
of Law except to the extent the same is being contested in good faith and
except to the extent that failure to comply therewith would not, in the
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aggregate, have a material adverse effect on the business of the Company and
its Subsidiaries taken as a whole.
6.5 Maintenance of Property; Insurance. (a) Keep all property
useful and necessary in its business in good working order and condition,
normal wear and tear excepted, to the extent customary for companies in similar
businesses; and
(b) Maintain with financially sound insurance companies insurance on
all its property in at least such amounts and with such deductibles as are
usually maintained by, and against at least such risks as are usually insured
against in the same general area by, companies engaged in the same or a similar
business.
6.6 Inspection of Property; Books and Records; Discussions. Upon
reasonable notice to the Company by the Administrative Agent or 25% of the
Lenders given through the Administrative Agent and at the expense of the
relevant Lenders, permit representatives of any Lenders to visit and inspect
such of their properties and examine and make abstracts from any of its books
and records at any reasonable time and as often as may reasonably be desired,
and to discuss the business of the Company and its Subsidiaries with officers
and employees of the Company and its Subsidiaries and with its independent
certified public accountants. Each Lender shall hold all non-public
information obtained pursuant to this subsection 6.6 confidential in accordance
with its customary procedures in respect of confidential information and in any
event subject to subsection 10.10(e) may make any disclosure to a Transferee or
as required or requested by any Governmental Authority.
6.7 Notices. Promptly give notice to the Administrative Agent and
each Lender:
(a) of the occurrence of any Default or Event of Default; and
(b) of any litigation or proceeding affecting the Company or any of
its Subsidiaries (i) in which the amount claimed is $25,000,000 or more and not
covered by insurance or (ii) in which injunctive or similar relief is sought,
which in any such case referred to in clause (i) or (ii) if obtained would have
a material adverse effect on the business of the Company and its Subsidiaries
taken as a whole.
Each notice pursuant to this subsection 6.7 shall be accompanied by a statement
of a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action the Company or such Subsidiary proposes to take
with respect thereto.
SECTION 7. NEGATIVE COVENANTS
The Company hereby agrees that, so long as the Commitments remain in
effect, any Loans or any Letter of Credit Obligations remain outstanding and
unpaid or any other amount is owing to any Lender or the Administrative Agent,
the Company shall not, and, in the case of subsections 7.2, 7.5 and 7.6, shall
not permit any of its Subsidiaries to, directly or indirectly:
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7.1 Maintenance of Consolidated Indebtedness to Consolidated
Capitalization Percentage Ratio of the Company. Permit the ratio (expressed as
a percentage) of (a) Consolidated Indebtedness to (b) Consolidated
Capitalization as at the end of any calendar quarter to be greater than 65%.
7.2 Limitation on Liens. Create, incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except:
(a) Liens for taxes, assessments, governmental charges or levies not
yet due or which are being contested in good faith and by appropriate
proceedings if adequate reserves (in the good faith judgment of the Company)
with respect thereto are maintained on the books of the Company in accordance
with GAAP;
(b) statutory Liens of landlords and carrier's, vendor's,
warehousemen's, mechanic's, materialmen's, repairmen's, or other like Liens
arising in the ordinary course of business if the obligations secured by such
Liens are not overdue for a period of more than 60 days or which are being
contested in good faith and (if necessary) by appropriate proceedings;
(c) pledges or deposits and Liens under bonds required in connection
with worker's compensation, unemployment insurance and other social security
legislation incurred in the ordinary course of business;
(d) Liens incurred or deposits to secure the performance of tenders,
bids, contracts (other than for borrowed money), leases, statutory obligations,
surety and appeal bonds, performance and return-of-money bonds and other
obligations of a like nature incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of the business of the Company;
(f) Liens arising from judgments or decrees in circumstances not
constituting an Event of Default under subsection 8.1(g);
(g) purchase money Liens securing obligations arising from the
acquisition by the Company of property, provided that the principal amount of
such obligations does not exceed the purchase price of such property;
(h) (A) Liens in existence on the date of this Agreement, (B) Liens
on any property existing at the time of acquisition thereof (including Liens on
any property acquired from a Person which is merged into the Company) and (C)
any extension, renewal or refunding of any Lien referred to in clause (A) or
(B), provided that no such Lien is extended to cover any additional property
(other than replacement property) and that the amount of Indebtedness secured
thereby is not increased;
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(i) Liens in respect of future demand charges or reservation charges
sold by the Company or any Subsidiary not exceeding $275,000,000 at any one
time;
(j) Liens in favor of the Company or any Subsidiary;
(k) Liens in favor of the Administrative Agent, any Issuing Lender
or the Lenders under this Agreement; and
(l) other Liens securing obligations such that the aggregate book
value (net of applicable reserves) of the assets securing such obligations does
not exceed at any one time an amount equal to 10% of Consolidated Tangible
Assets at such time.
7.3 Consolidation, Merger, Etc. Consolidate with, merge into or
sell, lease or otherwise dispose of its properties and assets as an entirety or
substantially as an entirety to any Person in one transaction or any series of
transactions.
7.4 Principal Subsidiaries. (a) Fail to own, directly or
indirectly, all of the outstanding shares of common stock of each of the
Principal Subsidiaries or (b) create, incur, assume or suffer to exist any Lien
upon any shares of common stock of any Principal Subsidiary owned by the
Company or any of its Subsidiaries except Liens of the nature referred to in
clauses (a), (f), (j) and (k) of subsection 7.2.
7.5 Lines of Business. Engage in any line of business which is
material to the Company and its Subsidiaries taken as a whole other than the
lines of business in which the Company and its Subsidiaries are now engaged and
other energy related lines of business.
7.6 Asset Sales. Make any Asset Sale in any fiscal year if such
Asset Sale, together with all other Asset Sales made during such fiscal year,
will result in Asset Sales of property or assets with an aggregate fair market
value (as determined in good faith by the Company) equal to or greater than 5%
of Consolidated Tangible Assets at the time of such Asset Sale.
SECTION 8. EVENTS OF DEFAULT
Upon the occurrence and during the continuance of any of the
following events:
(a) Payments. The Company shall fail to pay any principal of any
Loan when due (whether at stated maturity, by acceleration or otherwise); or
the Company shall fail to pay any interest on any Loan or any fee payable
hereunder within ten days after the same becomes due and payable in accordance
with the terms hereof; or
(b) Representations and Warranties. Any representation, warranty or
other statement made or deemed made by the Company herein or which is contained
in any certificate furnished at any time pursuant to Section 4 hereof shall
prove to have been untrue in any material respect on or as of the date made or
deemed made or furnished; or
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(c) Certain Covenants. The Company shall default in the observance
or performance of any covenant or agreement contained in subsection 7.1, 7.3,
7.4, 7.5 or 7.6; or
(d) Other Covenants. The Company shall default in the observance or
performance of any other covenant or agreement contained in this Agreement, and
any such default referred to in this paragraph (d) shall continue unremedied
for a period of 30 days after written notice from the Administrative Agent at
the direction of the Required Lenders; or
(e) Cross-Default. The Company, any of its Significant Subsidiaries
or any Principal Subsidiary shall (i) default in any payment of principal of or
interest on any other Indebtedness for borrowed money or deferred Indebtedness
for the payment of the purchase price of property or assets purchased, in
excess of $100,000,000 in the aggregate, beyond the period of grace, if any,
provided in the agreement or instrument under which such Indebtedness was
created; or (ii) default in the observance or performance of any other
agreement or condition relating to any such Indebtedness or contained in any
agreement or instrument evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause, without the further giving of notice or the further lapse of time, if
required, such Indebtedness to become due prior to its stated maturity;
provided, however, that if either (i) such Indebtedness shall have been paid or
(ii) such default or other event shall be cured by the Company, such
Significant Subsidiary or such Principal Subsidiary, as the case may be, or
waived by the holders of such Indebtedness and any acceleration of maturity
having resulted from such default or other event or condition shall be
rescinded or annulled, in each case in accordance with the terms of such
agreement or instrument, without any modification of the terms of such
Indebtedness requiring the Company, such Significant Subsidiary or such
Principal Subsidiary, as the case may be, to furnish additional or other
security therefor or reducing the average life to maturity thereof or
increasing the principal amount thereof or any agreement by the Company, such
Significant Subsidiary or such Principal Subsidiary, as the case may be, to
furnish additional or other security therefor or to issue in lieu thereof
Indebtedness secured by additional or other collateral or with a shorter
average life to maturity or in a greater principal amount, then any default
hereunder by reason thereof shall be deemed to have been thereupon cured or
waived; or
(f) Bankruptcy or Reorganization Proceeding. (i) The Company, any
of its Significant Subsidiaries or any Principal Subsidiary shall commence any
case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (B) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its assets, or
the Company, any of its Significant Subsidiaries or any Principal Subsidiary
shall make a general assignment for the benefit of its creditors; or (ii) there
shall be commenced against the Company, any of its Significant Subsidiaries or
any Principal Subsidiary any case, proceeding or other action of a nature
referred to in clause (i) above which (A) results in the
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entry of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of 60 days; or (iii)
there shall be commenced against the Company, any of its Significant
Subsidiaries or any Principal Subsidiary any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results in the
entry of an order for any such relief which shall not have been vacated,
discharged, stayed or bonded pending appeal within 60 days from the entry
thereof; or (iv) the Company, any of its Significant Subsidiaries or any
Principal Subsidiary shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth in
clause (i), (ii), or (iii) above; or (v) any of the Company, any of its
Significant Subsidiaries or any Principal Subsidiary shall generally not, or
shall be unable to, or shall admit in writing its inability to, pay their
respective debts as they become due; or
(g) Judgments. One or more judgments or decrees for the payment of
money shall be entered against the Company or any of its Significant
Subsidiaries involving in the aggregate a liability (not paid or fully covered
by insurance, except for any reasonable deductible) of $25,000,000 or more and
there shall have been a period of 60 consecutive days during which a stay of
enforcement of such judgment or decree, by reason of a pending appeal or
otherwise, shall not be in effect or during which such judgment or decree shall
not have been vacated or discharged; or
(h) Change in Control of the Company. (i) Any Person or any Persons
acting together which would constitute a "group" for purposes of Section 13(d)
of the Exchange Act (a "Group"), together with any Affiliates thereof, shall
acquire direct or indirect beneficial ownership (as defined in Rule 13d-3 of
the Exchange Act) of 50% or more of the total voting power of all classes of
capital stock of the Company entitled to vote generally in the election of
directors of the Company or (ii) the election by any Person or Group, together
with any Affiliates thereof, of a sufficient number of its or their nominees to
the Board of Directors of the Company such that such nominees, when added to
any existing directors remaining on such Board of Directors after such election
who are Affiliates of such Person or Group, shall constitute a majority of such
Board of Directors; or
(i) ERISA. Any accumulated funding deficiency shall exist with
respect to any employee benefit plan established or maintained, or to which
contributions have been made, by the Company or any Commonly Controlled Entity
or the Company shall incur any material liability to the Pension Benefit
Guarantee Corporation with respect to any such plan or any such plan or trustee
or administrator thereof shall engage in a prohibited transaction, and in each
case such event or condition, together with all such other events or conditions
which have occurred and are continuing at such time, has a material adverse
effect on the ability of the Company to perform its obligations under this
Agreement or the Notes;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Company,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under
this Agreement (including amounts payable in respect of Letters of Credit
whether or not the beneficiaries thereof shall have presented the drafts and
other documents required thereunder) and the Notes shall immediately become due
and payable and
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(B) if such event is any other Event of Default, any of the following actions
may be taken: (i) with the consent of the Required Lenders, the Administrative
Agent may, or upon the direction of the Required Lenders, the Administrative
Agent shall, by notice to the Company, declare the Commitments to be terminated
forthwith, whereupon the Commitments shall immediately terminate; (ii) with the
consent of the Required Lenders, the Administrative Agent may, or upon the
direction of the Required Lenders, the Administrative Agent shall, by notice of
default to the Company, declare the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement (including amounts
payable in respect of Letters of Credit whether or not the beneficiaries
thereof shall have presented the drafts and other documents required
thereunder) and the Notes to be due and payable forthwith, whereupon the same
shall immediately become due and payable; and (iii) the Administrative Agent
may, and upon the direction of the Required Lenders shall, exercise any and all
remedies and other rights provided pursuant to this Agreement. With respect to
all Letters of Credit that shall not have expired or with respect to which
presentment for honor shall not have occurred, upon the occurrence of an Event
of Default, the Company shall deposit in a cash collateral account opened by
the Administrative Agent an amount equal to the aggregate undrawn face amount
of such Letters of Credit for application to payments of drafts drawn
thereunder, and the Administrative Agent shall use its best efforts to invest
such amounts so deposited in United States Treasury bills or other Cash
Equivalents designated by the Company; provided that the Administrative Agent
shall not be liable to the Company for failure to invest or for any losses
suffered as a result of any such investment or withdrawal. The unused portion
of such amounts, if any, shall be returned to the Company after the respective
expiry dates of the Letters of Credit and after all Obligations are paid in
full. Except as expressly provided above in this Section 8, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
SECTION 9. THE ADMINISTRATIVE AGENT AND THE ISSUING LENDERS
9.1 Appointment. Each Lender hereby irrevocably designates and
appoints Chemical as the Administrative Agent of such Lender under this
Agreement, the Notes and each other agreement (if any) entered into pursuant to
this Agreement (collectively, the "Credit Documents") and Chemical and each
other Lender so designated hereunder as the Issuing Lenders under this
Agreement, and each such Lender irrevocably authorizes Chemical as the
Administrative Agent for such Lender and Chemical and each other Issuing Lender
as Issuing Lenders to take such action on its behalf under the provisions of
this Agreement and each other Credit Document and to exercise such powers and
perform such duties as are expressly delegated to the Administrative Agent or
the Issuing Lenders, as the case may be, by the terms of this Agreement and
each other Credit Document, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement, neither the Administrative Agent nor the Issuing Lenders shall
have any duties or responsibilities, except those expressly set forth herein
and in the other Credit Documents, or any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or otherwise exist
against the Administrative Agent and the Issuing Lenders.
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9.2 Delegation of Duties. The Administrative Agent and the Issuing
Lenders may execute any of their respective duties under this Agreement or the
other Credit Documents by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
Neither the Administrative Agent nor any Issuing Lender shall be responsible
for the negligence or misconduct of any agents or attorneys-in-fact selected by
it with reasonable care.
9.3 Exculpatory Provisions. Neither the Administrative Agent nor
any Issuing Lender nor any of their respective officers, directors, employees,
agents, attorneys-in-fact or Affiliates shall be (a) liable for any action
lawfully taken or omitted to be taken by it or such Person under or in
connection with this Agreement or any other Credit Document (except for its or
such Person's own gross negligence or willful misconduct), or (b) responsible
in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Company or any officer thereof
contained in this Agreement or any other Credit Document or in any certificate,
report, statement or other document referred to or provided for in, or received
under or in connection with, this Agreement or any other Credit Document or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or any other Credit Document, or for any failure of the
Company or any other Person to perform its obligations hereunder or thereunder.
Neither the Administrative Agent nor any Issuing Lender shall be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Credit Document or to inspect the properties, books or
records of the Company or any of its Subsidiaries. This subsection 9.3 is
intended to govern the relationship between the Administrative Agent and the
Issuing Lenders, on the one hand, and the Lenders, on the other.
9.4 Reliance by Administrative Agent and the Issuing Lenders. The
Administrative Agent and the Issuing Lenders shall be entitled to rely, and
shall be fully protected in relying, upon any Note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy,
telex or teletype message, statement, order or other document or conversation
believed by any of them to be genuine and correct and to have been signed, sent
or made by the proper Person or Persons and upon advice and statements of legal
counsel (including, without limitation, counsel to the Company), independent
accountants and other experts selected by the Administrative Agent or an
Issuing Lender. The Administrative Agent may deem and treat the payee of any
Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Administrative Agent. The Administrative Agent and the Issuing Lenders shall
be fully justified in failing or refusing to take any action under this
Agreement or any other Credit Document unless any such Person shall first
receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative Agent and
the Issuing Lenders shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement and the other Credit Documents in
accordance with a request of the Required Lenders (or, if required by this
Agreement, all of the Lenders), and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders and all
future holders of the Notes.
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9.5 Notice of Default. Neither the Administrative Agent nor any
Issuing Lender shall be deemed to have knowledge or notice of the occurrence of
any Default or Event of Default hereunder unless the Administrative Agent or
such Issuing Lender, as the case may be, has received notice from a Lender or
the Company referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event
that the Administrative Agent or an Issuing Lender receives such a notice, the
Administrative Agent shall give notice thereof to the Lenders. The
Administrative Agent and the Issuing Lenders shall take such action with
respect to such Default or Event of Default as shall be reasonably directed by
the Required Lenders; provided that unless and until the Administrative Agent
or the Issuing Lenders shall have received such directions, the Administrative
Agent and the Issuing Lenders may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Default or
Event of Default as they shall deem advisable in the best interests of the
Lenders.
9.6 Non-Reliance on Administrative Agent, Issuing Lenders and Other
Lenders. Each Lender expressly acknowledges that neither the Administrative
Agent nor the Issuing Lenders nor any of their respective officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Administrative Agent or the Issuing
Lenders hereafter taken, including any review of the affairs of the Company,
shall be deemed to constitute any representation or warranty by the
Administrative Agent or the Issuing Lenders to any Lender. Each Lender
represents to the Administrative Agent and the Issuing Lenders that it has,
independently and without reliance upon the Administrative Agent, the Issuing
Lenders or any other Lender and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of the Company and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon the Administrative Agent, the
Issuing Lenders 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 analysis, appraisals and decisions in taking or not taking action under
this Agreement or under the other Credit Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Company. Except for notices, reports and other documents expressly required to
be furnished to the Lenders by the Administrative Agent or an Issuing Lender
hereunder or under the other Credit Documents, neither the Administrative Agent
nor such Issuing Lender shall have any duty or responsibility to provide any
Lender with any credit or other information concerning the business,
operations, property, financial and other condition or creditworthiness of the
Company which may come into the possession of the Administrative Agent or the
Issuing Lenders or any of their respective officers, directors, employees,
agents, attorneys-in-fact or Affiliates.
9.7 Indemnification. The Lenders agree to indemnify the
Administrative Agent and the Issuing Lenders in their respective capacities as
such (to the extent not reimbursed by the Company and without limiting the
obligation of the Company to do so), ratably according to the respective
amounts of their Commitments, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including without limitation at
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any time following the payment of the Notes) be imposed on, incurred by or
asserted against the Administrative Agent or the Issuing Lenders in any way
relating to or arising out of this Agreement or any other Credit Document or
any documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or any action taken or omitted by
the Administrative Agent or the Issuing Lenders under or in connection with any
of the foregoing; provided that no Lender shall be liable for the payment of
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting solely
from the Administrative Agent's or an Issuing Lender's gross negligence or
willful misconduct. The agreements in this subsection 9.7 shall survive the
payment of the Notes and all other amounts payable hereunder.
9.8 Administrative Agent and Issuing Lenders in Their Individual
Capacities. The Administrative Agent, each Issuing Lender and their respective
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Company as though the Administrative Agent or such
Issuing Lender were not the Administrative Agent or an Issuing Lender,
respectively, hereunder. With respect to Loans made or renewed by it and any
Note issued to it, the Administrative Agent and the Issuing Lenders shall have
the same rights and powers under this Agreement as any Lender and may exercise
the same as though it were not the Administrative Agent or an Issuing Lender,
and the terms "Lender" and "Lenders" shall include the Administrative Agent and
the Issuing Lenders in their respective individual capacities.
9.9 Successor Administrative Agent and Issuing Lenders. The
Administrative Agent or any Issuing Lender may resign as Administrative Agent
or Issuing Lender upon 30 days' notice to the Company and the Lenders. If the
Administrative Agent or any Issuing Lender shall resign as Administrative Agent
or Issuing Lender under this Agreement, then the Required Lenders during such
30-day period shall appoint from among the Lenders a successor agent or issuing
bank for the Lenders, whereupon such successor agent or issuing bank shall
succeed to the rights, powers and duties of the Administrative Agent or Issuing
Lender being replaced and the term "Administrative Agent" or "Issuing Lender"
shall mean such successor agent or issuing bank, respectively, effective upon
its appointment, and the former Administrative Agent's or Issuing Lender's
rights, powers and duties as Administrative Agent or Issuing Lender shall be
terminated, without any other or further act or deed on the part of such former
Administrative Agent or Issuing Lender or any of the parties to this Agreement
or any holders of the Notes; provided that no successor agent or issuing bank
may be appointed by the Required Lenders without the prior written consent of
the Company, which consent shall not be unreasonably withheld. After any
retiring Administrative Agent's or Issuing Lender's resignation hereunder as
the Administrative Agent or an Issuing Lender, the provisions of this Section 9
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was the Administrative Agent or an Issuing Lender under this
Agreement.
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SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. Neither this Agreement, any Note, any
other Credit Document nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this
subsection 10.1. With the written consent of the Required Lenders, the
Administrative Agent and the Company may, from time to time, enter into written
amendments, supplements or modifications for the purpose of adding, deleting or
changing any provisions to this Agreement, the Notes or any other Credit
Document, or changing in any manner the rights of the Lenders or of the Company
hereunder or thereunder or waiving, on such terms and conditions as the
Administrative Agent may specify in such instrument, any of the requirements of
this Agreement, the Notes or any other Credit Document or any Default or Event
of Default and its consequences; provided that no such waiver and no such
amendment, supplement or modification shall (a) extend the Revolving Credit
Termination Date (except in the manner expressly contemplated by this
Agreement) or Term Loan Maturity Date or extend the maturity of any Loan or any
installment thereof, or reduce the rate or extend the time of payment of
interest thereon, or reduce any fee payable to the Lenders hereunder, or reduce
the principal amount thereof, or increase the amount of any Lender's Revolving
Credit Commitment, Term Loan Commitment or Commitment Percentage, or amend,
modify or waive any provision of this subsection 10.1 or reduce the percentage
specified in the definition of Required Lenders, or consent to the assignment
or transfer by the Company of any of its rights and obligations under this
Agreement, in each case without the written consent of all the Lenders or (b)
amend, modify or waive any provision of Section 9 without the written consent
of the then Administrative Agent or Issuing Lender affected by such amendment,
modification or waiver. Any such waiver and any such amendment, supplement or
modification shall apply to each of the Lenders equally and shall be binding
upon the Company, the Lenders, the Administrative Agent and all future holders
of the Notes. In the case of any waiver, the Company, the Lenders and the
Administrative Agent shall be restored to their former position and rights
hereunder and under the outstanding Notes, and any Default or Event of Default
waived shall be deemed to be cured and not continuing; but no such waiver shall
extend to any subsequent or other Default or Event of Default, or impair any
right consequent thereon.
10.2 Notices. Except as otherwise expressly provided herein, all
notices, requests and demands to or upon the respective parties hereto to be
effective shall be in writing (including by facsimile), and shall be deemed to
have been duly given or made when delivered by hand, or five days after being
deposited in the United States mail, postage prepaid, or, in the case of
facsimile notice, when sent, and telephonically confirmed, or, in the case of a
nationally recognized courier service, one Business Day after delivery to such
courier service, addressed as follows in the case of the Company and the
Administrative Agent, and as set forth on Schedule 1 in the case of the
Lenders, or to such other address as may be hereafter notified by the
respective parties hereto and any future holders of the Notes:
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The Company: PanEnergy Corp
5400 Westheimer Court
Houston, Texas 77056-5310
Attention: Treasurer
Facsimile: (713) 627-4603
Confirmation: (713) 627-5900
The Administrative Agent: Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: Energy Division
Facsimile: (212) 270-4892
Confirmation: (212) 270-3531
provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to subsections 2.3, 2.15, 2.18, 2.19, 3.5, 3.6 and 3.10
shall not be effective until actually received.
10.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
10.4 Survival of Representations and Warranties. All
representations and warranties made hereunder and in any document, certificate
or statement delivered pursuant hereto or in connection herewith shall survive
the execution and delivery of this Agreement and the making of the Loans and
issuance of Letters of Credit hereunder.
10.5 Payment of Expenses and Taxes. The Company agrees (a) to pay
or reimburse the Administrative Agent for all the reasonable fees and
disbursements of counsel to the Administrative Agent incurred in connection
with the development, preparation and execution of, and any amendment,
supplement or modification to, this Agreement, the Notes and any other
documents prepared in connection herewith or therewith, and the consummation of
the transactions contemplated hereby and thereby, (b) to pay or reimburse each
Lender and the Administrative Agent for all their costs and expenses incurred
in connection with the enforcement or preservation of any rights under this
Agreement, the Notes and any such other documents, including, without
limitation, the fees and disbursements of counsel to the Administrative Agent,
and (c) to pay, indemnify and hold each Lender and the Administrative Agent
harmless from any and all recording and filing fees and any and all liabilities
with respect to, or resulting from any delay in paying, stamp, excise and other
similar taxes, if any, which may be payable or determined to be payable in
connection with the execution and delivery of, or consummation of any of the
transactions contemplated by, or any amendment,
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supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the Notes and any such other documents. This covenant shall
survive the termination of this Agreement and payment in full of the
Obligations.
10.6 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Company, the Lenders, the Administrative Agent,
all future holders of the Notes and their respective successors and assigns,
except that the Company may not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of each
Lender. No Lender may participate, assign or sell any of its Credit Exposure
(as defined in subsection 10.7) except as required by operation of law, in
connection with the merger, consolidation, dissolution or sale of any Lender or
the sale of all or substantially all of the assets of such Lender or as
provided in subsection 10.7, 10.8 or 10.9.
10.7 Participations. Any Lender may, in the ordinary course of its
commercial banking business and in accordance with applicable law, at any time
sell to one or more commercial banks or other entities ("Participants")
participating interests in any Loan owing to such Lender, any Note held by such
Lender, any L/C Participating Interest of such Lender, any part of the
Commitments of such Lender or any other interest of such Lender hereunder (in
respect of any such Lender, its "Credit Exposure"); provided, however, that,
except with the prior written consent of the Company and the Administrative
Agent (which in each case shall not be unreasonably withheld), after giving
effect to all of such sales by any Lender, and any other assignments permitted
under this subsection 10.7 and 10.8, such Lender shall continue to have
beneficial ownership of Credit Exposure equal to not less than 50% of its
Commitments; and provided, further, that no Participant (other than an
Affiliate of a Lender) shall be entitled under the relevant participation
agreement to require such Lender to take or omit to take any action hereunder,
except, to the extent any Participant has any interest directly affected
thereby, that extends the Revolving Credit Termination Date or the Term Loan
Maturity Date or the final maturity of any Note or any installment thereof or
reduces the rate or extends the time of payment of interest thereon, or reduces
any fee payable to the Lenders hereunder, or reduces the principal amount
thereof, or changes the amount of any Lender's Commitment Percentage, or
increases the amount of any Lender's Revolving Credit Commitment or Term Loan
Commitment. In the event of any such sale by a Lender of participating
interests to a Participant, such Lender's obligations under this Agreement
shall remain unchanged, such Lender shall remain solely responsible for the
performance thereof, such Lender shall remain the holder of any such Note or
L/C Participating Interest for all purposes under this Agreement, and the
Company and the Administrative Agent shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and obligations under
this Agreement. The Company agrees that if amounts outstanding under this
Agreement and the Notes are due or unpaid, or shall have been declared or shall
have become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement, any Note and any
Letter of Credit to the same extent as if the amount of its participating
interest were owing directly to it as a Lender under this Agreement or any Note
or the Issuing Lender with respect to any Letter of Credit; provided that such
right of set-off shall be subject to the obligations of such Participant to
share with the Lenders, and the Lenders agree to share with such Participant,
as provided in subsection 10.11. The Company also agrees that each Participant
shall be entitled to the benefits of subsections 3.12,
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3.13, 3.14 and 3.15 with respect to its participation in the Commitments, the
Loans and the Letters of Credit outstanding from time to time; provided that no
Participant shall be entitled to receive any greater amount pursuant to such
subsections than the transferor Lender would have been entitled to receive in
respect of the amount of the participation transferred by such transferor
Lender to such Participant had no such transfer occurred.
10.8 Assignments. Any Lender may, in the ordinary course of its
commercial banking business and in accordance with applicable law, at any time
sell to any other Lender or any Affiliate thereof, and, subject to the
limitations set forth in the proviso to this sentence and with the consent of
the Company and the Administrative Agent (which in each case shall not be
unreasonably withheld) to one or more additional commercial banks or other
financial institutions ("Purchasing Lenders") all or any part of its rights and
obligations under this Agreement and its Notes and with respect to the Letters
of Credit, pursuant to a Commitment Transfer Supplement, in the form of Exhibit
K (a "Commitment Transfer Supplement"), executed by such Purchasing Lender,
such transferor Lender (and, in the case of a Purchasing Lender that is not
then a Lender or an Affiliate thereof, by the Company and the Administrative
Agent), and delivered to the Administrative Agent for its acceptance and
recording in the Register; provided, however, that, except with the prior
written consent of the Company (which consent shall not be unreasonably
withheld) or in connection with a transfer pursuant to subsection 10.10(d), (i)
the Commitments purchased by any such Purchasing Lender that is not then a
Lender shall be equal to or greater than $15,000,000 and (ii) the transferor
Lender which has transferred part of its Commitments to any such Purchasing
Lender that is not then a Lender shall retain Commitments, after giving effect
to such sale, equal to or greater than $15,000,000 in the aggregate. Upon such
execution, delivery, acceptance and recording, from and after the Transfer
Effective Date determined pursuant to such Commitment Transfer Supplement, (x)
the Purchasing Lender thereunder shall be a party hereto and, to the extent
provided in such Commitment Transfer Supplement, have the rights and
obligations of a Lender hereunder with Commitments as set forth therein to the
same extent as if it were an original party hereto with the same Commitment
Percentage set forth in such Commitment Transfer Supplement and no further
action by the Company, the Lenders or the Administrative Agent shall be
required in respect thereof except as otherwise provided herein, and (y) the
transferor Lender thereunder shall, to the extent provided in such Commitment
Transfer Supplement, be released from its obligations under this Agreement
(and, in the case of a Commitment Transfer Supplement covering all or the
remaining portion of a transferor Lender's rights and obligations under this
Agreement, such transferor Lender shall cease to be a party hereto except, in
respect of periods prior to such termination, with respect to subsections 3.8,
3.14, 3.15 and 10.5). Such Commitment Transfer Supplement shall be deemed to
amend this Agreement to the extent, and only to the extent, necessary to
reflect the addition of such Purchasing Lender and the resulting adjustment of
Commitment Percentages arising from the purchase by such Purchasing Lender of
all or a portion of the rights and obligations of such transferor Lender under
this Agreement and its Notes and with respect to the Letters of Credit. On or
prior to the Transfer Effective Date determined pursuant to such Commitment
Transfer Supplement, the Company, at the Company's expense, shall execute and
deliver to the Administrative Agent in exchange for each surrendered Note a new
Note, to the order of such Purchasing Lender, and each Issuing Lender shall
execute and deliver new Letter of Credit Participation Certificates, if
appropriate, in each case in amounts equal to its respective percentages of
Commitments or,
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<PAGE> 67
as appropriate, the outstanding Loans as adjusted assumed by it pursuant to
such Commitment Transfer Supplement and, if the transferor Lender has retained
Commitments or any Competitive Loans hereunder, a new Note or Notes to the
order of the transferor Lender in an amount or amounts equal to the Commitments
and any Competitive Loans retained by it hereunder. Such new Note or Notes
shall be dated the Effective Date in the case of a Revolving Credit Note or
Competitive Loan Note or the Revolving Credit Termination Date in the case of a
Term Note and shall otherwise be in the form of the Note replaced thereby. The
Note surrendered by the transferor Lender shall be returned by the
Administrative Agent to the Company marked "cancelled". If any Letter of
Credit Participation Certificates have been issued to the transferor Lender and
are then outstanding, appropriate adjustments by virtue of the issuance of new
certificates to the Purchasing Lender and, if appropriate, the transferor
Lender shall be made as promptly as practicable after the Transfer Effective
Date.
10.9 Transfers of Competitive Loans. (a) Any Competitive Loan
Lender, in the ordinary course of its business and in accordance with
applicable law, at any time may assign to one or more banks or other entities
(each, a "Competitive Loan Assignee") any Competitive Loan owing to such
Competitive Loan Lender and any Individual Competitive Loan Note held by such
Lender evidencing such Competitive Loan, pursuant to a Competitive Loan
Assignment executed by the assignor Competitive Loan Lender and the Competitive
Loan Assignee.
(b) Upon such execution, from and after the date of such Competitive
Loan Assignment, the Competitive Loan Assignee shall be deemed, to the extent
of the assignment provided for in such Competitive Loan Assignment, and subject
to the provisions of subsections 10.9(c) and 10.9(d), to have the same rights
and benefits of payment and enforcement with respect to such Competitive Loan
and Individual Competitive Loan Note (including, without limitation, the
applicable rights set forth in subsections 3.12, 3.13, 3.14 and 3.15) and the
same rights of setoff and obligation to share pursuant to subsection 10.11 as
it would have had if it were a Competitive Loan Lender hereunder.
(c) Unless such Competitive Loan Assignment shall otherwise specify
and a copy of such Competitive Loan Assignment shall have been delivered to the
Administrative Agent for its acceptance and recording in the Register in
accordance with subsection 10.10(a), the assignor under the Competitive Loan
Assignment shall act as collection agent for the Competitive Loan Assignee
thereunder, and the Administrative Agent shall pay all amounts received from
the Company which are allocable to the assigned Competitive Loan or Individual
Competitive Loan Note directly to such assignor without any liability to such
Competitive Loan Assignee.
(d) A Competitive Loan Assignee under a Competitive Loan Assignment
shall not, by virtue of such Competitive Loan Assignment, become a party to
this Agreement or a "Competitive Loan Lender", or have any rights to consent to
or refrain from consenting to any amendment, waiver or other modification of
any provision of this Agreement or any related document; provided that (i) the
assignor under such Competitive Loan Assignment and such Competitive Loan
Assignee may, in their discretion, agree between themselves upon the manner in
which such assignor will exercise its rights under this Agreement and any
related document, and (ii) if a copy of such Competitive Loan Assignment shall
have been delivered
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to the Administrative Agent for its acceptance and recording in the Register in
accordance with subsection 10.10(a), no such amendment, waiver or modification
may reduce or postpone any payment of principal or interest or modify the
Competitive Loan Maturity Date in respect of any Competitive Loan or Individual
Competitive Loan Note assigned to such Competitive Loan Assignee without the
written consent of such Competitive Loan Assignee.
(e) If a Competitive Loan Assignee has caused a Competitive Loan
Assignment to be recorded in the Register in accordance with subsection
10.10(a) such Competitive Loan Assignee may thereafter, in the ordinary course
of its business and in accordance with applicable law, assign the relevant
Competitive Loans and Individual Competitive Loan Notes to any Competitive Loan
Lender, to any affiliate or subsidiary of such Competitive Loan Assignee or to
any other financial institution that has total assets in excess of
$1,000,000,000 and that in the ordinary course of its business extends credit
of the same type as the Competitive Loans, and the foregoing provisions of this
subsection 10.9 shall apply, mutatis mutandis, to any such assignment by a
Competitive Loan Assignee. Except in accordance with the preceding sentence,
Competitive Loans and Individual Competitive Loan Notes may not be further
assigned by a Competitive Loan Assignee, subject to any legal or regulatory
requirement that the Competitive Loan Assignee's assets must remain under its
control.
10.10 Register, Etc. (a) The Administrative Agent shall maintain
at its address referred to in subsection 10.2 a copy of each Commitment
Transfer Supplement and each Competitive Loan Assignment delivered to it and a
register (the "Register") for the recordation of (i) the names and addressees
of the Lenders and the Commitments of, and principal amount of the Loans owing
to and L/C Participating Interests of, each Lender from time to time and (ii)
with respect to each Competitive Loan Assignment delivered to the
Administrative Agent, the name and address of the Competitive Loan Assignee and
the principal amount of each Competitive Loan owing to such Competitive Loan
Assignee. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Company, the Administrative Agent and the Lenders may
treat each Person whose name is recorded in the Register as the owner of the
Loans recorded therein for all purposes of this Agreement. The Register shall
be available for inspection by the Company or any Lender or Competitive Loan
Assignee at any reasonable time and from time to time upon reasonable prior
notice.
(b) Upon its receipt of a Commitment Transfer Supplement executed by
a transferor Lender and a Purchasing Lender (and, in the case of a Purchasing
Lender that is not then a Lender or an Affiliate thereof, by the Company and
the Administrative Agent) together with payment by the Purchasing Lender to the
Administrative Agent of a registration and processing fee of $2,500, the
Administrative Agent shall (i) promptly accept such Commitment Transfer
Supplement and (ii) on the Transfer Effective Date determined pursuant thereto
(and as defined therein) record the information contained therein in the
Register and give notice of such acceptance and recordation to the Lenders and
the Company.
(c) Upon its receipt of a Competitive Loan Assignment executed by an
assignor Competitive Loan Lender and a Competitive Loan Assignee, together with
payment to the Administrative Agent of a registration and processing fee of
$2,500 (which shall not be payable by the Company), the Administrative Agent
promptly shall (i) accept such Competitive Loan Assignment, (ii) record the
information contained therein in the Register
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<PAGE> 69
and (iii) give notice of such acceptance and recordation to the assignor
Competitive Loan Lender, the Competitive Loan Assignee and the Company.
(d) If any Lender (or, if such Lender has participated all or any
part of its Loans or Commitments or assigned any of its Competitive Loans, any
of such Lender's Participants or Competitive Loan Assignees) does not agree
with a proposal of the Company for an amendment, waiver or consent in respect
of an issue described in clause (a) of the proviso to the second sentence of
subsection 10.1, the Company, with the consent of the Required Lenders, may
require that such Lender (and each of its Participants and Competitive Loan
Assignees, if any) transfer all of its right, title and interest under this
Agreement and such Lender's Note or Notes to a bank identified by the Company
who agrees to assume the obligations of such Lender (a "Proposed Lender") for a
consideration equal to the outstanding principal amount of such Lender's Loans,
together with interest thereon to the date of such transfer and all other
amounts payable hereunder (including but not limited to amounts payable under
subsection 3.15) to such Lender on or prior to the date of such transfer. No
Lender shall withhold its consent to such a transfer if the fee and any
consideration paid to such transferee are reasonably acceptable to such Lender.
Subject to the execution and delivery of a Commitment Transfer Supplement, such
Proposed Lender shall be a "Lender" for all purposes hereunder.
(e) The Company authorizes each Lender to disclose to any
Participant, Competitive Loan Assignee or Purchasing Lender (each, a
"Transferee") and any prospective Transferee any and all financial information
in such Lender's possession concerning the Company which has been delivered to
such Lender by or on behalf of the Company pursuant to this Agreement or which
has been delivered to such Lender by or on behalf of the Company in connection
with such Lender's credit evaluation of the Company prior to entering into this
Agreement; provided that, if non-public information is furnished, each
Transferee shall execute and deliver to such Lender a confidentiality agreement
between such Lender and the Transferee, substantially in the form previously
approved by the Administrative Agent and the Company.
(f) If, pursuant to subsection 10.7, 10.8 or 10.9, any interest in
this Agreement or any Note or Letter of Credit is transferred to any Transferee
which is organized under the laws of any jurisdiction other than the United
States or any State thereof, the transferor Lender shall cause such Transferee
(unless such Transferee is a Lender purchasing under subsection 10.8)
concurrently with the effectiveness of such transfer, (i) to represent to the
transferor Lender (for the benefit of the transferor Lender, the Administrative
Agent and the Company) that under applicable law and treaties no taxes will be
required to be withheld by the Administrative Agent, the Company or the
transferor Lender with respect to any payments to be made to such Transferee,
in respect of the Loans or Letters of Credit, (ii) to furnish to the transferor
Lender, the Administrative Agent and the Company either U.S. Internal Revenue
Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein such
Participant claims entitlement to complete exemption from U.S. federal
withholding tax on all interest payments hereunder) and (iii) to agree (for the
benefit of the transferor Lender, the Administrative Agent and the Company) to
provide the transferor Lender, the Administrative Agent and the Company a new
Form 4224 or Form 1001 upon the obsolescence of any previously delivered form
and comparable statements in accordance with applicable U.S. laws
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and regulations and amendments duly executed and completed by such Transferee,
and to comply from time to time with all applicable U.S. laws and regulations
with regard to such withholding tax exemption.
(g) Nothing herein shall prohibit any Lender from pledging or
assigning any Notes to any Federal Reserve Bank in accordance with applicable
law.
10.11 Adjustments; Set-Off. (a) If any Lender (a "Benefitted
Lender") shall at any time receive any payment in respect of all or part of its
Loans or L/C Participating Interests (other than pursuant to subsections 3.8,
3.12, 3.13, 3.14, 3.15, 3.17, 10.8, 10.9 or 10.10(d)), or interest thereon, or
receive any collateral in respect thereof or any amount under any guarantee in
respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to
events or proceedings of the nature referred to in clause (f) of Section 8, or
otherwise) in a greater proportion than any such payment to and collateral
received by any other Lender, if any, in respect of such other Lender's Loans
or L/C Participating Interests, or interest thereon, such Benefitted Lender
shall purchase for cash from the other Lender such portion of each such other
Lender's Loans or L/C Participating Interests, or shall provide such other
Lender with the benefits of any such collateral, or the proceeds thereof, as
shall be necessary to cause such Benefitted Lender to share the excess payment
or benefits of such collateral or proceeds ratably with each of the Lenders;
provided that if all or any portion of such excess payment or benefits is
thereafter recovered from such Benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. The Company agrees that each Lender so
purchasing a portion of another Lender's Loans or L/C Participating Interests
may exercise all rights of payment (including, without limitation, rights of
set-off) with respect to such portion as fully as if such Lender were the
direct holder of such portion.
(b) In addition to any rights and remedies of the Lenders provided
by law, upon the occurrence of an Event of Default, each Lender shall have the
right, without prior notice to the Company, any such notice being expressly
waived by the Company to the extent permitted by applicable law, to set off and
apply against any indebtedness, whether matured or unmatured, of the Company to
such Lender, any amount owing from such Lender to the Company, and the
aforesaid right of set-off may be exercised by such Lender against the Company
or against any trustee in bankruptcy, debtor in possession, assignee for the
benefit of creditors, receiver or executor, judgment or attachment creditor of
the Company or against anyone else claiming through or against the Company or
such trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver or executor, judgment or attachment creditor,
notwithstanding the fact that such right of set-off shall not have been
exercised by such Lender prior to the making, filing or issuance, or service
upon such Lender of, or of notice of, any such petition, assignment for the
benefit of creditors, appointment or application for the appointment of a
receiver, or issuance of execution, subpoena, order or warrant. Each Lender
agrees promptly to notify the Company and the Administrative Agent 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.
10.12 Existing Facilities. Each Lender which is a party to the
Existing Facilities (the "Existing Lenders") agrees that the irrevocable notice
and direction to be delivered by the
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<PAGE> 71
Company, PEPL and TETCO to each Lender and the Administrative Agent pursuant to
subsection 4.1(d) shall constitute sufficient notice of the termination of the
Commitments (as defined in each Existing Facility) and the prepayment of any
loans outstanding under the Existing Facilities, and hereby waives any express
notice requirements under each Existing Facility in connection therewith.
10.13 Counterparts. This Agreement may be executed by one or more
of the parties to this Agreement on any number of separate counterparts and all
of said counterparts taken together shall be deemed to constitute one and the
same instrument. A set of the copies of this Agreement signed by all the
parties shall be lodged with the Company and the Administrative Agent.
10.14 GOVERNING LAW. THIS AGREEMENT, THE NOTES AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
10.15 SUBMISSION TO JURISDICTION; WAIVERS. THE COMPANY HEREBY
IRREVOCABLY AND UNCONDITIONALLY:
(A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT, OR FOR
RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE
NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK,
THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF
NEW YORK, AND THE APPELLATE COURTS FROM ANY THEREOF;
(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN
SUCH COURTS, AND WAIVES TRIAL BY JURY AND 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;
(C) AGREES THAT, IF IT SHALL NOT HAVE A REGISTERED AGENT FOR SERVICE
OF PROCESS IN THE STATE OF NEW YORK, THEN 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 OF MAIL),
AS THE CASE MAY BE, AT ITS ADDRESS SET FORTH IN SUBSECTION 10.2 OR AT SUCH
OTHER ADDRESS OF WHICH THE LENDERS SHALL HAVE BEEN NOTIFIED PURSUANT
THERETO; AND
(D) 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.
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<PAGE> 72
10.16 Limitation of Interest. It is expressly stipulated and agreed
to be the intent of the Company and each Lender at all times to comply with the
law applicable to such Lender in connection with the Credit Documents governing
the maximum rate or amount of interest payable on or in connection with the
Credit Documents. If the applicable law is ever judicially interpreted so as
to render usurious any amount called for under the Credit Documents, or
contracted for, charged, taken, reserved or received with respect to the Credit
Documents, or if acceleration of the maturity of the Loans or if any prepayment
by or on behalf of the Company results in the payment of any interest in excess
of that permitted by applicable law, then it is the Company's and such Lender's
express intent that all excess amounts theretofore collected by such Lender be
credited on the principal balance of the Loans (or, if such Loans have been or
would thereby be paid in full, refunded to the Company), and the provisions of
the Credit Documents immediately be deemed reformed and the amounts thereafter
collectible thereunder reduced as to such Lender, without the necessity of the
execution of any new document, so as to comply with applicable law, but so as
to permit the recovery of the fullest amount otherwise called for hereunder and
thereunder. The right to accelerate the maturity of the Loans does not include
the right to accelerate any interest which has not otherwise accrued on the
date of such acceleration, and the Lenders do not intend to collect any
unearned interest in the event of acceleration. All sums paid or agreed to be
paid to each Lender for the use, forbearance or detention of the indebtedness
evidenced by the Credit Documents shall, to the extent permitted by applicable
law, be amortized, prorated, allocated and spread throughout the full term of
such indebtedness until payment in full so that the rate or amount of interest
on account of such indebtedness does not exceed the applicable usury ceiling.
As used herein, the term "maximum rate" as to any Lender shall mean the maximum
non-usurious rate of interest which may be lawfully contracted for, charged,
taken, reserved or received by such Lender from the Company in connection with
the Loans evidenced hereby under applicable law.
10.17 Entire Agreement. This Agreement constitutes the entire
agreement and understanding among the parties hereto as to the subject matter
hereof and supersedes any previous agreement, oral or written, as to such
subject matter.
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<PAGE> 73
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered in New York, New York by their proper and duly
authorized officers as of the day and year first above written.
PANHANDLE EASTERN CORPORATION,
doing business as PANENERGY CORP
By: [ILLEGIBLE]
------------------------------------------
Title:
CHEMICAL BANK, as Administrative Agent, as
an Issuing Lender and as a Lender
By: /s/ JAMES H. RAMAGE
------------------------------------------
Title: Vice President
BANK OF AMERICA ILLINOIS
By: [ILLEGIBLE]
------------------------------------------
Title:
BANK OF MONTREAL
By: [ILLEGIBLE]
------------------------------------------
Title: Director
THE BANK OF NEW YORK
By: /s/ RAYMOND J. PALMER
------------------------------------------
Title: Vice President
<PAGE> 74
THE BANK OF NOVA SCOTIA
By: /s/ F.C.H. ASHBY
------------------------------------------
Title: Senior Manager Loan Operations
BARCLAYS BANK PLC
By: [ILLEGIBLE]
------------------------------------------
Title: Director
CIBC, INC.
By: [ILLEGIBLE]
------------------------------------------
Title: Authorized Signatory
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ CAROL E. HOLLEY
------------------------------------------
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: [ILLEGIBLE]
------------------------------------------
Title: Attorney in Fact
MELLON BANK, N.A.
By: E. MARC CUENOD, JR.
------------------------------------------
Title: First Vice President
<PAGE> 75
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By: [ILLEGIBLE]
------------------------------------------
Title: Vice President
NATIONSBANK OF TEXAS, N.A.
By: [ILLEGIBLE]
------------------------------------------
Title: Senior Vice President
NATIONAL WESTMINSTER BANK PLC NEW YORK BRANCH
By: /s/ DAVID L. SMITH
------------------------------------------
Title: Vice President
NATIONAL WESTMINSTER BANK PLC NASSAU BRANCH
By: /s/ DAVID L. SMITH
------------------------------------------
Title: Vice President
BANK OF TOKYO LIMITED, DALLAS AGENCY
By: /s/ J. McINTYRE
------------------------------------------
Title: Vice President
<PAGE> 76
THE FUJI BANK, LIMITED (HOUSTON AGENCY)
By: [ILLEGIBLE]
------------------------------------------
Title: Vice President & Senior Manager
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
By: [ILLEGIBLE]
------------------------------------------
Title: Joint General Manager
THE ROYAL BANK OF CANADA
By: /s/ EVERETT M. HARNER
------------------------------------------
Title: Manager
THE SANWA BANK, LIMITED, DALLAS AGENCY
By: [ILLEGIBLE]
------------------------------------------
Title: Vice President
SOCIETE GENERALE, SOUTHWEST AGENCY
By: /s/ RICHARD A. GOULD
------------------------------------------
Title: Vice President
<PAGE> 77
THE TORONTO-DOMINION BANK, HOUSTON AGENCY
By: /s/ WARREN FINLAY
------------------------------------------
Title: Manager Credit
UNION BANK OF SWITZERLAND, HOUSTON AGENCY
By: /s/ DAN O. BOYLE
------------------------------------------
Title: Managing Director
By: /s/ FINLEY BIGGERSTAFF
------------------------------------------
Title: Assistant Treasurer
ARAB BANKING CORPORATION
By: STEPHEN A. PLAUCHE'
------------------------------------------
Title: Vice President
BANK OF SCOTLAND
By: /s/ CATHERINE M. ONIFFREY
------------------------------------------
Title: Vice President
THE CHASE MANHATTAN BANK, N.A.
By: /s/ BETTYLOU J. ROBERT
------------------------------------------
Title: Vice President
<PAGE> 78
CHRISTIANIA BANK
By: [ILLEGIBLE]
------------------------------------------
Title: Vice President
By: /s/ CARL-PETTER SVENDSEN
------------------------------------------
Title: First Vice President
FIRST INTERSTATE BANK OF TEXAS, N.A.
By: /s/ COLLIE C. MICHAELS
------------------------------------------
Title: Vice President
THE BANK OF YOKOHAMA, LOS ANGELES AGENCY
By: [ILLEGIBLE]
------------------------------------------
Title: Deputy General Manager
THE INDUSTRIAL BANK OF JAPAN TRUST COMPANY
By: [ILLEGIBLE]
------------------------------------------
Title: Senior Vice President
THE MITSUBISHI BANK, LIMITED, HOUSTON AGENCY
By: /s/ SHOJI HONDA
------------------------------------------
Title: General Manager
<PAGE> 79
THE NORTHERN TRUST COMPANY
By: [ILLEGIBLE]
------------------------------------------
Title: [ILLEGIBLE]
THE SUMITOMO BANK, LIMITED, HOUSTON AGENCY
By: /s/ HARUMITSU SEKI
------------------------------------------
Title: General Manager
<PAGE> 80
Schedule 1
Schedules to
Credit Agreement
dated as of January 31, 1996
LENDING OFFICES
Chemical Bank
140 East 45th Street, 29th Floor
New York, NY 10017
Attn: Hilma Gabbidon
Telex: 166350
Answerback: TCBHOU
Telecopy: (212) 622-0002
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
Bank of America Illinois
231 South LaSalle Street, 10th Floor
Chicago, IL 60697
Attn: Amy Goldstein
Telecopy: (312) 974-9626
and
Bank of Montreal
115 South LaSalle Street
Chicago, IL 60603
Attn:
Telex:
Answerback:
Telecopy:
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
<PAGE> 81
Bank of Montreal, Houston Agency
700 Louisiana, Suite 4400
Houston, TX 77002
Attn: Mark E. Peterson
Telex: 775640
Answerback: BMOHOU
Telecopy: (713) 223-4007
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
The Bank of New York
One Wall Street
New York, NY 10286
Attn: Raymond J. Palmer
Telex: MCI 62763
Answerback: BONY UW
Telecopy: (212) 635-7923
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
The Bank of Nova Scotia-Atlanta Agency
600 Peachtree Street, N.E., Suite 2700
Atlanta, GA 30308
Attn: Claude Ashby
Telex: 00542319
Answerback: SCOTIABANK ATL
Telecopy: (404) 888-8998
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
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<PAGE> 82
With a copy to:
Bank of Nova Scotia, Houston Rep. Office
2430 Two Shell Plaza
Houston, TX 77002
Attn: R.R. Slaid
Barclays Bank PLC
222 Broadway, 12th Floor
New York, NY 10038
Attn: Customer Service Unit
Telex: 126195
Answerback: BARCLADOM NYK
Telecopy: (212) 412-5002
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
CIBC, Inc.
2 Paces West
2727 Paces Ferry Road, Suite 1200
Atlanta, GA 30339
Attn: Adrianne Burch
Telex: 54-2413
Answerback: CANBANK ATL
Telecopy: (404) 319-4950
(404) 319-4951
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
The First National Bank of Boston
100 Federal Street, 01-15-4
Boston, MA 02110
Attn: Lee A. Merkle
Telex:
Answerback:
Telecopy: (617) 434-3652
-3-
<PAGE> 83
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Bank of Boston
100 Federal St., 01-1B-12
Boston, MA 02110
The First National Bank of Chicago
One First National Plaza
Chicago, IL 60670
Attn: Petroleum & Mining Division
Telex:
Answerback:
Telecopy: (312) 658-0880
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
Mellon Bank, N.A.
Three Mellon Bank Center
Pittsburgh, PA 15259
Attn: Loan Administration
Telex: 812367
Answerback: MELBNK
Telecopy: (412) 236-2027
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
Morgan Guaranty Trust Company of
New York
60 Wall Street
New York, NY 10260
Attn: John Kowalczuk
Telex: ITT 420230
Answerback: MGT UI
Telecopy: (212) 648-7612
-4-
<PAGE> 84
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
NationsBank of Texas, N.A.
700 Louisiana Street, 8th Floor
Houston, TX 77002
Attn: Loan Services
Telex: 6829317
Answerback: NATIONSBK-DAL
Telecopy: (713) 247-6432
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
National Westminster Bank PLC
175 Water Street, Level 21
New York, NY 10038
Attn: Gary Tenner
Telex: 233 222
Answerback: NWBUR
Telecopy: (212) 602-4180
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
Bank of Tokyo, Ltd., Dallas Agency
909 Fannin Street, Suite 1104
Houston, TX 77010
Attn: Michael G. Meiss
Telex:
Answerback:
Telecopy: (713) 658-8341
-5-
<PAGE> 85
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
The Fuji Bank, Limited (Houston Agency)
1 Houston Center, Suite 4100
1221 McKinney Street
Houston, TX 77010
Attn: Jenny Lin/Teri McPherson
Credit Contact: Charles van Ravenswaay
Telex: 790-026
Answerback: FUJIBANK HOU
Telecopy: (713) 759-0048
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
The Long-Term Credit Bank of Japan, Ltd.
165 Broadway
New York, NY 10006
Attn: Chikara Mano
Telex: 425722
Answerback: LTCB-UI
Telecopy: (212) 608-2371
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
-6-
<PAGE> 86
The Royal Bank of Canada
1 Financial Square, 24th Floor
New York, NY 10005-3531
Attn: Rosemary Addonizio, Loans Administration
Telex: MCI 62519
Answerback: ROYBAN
Telecopy: (212) 428-2372
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
The Sanwa Bank, Limited, Dallas Agency
4100W Texas Commerce Tower
2200 Ross Avenue
Dallas, TX 75201
Attn: Brian Heagler
Telex: 735282
Answerback: SANWABK DAL
Telecopy: (2214) 741-6535
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
Societe Generale, Southwest Agency
1111 Bagby, Suite 2020
Houston, Texas 77002
Attn: Richard A. Gould
Telex:
Answerback:
Telecopy: (713) 650-0824
Domestic Lending Office:
2001 Ross Avenue, Suite 4800
Dallas, Texas 75201
Attn: Ralph Saheb
Telecopy: (214) 979-1104
Eurodollar Lending Office:
Same as above
-7-
<PAGE> 87
The Toronto-Dominion Bank, Houston Agency
909 Fannin, 17th Floor
Houston, TX 77010
Attn: Jeff Jones
Telex:
Answerback:
Telecopy: (713) 951-9921
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
Union Bank of Switzerland, Houston Agency
1100 Louisiana Street, Suite 4500
Houston, TX 77002
Attn: Dan Boyle
Telex: 762 597
Answerback: UBSHOU
Telecopy: (713) 655-6555
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
Arab Banking Corporation (B.S.C.)
245 Park Avenue
New York, NY 10167
Attn: Loan Manager
Telex: 661978 WU
Answerback: ABC NY
Telecopy: (212) 599-8385
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
-8-
<PAGE> 88
Bank of Scotland
565 Fifth Avenue
New York, NY 10017
Attn: Janet Taffe
Telex: 6801012
Answerback: UBIFORN
Telecopy: (212) 557-9460
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
Christiania Bank
11 West 42nd Street, 7th Floor
New York, NY 10026
Attn: Jahn O. Roising
Telex: 824277
Answerback: CHRBK
Telecopy: (212) 827-4888
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
First Interstate Bank of Texas, N.A.
1000 Louisiana, 3rd Floor
Houston, TX 77002
Attn: Ann Rhoads
Telex: 166488
Answerback: FITXINTHOU
Telecopy: (713) 250-7912
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
-9-
<PAGE> 89
The Bank of Yokohama, Ltd., Los Angeles Agency
777 So. Figueroa Street, Suite 700
Los Angeles, CA 90017
Attn: Mike Jackson
Telex: TWX9103213395
Answerback: HAMAGIN
Telecopy: (213) 236-0007
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, NY 10081
Attn: Vito Cipriano
Telex: 62910 CMBUW
Telecopy: (212) 552-1687
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Cayman Islands, B.W.I.
c/o The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, NY 10081
The Industrial Bank of Japan Trust Company
245 Park Avenue
New York, NY 10167-0037
Attn: Ira Gottlieb
Telex: 425754
Answerback: IBTC UI
Telecopy: (212) 557-3581
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
-10-
<PAGE> 90
The Mitsubishi Bank, Limited, Houston Agency
2 Houston Center, Suite 3100
909 Fannin Street
Houston, TX 77010
Attn: Barrie Hogue
Telex: 791211
Answerback: BISHIHOV
Telecopy: (713) 658-0116
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
The Northern Trust Company
50 South LaSalle Street
Chicago, IL 60675
Attn: Mark A. Short
Telex: WUD 254419
Answerback: NORTRUST CGO
Telecopy: (312) 630-1566
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
The Sumitomo Bank, Limited, Houston Agency
NCNB Center
700 Louisiana, Suite 1750
Houston, TX 77002
Attn: Akihiko Yuasa
Telex: 774417
Answerback: SUMITBANK HOUA
Telecopy: (713) 759-0020
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
-11-
<PAGE> 91
Schedule 2
REVOLVING CREDIT COMMITMENTS
<TABLE>
<CAPTION>
Percentage
Commitment of
Lender (in millions) Commitments
------ ------------- -----------
<S> <C> <C>
Chemical Bank $ 17.0 4.25%
Bank of America Illinois 18.5 4.625
Bank of Montreal 18.5 4.625
The Bank of New York 18.5 4.625
The Bank of Nova Scotia 18.5 4.625
Barclays Bank PLC 18.5 4.625
CIBC, Inc. 18.5 4.625
The First National Bank of Boston 18.5 4.625
The First National Bank of Chicago 18.5 4.625
Mellon Bank, N.A. 18.5 4.625
Morgan Guaranty Trust Company of New York 18.5 4.625
NationsBank of Texas, N.A. 18.5 4.625
National Westminster Bank PLC 18.5 4.625
Bank of Tokyo, Ltd., Dallas Agency 12.0 3.0
The Fuji Bank, Limited (Houston Agency) 12.0 3.0
The Long-Term Credit Bank of Japan, Ltd. 12.0 3.0
The Royal Bank of Canada 12.0 3.0
The Sanwa Bank, Limited, Dallas Agency 12.0 3.0
Societe Generale, Southwest Agency 12.0 3.0
The Toronto-Dominion Bank, Houston Agency 12.0 3.0
Union Bank of Switzerland, Houston Agency 12.0 3.0
Arab Banking Corporation (B.S.C.) 6.5 1.625
Bank of Scotland 6.5 1.625
Christiania Bank 6.5 1.625
First Interstate Bank of Texas, N.A. 6.5 1.625
The Bank of Yokohama, Ltd., Los Angeles Agency 6.5 1.625
The Chase Manhattan Bank, N.A. 6.5 1.625
The Industrial Bank of Japan Trust Company 6.5 1.625
The Mitsubishi Bank, Limited, Houston Agency 6.5 1.625
The Northern Trust Company 6.5 1.625
The Sumitomo Bank, Limited, Houston Agency 6.5 1.625
------ -----
Total $400.0 100.0%
====== =====
</TABLE>
<PAGE> 92
Schedule 3
EXCLUDED SALES OF ASSETS
PEPL's transmission and gathering system west of Haven, Kansas known as the
"West End System."
The two liquefied natural gas tankers owned by Lachmar, a Delaware partnership,
and related parts and equipment.
PEPL's headquarters building and related assets located at 5400 Westheimer
Court, Houston, Texas.
Transportation equipment and related facilities of the Company and its
Subsidiaries.
Any investment in any entity (other than the Principal Subsidiaries) in which
the Company and/or its Subsidiaries owns less than 100% of the equity interest.
<PAGE> 93
EXHIBIT A TO
CREDIT AGREEMENT
FORM OF COMPETITIVE LOAN CONFIRMATION
____________, 199__
Chemical Bank, as Administrative Agent
270 Park Avenue
New York, New York 10017
Reference is made to the Credit Agreement, dated as of January 31,
1996, among the undersigned, the Lenders named therein, and Chemical Bank, as
Administrative Agent (as the same may be amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"). Terms defined in the
Credit Agreement and used herein shall have the meanings given to them in the
Credit Agreement.
In accordance with subsection 2.15(d) of the Credit Agreement, the
undersigned accepts and confirms the offers by Competitive Loan Lender(s) to
make Competitive Loans to the undersigned on ________________, 199__
[Competitive Loan Borrowing Date] under subsection 2.15(b) [index rate] or
2.15(c) [fixed rate] in the (respective) amount(s) set forth on the attached
list of Competitive Loans offered.
Very truly yours,
PANHANDLE EASTERN CORPORATION,
doing business as PANENERGY CORP
By:
------------------------------------
Title:
[The Company must attach Competitive Loan Offer list prepared by Administrative
Agent with accepted amount entered by the Company to right of each Competitive
Loan Offer.]
A-1
<PAGE> 94
EXHIBIT B TO
CREDIT AGREEMENT
FORM OF COMPETITIVE LOAN OFFER
Chemical Bank, as Administrative Agent ____________, 199__
270 Park Avenue
New York, New York 10017
Reference is made to the Credit Agreement, dated as of January 31,
1996, among Panhandle Eastern Corporation, a Delaware corporation, doing
business as PanEnergy Corp, the Lenders named therein, and Chemical Bank, as
Administrative Agent (as the same may be amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"). Terms defined in the
Credit Agreement and used herein shall have the meanings given to them in the
Credit Agreement. In accordance with subsection 2.15(b) [index rate] or
2.15(c) [fixed rate] of the Credit Agreement, the undersigned Competitive Loan
Lender offers to make Competitive Loans thereunder in the following amounts
with the following maturity dates:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Competitive Loan Borrowing
<S> <C>
Date: _______________, 199__ Aggregate Maximum Amount $__________
- ----------------------------------------------------------------------------------------
Maturity Date 1: Maximum Amount: $_________________
_______________, 199__ $____________ offered at __________*
$____________ offered at __________*
- ----------------------------------------------------------------------------------------
Maturity Date 2: Maximum Amount: $_________________
_______________, 199__ $____________ offered at __________*
$____________ offered at __________*
- ----------------------------------------------------------------------------------------
Maturity Date 3: Maximum Amount: $_________________
_______________, 199__ $____________ offered at __________*
$____________ offered at __________*
- ----------------------------------------------------------------------------------------
</TABLE>
Very truly yours,
[NAME OF COMPETITIVE LOAN LENDER]
By
-------------------------------------
Name
-----------------------------------
Title
----------------------------------
Telephone No.
--------------------------
Fax No.
--------------------------------
- --------------------
* Insert the interest rate offered for the specified loan amount. In the
case of Index Rate Competitive Loans, insert a margin bid. In the case of
Fixed Rate Competitive Loans, insert a fixed rate bid.
B-1
<PAGE> 95
EXHIBIT C TO
CREDIT AGREEMENT
FORM OF COMPETITIVE LOAN REQUEST
_______________, 199__
Chemical Bank, as Administrative Agent
270 Park Avenue
New York, New York 10017
Reference is made to the Credit Agreement, dated as of January 31,
1996, among the undersigned, the Lenders named therein, and Chemical Bank, as
Administrative Agent (as the same may be amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"). Terms defined in the
Credit Agreement and used herein shall have the meanings given to them in the
Credit Agreement.
This is [an Index Rate] [a Fixed Rate] Competitive Loan Reques(1)
pursuant to subsection 2.14(a) of the Credit Agreement requesting quotes for
the following Competitive Loans:
<TABLE>
<CAPTION>
===========================================================================================
Loan 1 Loan 2 Loan 3
<S> <C> <C> <C>
Aggregate Principal Amount $__________ $__________ $__________
- -------------------------------------------------------------------------------------------
Borrowing Date
- -------------------------------------------------------------------------------------------
Competitive Loan Maturity Date
- -------------------------------------------------------------------------------------------
Interest Payment Dates
===========================================================================================
</TABLE>
Very truly yours,
PANHANDLE EASTERN CORPORATION,
doing business as PANENERGY CORP
By:
------------------------------------
Title:
- -------------------------
(1) Pursuant to the Credit Agreement, a Competitive Loan Request may be
transmitted in writing (including by facsimile transmission), or by
telephone, immediately confirmed by facsimile transmission. In any case, a
Competitive Loan Request shall contain the information specified in the
second paragraph of this form.
C-1
<PAGE> 96
EXHIBIT D TO
CREDIT AGREEMENT
FORM OF LETTER OF CREDIT PARTICIPATION CERTIFICATE
__________, 19__
Name of Lender
Dear Sirs:
Pursuant to subsection 2.7 of the Credit Agreement dated as of January
31, 1996 (the "Credit Agreement"; terms defined in the Credit Agreement being
used herein with their respective defined meanings) among Panhandle Eastern
Corporation, a Delaware corporation, doing business as PanEnergy Corp, the
financial institutions parties thereto (the "Lenders") and Chemical Bank, as
Administrative Agent for the Lenders, the undersigned hereby acknowledges
receipt from you on the date hereof of an L/C Participating Interest in the
amount of ____________________ DOLLARS ($_________) in the following [Standby
L/C] [Commercial L/C] and the Letter of Credit Application relating thereto.
Very truly yours,
[ISSUING LENDER]
By:
------------------------------------
Title:
D-1
<PAGE> 97
EXHIBIT E TO
CREDIT AGREEMENT
FORM OF REVOLVING CREDIT NOTE
REVOLVING CREDIT NOTE
New York, New York
January 31, 1996
FOR VALUE RECEIVED, the undersigned, PANHANDLE EASTERN CORPORATION, a
Delaware corporation, doing business as PanEnergy Corp (the "Company"), hereby
unconditionally promises to pay on the Revolving Credit Termination Date to the
order of [NAME OF LENDER] (the "Lender") at the office of Chemical Bank located
at 270 Park Avenue, New York, New York 10017, in lawful money of the United
States of America and in immediately available funds, the principal amount of
the lesser of (a) _________________________ DOLLARS ($________) and (b) the
aggregate unpaid principal amount of all Revolving Credit Loans made by the
Lender to the undersigned pursuant to subsection 2.1 of the Credit Agreement
referred to below.
The undersigned further agrees to pay interest in like money at such
office on the unpaid principal amount hereof from time to time from the date
hereof at the applicable rate per annum set forth in subsection 3.1 of the
Credit Agreement referred to below until any such amount shall become due and
payable (whether at the stated maturity, by acceleration or otherwise), and
thereafter on such overdue amount at the rate per annum set forth in subsection
3.1(e) of said Credit Agreement until paid in full (both before and after
judgment). Interest shall be payable in arrears on each Interest Payment Date,
commencing on the first such date to occur after the date hereof and upon
payment (including prepayment) in full of the unpaid principal amount hereof.
The holder of this Note is authorized to record the date, Type and
amount of each Loan made by the Lender pursuant to subsection 2.1 of said
Credit Agreement, the date and amount of each payment or prepayment of
principal with respect thereto, the length of each Interest Period with respect
to each Loan made and/or maintained as a Eurodollar Loan or CD Rate Loan and
the Eurodollar Rate or Adjusted CD Rate and each conversion made pursuant to
subsection 3.10 of said Credit Agreement on the schedules annexed hereto and
made a part hereof, or on a continuation thereof which shall be attached hereto
and made a part hereof, which recordation shall constitute prima facie evidence
of the accuracy of the information recorded; provided that failure by the
Lender to make any such recordation on this Note shall not affect the
obligations of the Company under this Note or said Credit Agreement.
This Note is one of the Revolving Credit Notes referred to in the
Credit Agreement dated as of January 31, 1996 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement") among Panhandle
Eastern Corporation, doing business as PanEnergy Corp, the Lender, the other
financial institutions parties thereto, and Chemical Bank, as Administrative
Agent, is entitled to the benefits thereof and is subject to prepayment
E-1
<PAGE> 98
in whole or in part as provided therein. Terms used herein which are defined
in the Credit Agreement shall have such defined meanings unless otherwise
defined herein or unless the context otherwise requires.
Upon the occurrence of any one or more of the Events of Default
specified in said Credit Agreement, all amounts then remaining unpaid on this
Note shall become, or may be declared to be, immediately due and payable, all
as provided therein.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
PANHANDLE EASTERN CORPORATION,
doing business as PANENERGY CORP
By:
------------------------------------
Title:
E-2
<PAGE> 99
SCHEDULE A
to
Revolving Credit Note
LOANS, CONVERSIONS AND PAYMENTS
WITH RESPECT TO ABR LOANS
<TABLE>
<CAPTION>
Amount of ABR Loans Amount of ABR Loans
Made or Converted Paid or Converted into
from Eurodollar Loans Eurodollar Loans or CD Unpaid Principal Notation Made
Date or CD Rate Loans Rate Loans Balance of ABR Loans by
- --------------- --------------------- ---------------------- -------------------- -------------
<S> <C> <C> <C> <C>
- --------------- --------------------- ---------------------- -------------------- -------------
- --------------- --------------------- ---------------------- -------------------- -------------
- --------------- --------------------- ---------------------- -------------------- -------------
- --------------- --------------------- ---------------------- -------------------- -------------
- --------------- --------------------- ---------------------- -------------------- -------------
- --------------- --------------------- ---------------------- -------------------- -------------
- --------------- --------------------- ---------------------- -------------------- -------------
- --------------- --------------------- ---------------------- -------------------- -------------
- --------------- --------------------- ---------------------- -------------------- -------------
- --------------- --------------------- ---------------------- -------------------- -------------
- --------------- --------------------- ---------------------- -------------------- -------------
- --------------- --------------------- ---------------------- -------------------- -------------
- --------------- --------------------- ---------------------- -------------------- -------------
- --------------- --------------------- ---------------------- -------------------- -------------
- --------------- --------------------- ---------------------- -------------------- -------------
</TABLE>
E-3
<PAGE> 100
SCHEDULE B
to
Revolving Credit Note
LOANS, CONVERSIONS AND PAYMENTS
WITH RESPECT TO EURODOLLAR LOANS
<TABLE>
<CAPTION>
Amount of Amount of Unpaid
Eurodollar Loans Interest Period Eurodollar Loans Principal
Made or Converted and Eurodollar Paid or Converted Balance of
from ABR Loans or Rate with Respect into ABR Loans or Eurodollar Notation
Date CD Rate Loans Thereto CD Rate Loans Loans Made By
- ------------------ ----------------- ----------------- ----------------- ---------- --------
<S> <C> <C> <C> <C> <C>
- ------------------ ----------------- ----------------- ----------------- ---------- --------
- ------------------ ----------------- ----------------- ----------------- ---------- --------
- ------------------ ----------------- ----------------- ----------------- ---------- --------
- ------------------ ----------------- ----------------- ----------------- ---------- --------
- ------------------ ----------------- ----------------- ----------------- ---------- --------
- ------------------ ----------------- ----------------- ----------------- ---------- --------
- ------------------ ----------------- ----------------- ----------------- ---------- --------
- ------------------ ----------------- ----------------- ----------------- ---------- --------
- ------------------ ----------------- ----------------- ----------------- ---------- --------
- ------------------ ----------------- ----------------- ----------------- ---------- --------
- ------------------ ----------------- ----------------- ----------------- ---------- --------
- ------------------ ----------------- ----------------- ----------------- ---------- --------
- ------------------ ----------------- ----------------- ----------------- ---------- --------
- ------------------ ----------------- ----------------- ----------------- ---------- --------
- ------------------ ----------------- ----------------- ----------------- ---------- --------
</TABLE>
E-4
<PAGE> 101
SCHEDULE C
to
Revolving Credit Note
LOANS, CONVERSIONS AND PAYMENTS
WITH RESPECT TO CD RATE LOANS
<TABLE>
<CAPTION>
Amount of CD Rate
Amount of CD Rate Loans Paid or Unpaid
Loans Made or Converted into ABR Principal
Converted from Interest Period Loans or Balance of
ABR Loans or and CD Rate with Eurodollar Rate CD Rate Notation
Date Eurodollar Loans Respect Thereto Loans Loans Made By
- ------------------ ----------------- ----------------- ------------------ ---------- --------
<S> <C> <C> <C> <C> <C>
- ------------------ ----------------- ----------------- ------------------ ---------- --------
- ------------------ ----------------- ----------------- ------------------ ---------- --------
- ------------------ ----------------- ----------------- ------------------ ---------- --------
- ------------------ ----------------- ----------------- ------------------ ---------- --------
- ------------------ ----------------- ----------------- ------------------ ---------- --------
- ------------------ ----------------- ----------------- ------------------ ---------- --------
- ------------------ ----------------- ----------------- ------------------ ---------- --------
- ------------------ ----------------- ----------------- ------------------ ---------- --------
- ------------------ ----------------- ----------------- ------------------ ---------- --------
- ------------------ ----------------- ----------------- ------------------ ---------- --------
- ------------------ ----------------- ----------------- ------------------ ---------- --------
- ------------------ ----------------- ----------------- ------------------ ---------- --------
- ------------------ ----------------- ----------------- ------------------ ---------- --------
- ------------------ ----------------- ----------------- ------------------ ---------- --------
- ------------------ ----------------- ----------------- ------------------ ---------- --------
</TABLE>
E-5
<PAGE> 102
EXHIBIT F-1 TO
CREDIT AGREEMENT
FORM OF GRID COMPETITIVE LOAN NOTE
COMPETITIVE LOAN NOTE
$400,000,000 New York, New York
January 31, 1996
FOR VALUE RECEIVED, the undersigned, PANHANDLE EASTERN CORPORATION, a
Delaware corporation, doing business as PanEnergy Corp (the "Company"), hereby
unconditionally promises to pay to the order of [NAME OF LENDER] (the
"Competitive Loan Lender") at the office of Chemical Bank located at 270 Park
Avenue, New York, New York 10017, in lawful money of the United States of
America and in immediately available funds, the principal amount of the lesser
of (a) FOUR HUNDRED MILLION DOLLARS ($400,000,000) and (b) the aggregate unpaid
principal amount of all Competitive Loans made by the Competitive Loan Lender
to the Borrower pursuant to subsection 2.13 of the Credit Agreement referred to
below. The principal amount of each Competitive Loan evidenced hereby shall be
payable on the Competitive Loan Maturity Date therefor set forth on the
schedule annexed hereto and made a part hereof or on a continuation of such
schedule which shall be attached hereto and made a part hereof (the "Grid").
The Company further agrees to pay interest in like money at such office on the
unpaid principal amount of each Competitive Loan evidenced hereby, at the rate
per annum set forth in respect of such Competitive Loan on the Grid, calculated
on the basis of a year of 360 days and actual days elapsed from the date of
such Competitive Loan until the due date thereof (whether at the stated
maturity, by acceleration or otherwise), and thereafter on such overdue amount
at the rate per annum set forth in subsection 3.1(e) of said Credit Agreement
until paid in full (both before and after judgment). Interest on each
Competitive Loan evidenced hereby shall be payable on the date or dates set
forth in respect of such Competitive Loan on the Grid. Competitive Loans
evidenced by this Note may not be prepaid.
The holder of this Note is authorized to record on the Grid the date,
amount, interest rate, Interest Payment Dates and Competitive Loan Maturity
Date in respect of each Competitive Loan made pursuant to subsection 2.13 of
said Credit Agreement, and amount of each payment of principal with respect
thereto. Each such recordation shall constitute prima facie evidence of the
accuracy of the information recorded; provided, that failure by the Competitive
Loan Lender to make any such recordation shall not affect the obligations of
the Company under this Note or said Credit Agreement.
This Note is one of the Competitive Loan Notes referred to in the
Credit Agreement dated as of January 31, 1996 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement") among Panhandle
Eastern Corporation, a Delaware corporation, doing business as PanEnergy Corp,
the Competitive Loan Lender, the other banks and financial institutions parties
thereto, and Chemical Bank, as Administrative Agent and is entitled to the
benefits thereof. Terms used herein which are defined in the Credit Agreement
shall have such defined meanings unless otherwise defined herein or unless the
context otherwise requires.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts then remaining unpaid on this
Note shall become, or may be declared to be, immediately due and payable, all
as provided therein.
F-1-1
<PAGE> 103
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
PANHANDLE EASTERN CORPORATION,
doing business as PANENERGY CORP
By:
------------------------------------
Title:
F-1-2
<PAGE> 104
SCHEDULE OF COMPETITIVE LOANS
<TABLE>
<CAPTION>
Amount of Interest Payment Maturity Payment Notation
Date Loan Interest Rate Dates Date Date Made by
- ------------- --------- ------------- ---------------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
- ------------- --------- ------------- ---------------- -------- ------- --------
- ------------- --------- ------------- ---------------- -------- ------- --------
- ------------- --------- ------------- ---------------- -------- ------- --------
- ------------- --------- ------------- ---------------- -------- ------- --------
- ------------- --------- ------------- ---------------- -------- ------- --------
- ------------- --------- ------------- ---------------- -------- ------- --------
- ------------- --------- ------------- ---------------- -------- ------- --------
- ------------- --------- ------------- ---------------- -------- ------- --------
- ------------- --------- ------------- ---------------- -------- ------- --------
- ------------- --------- ------------- ---------------- -------- ------- --------
- ------------- --------- ------------- ---------------- -------- ------- --------
- ------------- --------- ------------- ---------------- -------- ------- --------
- ------------- --------- ------------- ---------------- -------- ------- --------
- ------------- --------- ------------- ---------------- -------- ------- --------
- ------------- --------- ------------- ---------------- -------- ------- --------
</TABLE>
F-1-3
<PAGE> 105
EXHIBIT F-2 TO
CREDIT AGREEMENT
FORM OF INDIVIDUAL COMPETITIVE LOAN NOTE
INDIVIDUAL COMPETITIVE LOAN NOTE
$_______________ New York, New York
__________ ___, 199_
FOR VALUE RECEIVED, the undersigned, PANHANDLE EASTERN CORPORATION, a
Delaware corporation, doing business as PanEnergy Corp (the "Company"), hereby
unconditionally promises to pay on ___________, 199_ to the order of [NAME OF
LENDER] (the "Competitive Loan Lender") at the office of Chemical Bank located
at 270 Park Avenue, New York, New York 10017, in lawful money of the United
States of America and in immediately available funds, the principal sum of
________________ DOLLARS ($___________). The undersigned further agrees to pay
interest in like money at such office on the unpaid principal amount hereof
from time to time from the date hereof at the rate of __% per annum (calculated
on the basis of a year of 360 days and actual days elapsed) until the due date
hereof (whether at the stated maturity, by acceleration or otherwise), and
thereafter on such overdue amount at the rate per annum set forth in subsection
3.1(e) of the Credit Agreement dated as of January 31, 1996 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement")
among Panhandle Eastern Corporation, doing business as PanEnergy Corp, the
Competitive Loan Lender, the other financial institutions parties thereto, and
Chemical Bank, as Administrative Agent, until paid in full (both before and
after judgment). Interest shall be payable on the Interest Payment Date or
Dates determined as provided in subsections 3.1(d) and 3.1(f) of the Credit
Agreement.
This Note is one of the Individual Competitive Loan Notes referred to
in, is subject to and is entitled to the benefits of, the Credit Agreement,
which Credit Agreement, among other things, contains provisions for
acceleration of the maturity hereof upon the happening of certain stated
events. Terms used herein which are defined in the Credit Agreement shall have
such defined meanings unless otherwise defined herein or unless the context
otherwise requires. This Note may not be prepaid.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
PANHANDLE EASTERN CORPORATION,
doing business as PANENERGY CORP
By:
------------------------------------
Title
F-2-1
<PAGE> 106
EXHIBIT G TO
CREDIT AGREEMENT
FORM OF TERM NOTE
$__________ New York, New York
_____________, 199_
FOR VALUE RECEIVED, the undersigned, PANHANDLE EASTERN CORPORATION, a
Delaware corporation, doing business as PanEnergy Corp (the "Company"), hereby
unconditionally promises to pay to the order of [NAME OF LENDER] (the "Lender")
at the office of Chemical Bank located at 270 Park Avenue, New York, New York
10017, in lawful money of the United States of America and in immediately
available funds, the principal amount of (a) ________________________ DOLLARS
($________), or, if less (b) the aggregate unpaid principal amount of the Term
Loan which is made by the Lender to the Company pursuant to subsection 2.16 of
the Credit Agreement referred to below. The principal amount of the Term Loan
evidenced hereby shall be payable on __________, 199_.
The undersigned further agrees to pay interest in like money at such
office on the unpaid principal amount hereof from time to time from the date
hereof at the applicable rate per annum set forth in subsection 3.1 of the
Credit Agreement referred to below until any such amount shall become due and
payable (whether at the stated maturity, by acceleration or otherwise), and
thereafter on such overdue amount at the rate per annum set forth in subsection
3.1(e) of said Credit Agreement until paid in full (both before and after
judgment). Interest shall be payable in arrears on each Interest Payment Date,
commencing on the first such date to occur after the date hereof and upon
payment (including prepayment) in full of the unpaid principal amount hereof.
The holder of this Note is authorized to record the date and amount of
the Term Loan made by the Lender pursuant to subsection 2.16 of said Credit
Agreement, its character as an ABR Loan, CD Rate Loan or Eurodollar Loan, the
date and amount of each payment or prepayment of principal with respect
thereto, and, if such Term Loan is maintained as a Eurodollar Loan or CD Rate
Loan, the length of each Interest Period and the Eurodollar Rate or Adjusted CD
Rate applicable thereto and each conversion made pursuant to subsection 3.10 of
said Credit Agreement on the schedules annexed hereto and made a part hereof,
or on a continuation thereof which shall be attached hereto and made a part
hereof, which recordation shall constitute prima facie evidence of the accuracy
of the information recorded; provided that failure by the Lender to make any
such recordation on this Note shall not affect the obligations of the Company
under this Note or said Credit Agreement.
This Note is one of the Term Notes referred to in the Credit Agreement
dated as of January 31, 1996 (as amended, supplemented or otherwise modified
from time to time, the "Credit Agreement") among Panhandle Eastern Corporation,
doing business as PanEnergy Corp, the Lender, the other financial institutions
parties thereto, and Chemical Bank, as Administrative Agent, is entitled to the
benefits thereof, is secured as provided therein and is subject to prepayment
in whole or in part as provided therein. Terms used herein which are defined
in the Credit Agreement shall have such defined meanings unless otherwise
defined herein or unless the context otherwise requires.
G-1
<PAGE> 107
Upon the occurrence of any one or more of the Events of Default
specified in said Credit Agreement, all amounts then remaining unpaid on this
Note shall become, or may be declared to be, immediately due and payable all as
provided therein.
All parties now and hereafter liable with respect to this Term Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind.
THIS TERM NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
PANHANDLE EASTERN CORPORATION,
doing business as PANENERGY CORP
By:
------------------------------------
Title:
G-2
<PAGE> 108
SCHEDULE A
to
Term Note
LOANS, CONVERSIONS AND PAYMENTS
WITH RESPECT TO ABR LOAN
<TABLE>
<CAPTION>
Amount of ABR Loan Amount of ABR Loan
Made or Converted Paid or Converted into
from Eurodollar Loan Eurodollar Loan or CD Unpaid Principal Notation Made
Date or CD Rate Loan Rate Loan Balance of ABR Loan by
- ----------------- -------------------- ---------------------- ------------------- -------------
<S> <C> <C> <C> <C>
- ----------------- -------------------- ---------------------- ------------------- -------------
- ----------------- -------------------- ---------------------- ------------------- -------------
- ----------------- -------------------- ---------------------- ------------------- -------------
- ----------------- -------------------- ---------------------- ------------------- -------------
- ----------------- -------------------- ---------------------- ------------------- -------------
- ----------------- -------------------- ---------------------- ------------------- -------------
- ----------------- -------------------- ---------------------- ------------------- -------------
- ----------------- -------------------- ---------------------- ------------------- -------------
- ----------------- -------------------- ---------------------- ------------------- -------------
- ----------------- -------------------- ---------------------- ------------------- -------------
- ----------------- -------------------- ---------------------- ------------------- -------------
- ----------------- -------------------- ---------------------- ------------------- -------------
- ----------------- -------------------- ---------------------- ------------------- -------------
- ----------------- -------------------- ---------------------- ------------------- -------------
- ----------------- -------------------- ---------------------- ------------------- -------------
</TABLE>
G-3
<PAGE> 109
SCHEDULE B
to
Term Note
LOANS, CONVERSIONS AND PAYMENTS
WITH RESPECT TO EURODOLLAR LOAN
<TABLE>
<CAPTION>
Amount of Amount of Unpaid
Eurodollar Loan Interest Period Eurodollar Loan Principal
Made or Converted and Eurodollar Paid or Converted Balance of
from ABR Loan or Rate with Respect into ABR Loan or Eurodollar Notation
Date CD Rate Loan Thereto CD Rate Loan Loan Made By
- ------------------- ----------------- ----------------- ----------------- ---------- --------
<S> <C> <C> <C> <C> <C>
- ------------------- ----------------- ----------------- ----------------- ---------- --------
- ------------------- ----------------- ----------------- ----------------- ---------- --------
- ------------------- ----------------- ----------------- ----------------- ---------- --------
- ------------------- ----------------- ----------------- ----------------- ---------- --------
- ------------------- ----------------- ----------------- ----------------- ---------- --------
- ------------------- ----------------- ----------------- ----------------- ---------- --------
- ------------------- ----------------- ----------------- ----------------- ---------- --------
- ------------------- ----------------- ----------------- ----------------- ---------- --------
- ------------------- ----------------- ----------------- ----------------- ---------- --------
- ------------------- ----------------- ----------------- ----------------- ---------- --------
- ------------------- ----------------- ----------------- ----------------- ---------- --------
- ------------------- ----------------- ----------------- ----------------- ---------- --------
- ------------------- ----------------- ----------------- ----------------- ---------- --------
- ------------------- ----------------- ----------------- ----------------- ---------- --------
- ------------------- ----------------- ----------------- ----------------- ---------- --------
</TABLE>
G-4
<PAGE> 110
SCHEDULE C
to
Term Note
LOANS, CONVERSIONS AND PAYMENTS
WITH RESPECT TO CD RATE LOAN
<TABLE>
<CAPTION>
Amount of CD Rate Amount of CD Rate
Loan Made or Loan Paid or Unpaid
Converted from Interest Period Converted into ABR Principal
ABR Loan or and CD Rate with Loan or Eurodollar Balance of Notation
Date Eurodollar Loan Respect Thereto Rate Loan CD Rate Loan Made By
- ------------------- ----------------- ---------------- ------------------ ------------ --------
<S> <C> <C> <C> <C> <C>
- ------------------- ----------------- ---------------- ------------------ ------------ --------
- ------------------- ----------------- ---------------- ------------------ ------------ --------
- ------------------- ----------------- ---------------- ------------------ ------------ --------
- ------------------- ----------------- ---------------- ------------------ ------------ --------
- ------------------- ----------------- ---------------- ------------------ ------------ --------
- ------------------- ----------------- ---------------- ------------------ ------------ --------
- ------------------- ----------------- ---------------- ------------------ ------------ --------
- ------------------- ----------------- ---------------- ------------------ ------------ --------
- ------------------- ----------------- ---------------- ------------------ ------------ --------
- ------------------- ----------------- ---------------- ------------------ ------------ --------
- ------------------- ----------------- ---------------- ------------------ ------------ --------
- ------------------- ----------------- ---------------- ------------------ ------------ --------
- ------------------- ----------------- ---------------- ------------------ ------------ --------
- ------------------- ----------------- ---------------- ------------------ ------------ --------
- ------------------- ----------------- ---------------- ------------------ ------------ --------
</TABLE>
G-5
<PAGE> 111
EXHIBIT H TO
CREDIT AGREEMENT
FORM OF EXTENSION REQUEST
________________, 199__
Chemical Bank, as Administrative Agent
270 Park Avenue
New York, New York 10017
Reference is made to the Credit Agreement, dated as of January 31,
1996, among the undersigned (the "Company"), the Lenders named therein, and
Chemical Bank, as Administrative Agent (as the same may be amended,
supplemented or otherwise modified from time to time, the "Credit Agreement").
Terms defined in the Credit Agreement and used herein shall have the meanings
given to them in the Credit Agreement.
The Company hereby requests, pursuant to subsection 2.19 of the Credit
Agreement, that the Revolving Credit Termination Date be extended on such date
for 364 days, to _________, 199_.
Very truly yours,
PANHANDLE EASTERN CORPORATION,
doing business as PANENERGY CORP
By:
------------------------------------
Title
H-1
<PAGE> 112
EXHIBIT I TO
CREDIT AGREEMENT
FORM OF OPINION OF SULLIVAN & CROMWELL
January 31, 1996
To the Lenders and the Administrative Agent
Referred to Below
Dear Sirs:
We have acted as special counsel to Panhandle Eastern
Corporation, a Delaware corporation, doing business as PanEnergy Corp (the
"Company"), in connection with the Credit Agreement, dated as of January 31,
1996 (the "Credit Agreement"), among the Company, the several financial
institutions party thereto (the "Lenders") and Chemical Bank, as administrative
agent for the Lenders (in such capacity, the "Administrative Agent"). All
capitalized terms used herein which are not otherwise defined are used herein
with the meanings assigned to such terms in the Credit Agreement.
We have examined executed copies of the Credit Agreement, the
Revolving Credit Notes and the Competitive Loan Notes delivered on the date
hereof, as well as such records, certificates and other documents and such
questions of law as we have considered necessary or appropriate for the
purposes of this opinion.
Based upon the foregoing, we are of the opinion that:
1. The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware. The
Company has the corporate power and authority to own and operate its
properties, to lease the properties it operates as lessee and to conduct the
businesses in which it is currently engaged.
2. The Company has the corporate power and authority to
execute, deliver and perform the Credit Agreement and the Notes and has taken
all corporate action to authorize the execution, delivery and performance of
the Credit Agreement and the Notes.
3. No regulatory consent, authorization, approval or filing
is required to be obtained or made by the Company under the Federal laws of the
United States, the laws of the State of New York or the General Corporation Law
of the State of Delaware for the execution, delivery and performance of the
Credit Agreement and the Notes.
4. The Credit Agreement, the Revolving Credit Notes and the
Competitive Loan Notes delivered on the date hereof have been duly executed and
delivered by the Company and constitute valid and legally binding obligations
of the Company enforceable in accordance with their respective terms, subject
to bankruptcy, insolvency, fraudulent transfer,
I-1
<PAGE> 113
reorganization, moratorium and similar laws of general applicability relating
to or affecting creditors' rights and to general equity principles.
5. The execution, delivery and performance by the Company of
the Credit Agreement and the Notes will not (a) violate the Certificate of
Incorporation or By-Laws of the Company, (b) result in a default under or
breach of any indenture, loan agreement or other similar agreement or
instrument known to us to be binding upon the Company, (c) violate any Federal
law of the United States, any law of the State of New York or Delaware (in the
case of the State of Delaware, solely in respect of its General Corporation
Law), or any rule or regulation adopted by a Governmental Authority thereof, or
(d) result in, or require the creation or imposition of, any Lien on any
properties or revenues of the Company pursuant to any of the foregoing;
provided, however, that for purposes of this paragraph 5, we express no opinion
with respect to Federal or state securities laws, other anti-fraud laws and
fraudulent transfer laws; and provided, further, that insofar as performance by
the Company of its obligations under the Credit Agreement and the Notes is
concerned, we express no opinion as to bankruptcy, insolvency, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights.
6. Assuming the proceeds of the Loans are used solely for the
purposes set forth in the Credit Agreement, such Loans will not violate the
provisions of Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System.
7. The Company is not an "investment company" as that term is
defined in the Investment Company Act of 1940.
The foregoing opinion is limited to the Federal laws of the
United States, the laws of the State of New York and the General Corporation
Law of the State of Delaware, and we are expressing no opinion as to the effect
of the laws of any other jurisdiction.
We express no opinion as to the validity, binding effect or
enforceability of any provision in the Credit Agreement which purports to (i)
provide indemnification of any person for any claims, damages, liabilities or
expenses resulting from violation by such person of applicable securities laws,
(ii) grant any Lender rights of setoff other than as provided in Section 151 of
the Debtor & Creditor Law of the State of New York or (iii) preserve or
maintain the enforceability of the Credit Agreement where one or more
provisions contained therein is determined to be invalid, illegal or
unenforceable.
With your approval, we have also relied as to certain matters
on information obtained from public officials, officers of the Company or other
sources believed by us to be responsible and we have assumed that the Credit
Agreement has been duly authorized, executed and delivered by the parties
thereto other than the Company and that the signatures on all documents
examined by us are genuine, assumptions which we have not independently
verified.
Very truly yours,
SULLIVAN & CROMWELL
I-2
<PAGE> 114
EXHIBIT J TO
CREDIT AGREEMENT
FORM OF GENERAL COUNSEL'S OPINION
January 31, 1996
To the Lenders and the
Administrative Agent
Referred to Below
Dear Sirs:
I am General Counsel of Panhandle Eastern Corporation, a
Delaware corporation, doing business as PanEnergy Corp (the "Company"), and am
familiar with the Credit Agreement, dated as of January 31, 1996 (the "Credit
Agreement"), among the Company, the several financial institutions party
thereto (the "Lenders") and Chemical Bank, as administrative agent for the
Lenders (in such capacity, the "Administrative Agent"). All capitalized terms
used herein which are not otherwise defined are used herein with the meanings
assigned to such terms in the opinion of Sullivan & Cromwell delivered to you
on the date hereof in connection with the Credit Agreement.
As General Counsel of the Company, I am generally familiar
with the organization and affairs of the Company. Lawyers in the Legal
Department of the Company have been asked, by me or others, to review legal
matters arising in connection with the Credit Agreement. Accordingly some of
the matters referred to herein have not been handled personally by me, but I
have been made familiar with the facts and circumstances and the applicable
law, and the opinions herein expressed are my own or the opinions of other
lawyers in which I concur. In rendering the opinions expressed herein, I or
lawyers in the Legal Department of the Company have examined such corporate
records, certificates and other documents and such questions of law as were
considered necessary or appropriate for the purposes hereof.
Based upon the foregoing, I am of the opinion that:
1. The Company is duly qualified to do business as a foreign
corporation in good standing in each jurisdiction where it is required to be so
qualified, except where any failure to be so qualified and in good standing
would not have a material adverse effect on the business of the Company and its
Subsidiaries taken as a whole.
2. Except as set forth in the SEC Reports, no litigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the best of my knowledge, threatened by or against the Company or any of its
Subsidiaries or against any of their respective properties or revenues which
would have a material adverse effect on the business of the Company and its
Subsidiaries taken as a whole.
J-1
<PAGE> 115
3. The execution, delivery and performance by the Company of
the Credit Agreement and the Notes will not violate any contract known to me to
be binding upon the Company, except for such violations which would not have a
material adverse effect on the business of the Company and its Subsidiaries
taken as a whole and will not result in or require the creation or imposition
of any Lien on any of its properties or revenues pursuant to any such contract.
With your approval, I have relied as to certain matters on
information obtained from public officials, officers of the Company, opinions
of local counsel or other sources believed by me to be responsible and I have
assumed that the signatures on all documents examined by me are genuine,
assumptions which I have not independently verified.
This opinion is solely for your benefit and the benefit of
your respective assignees and transferees permitted under the Credit Agreement
and the benefit of special counsel to the Administrative Agent and the benefit
of the Company's special counsel and may not be relied upon in any matter by
any other person without my written consent.
Very truly yours,
J-2
<PAGE> 116
EXHIBIT K TO
CREDIT AGREEMENT
FORM OF COMMITMENT TRANSFER SUPPLEMENT
COMMITMENT TRANSFER SUPPLEMENT, dated as of the date set forth in Item
1 of Schedule I hereto, among the Transferor Lender set forth in Item 2 of
Schedule I hereto (the "Transferor Lender"), each Purchasing Lender set forth
in Item 3 of Schedule I hereto (each, a "Purchasing Lender"), and CHEMICAL
BANK, as administrative agent for the Lenders under the Credit Agreement
described below (in such capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, this Commitment Transfer Supplement is being executed and
delivered in accordance with subsection 10.8 of the Credit Agreement, dated as
of January 31, 1996, among Panhandle Eastern Corporation, a Delaware
corporation, doing business as PanEnergy Corp (the "Borrower"), the Transferor
Lender, the other Lenders parties thereto and the Administrative Agent (as from
time to time amended, supplemented or otherwise modified in accordance with the
terms thereof, the "Credit Agreement"; terms defined therein being used herein
as therein defined);
WHEREAS, each Purchasing Lender (if it is not already a Lender party
to the Credit Agreement) wishes to become a Lender party to the Credit
Agreement; and
WHEREAS, the Transferor Lender is selling and assigning to each
Purchasing Lender, rights, obligations and commitments under the Credit
Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Upon receipt by the Administrative Agent of five counterparts of
this Commitment Transfer Supplement, to each of which is attached a fully
completed Schedule I and Schedule II, and each of which has been executed by
the Transferor Lender, each Purchasing Lender (and any other person required by
the Credit Agreement to execute this Commitment Transfer Supplement), the
Administrative Agent will transmit to the Borrower, the Transferor Lender and
each Purchasing Lender a Transfer Effective Notice, substantially in the form
of Schedule III to this Commitment Transfer Supplement (a "Transfer Effective
Notice"). Such Transfer Effective Notice shall set forth, inter alia, the date
on which the transfer effected by this Commitment Transfer Supplement shall
become effective (the "Transfer Effective Date"), which date shall be the fifth
Business Day following the date of such Transfer Effective Notice. From and
after the Transfer Effective Date each Purchasing Lender shall be a Lender
party to the Credit Agreement for all purposes thereof.
2. At or before 12:00 Noon, local time of the Transferor Lender, on
the Transfer Effective Date, each Purchasing Lender shall pay to the Transferor
Lender, in immediately available funds, an amount equal to the purchase price,
as agreed between the Transferor Lender and such Purchasing Lender (the
"Purchase Price"), of the portion being purchased by
K-1
<PAGE> 117
such Purchasing Lender (such Purchasing Lender's "Purchased Percentage") of the
outstanding principal amount of the Loans, the Letter of Credit Obligations,
the L/C Participating Interests and other amounts owing to the Transferor
Lender under the Credit Agreement and its Notes. Effective upon receipt by the
Transferor Lender of the Purchase Price from a Purchasing Lender, without
recourse, representation or warranty, each Purchasing Lender hereby irrevocably
purchases, takes and assumes from the Transferor Lender, such Purchasing
Lender's Purchased Percentage of the Commitments, the L/C Participating
Interests, the obligation to purchase L/C Participating Interests and the
presently outstanding Loans and other amounts owing to the Transferor Lender
under the Credit Agreement and its Notes together with all instruments,
documents and collateral security pertaining thereto; provided that such
Participating Lender's interest in any Letter of Credit outstanding on the
Transfer Effective Date shall be as set forth in subsection 2.7 of the Credit
Agreement.
3. The Transferor Lender has made arrangements with each Purchasing
Lender with respect to (i) the portion, if any, to be paid, and the date or
dates for payment, by the Transferor Lender to such Purchasing Lender of any
fees heretofore received by the Transferor Lender pursuant to the Credit
Agreement prior to the Transfer Effective Date and (ii) the portion, if any, to
be paid and the date or dates for payment, by such Purchasing Lender to the
Transferor Lender of fees or interest received by such Purchasing Lender
pursuant to the Credit Agreement and from and after the Transfer Effective
Date.
4. (a) All principal payments that would otherwise be payable from
and after the Transfer Effective Date to or for the account of the Transferor
Lender pursuant to the Credit Agreement and its Notes shall, instead, be
payable to or for the account of the Transferor Lender or the Purchasing
Lender, as the case may be, in accordance with their respective interest as
reflected in this Commitment Transfer Supplement.
(b) All interest, fees and other amounts that would otherwise
accrue for the account of the Transferor Lender from and after the Transfer
Effective Date pursuant to the Credit Agreement and its Notes shall, instead,
accrue for the account of, and be payable to, the Transferor Lender and the
Purchasing Lenders, as the case may be, in accordance with their respective
interests as reflected in this Commitment Transfer Supplement. In the event
that any amount of interest, fees or other amounts accruing prior to the
Transfer Effective Date was included in the Purchase Price paid by the
Purchasing Lender, the Transferor Lender and each Purchasing Lender will make
appropriate arrangements for payment by the Transferor Lender to such
Purchasing Lender of such amount upon receipt thereof from the Borrower.
5. On or prior to the Transfer Effective Date, the Transferor Lender
will deliver to the Administrative Agent its Notes. On or prior to the
Transfer Effective Date, the Borrower will deliver to the Administrative Agent
new Notes for each Purchasing Lender and the Transferor Lender, in each case in
principal amounts reflecting, in accordance with the Credit Agreement, the
principal amount of any Competitive Loans being transferred and their
respective Commitments (as adjusted pursuant to this Commitment Transfer
Supplement). As provided in subsection 10.8 of the Credit Agreement, each such
new Note shall be dated the Effective Date in the case of a Revolving Credit
Note or Competitive Loan Note or the
K-2
<PAGE> 118
Revolving Credit Termination Date in the case of a Term Note. In addition, on
or prior to the Transfer Effective Date, the Transferor Lender will deliver to
the Administrative Agent any Letter of Credit Participation Certificates issued
by an Issuing Lender to the Transferor Lender. On or prior to the Transfer
Effective Date, if applicable, each Issuing Lender shall deliver to the
Administrative Agent for each Purchasing Lender and the Transferor Lender new
Letter of Credit Participation Certificates, in each case in amounts
reflecting, in accordance with the Credit Agreement, their respective
Commitments (as adjusted pursuant to this Commitment Transfer Supplement).
Promptly after the Transfer Effective Date, the Administrative Agent will send
to each of the Transferor Lender and the Purchasing Lenders its new Notes and
new Letter of Credit Participation Certificates and will send to the Borrower
the superseded Notes of the Transferor Lender, marked "Cancelled".
6. Concurrently with the execution and delivery hereof, the
Transferor Lender will provide to each Purchasing Lender (if it is not already
a Lender party to the Credit Agreement) copies of all documents delivered to
such Transferor Lender on the Effective Date in satisfaction of the conditions
precedent set forth in the Credit Agreement.
7. Each of the parties to this Commitment Transfer Supplement agrees
that at any time and from time to time upon the written request of any other
party, it will execute and deliver such further documents and do such further
acts and things as such other party may reasonably request in order to effect
the purposes of this Commitment Transfer Supplement.
8. By executing and delivering this Commitment Transfer Supplement,
the Transferor Lender and each Purchasing Lender confirm to and agree with each
other and the Administrative Agent and the Lenders as follows: (i) other than
the representation and warranty that it is the legal and beneficial owner of
the interest being assigned hereby free and clear of any adverse claim, the
Transferor Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement, the Notes, the Letters of
Credit or any other instrument or document furnished pursuant thereto or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Credit Agreement, the Notes, the Letters of Credit or any other
instrument or document furnished pursuant thereto; (ii) the Transferor Lender
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of the Borrower or the performance or observance by
the Borrower of any of their respective obligations under the Credit Agreement,
the Notes, the Letters of Credit or any other instrument or document furnished
pursuant thereto; (iii) each Purchasing Lender confirms that it has received a
copy of the Credit Agreement, together with copies of the financial statements
referred to in subsection 5.1 and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into this Commitment Transfer Supplement; (iv) each Purchasing Lender will,
independently and without reliance upon the Administrative Agent, the
Transferor 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 the Credit Agreement; (v)
each Purchasing Lender appoints and authorizes the Administrative Agent and any
Issuing Lender to take such action as agent and issuing lender on its behalf
and to exercise such powers under the Credit Agreement as are delegated to the
Administrative Agent and Issuing Lenders by the terms thereof, together with
such powers as are reasonably
K-3
<PAGE> 119
incidental thereto, all in accordance with Section 9 of the Credit Agreement;
and (vi) each Purchasing Lender agrees that it will perform in accordance with
their terms all of the obligations which by the terms of the Credit Agreement
are required to be performed by it as a Lender.
9. Each party hereto represents and warrants to and agrees with the
Administrative Agent that it is aware of and will comply with the provisions of
subsections 10.10(e) and (f) of the Credit Agreement.
10. Schedule II hereto sets forth the revised Commitments and
Commitment Percentages of the Transferor Lender and each Purchasing Lender as
well as administrative information with respect to each Purchasing Lender.
11. THIS COMMITMENT TRANSFER SUPPLEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Commitment
Transfer Supplement to be executed by their respective duly authorized officers
on Schedule I hereto as of the date set forth in Item 1 of Schedule I hereto.
K-4
<PAGE> 120
SCHEDULE I
to
Commitment Transfer Supplement
COMPLETION OF INFORMATION AND SIGNATURES
FOR COMMITMENT TRANSFER SUPPLEMENT
Re: Credit Agreement, dated as of January 31, 1996, with
Panhandle Eastern Corporation, doing business as
PanEnergy Corp, as Borrower
<TABLE>
<S> <C> <C>
Item 1 (Date of Commitment Transfer [Insert date of Commitment Transfer
Supplement): Supplement]
Item 2 (Transferor Lender): [Insert name of Transferor Lender]
Item 3 (Purchasing Lender[s]): [Insert name[s] of Purchasing Lender[s]]
Item 4 (Signatures of Parties to Commitment
Transfer Supplement):
</TABLE>
, as
Transferor Lender
By:
------------------------------------
Title
, as a
Purchasing Lender
By:
------------------------------------
Title
, as a
Purchasing Lender
By:
------------------------------------
Title
K-5
<PAGE> 121
Consented to and Acknowledged:
PANHANDLE EASTERN CORPORATION,
doing business as PANENERGY CORP
By
-------------------------------------------
Title:
CHEMICAL BANK, As Administrative Agent
By
-------------------------------------------
Title:
[Consents Required only when
Purchasing Lender is not already
a Lender or Affiliate thereof]
Accepted for Recordation
in Register:
CHEMICAL BANK, as Administrative Agent
By
-------------------------------------------
Title:
Acknowledged:
[Acknowledgement from Issuing Lender (other
than Chemical Bank) required if such
Issuing Lender has outstanding Letter of
Credit Participation Certificates]
By
-------------------------------------------
Title:
K-6
<PAGE> 122
SCHEDULE II
to
Commitment Transfer Supplement
LIST OF LENDING OFFICES, ADDRESS
FOR NOTICES AND COMMITMENT AMOUNTS
<TABLE>
<S> <C> <C>
[Name of Transferor Lender] Revised Commitment Amount: $___________
Revised Commitment Percentage: ___________
[Name of Purchasing Lender] New Commitment Amount: $___________
New Commitment Percentage: ___________
</TABLE>
Address for Notices:
[Address]
Attention:
Telex:
Answerback:
Telephone:
Telecopier:
Confirmation:
Eurodollar Lending Office:
- ----------------------------------
- ----------------------------------
- ----------------------------------
Domestic Lending Office:
- ----------------------------------
- ----------------------------------
- ----------------------------------
K-7
<PAGE> 123
SCHEDULE III
to
Commitment Transfer Supplement
Form of Transfer Effective Notice
To: Panhandle Eastern Corporation,
doing business as PanEnergy Corp
Insert Name of Transferor Lender and
each Purchasing Lender
The undersigned, as Administrative Agent [delegate of the
Administrative Agent performing administrative functions of the Administrative
Agent] under the Credit Agreement, dated as of January 31, 1996, among
Panhandle Eastern Corporation, a Delaware corporation, doing business as
PanEnergy Corp, the Lenders parties thereto and Chemical Bank, as
Administrative Agent, acknowledges receipt of five executed counterparts of a
completed Commitment Transfer Supplement, as described in Schedule I hereto.
[Note: attach copy of Schedule I from Commitment Transfer Supplement.] Terms
defined in such Commitment Transfer Supplement are used herein as therein
defined.
1. Pursuant to such Commitment Transfer Supplement, you are advised
that the Transfer Effective Date will be ________________ [insert fifth
Business Day following date of Transfer Effective Notice].
2. Pursuant to such Commitment Transfer Supplement, the Transferor
Lender is required to deliver to the Administrative Agent on or before the
Transfer Effective Date its Notes and to each Issuing Lender any applicable
Letter of Credit Participation Certificates.
3. Pursuant to such Commitment Transfer Supplement, the Company is
required to deliver to the Administrative Agent on or before the Transfer
Effective Date the following Notes dated ____________________.
[Describe each new Note for Transferor Lender and Purchasing Lender as
to principal amount and payee]
4. Pursuant to such Commitment Transfer Supplement, each Issuing
Lender listed below is required to deliver to the Administrative Agent on or
before the Transfer Effective Date the following Letter of Credit Participation
Certificates:
5. Pursuant to such Commitment Transfer Supplement, each Purchasing
Lender is required to pay its Purchase Price to the Transferor Lender at or
before 12:00 noon on the Transfer Effective Date in immediately available
funds.
Very truly yours,
CHEMICAL BANK
By:
------------------------------------
Title:
K-8
<PAGE> 1
EXHIBIT 4.03
[EXECUTION COPY]
================================================================================
PANHANDLE EASTERN CORPORATION
doing business as
PANENERGY CORP
___________________________________
$400,000,000
CREDIT AGREEMENT
(FIVE YEAR FACILITY)
dated as of January 31, 1996
___________________________________
CHEMICAL BANK
as Administrative Agent
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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<S> <C> <C>
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2. AMOUNTS AND TERMS OF LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.1 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.2 Revolving Credit Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.3 Procedure for Revolving Credit Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.4 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.5 Issuance of Commercial L/Cs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.6 Issuance of Standby L/Cs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.7 Participating Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.8 Procedure for Opening Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.9 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.11 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.12 Letter of Credit Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.13 Competitive Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.14 Competitive Loan Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.15 Procedure for Competitive Loan Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.16 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 3. INTEREST RATE PROVISIONS, FEES, CONVERSIONS AND PAYMENTS . . . . . . . . . . . . . . . . . . . . . . 27
3.1 Interest Rates and Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.2 Facility and Other Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.3 Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.4 Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.5 Optional Prepayments of Revolving Credit Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.6 Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.7 Pro Rata Treatment and Payments; Lending Offices . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.8 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.9 Failure by Lenders to Make Funds Available . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.10 Conversion Options for Loans; Minimum Amount of Loans . . . . . . . . . . . . . . . . . . . . . . . 33
3.11 Inability to Determine Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.13 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.14 Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.15 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.16 Lenders' Obligation to Mitigate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.17 Replacement of Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
i
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SECTION 4. CONDITIONS OF LENDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.1 Conditions to the Initial Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.2 Conditions to All Loans and All Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 5. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.1 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.2 Corporate Existence; Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.3 Corporate Power; Authorization; Enforceable Obligations . . . . . . . . . . . . . . . . . . . . . . 41
5.4 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.5 No Material Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.6 Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.7 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.8 Environmental Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.9 Investment Company Act, Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . 43
SECTION 6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.1 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.2 Certificates; Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.3 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.4 Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.5 Maintenance of Property; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.6 Inspection of Property; Books and Records; Discussions . . . . . . . . . . . . . . . . . . . . . . . 45
6.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.1 Maintenance of Consolidated Indebtedness to Consolidated Capitalization Percentage Ratio of the
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.2 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.3 Consolidation, Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.4 Principal Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.5 Lines of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.6 Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 8. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 9. THE ADMINISTRATIVE AGENT AND THE ISSUING LENDERS . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.3 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.4 Reliance by Administrative Agent and the Issuing Lenders . . . . . . . . . . . . . . . . . . . . . . 51
9.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.6 Non-Reliance on Administrative Agent, Issuing Lenders and Other Lenders . . . . . . . . . . . . . . 52
9.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
</TABLE>
ii
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9.8 Administrative Agent and Issuing Lenders in Their Individual Capacities . . . . . . . . . . . . . . 53
9.9 Successor Administrative Agent and Issuing Lenders . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.1 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.3 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.4 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.5 Payment of Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.6 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.7 Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.8 Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.9 Transfers of Competitive Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.10 Register, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.11 Adjustments; Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.12 Existing Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.14 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.15 Submission to Jurisdiction; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.16 Limitation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.17 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
</TABLE>
iii
<PAGE> 5
SCHEDULES
1 Lending Offices
2 Commitments
3 Excluded Sales of Assets
EXHIBITS
A Form of Competitive Loan Confirmation
B Form of Competitive Loan Offer
C Form of Competitive Loan Request
D Form of Letter of Credit Participation
Certificate
E Form of Revolving Credit Note
F-1 Form of Grid Competitive Loan Note
F-2 Form of Individual Competitive Loan Note
G Form of Opinion of Sullivan & Cromwell
H Form of General Counsel's Opinion
I Form of Commitment Transfer Supplement
iv
<PAGE> 6
CREDIT AGREEMENT
(FIVE YEAR FACILITY)
Dated as of January 31, 1996
PANHANDLE EASTERN CORPORATION, a Delaware corporation doing business
as PanEnergy Corp (the "Company"), the several financial institutions from time
to time parties to this Agreement (collectively, the "Lenders" and
individually, a "Lender") and CHEMICAL BANK, a New York banking corporation
("Chemical"), as Administrative Agent, do hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms
have the following meanings:
"ABR Loans": Revolving Credit Loans at such time as they are made
and/or are being maintained at a rate of interest based upon the Alternate Base
Rate.
"Adjusted CD Rate": with respect to each day during an Interest
Period for CD Rate Loans, a rate per annum determined for such day in
accordance with the following formula (rounded upward, if necessary, to the
next higher 1/100 of 1%):
CD Rate + Assessment Rate
----------------------------
1.00-CD Reserve Requirements
"Administrative Agent": Chemical, in its capacity as administrative
agent for the Lenders hereunder and its successors and assigns in such
capacity.
"Administrative Agent's Office": the office of the Administrative
Agent located at 270 Park Avenue, New York, New York 10017, or such other
office as the Administrative Agent may hereafter designate in writing as such
to the other parties hereto.
"Affiliate": of any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control
with, such Person. For purposes of this definition, control of a Person shall
mean the power, direct or indirect, to direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.
"Agreement": this Credit Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"AGTCO": Algonquin Gas Transmission Company, a Delaware corporation.
<PAGE> 7
"Alternate Base Rate": for any day, a rate per annum (rounded
upward, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the
Prime Rate in effect on such day or (b) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall
mean 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 not being intended to be the lowest rate of interest charged by
Chemical in connection with extensions of credit to debtors); and "Federal
Funds Effective Rate" shall mean, 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 on the next
succeeding 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 the day of such transactions received by the Administrative
Agent from three federal funds brokers of recognized standing selected by it.
If the Administrative Agent shall have determined that it is unable to
ascertain the Federal Funds Effective Rate, for any reason, including the
inability or failure of the Administrative Agent to obtain sufficient
quotations in accordance with the terms thereof (which determination shall be
prima facie evidence of such inability), the Alternate Base Rate shall be
determined without regard to clause (b) of the first sentence of this
definition, until the circumstances giving rise to such inability no longer
exist. Any change in the Alternate Base Rate due to a change in the Prime Rate
or the Federal Funds Effective Rate shall be effective as of the opening of
business on the effective date of such change in the Prime Rate or the Federal
Funds Effective Rate, respectively.
"Applicable Facility Fee Percentage": on any date, the applicable
percentage set forth below based upon the ratings applicable on such date to
the Company's senior, unsecured, non-credit-enhanced long-term indebtedness for
borrowed money ("Index Debt"):
<TABLE>
<CAPTION>
Percentage
----------
<S> <C>
CATEGORY 1
Rating
A- or higher by S&P
A3 or higher by Moody's .09%
CATEGORY 2
Rating
BBB+ by S&P
Baa1 by Moody's .125%
CATEGORY 3
Rating
BBB by S&P
Baa2 by Moody's .15%
</TABLE>
-2-
<PAGE> 8
<TABLE>
<CAPTION>
Percentage
----------
<S> <C>
CATEGORY 4
Rating
BBB- by S&P
Baa3 by Moody's .20%
CATEGORY 5
Rating
BB+ or lower by S&P
Ba1 or lower by Moody's .275%
</TABLE>
For purposes of the foregoing, (i) if the ratings for Index Debt established or
deemed to have been established by S&P and Moody's shall fall within different
Categories, the Applicable Facility Fee Percentage shall be determined by
reference to the numerically lower of such Categories (i.e., the Category
corresponding to the higher rating); (ii) if S&P or Moody's shall not have in
effect a rating for Index Debt (other than for a reason not related to the
creditworthiness of the Company or to any act or failure to act on the part of
the Company, or because such rating agency shall no longer be in the business
of rating corporate debt obligations), then the rating of such agency shall be
deemed to fall within Category 5; and (iii) if any rating established or
deemed to have been established by S&P or Moody's shall be changed (other than
as a result of a change in the rating system of S&P or Moody's), such change
shall be effective as of the date on which it is first announced by the
applicable rating agency. Each change in the Applicable Facility Fee
Percentage shall apply during the period commencing on the effective date of
such change and ending on the date immediately preceding the effective date of
the next such change. If the rating system of S&P or Moody's shall change, or
if either such rating agency shall no longer have in effect a rating for Index
Debt (other than for one of the reasons referred to in clause (ii) above), the
Company and the Lenders, acting through the Administrative Agent, shall
negotiate in good faith to amend the references to specific ratings in this
definition to reflect such changed rating system or the non-availability of
ratings from such rating agency.
"Applicable Index Rate": in respect of any Index Rate Competitive
Loan of a specified maturity requested pursuant to an Index Rate Competitive
Loan Request, the London interbank offered rate for deposits in Dollars for the
period commencing on the date of such Index Rate Competitive Loan and ending on
the maturity date thereof which appears on Telerate Page 3750 as of 11:00 A.M.,
London time, two Working Days prior to the beginning of such period.
"Applicable L/C Fee Percentage": on any date, the applicable
percentage set forth below based upon the ratings applicable on such date to
the Index Debt:
-3-
<PAGE> 9
<TABLE>
<CAPTION>
Percentage
----------
<S> <C>
CATEGORY 1
Rating
A- or higher by S&P
A3 or higher by Moody's .185%
CATEGORY 2
Rating
BBB+ by S&P
Baa1 by Moody's .20%
CATEGORY 3
Rating
BBB by S&P
Baa2 by Moody's .225%
CATEGORY 4
Rating
BBB- by S&P
Baa3 by Moody's .25%
CATEGORY 5
Rating
BB+ or lower by S&P
Ba1 or lower by Moody's .35%
</TABLE>
For purposes of the foregoing, (i) if the ratings for Index Debt established or
deemed to have been established by S&P and Moody's shall fall within different
Categories, the Applicable L/C Fee Percentage shall be determined by reference
to the numerically lower of such Categories (i.e., the Category corresponding
to the higher rating); (ii) if S&P or Moody's shall not have in effect a rating
for Index Debt (other than for a reason not related to the creditworthiness of
the Company or to any act or failure to act on the part of the Company, or
because such rating agency shall no longer be in the business of rating
corporate debt obligations), then the rating of such rating agency shall be
deemed to fall within Category 5; and (iii) if any rating established or deemed
to have been established by S&P or Moody's shall be changed (other than as a
result of a change in the rating system of S&P or Moody's), such change shall
be effective as of the date on which it is first announced by the applicable
rating agency. Each change in the Applicable L/C Fee Percentage shall apply
during the period commencing on the effective date of such change and ending on
the date immediately preceding the effective date of the next such change. If
the rating system of S&P or Moody's shall change, or if either such rating
agency shall no longer have in effect a rating for Index Debt (other than for
one of the reasons referred to in clause (ii) above), the Company and the
-4-
<PAGE> 10
Lenders, acting through the Administrative Agent, shall negotiate in good faith
to amend the references to specific ratings in this definition to reflect such
changed rating system or the non-availability of ratings from such rating
agency.
"Applicable Margin": on any date, for CD Rate Loans and Eurodollar
Loans, the applicable percentage set forth below based upon the ratings
applicable on such date to the Index Debt:
<TABLE>
<CAPTION>
EURODOLLAR
CD RATE LOAN LOAN
Percentage Percentage
------------ ----------
<S> <C> <C>
CATEGORY 1
Rating
A- or higher by S&P
A3 or higher by Moody's .31% .185%
CATEGORY 2
Rating
BBB+ by S&P
Baa1 by Moody's .325% .20%
CATEGORY 3
Rating
BBB by S&P
Baa2 by Moody's .35% .225%
CATEGORY 4
Rating
BBB- by S&P
Baa3 by Moody's .375% .25%
CATEGORY 5
Rating
BB+ or lower by S&P
Ba1 or lower by Moody's .475% .35%
</TABLE>
For purposes of the foregoing, (i) if the ratings for Index Debt established or
deemed to have been established by S&P and Moody's shall fall within different
Categories, the Applicable Margin shall be determined by reference to the
numerically lower of such categories (i.e., the Category corresponding to the
higher rating); (ii) if S&P or Moody's shall not have in effect a rating for
Index Debt (other than for a reason not related to the creditworthiness of the
Company or to any act or failure to act on the part of the Company, or because
such rating agency shall no longer be in the business of rating corporate debt
obligations), then the rating
-5-
<PAGE> 11
of such rating agency shall be deemed to fall within Category 5; and (iii) if
any rating for Index Debt established or deemed to have been established by S&P
or Moody's shall be changed (other than as a result of a change in the rating
system of S&P or Moody's), such change shall be effective as of the date on
which it is first announced by the applicable rating agency. Each change in
the Applicable Margin shall apply during the period commencing on the effective
date of such change and ending on the date immediately preceding the effective
date of the next such change. If the rating system of S&P or Moody's shall
change, or if either such rating agency shall no longer have in effect a rating
for Index Debt (other than for one of the reasons referred to in clause (ii)
above), the Company and the Lenders, acting through the Administrative Agent,
shall negotiate in good faith to amend the references to specific ratings in
this definition to reflect such changed rating system or the non-availability
of ratings from such rating agency.
"Assessment Rate": for each Interest Period for CD Rate Loans, the
net annual assessment rate (rounded upward, if necessary, to the next higher
1/100 of 1%) estimated by Chemical at the beginning of such Interest Period to
be the current annual assessment rate payable by Chemical to the Federal
Deposit Insurance Corporation (or any successor) for insuring time deposits
made in Dollars at offices of Chemical in the United States.
"Asset Sale": any sale, transfer, lease or other disposition of any
property or asset of the Company or any Subsidiary of the Company except a
sale, transfer, lease or other disposition (a) of cash, (b) of temporary cash
investments, (c) of trade receivables or other rights to receive money (whether
absolute or contingent, or matured or unmatured), (d) of inventories of gas and
materials and supplies other than (i) in connection with a sale, transfer,
lease or other disposition of property, plant and equipment or (ii) for the
primary purpose of financing the purchase, storage or transportation of such
gas or materials and supplies by the Company or a Subsidiary of the Company,
(e) by the Company to a Subsidiary of the Company or by a Subsidiary of the
Company to the Company or to another Subsidiary of the Company (but if the
sale, transfer, lease or other disposition is by one of the Principal
Subsidiaries, then only to another of the Principal Subsidiaries), (f) of other
assets in the ordinary course of business or (g) of other assets listed on
Schedule 3 hereto.
"Borrowing Date": any Business Day or Working Day, as applicable,
specified in a notice pursuant to subsection 2.3, 2.5, 2.6 or 2.15 as a date on
which the Lenders are to make Loans or an Issuing Lender is to issue a Letter
of Credit pursuant to such notice.
"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized or required by
law to close.
"Capital Lease": as to any Person, (a) any lease of property, real
or personal, the obligations under which are capitalized on a balance sheet of
such Person and (b) any other such lease to the extent that the then present
value of the minimum rental commitment thereunder should, in accordance with
GAAP, be capitalized on a balance sheet of the lessee.
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"Cash Equivalents": (i) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having the highest rating obtainable
from either S&P or Moody's; (iii) commercial paper maturing no more than one
year from the date of creation thereof and, at the time of acquisition, having
the highest rating obtainable from either S&P or Moody's; (iv) certificates of
deposit or banker's acceptances maturing within one year from the date of
acquisition thereof issued by (x) any Lender, (y) any commercial bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia having combined capital and surplus of not less than
$250,000,000 or (z) any bank which has a short-term commercial paper rating
meeting the requirements of clause (iii) above (any such Lender or bank, a
"Qualifying Lender"); (v) eurodollar time deposits having a maturity of less
than one year purchased directly from any Lender (whether such deposit is with
such Lender or any other Lender hereunder) or issued by any Qualifying Lender;
and (vi) repurchase agreements and reverse repurchase agreements with a term of
not more than one year with any Qualifying Lender relating to marketable direct
obligations issued or unconditionally guaranteed by the United States.
"CD Rate": with respect to each day during an Interest Period for CD
Rate Loans, the rate per annum equal to the average (rounded upward, if
necessary, to the next higher of 1/100 of 1%) of the respective rates notified
to the Administrative Agent by each of the Reference Lenders as the average
rate per annum bid by New York certificate of deposit dealers of recognized
standing for the purchase at face value from the Reference Lenders of their
certificates of deposit in The City of New York at or about 10:00 A.M., New
York City time, on the first day of such Interest Period for the number of days
comprised therein and in an amount comparable to the amount of the CD Rate
Loans of such Reference Lender to be outstanding during such Interest Period.
"CD Rate Loans": Revolving Credit Loans at such time as they are
made and/or are being maintained at a rate of interest based upon the Adjusted
CD Rate.
"CD Reserve Requirements": with respect to any day during an
Interest Period for CD Rate Loans, 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) for determining the reserve
requirement for a member bank of the Federal Reserve System in The City of New
York with deposits exceeding $1,000,000,000 in respect of new non-personal time
deposits in Dollars in The City of New York having a maturity comparable to
such Interest Period and in an amount of $100,000 or more.
"Chemical": Chemical Bank.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
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"Commercial L/C": a commercial letter of credit in a face amount of
not less than $500,000, payable in Dollars, issued by an Issuing Lender in
accordance with subsections 2.4 and 2.5 for the account of the Company for the
purchase of goods in the ordinary course of business, in which the
Participating Lenders participate pursuant to subsection 2.7.
"Commercial L/C Application": as defined in subsection 2.5(a).
"Commitments": as defined in subsection 2.1(a).
"Commitment Percentage": as to any Lender, the percentage of the
aggregate Commitments constituted by such Lender's Commitments (or, at any time
after the Commitments shall have expired or terminated, the ratio, expressed as
a percentage, which the aggregate principal amount of such Lender's Loans then
outstanding bears to the aggregate principal amount of all Loans then
outstanding).
"Commitment Transfer Supplement": as defined in subsection 10.8.
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Company within the meaning
of Section 4001 of ERISA.
"Company": Panhandle Eastern Corporation, a Delaware corporation,
doing business as PanEnergy Corp.
"Competitive Loan": each loan made pursuant to subsection 2.13.
"Competitive Loan Assignee": as defined in subsection 10.9(a).
"Competitive Loan Assignment": any assignment by a Competitive Loan
Lender to a Competitive Loan Assignee of a Competitive Loan and related
Individual Competitive Loan Note; any such Competitive Loan Assignment to be
registered in the Register must set forth, in respect of the Competitive Loan
Assignee thereunder, the full name of such Competitive Loan Assignee, its
address for notices, its lending office address (in each case with telephone
and facsimile transmission numbers) and payment instructions for all payments
to such Competitive Loan Assignee, and must contain an agreement by such
Competitive Loan Assignee to comply with the provisions of subsections 3.12,
3.16 and 10.9.
"Competitive Loan Borrowing Period": the period from and including
the Effective Date until the date which is seven days prior to the Termination
Date or, if earlier, the date on which the Commitments shall terminate as
provided herein.
"Competitive Loan Confirmation": each confirmation by the Company of
its acceptance of Competitive Loan Offers, which Competitive Loan Confirmation
shall be substantially in the form of Exhibit A and shall be delivered to the
Administrative Agent in writing or by facsimile transmission.
"Competitive Loan Lender": each Lender that has agreed to offer to
make Competitive Loans hereunder.
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"Competitive Loan Maturity Date": as to any Competitive Loan, the
date specified by the Company pursuant to subsection 2.15(d)(ii) in its
acceptance of the related Competitive Loan Offer.
"Competitive Loan Note": a Grid Competitive Loan Note or an
Individual Competitive Loan Note.
"Competitive Loan Offer": each offer of a Competitive Loan Lender to
make Competitive Loans pursuant to a Competitive Loan Request, which
Competitive Loan Offer shall contain the information specified in Exhibit B and
shall be delivered to the Administrative Agent by telephone, immediately
confirmed by facsimile transmission.
"Competitive Loan Request": each request by the Company for
Competitive Loan Lenders to submit bids to make Competitive Loans, which
request shall contain the information in respect of such requested Competitive
Loans specified in Exhibit C and shall be delivered to the Administrative Agent
in writing or by facsimile transmission, or by telephone, immediately confirmed
by facsimile transmission.
"Consolidated Capitalization": at a particular date, the sum of (a)
Consolidated Net Worth at such date, (b) the amount of Consolidated
Indebtedness at such date and (c) the aggregate amounts payable upon
involuntary liquidation (other than accrued dividends) to holders of shares of
any classes of preferred stock (other than preferred stock subject to mandatory
redemption or repurchase) of the Company and its Subsidiaries at such date.
"Consolidated Indebtedness": at a particular date, all Indebtedness
of the Company and its Subsidiaries determined on a consolidated basis in
accordance with GAAP.
"Consolidated Net Worth": at a particular date, all amounts which
would be included under common stockholders' equity on a consolidated balance
sheet of the Company and its Subsidiaries determined on a consolidated basis in
accordance with GAAP.
"Consolidated Tangible Assets": at a particular date, the total
assets appearing on the consolidated balance sheet of the Company and its
consolidated Subsidiaries most recently delivered to each Lender pursuant to
subsection 5.1, 6.1(a) or 6.1(b), as the case may be, less intangible assets.
As used herein "intangible assets" means the value (net of applicable reserves)
as shown on or reflected in such balance sheet of goodwill, deferred charges,
patents and trademarks.
"Contractual Obligations": as to any Person, any provision of any
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.
"Credit Availability Amount": at any time, (a) the then aggregate
amount of the Commitments less (b) the then Extensions of Credit.
"Credit Documents": as defined in subsection 9.1.
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"Credit Exposure": as defined in subsection 10.7.
"Default": any of the events specified in Section 8, whether or not
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, event or act, has been satisfied.
"Determining Lenders": (a) Lenders whose Commitment Percentages
aggregate at least 40% and (b) after the Commitments have expired or
terminated, Lenders whose outstanding Loans represent in the aggregate at least
40% of all outstanding Loans.
"Dollars" and "$": the lawful currency of the United States of
America.
"Domestic Lending Office": initially, the office of each Lender
designated as such and set forth on Schedule 1, and thereafter, such other
office of such Lender, if any, of which such Lender shall notify the
Administrative Agent and the Company in writing.
"Effective Date": the earliest date (but not later than March 31,
1996) on which all of the conditions precedent to the initial Loans set forth
in Section 4 shall have occurred (or shall have been waived in accordance with
subsection 10.1).
"ERISA": as defined in subsection 5.7.
"Eurocurrency Reserve Requirements": with respect to each day during
an Interest Period for Eurodollar Loans, the aggregate (without duplication) of
the rates (expressed as a decimal) of reserve requirements in effect on such
day (including, without limitations, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors of the
Federal Reserve System or other Governmental Authority having jurisdiction with
respect thereto), dealing with reserve requirements prescribed for eurocurrency
funding (currently referred to as "Eurocurrency liabilities" in Regulation D of
such Board) maintained by a member bank of such System.
"Eurodollar Base Rate": with respect to each day during an Interest
Period for Eurodollar Loans, the rate per annum equal to the average (rounded
upward, if necessary, to the next higher 1/16 of 1%) of the respective rates
notified to the Administrative Agent by each of the Reference Lenders as the
rate at which its Eurodollar Lending Office is offered Dollar deposits two
Working Days prior to the beginning of such Interest Period in the interbank
eurodollar market where the eurodollar and foreign currency and exchange
operations of such Eurodollar Lending Office are customarily conducted at or
about 10:00 A.M., New York City time, for delivery on the first day of such
Interest Period for the number of days comprised therein and in an amount
comparable to the amount of the Eurodollar Loans of such Reference Lender to be
outstanding during such Interest Period.
"Eurodollar Lending Office": initially, the office of each Lender
designated as such and set forth on Schedule 1, and thereafter, such other
office of such Lender, if any, of which such Lender shall notify the
Administrative Agent and the Company in writing.
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"Eurodollar Loans": Revolving Credit Loans at such time as they are
made and/or are being maintained at a rate of interest based upon the
Eurodollar Rate.
"Eurodollar Rate": with respect to each day during an Interest
Period for Eurodollar Loans, a rate per annum determined for such day in
accordance with the following formula (rounded upward, if necessary, to the
next higher 1/16 of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Event of Default": any of the events specified in Section 8;
provided that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, event or act, has been satisfied.
"Exchange Act": the Securities Exchange Act of 1934, as amended.
"Existing Facilities": (a) the Credit Agreement, dated as of
December 1, 1994, among the Company, the financial institutions parties thereto
and Chemical Bank, as administrative agent, (b) the Credit Agreement, dated as
of December 1, 1994, among TETCO, the financial institutions parties thereto
and Chemical Bank, as administrative agent, and (c) the Credit Agreement, dated
as of December 1, 1994, among PEPL, the financial institutions parties thereto
and Chemical Bank, as administrative agent.
"Extensions of Credit": at any particular time, the sum of (a) the
aggregate principal amount of Loans then outstanding and (b) the aggregate
Letter of Credit Obligations (excluding interest, fees and indemnities thereon)
then outstanding.
"Facility Fee": as defined in subsection 3.2(a).
"Fixed Rate Competitive Loan Request": any Competitive Loan Request
requesting the Competitive Loan Lenders to offer to make Fixed Rate Competitive
Loans.
"Fixed Rate Competitive Loans": Competitive Loans the rate of
interest applicable to which is equal to a fixed percentage rate per annum
specified by the Competitive Loan Lender making such Loan in its Competitive
Loan Offer (as opposed to a rate composed of the Applicable Index Rate plus or
minus a margin).
"GAAP": generally accepted accounting principles in the United
States of America as in effect from time to time.
"Governmental Authority": any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Grid Competitive Loan Notes": as defined in subsection 2.14(a).
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"Indebtedness": of a Person, at a particular date, the sum (without
duplication) at such date of (a) indebtedness for borrowed money or for the
deferred purchase price of property or services in respect of which such Person
is liable as obligor or arising under any conditional sales contract or other
title retention agreement with respect to property acquired by such Person
(even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (b) obligations of such Person under Capital Leases, (c) the face
amount available or to be available to be drawn under all letters of credit
issued for the account of such Person (excluding any amount relating to
Indebtedness included in the definition of Indebtedness under another clause of
this definition) and, without duplication, the unreimbursed amount of all
drafts drawn thereunder, (d) any obligations (in the nature of principal or
interest) of such Person in respect of acceptances or similar obligations
issued or created for the account of such Person, (e) Indebtedness referred to
in clause (a), (b), (c) or (d) above or (f) or (g) below secured by any Lien on
any property or asset owned or held by such Person regardless of whether the
Indebtedness secured thereby shall have been assumed by or is a primary
liability of such Person (but in any event not exceeding the fair market value
of such property or asset), (f) all direct guarantees by such Person of
Indebtedness referred to in clause (a), (b), (c), (d) or (e) above of another
Person and (g) all amounts payable in connection with mandatory redemptions or
repurchases of preferred stock of such Person.
"Index Debt": as defined in the definition of "Applicable Facility
Fee Percentage".
"Index Rate Competitive Loans": Competitive Loans bearing interest
at a rate equal to the Applicable Index Rate plus or minus a margin bid.
"Index Rate Competitive Loan Request": any Competitive Loan Request
requesting the Competitive Loan Lenders to offer to make Index Rate Competitive
Loans.
"Individual Competitive Loan Notes": as defined in subsection
2.14(b).
"Interest Payment Date": (a) as to any ABR Loan, the last day of
each March, June, September and December to occur while such ABR Loan is
outstanding, commencing on March 31, 1996, and each date principal is due with
respect to such ABR Loan; (b) as to any Eurodollar Loan in respect of which the
Company has selected an Interest Period of one, two or three months and any CD
Rate Loan in respect of which the Company has selected an Interest Period of
30, 60 or 90 days, the last day of such Interest Period; (c) as to any
Eurodollar Loan and any CD Rate Loan in respect of which the Company has
selected a longer Interest Period than the periods described in clause (b), the
last day of each March, June, September and December falling within such
Interest Period and the last day of such Interest Period; (d) as to any Fixed
Rate Competitive Loan, each interest payment date specified by the Company for
such Loan in the related Competitive Loan Request (including, in any event, the
Competitive Loan Maturity Date in respect of such Loan); and (e) as to any
Index Rate Competitive Loan, (i) the Competitive Loan Maturity Date in respect
of such Loan and (ii) each date (if any) occurring prior to such Competitive
Loan Maturity Date which is three months, or a whole multiple thereof, after
the Borrowing Date in respect of such Loan.
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"Interest Period": (a) with respect to any Eurodollar Loan:
(i) initially, the period commencing on the borrowing or conversion
date, as the case may be, with respect to such Eurodollar Loan and ending
one, two, three or six months (or nine or twelve months, to the extent
funds are available for such nine- or twelve-month period) thereafter, as
selected by the Company in its notice of borrowing as provided in
subsection 2.3, or its notice of conversion as provided in subsection
3.10, as the case may be; and
(ii) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurodollar Loan and ending
one, two, three or six months (or nine or twelve months, to the extent
funds are available for such nine- or twelve-month period) thereafter, as
selected by the Company by irrevocable notice to the Administrative Agent
not less than three Working Days prior to the last day of the then current
Interest Period with respect to such Eurodollar Loan; and
(b) with respect to any CD Rate Loan:
(i) initially, the period commencing on the borrowing or conversion
date, as the case may be, with respect to such CD Rate Loan and ending 30,
60, 90, 120 or 180 days (or 360 days, to the extent funds are available
for such 360-day period) thereafter, as selected by the Company in its
notice of borrowing as provided in subsection 2.3, or its notice of
conversion as provided in subsection 3.10, as the case may be; and
(ii) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such CD Rate Loan and ending 30,
60, 90, 120 or 180 days (or 360 days, to the extent funds are available
for such 360-day period) thereafter, as selected by the Company by
irrevocable notice to the Administrative Agent not less than two Business
Days prior to the last day of the then current Interest Period with
respect to such CD Rate Loan.
All of the foregoing provisions relating to Interest Periods are
subject to the following:
(A) if any Interest Period for Eurodollar Loans would otherwise end
on a day which is not a Working Day, that Interest Period shall be extended to
the next succeeding Working Day unless the result of such extension would be to
carry such Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Working Day;
(B) if any Interest Period for CD Rate Loans would otherwise end on
a day which is not a Business Day, such Interest Period shall be extended to
the next succeeding Business Day;
(C) the Company shall have no right to elect an Interest Period
which would extend beyond the Termination Date;
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(D) if the Company shall fail to give notice as provided above, the
Company shall be deemed to have selected an ABR Loan to replace the affected
Eurodollar Loans or CD Rate Loans;
(E) any Interest Period for Eurodollar Loans that begins on the last
Working 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 Working Day of a calendar month;
(F) the Company shall select Interest Periods so that there shall be
no more than eight Tranches with respect to the Revolving Credit Loans in
existence at any one time; and
(G) for purposes of determining the availability of a nine- or
twelve-month Interest Period for Eurodollar Loans, or a 360-day Interest Period
for CD Rate Loans, such Interest Period shall be deemed available if (a) each
of the Reference Banks quotes a rate to the Administrative Agent as provided in
the definition of "Eurodollar Base Rate" or "CD Rate", as the case may be, and
(b) the Determining Lenders shall not have advised the Administrative Agent
that the Eurodollar Rate or the Adjusted CD Rate, as the case may be,
determined by the Administrative Agent on the basis of such quotes will not
adequately and fairly reflect the cost to such Lenders of maintaining or
funding their Eurodollar Loans or CD Rate Loans, as the case may be, for such
Interest Period.
"Issuing Lender": with respect to Letters of Credit, Chemical or
such other Lenders as the Company may from time to time designate as an Issuing
Lender (and which shall accept such designation) and notify the Administrative
Agent of such designation, each in its capacity as issuer of such Letters of
Credit.
"L/C Participating Interest": with respect to any Letter of Credit,
(a) in the case of the Issuing Lender, its interest in such Letter of Credit
and the Letter of Credit Application relating thereto after giving effect to
the granting of any participating interests therein pursuant to subsection 2.7
and (b) in the case of each Participating Lender, its undivided participating
interest in such Letter of Credit and the Letter of Credit Application relating
thereto.
"Lenders": as defined in the preamble to this Agreement, which term
includes Lenders originally executing this Agreement and, thereafter, from the
date upon which the conditions referred to in subsection 10.8 are satisfied,
the Purchasing Lenders.
"Letter of Credit Applications": the collective reference to
Commercial L/C Applications and Standby L/C Applications.
"Letter of Credit Obligations": at any particular time, all
liabilities of the Company with respect to Letters of Credit, whether or not
any such liability is contingent, including without duplication, the sum of (a)
the then outstanding Reimbursement Obligations plus (b) the then aggregate
undrawn face amount of the Letters of Credit.
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"Letter of Credit Participation Certificate": a certificate in
substantially the form of Exhibit D.
"Letters of Credit": the collective reference to Commercial L/Cs and
Standby L/Cs.
"Lien": any mortgage, pledge, hypothecation, security interest,
encumbrance, charge or lien (statutory or otherwise) (including, without
limitation, any conditional sale or other title retention agreement and any
Capital Lease having substantially the same economic effect as any of the
foregoing) or the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction in respect of any of the
foregoing.
"Loan": any Revolving Credit Loan or Competitive Loan made pursuant
to this Agreement.
"Moody's": Moody's Investors Service, Inc.
"Note": any Revolving Credit Note or Competitive Loan Note.
"Obligations": the unpaid principal amount of, and interest on, the
Notes and all other obligations and liabilities of the Company to the
Administrative Agent and the Lenders (including, without limitation,
Reimbursement Obligations), 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, whether on account of
principal, interest, fees, indemnities, costs, expenses (including, without
limitation, all fees and disbursements of counsel to the Administrative Agent)
or otherwise.
"Participants": as defined in subsection 10.7.
"Participating Lender": each Lender (other than the Issuing Lender),
with respect to its L/C Participating Interest in each Letter of Credit.
"PENGC": PanEnergy Natural Gas Corporation, a Delaware corporation.
"PEPL": Panhandle Eastern Pipe Line Company, a Delaware corporation.
"Person": an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"PES": PanEnergy Services, Inc., a Delaware corporation.
"Principal Subsidiaries": TETCO, PEPL, AGTCO, PENGC and PES.
"Purchasing Lender": as defined in subsection 10.8.
"Reference Lenders": Chemical, Morgan Guaranty Trust Company of New
York and NationsBank of Texas, N.A.
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"Refunding Extension of Credit": Loans or issuances of Letters of
Credit hereunder which, after application of the proceeds thereof, result in no
net increase in the aggregate outstanding Extensions of Credit with respect to
any Lender.
"Register": as defined in subsection 10.10.
"Reimbursement Obligation": the obligation of the Company to
reimburse an Issuing Lender in accordance with the terms of this Agreement and
the related Letter of Credit Application for any payment made by an Issuing
Lender under any Letter of Credit.
"Required Lenders": (a) Lenders whose Commitment Percentages
aggregate at least 50.1% and (b) after the Commitments have expired or
terminated, Lenders whose outstanding Loans represent in the aggregate at least
50.1% of all outstanding Loans.
"Requirements of Law": as to any Person, the articles or certificate
of incorporation and bylaws (or other organizational or governing documents) of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person
or any of its property is subject.
"Responsible Officer": as to any Person, the chief executive
officer, president or any vice-president of such Person or, with respect to
financial matters, the chief financial officer, treasurer or controller or any
assistant treasurer, of such Person or any other officer authorized by such
Person to deliver documents with respect to financial matters pursuant to this
Agreement. Unless otherwise qualified, all references to a "Responsible
Officer" in this Agreement shall refer to a Responsible Officer of the Company.
"Revolving Credit Loans": as defined in subsection 2.1(a)
"Revolving Credit Notes": as defined in subsection 2.2.
"S&P": Standard & Poor's Ratings Group.
"SEC Reports": the Company's (a) Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 and (b) Quarterly Reports on Form 10-Q for
the quarters ended March 31, 1995, June 30, 1995 and September 30, 1995.
"Significant Subsidiary": any Subsidiary of the Company that, in
terms of total assets or the investment therein, would be a "significant
subsidiary" as defined in Rule 1-02 of Regulation S-X under the Securities Act
of 1933 and the Exchange Act.
"Standby L/C": an irrevocable letter of credit in a face amount of
not less than $500,000, payable in Dollars, issued in accordance with
subsections 2.4 and 2.6 by an Issuing Lender in Dollars for the account of the
Company in respect of obligations of the Company and its Subsidiaries incurred
pursuant to contracts made or performances undertaken or to be undertaken or
like matters relating to contracts to which the Company or any Subsidiary
thereof is or proposes to become a party in the ordinary course of the
Company's or such
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<PAGE> 22
Subsidiary's, as the case may be, business, including, without limiting the
foregoing, for insurance purposes.
"Standby L/C Application": as defined in subsection 2.6(a).
"Subsidiary": a corporation of which shares of stock having ordinary
voting power (other than stock having such power only by reason of the
happening of a contingency) to elect a majority of the board of directors or
other managers of such corporation are at the time owned, or the management of
which is otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by the Company.
"Termination Date": January 31, 2001.
"TETCO": Texas Eastern Transmission Corporation, a Delaware
corporation.
"Tranche": Eurodollar Loans or CD Rate Loans, in either case whose
Interest Periods each begin on the same day and end on the same day.
"Transferee": as defined in subsection 10.10(e).
"Type": (a) as to any Revolving Credit Loan, its nature as an ABR
Loan, a Eurodollar Loan or a CD Rate Loan and (b) as to any Competitive Loan,
its nature as a Fixed Rate Competitive Loan or an Index Rate Competitive Loan .
"Uniform Customs": the Uniform Customs and Practice for Documentary
Credits (1993 Version), International Chamber of Commerce Publication No. 500
and any amendments or revisions thereof.
"Wholly-Owned Subsidiary": a corporation of which all of the shares
of stock having ordinary voting power (other than stock having such power only
by reason of the happening of a contingency) to elect a majority of the Board
of Directors or other managers of such corporation are at the time owned,
directly or indirectly through one or more intermediaries, or both, by the
Company.
"Working Day": any Business Day on which dealings in foreign
currencies and exchange between banks may be carried on in London, England and
in The City of New York.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
herein, all terms defined in this Agreement or any other Credit Document shall
have the defined meanings when used in any certificate or other document made
or delivered pursuant hereto.
(b) As used herein or in any certificate or document made or
delivered pursuant hereto, accounting terms relating to the Company and its
Subsidiaries not defined in subsection 1.1 and accounting terms partly defined
in subsection 1.1, to the extent not defined, shall have the respective
meanings given to them under GAAP.
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(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement, or any other certificate or
document made or delivered pursuant hereto shall refer to this Agreement or
such other certificate or document, as the case may be, as a whole and not to
any particular provision thereof, and Section, subsection, Schedule and Exhibit
references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNTS AND TERMS OF LOANS
2.1 Commitments. (a) Subject to the terms and conditions hereof,
each Lender severally, and not jointly, agrees to make revolving credit loans
(collectively, the "Revolving Credit Loans") to the Company from time to time
during the period from the Effective Date to, but not including, the
Termination Date in an aggregate principal amount at any one time outstanding
not to exceed the amount set forth under the heading "Commitment" opposite the
name of such Lender on Schedule 2 hereto, as such amount may be reduced from
time to time pursuant to subsection 3.6 hereof (collectively, the
"Commitments"). The Company may use the Commitments by requesting the Lenders
to make Revolving Credit Loans, prepaying Revolving Credit Loans in whole or in
part and reborrowing, all in accordance with the terms and conditions hereof;
provided that the Revolving Credit Loans made as part of any one borrowing
shall not exceed the Credit Availability Amount on the Borrowing Date, after
giving effect to the use and application of the proceeds thereof.
(b) Subject to the terms and conditions hereof, the Revolving Credit
Loans may be (i) ABR Loans, (ii) Eurodollar Loans, (iii) CD Rate Loans or (iv)
any combination thereof, as determined by the Company and notified to the
Administrative Agent in accordance with subsection 2.3.
2.2 Revolving Credit Notes. The Revolving Credit Loans made by each
Lender pursuant hereto shall be evidenced by a promissory note of the Company,
substantially in the form of Exhibit E (collectively, the "Revolving Credit
Notes"), with appropriate insertions therein as to principal amount, payable to
the order of such Lender and representing the obligation of the Company to pay
a principal amount equal to the lesser of (a) such Lender's Commitment and (b)
the aggregate unpaid principal amount of all Revolving Credit Loans made by
such Lender, with interest thereon as prescribed in subsection 3.1. Each
Lender is hereby authorized to record the date, Type and amount of each
Revolving Credit Loan made by such Lender and the date and amount of each
payment or prepayment of principal thereof and, with respect to Eurodollar
Loans and CD Rate Loans, the length of the Interest Period and the Eurodollar
Rate or CD Rate applicable 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 in the
absence of manifest error; provided that failure by any Lender to make any such
recordation on such Revolving Credit Note shall not affect any of the
obligations of the Company under such Revolving Credit Note or this Agreement.
The Revolving Credit Note of each Lender shall (i) be dated the Effective Date,
(ii) bear interest, payable as specified in subsection 3.1, for the period
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from the date thereof on the unpaid principal amount thereof from time to time
outstanding at the interest rate per annum specified in subsection 3.1 until
paid in full and (iii) be stated to mature on the Termination Date.
2.3 Procedure for Revolving Credit Borrowings. The Company may
borrow pursuant to subsection 2.1 hereof on any Working Day if the borrowing
(or any portion thereof) consists of Eurodollar Loans or on any Business Day if
the borrowing consists entirely of ABR Loans and/or CD Rate Loans by the
Company giving the Administrative Agent irrevocable written notice (or
telephonic notice promptly confirmed in writing) prior to 11:45 A.M., New York
City time, on, in the case of ABR Loans, two Business Days prior to, in the
case of CD Rate Loans, and three Working Days prior to, in the case of
Eurodollar Loans, the proposed Borrowing Date specifying (a) the amount to be
borrowed, (b) the requested Borrowing Date, (c) whether the borrowing is to be
a Eurodollar Loan, a CD Rate Loan, an ABR Loan, or a combination thereof and
(d) if the borrowing is to be entirely or partly a Eurodollar Loan or a CD Rate
Loan, the length of the Interest Period(s) thereof. Each borrowing shall be in
an aggregate principal amount of the lesser of (i) $10,000,000 or a whole
multiple of $5,000,000 in excess thereof and (ii) the then Credit Availability
Amount. Upon receipt of such notice from the Company, the Administrative Agent
shall promptly notify each Lender thereof. Not later than 1:00 P.M., New York
City time, on the Borrowing Date specified in such notice, each Lender shall
make available to the Administrative Agent at the Administrative Agent's Office
for the account of the Company an amount in immediately available funds equal
to the amount of the Revolving Credit Loan to be made by such Lender. The
proceeds of such Revolving Credit Loans will then be made available to the
Company by the Administrative Agent at the Administrative Agent's Office by
crediting the account of the Company on the books of the Administrative Agent's
Office with the aggregate of the amounts made available to the Administrative
Agent by the Lenders and in like funds as received by the Administrative Agent.
2.4 Letters of Credit. Subject to the terms and conditions hereof,
the Issuing Lenders agree to issue, and each Participating Lender agrees to
purchase an L/C Participating Interest in, Letters of Credit in the form of
Commercial L/Cs or Standby L/Cs from time to time during the period from the
Effective Date to, but not including, the Termination Date; provided that (i)
the aggregate face amount of the Letters of Credit issued on any Borrowing Date
shall not exceed the Credit Availability Amount on such Borrowing Date and (ii)
on the date of the issuance of any Letter of Credit, and after giving effect to
the issuance of such Letter of Credit, the aggregate Letter of Credit
Obligations outstanding at such time shall not exceed 50% of the aggregate
Commitments at such time.
2.5 Issuance of Commercial L/Cs. (a) The Company may request an
Issuing Lender to issue a Commercial L/C in favor of sellers of goods to the
Company or any of its Subsidiaries on any Business Day during the period from
the Effective Date to, but not including, the Termination Date by delivering to
the Issuing Lender, through the Administrative Agent at its address specified
in subsection 10.2, a commercial letter of credit application and security
agreement in such Issuing Lender's then customary form (as such form may be
agreed to be modified, the "Commercial L/C Application"), completed to the
satisfaction of such Issuing Lender, and such other certificates, documents and
other papers and information as such Issuing Lender may reasonably request.
The Company hereby agrees
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to observe and perform its covenants, duties and obligations under each
Commercial L/C Application.
(b) Each Commercial L/C issued hereunder shall, among other things,
(i) provide for the payment of sight drafts when presented for honor
thereunder, in accordance with the terms thereof and when accompanied by the
documents described therein or when such documents are presented, as the case
may be, (ii) have an expiry date occurring not later than 180 days after the
date of issuance of such Commercial L/C and in no event occurring later than
the Termination Date and (iii) have a minimum face amount of $500,000. Each
Commercial L/C Application and each Commercial L/C shall be subject to the
Uniform Customs and, to the extent not inconsistent therewith, the laws of the
State of New York.
2.6 Issuance of Standby L/Cs. (a) The Company may request an
Issuing Lender to issue a Standby L/C on any Business Day during the period
from the Effective Date to, but not including, the Termination Date by
delivering to such Issuing Lender, through the Administrative Agent at its
address specified in subsection 10.2, a standby letter of credit application in
such Issuing Lender's then customary form (as such form may be agreed to be
modified, the "Standby L/C Application"), completed to the satisfaction of such
Issuing Lender together with the proposed form of such letter of credit (which
shall comply with the applicable requirements of paragraph (b) below) and such
other certificates, documents and other papers and information as such Issuing
Lender may reasonably request. The Company hereby agrees to observe and
perform its covenants, duties and obligations under each Standby L/C
Application.
(b) Each Standby L/C issued hereunder shall, among other things, (i)
be in such form requested by the Company as shall be acceptable to the relevant
Issuing Lender in its sole discretion, (ii) have an expiry date occurring not
later than the Termination Date and (iii) have a minimum face amount of
$500,000. Each Standby L/C Application and each Standby L/C shall be subject
to the Uniform Customs and, to the extent not inconsistent therewith, the laws
of the State of New York.
2.7 Participating Interests. Effective in the case of each Letter
of Credit as of the date of the issuance thereof, each Issuing Lender agrees to
allot and does allot, to itself and each Participating Lender, and each
Participating Lender severally and irrevocably agrees to take and does take, an
L/C Participating Interest in such Letter of Credit and the related Letter of
Credit Application in a percentage equal to such Participating Lender's
Commitment Percentage. Each Participating Lender hereby agrees that its
obligation to participate in each Letter of Credit issued by such Issuing
Lender hereunder and the drafts drawn thereunder shall be irrevocable and
unconditional.
2.8 Procedure for Opening Letters of Credit. Upon receipt of any
Letter of Credit Application from the Company, the relevant Issuing Lender will
promptly notify each Lender thereof through the Administrative Agent, but in no
event shall such notice to each Lender be given later than the date three
Business Days following receipt of such Letter of Credit Application or the
date such Issuing Lender issues the Letter of Credit, whichever is earlier.
Subject to the terms and conditions hereof, upon such receipt, such Issuing
Lender will process such Letter of Credit Application, and the other
certificates, documents and other
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papers delivered to such Issuing Lender in connection therewith, in accordance
with its customary procedures and, subject to fulfillment of the applicable
conditions specified in subsection 4.2, shall promptly open such Letter of
Credit (but in no event shall such Issuing Lender be required to open any
Letter of Credit earlier than three Business Days after receipt by such Issuing
Lender of the Letter of Credit Application relating thereto) by issuing the
original of such Letter of Credit to the beneficiary thereof and by furnishing
a copy thereof to the Company and to the other Lenders.
2.9 Payments. (a) In the event of any request for drawing under
any Letter of Credit by the beneficiary thereof, the relevant Issuing Lender
shall immediately notify the Company and the Administrative Agent, and the
Company shall reimburse such Issuing Lender on the day on which such drawing is
honored in an amount in same day funds equal to the amount of such drawing, and
otherwise in accordance with the terms of the Letter of Credit Application
relating thereto; provided that anything contained in this Agreement to the
contrary notwithstanding, (i) unless the Company shall have notified the
Administrative Agent and such Issuing Lender prior to 11:00 A.M., New York City
time, on the date of such drawing that the Company intends to reimburse such
Issuing Lender for the amount of such drawing with funds other than the
proceeds of Revolving Credit Loans, the Company shall be deemed to have given
notice pursuant to subsection 2.3 to the Administrative Agent requesting the
Lenders to make Revolving Credit Loans on the date on which such drawing is
honored in an amount equal to the amount of such drawing, and (ii) subject to
satisfaction or waiver of the applicable conditions specified in subsections
4.1 and 4.2, the Lenders shall, on the date of such drawing, make Revolving
Credit Loans that are ABR Loans in the amount of such drawing, the proceeds of
which shall be applied directly by the Administrative Agent to reimburse such
Issuing Lender for the amount of such drawing, and provided further that if for
any reason the Company does not cause the proceeds of Revolving Credit Loans to
be received by such Issuing Lender on such date in an amount equal to the
amount of such drawing, the Company shall reimburse such Issuing Lender, on the
Business Day immediately following the date of such drawing, in an amount in
same day funds equal to the excess of the amount of such drawing over the
amount of such Revolving Credit Loans, if any, which are so received, plus
accrued interest on such amount at the rate per annum equal to 2% above the
Alternate Base Rate.
(b) If the Company shall fail to reimburse an Issuing Lender as
provided in subsection 2.9(a) in an amount equal to the amount of any drawing
honored by such Issuing Lender under a Letter of Credit issued by it, such
Issuing Lender shall promptly notify each Participating Lender through the
Administrative Agent of the unreimbursed amount of such drawing and of such
Participating Lender's respective participation therein based on such
Participating Lender's Commitment Percentage. Forthwith upon its receipt of
any such notice, each Participating Lender will transfer to such Issuing Lender
in immediately available funds an amount equal to such Participating Lender's
Commitment Percentage of the unreimbursed portion of such payment. Upon its
receipt from such Participating Lender of such amount, such Issuing Lender will
complete, execute and deliver to such Participating Lender a Letter of Credit
Participation Certificate dated the date of such receipt and in such amount.
If any Participating Lender fails to make available to such Issuing Lender the
amount of such Participating Lender's Commitment Percentage of such drawing as
provided in this subsection 2.9(b), such Issuing Lender shall be entitled to
recover such amount on
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demand from such Participating Lender together with interest at the rate per
annum equal to 1/2 of 1% above the then applicable Federal funds rate for three
Business Days and thereafter at the rate per annum equal to 2% above the
Alternate Base Rate.
(c) Whenever, at any time after an Issuing Lender has made a payment
under any Letter of Credit and has received from any Participating Lender such
Participating Lender's Commitment Percentage of the unreimbursed portion of
such payment, such Issuing Lender receives any reimbursement on account of such
unreimbursed portion or any payment of interest on account thereof, such
Issuing Lender will transfer such amount to the Administrative Agent in
immediately available funds, and the Administrative Agent will promptly and in
no event later than one Business Day after it receives such payment, distribute
to each Participating Lender its Commitment Percentage thereof in like funds as
received by the Administrative Agent; provided that in the event that the
receipt by an Issuing Lender of such reimbursement or such payment of interest
(as the case may be) is required to be returned, such Participating Lender will
return to such Issuing Lender any portion thereof previously distributed by
such Issuing Lender to it, and provided further that any payment by the Company
on account of such unreimbursed portion or interest thereon to such Issuing
Lender shall be deemed to satisfy the Company's obligations to such Issuing
Lender and any Participating Lenders with respect to such payment upon receipt
thereof by such Issuing Lender.
2.10 Further Assurances. The Company hereby agrees, from time to
time, to do and perform any and all acts and to execute any and all further
instruments reasonably requested by an Issuing Lender more fully to effect the
purposes of this Agreement and the issuance of the Letters of Credit opened
hereunder.
2.11 Obligations Absolute. The payment obligations of the Company
under subsection 2.9 shall be unconditional and irrevocable and shall be paid
strictly in accordance with the terms of this Agreement under all
circumstances, including, without limitation, the following circumstances:
(a) the existence of any claim, set-off, defense or other right
which the Company may have at any time against any beneficiary, or any
transferee, of any Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), any Issuing Lender or any
Participating Lender, or any other Person, whether in connection with this
Agreement, the transactions contemplated herein, or any unrelated transaction;
provided, however, that nothing herein shall prevent the assertion of any such
right by separate suit or compulsory counterclaim;
(b) any statement or any other document presented under any Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;
(c) payment by any Issuing Lender under any Letter of Credit against
presentation of a draft or certificate which does not comply with the terms of
such Letter of Credit, except payment resulting from the gross negligence or
willful misconduct of such Issuing Lender; or
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(d) any other circumstances or happening whatsoever, whether or not
similar to any of the foregoing, except circumstances or happenings resulting
from the gross negligence or willful misconduct of such Issuing Lender.
2.12 Letter of Credit Application. The provisions of any Letter of
Credit Application related to any Letter of Credit are supplemental to, and not
in derogation of, any rights and remedies of each Issuing Lender and the
Participating Lenders under this Section 2 and applicable law. The Company
acknowledges and agrees that all rights of each Issuing Lender under any Letter
of Credit Application and this Agreement (other than those pursuant to
subsections 3.3(b) and (c)) shall inure to the benefit of each Participating
Lender to the extent of its Commitment Percentage as fully as if such
Participating Lender was a party to such Letter of Credit Application.
2.13 Competitive Loans. Subject to the terms and conditions of this
Agreement, the Company may borrow Competitive Loans from time to time during
the Competitive Loan Borrowing Period on any Business Day (in the case of Fixed
Rate Competitive Loans) or Working Day (in the case of Index Rate Competitive
Loans), provided that in no event may Competitive Loans exceed the Credit
Availability Amount on the Borrowing Date, after giving effect to the use and
application of the proceeds thereof. Within the limits and on the conditions
hereinafter set forth with respect to Competitive Loans, the Company from time
to time may borrow, repay and reborrow Competitive Loans.
2.14 Competitive Loan Notes. (a) The Competitive Loans made by each
Competitive Loan Lender pursuant hereto shall be evidenced by a promissory note
of the Company, substantially in the form of Exhibit F-1 (collectively, the
"Grid Competitive Loan Notes"), with appropriate insertions therein as to
principal amount, payable to the order of such Lender and representing the
obligation of the Company to pay a principal amount equal to the lesser of (i)
the aggregate Commitments and (ii) the aggregate unpaid principal amount of all
Competitive Loans made by such Competitive Loan Lender, with interest thereon
as prescribed in subsection 3.1. Each Competitive Loan Lender is hereby
authorized to record the date, amount, interest rate, Interest Payment Dates
and Competitive Loan Maturity Date of each Competitive Loan made by such
Competitive Loan Lender and each payment of principal with respect thereto on
the schedule annexed to and constituting a part of its Grid Competitive Loan
Note, and any such recordation shall constitute prima facie evidence of the
accuracy of the information so recorded; provided that failure by any Lender to
make any such recordation on such Grid Competitive Loan Note shall not affect
any of the obligations of the Company under such Grid Competitive Loan Note or
this Agreement. Each Grid Competitive Loan Note shall be dated the Effective
Date and each Competitive Loan evidenced thereby shall bear interest, payable
as specified in subsection 3.1, for the period from the date thereof on the
unpaid principal amount thereof from time to time outstanding at the interest
rate per annum specified in subsection 3.1 until paid in full.
(b) Amounts advanced by a Competitive Loan Lender pursuant to
subsection 2.13 on a Borrowing Date which have the same maturity date and
interest rate shall be deemed to constitute one Competitive Loan so long as
such amounts remain evidenced by the Grid Competitive Loan Note of such
Competitive Loan Lender; any such Competitive Loan Lender that wishes such
amounts to constitute more than one Competitive Loan and to have each such
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Competitive Loan evidenced by a separate promissory note payable to such
Competitive Loan Lender, substantially in the form of Exhibit F-2 with
appropriate insertions as to Borrowing Date, principal amount and interest rate
(an "Individual Competitive Loan Note"), shall notify the Administrative Agent
and the Company by facsimile transmission of the respective principal amounts
of the Competitive Loans (which principal amounts shall not be less than
$5,000,000 for any of such Competitive Loans) to be evidenced by each such
Individual Competitive Loan Note. Not later than three Business Days after
receipt of such notice, the Company shall deliver to such Competitive Loan
Lender an Individual Competitive Loan Note payable to the order of such
Competitive Loan Lender in the principal amount of each such Competitive Loan
and otherwise conforming to the requirements of this Agreement. Upon receipt
of such Individual Competitive Loan Note, such Competitive Loan Lender shall
endorse on the schedule attached to its Grid Competitive Loan Note the transfer
of such Competitive Loan from such Grid Competitive Loan Note to such
Individual Competitive Loan Note.
2.15 Procedure for Competitive Loan Borrowing. (a) The Company
shall request Competitive Loans by delivering a Competitive Loan Request to the
Administrative Agent, not later than 12:00 Noon (New York City time) four
Working Days prior to the proposed Borrowing Date (in the case of an Index Rate
Competitive Loan Request), and not later than 10:00 A.M., New York City time,
one Business Day prior to the proposed Borrowing Date (in the case of a Fixed
Rate Competitive Loan Request). Each Competitive Loan Request in respect of
any Borrowing Date may solicit bids for Competitive Loans in an aggregate
principal amount of $10,000,000 or an integral multiple of $5,000,000 in excess
thereof and having not more than three alternative Competitive Loan Maturity
Dates. The Competitive Loan Maturity Date for each Fixed Rate Competitive Loan
shall be not less than seven days nor more than 360 days after the Borrowing
Date therefor and the Competitive Loan Maturity Date for each Index Rate
Competitive Loan shall be one, two, three, six, nine or twelve months after the
Borrowing Date therefor, and in any event shall be no later than the
Termination Date. The Administrative Agent shall notify each Competitive Loan
Lender promptly by facsimile transmission of the contents of such Competitive
Loan Request received by the Administrative Agent.
(b) In the case of an Index Rate Competitive Loan Request, upon
receipt of notice from the Administrative Agent of the contents of such
Competitive Loan Request, each Competitive Loan Lender may elect, in its sole
discretion, to offer irrevocably, subject to Section 4, to make one or more
Competitive Loans at the Applicable Index Rate plus or minus a margin
determined by such Competitive Loan Lender in its sole discretion for each such
Competitive Loan. Any such irrevocable offer shall be made by delivering a
Competitive Loan Offer to the Administrative Agent, before 10:30 A.M., New York
City time, on the day that is three Working Days before the proposed Borrowing
Date, setting forth:
(i) the maximum amount of Competitive Loans for each Competitive
Loan Maturity Date and the aggregate maximum amount of Competitive Loans
for all Competitive Loan Maturity Dates which such Competitive Loan Lender
would be willing to make (which amounts may, subject to subsection 2.13,
exceed such Competitive Loan Lender's Commitment); and
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(ii) the margin above or below the Applicable Index Rate at which
such Competitive Loan Lender is willing to make each such Competitive
Loan.
The Administrative Agent shall advise the Company before 11:00 A.M., New York
City time, on the date which is three Working Days before the proposed
Borrowing Date of the contents of each such Competitive Loan Offer received by
it. If the Administrative Agent, in its capacity as a Competitive Loan Lender,
shall elect, in its sole discretion, to make any such Competitive Loan Offer,
it shall advise the Company of the contents of its Competitive Loan Offer
before 10:15 A.M., New York City time, on the date which is three Working Days
before the proposed Borrowing Date.
(c) In the case of a Fixed Rate Competitive Loan Request, upon
receipt of notice from the Administrative Agent of the contents of such
Competitive Loan Request, each Competitive Loan Lender may elect, in its sole
discretion, to offer irrevocably, subject to Section 4, to make one or more
Competitive Loans at a rate of interest determined by such Competitive Loan
Lender in its sole discretion for each such Competitive Loan. Any such
irrevocable offer shall be made by delivering a Competitive Loan Offer to the
Administrative Agent before 9:30 A.M., New York City time, on the proposed
Borrowing Date, setting forth:
(i) the maximum amount of Competitive Loans for each Competitive
Loan Maturity Date and the aggregate maximum amount of Competitive Loans
for all Competitive Loan Maturity Dates, which such Competitive Loan
Lender would be willing to make (which amounts may, subject to subsection
2.13, exceed such Competitive Loan Lender's Commitment); and
(ii) the rate of interest at which such Competitive Loan Lender is
willing to make each such Competitive Loan.
The Administrative Agent shall advise the Company before 10:00 A.M., New York
City time, on the proposed Borrowing Date of the contents of each such
Competitive Loan Offer received by it. If the Administrative Agent, in its
capacity as a Competitive Loan Lender, shall elect, in its sole discretion, to
make any such Competitive Loan Offer it shall advise the Company of the
contents of its Competitive Loan Offer before 9:15 A.M., New York City time, on
the proposed Borrowing Date.
(d) Before 11:30 A.M., New York City time, three Working Days before
the proposed Borrowing Date (in the case of Index Rate Competitive Loans) and
before 10:30 A.M., New York City time, on the proposed Borrowing Date (in the
case of Fixed Rate Competitive Loans), the Company, in its absolute discretion,
shall:
(i) cancel such Competitive Loan Request by giving the
Administrative Agent telephone notice to that effect, or
(ii) by giving telephone notice to the Administrative Agent
(immediately confirmed by delivery to the Administrative Agent of a
Competitive Loan Confirmation in writing) (1) subject to the provisions of
subsection 2.15(e), accept one or more of the offers made
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by any Competitive Loan Lender or Competitive Loan Lenders pursuant to
subsection 2.15(b) or subsection 2.15(c), as the case may be, of the
amount of Competitive Loans for each relevant maturity date and (2) reject
any remaining offers made by Competitive Loan Lenders pursuant to
subsection 2.15(b) or subsection 2.15(c), as the case may be.
(e) The Company's acceptance of Competitive Loans in response to any
Competitive Loan Request shall be subject to the following limitations:
(i) The amount of Competitive Loans accepted for each Competitive
Loan Maturity Date specified by any Competitive Loan Lender in its
Competitive Loan Offer shall not exceed the maximum amount for such
Competitive Loan Maturity Date specified in such Competitive Loan Offer;
(ii) the aggregate amount of Competitive Loans accepted for all
Competitive Loan Maturity Dates specified by any Competitive Loan Lender
in its Competitive Loan Offer shall not exceed the aggregate maximum
amount specified in such Competitive Loan Offer for all such Competitive
Loan Maturity Dates;
(iii) the Company may not accept offers for Competitive Loans for any
Competitive Loan Maturity Date in an aggregate principal amount in excess
of the maximum principal amount requested in the related Competitive Loan
Request; and
(iv) if the Company accepts any of such offers, (1) it must accept
such offers based solely upon pricing for such relevant Competitive Loan
Maturity Date (including any amounts which shall be payable to the
relevant Competitive Loan Lender in respect of the relevant Competitive
Loans pursuant to subsection 3.14) and upon no other criteria whatsoever
and (2) if two or more Competitive Loan Lenders submit offers for any
Competitive Loan 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 subsection 2.13 or in this subsection 2.15,
cannot) borrow the total amount offered by such Competitive Loan Lenders
with such identical pricing, the Company shall accept offers from all of
such Competitive Loan Lenders in amounts allocated among them pro rata
according to the amounts offered by such Competitive Loan Lenders (or as
nearly pro rata as shall be practicable after giving effect to the
requirement that Competitive Loans made by a Competitive Loan Lender on a
Borrowing Date for each relevant Competitive Loan 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 Competitive Loan
Lenders that submit offers for any Competitive Loan Maturity Date at
identical pricing is such that, after the Company accepts such offers pro
rata in accordance with the foregoing, the Competitive Loans to be made by
any such Competitive Loan Lender would be less than $5,000,000 principal
amount, the number of such Competitive Loan Lenders shall be reduced by
the Administrative Agent by lot until the Competitive Loans to be made by
each such remaining Competitive Loan Lender 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 Administrative Agent that a
Competitive Loan Request is cancelled pursuant to subsection 2.15(d)(i), the
Administrative Agent shall give prompt telephone notice thereof to the
Competitive Loan Lenders.
(g) If the Company accepts pursuant to subsection 2.15(d)(ii) one or
more of the offers made by any one or more Competitive Loan Lenders, the
Administrative Agent promptly shall notify each Competitive Loan Lender which
has made such a Competitive Loan Offer of (i) the aggregate amount of such
Competitive Loans to be made on such Borrowing Date for each Competitive Loan
Maturity Date and (ii) the acceptance or rejection of any offers to make such
Competitive Loans made by such Competitive Loan Lender. Before 12:00 Noon, New
York City time, on the Borrowing Date specified in the applicable Competitive
Loan Request, each Competitive Loan Lender whose Competitive Loan Offer has
been accepted shall make available to the Administrative Agent at the
Administrative Agent's Office the amount of Competitive Loans to be made by
such Competitive Loan Lender, in immediately available funds. The
Administrative Agent will make such funds available to the Company as soon as
practicable on such date at the Administrative Agent's Office. As soon as
practicable after each Borrowing Date, the Administrative Agent shall notify
each Lender of the aggregate amount of Competitive Loans advanced on such
Borrowing Date and the respective maturity dates thereof.
(h) Nothing in subsection 2.13 or this subsection 2.15 shall be
construed as a right of first offer in favor of the Lenders or to otherwise
limit the ability of the Company to request and accept credit facilities from
any Person (including any of the Lenders).
(i) A Competitive Loan Request may request offers for Competitive
Loans to be made on not more than one Borrowing Date and to mature on not more
than three Competitive Loan Maturity Dates. No Competitive Loan Request may be
submitted earlier than five Business Days after submission of any other
Competitive Loan Request.
(j) The Company shall pay to the Administrative Agent, for the
account of each Lender which has made a Competitive Loan, on the applicable
Competitive Loan Maturity Date the then unpaid principal amount of such
Competitive Loan. The Company shall not have the right to prepay any principal
amount of any Competitive Loan.
2.16 Use of Proceeds. The proceeds of the Loans shall be used to
finance the general corporate purposes of the Company and its Subsidiaries, and
the Letters of Credit shall be used to secure performance and other bonds and
provide credit support for general corporate purposes.
SECTION 3. INTEREST RATE PROVISIONS, FEES, CONVERSIONS AND
PAYMENTS
3.1 Interest Rates and Payment Dates. (a) Each ABR Loan shall bear
interest for the period from and including the date thereof until maturity or
conversion on the unpaid principal amount thereof at a fluctuating rate per
annum equal to the Alternate Base Rate.
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(b) Each Eurodollar Loan shall bear interest for each Interest
Period with respect thereto on the unpaid principal amount thereof at a rate
per annum equal to the Eurodollar Rate determined for such Interest Period plus
the Applicable Margin.
(c) Each CD Rate Loan shall bear interest for each Interest Period
with respect thereto on the unpaid principal amount thereof at a rate per annum
equal to the Adjusted CD Rate for such Interest Period plus the Applicable
Margin.
(d) Each Competitive Loan shall bear interest for each day from the
applicable Borrowing Date to (but excluding) the applicable Competitive Loan
Maturity Date at the rate of interest specified in the Competitive Loan Offer
accepted by the Company in connection with such Competitive Loan.
(e) If all or a portion of the principal amount of any of the
Eurodollar Loans or CD Rate Loans shall not be paid when due (whether at the
stated maturity, by acceleration or otherwise), each such Eurodollar Loan or CD
Rate Loan shall be converted to an ABR Loan at the end of the last applicable
Interest Period therefor for which the Administrative Agent shall have
determined, on or prior to the date such unpaid principal amount became due, a
Eurodollar Rate or an Adjusted CD Rate, as the case may be. Any overdue
principal amount of any Loan and, to the extent permitted by law, any interest
payable thereon which shall not be paid when due shall bear interest from the
due date thereof until payment in full thereof (as well after judgment as
before judgment) at a rate per annum equal to 2% above the rate otherwise
applicable.
(f) Interest payable under subsection 3.1(a), 3.1(b), 3.1(c) or
3.1(d) shall be payable in arrears on each Interest Payment Date. Interest
payable under subsection 3.1(e) shall be payable on demand.
3.2 Facility and Other Fees. (a) The Company agrees to pay to the
Administrative Agent for the account of each Lender a facility fee (a "Facility
Fee") from the Effective Date to, but not including, the Termination Date or
such earlier date upon which the Commitments shall terminate or be reduced to
zero, computed at a rate per annum equal to the Applicable Facility Fee
Percentage from time to time in effect, on the amount of the Commitment of such
Lender from time to time in effect, whether used or unused (including the
portion of such Commitment represented by such Lender's L/C Participating
Interest in outstanding Letters of Credit). Such Facility Fee shall be payable
quarterly in arrears on the last Business Day of each March, June, September
and December, commencing March 31, 1996 (such fee to be calculated through the
last day of such quarter) and on the Termination Date or such earlier date as
the Commitments shall terminate or be reduced to zero as provided herein.
(b) The Company agrees to pay to the Administrative Agent for its
own account the fees in the amounts and on the dates previously agreed to in
writing by the Company and the Administrative Agent. Each Lender acknowledges
that the Administrative Agent is being paid certain other fees for its own
account in connection with this Agreement in addition to the fees described
herein.
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3.3 Letter of Credit Fees. (a) In lieu of any letter of credit
commissions and fees provided for in any Commercial L/C Application or Standby
L/C Application (other than standard administration, amendment, transfer and
negotiation fees referred to in clause (c) below), the Company agrees to pay
the Administrative Agent, for the account of the relevant Issuing Lender and
the Participating Lenders in accordance with their respective Commitment
Percentages, (i) with respect to Standby L/Cs, a non-refundable Letter of
Credit fee computed at a rate per annum equal to the Applicable L/C Fee
Percentage from time to time in effect on the amount from time to time
available to be drawn under all outstanding Standby L/Cs during the period for
which payment is made, commencing on the respective dates of issuance thereof
until the last day a drawing may be made thereunder, payable quarterly in
advance commencing on the date of opening of each Standby L/C and thereafter on
each Interest Payment Date for ABR Loans and (ii) with respect to each
Commercial L/C, a non-refundable Letter of Credit fee equal to .25 of 1% of the
amount drawn on such Commercial L/C from time to time, payable upon each
drawing thereon.
(b) In addition to the fees set forth in subsection 3.3(a), the
Company agrees to pay each Issuing Lender, for such Issuing Lender's own
account, (i) with respect to Standby L/Cs, a Letter of Credit fee equal to .175
of 1% per annum of the amount from time to time available to be drawn under all
outstanding Standby L/Cs issued by it during the period for which payment is
made, commencing on the respective dates of issuance thereof until the last day
a drawing may be made thereunder, payable quarterly in advance commencing on
the date of opening each Standby L/C and thereafter on each Interest Payment
Date for ABR Loans and (ii) with respect to each Commercial L/C, a
non-refundable Letter of Credit fee equal to .0625 of 1% of the face amount of
such Commercial L/C payable upon issuance thereof.
(c) The Company agrees to pay each Issuing Lender for its own
account the customary administration, amendment, transfer and negotiation fees
charged by such Issuing Lender in connection with its issuance and
administration of Letters of Credit.
3.4 Computation of Interest and Fees. (a) Interest on ABR Loans
and all fees shall be calculated on the basis of a year of 365 days (or 366
days, as the case may be) for the actual days elapsed. Interest on Eurodollar
Loans, CD Rate Loans and Competitive Loans shall be calculated on the basis of
a year of 360 days for the actual days elapsed. The Administrative Agent shall
as soon as practicable notify the Company and the Lenders of each determination
of a Eurodollar Rate and of an Adjusted CD Rate. Any change in the interest
rate on a Loan resulting from a change in the Alternate Base Rate, the
Eurocurrency Reserve Requirements or the CD Reserve Requirements, as the case
may be, shall become effective as of the opening of business on the day on
which such change in the Alternate Base Rate is announced or such change in the
Eurocurrency Reserve Requirements or the CD Reserve Requirements shall become
effective, as the case may be. The Administrative Agent shall as soon as
practicable notify the Company and the Lenders of the effective date and the
amount of each such change.
(b) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall constitute prima facie
evidence of the rate so determined in the absence of manifest error.
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(c) If any Reference Lender's Commitment shall terminate (otherwise
than on termination of all the Commitments), or all of its Loans shall be
assigned for any reason whatsoever, such Reference Lender shall thereupon cease
to be a Reference Lender and, if as a result of the foregoing, there shall only
be one Reference Lender remaining, then the Administrative Agent (after
consultation with the Lenders and with the consent of the Company) 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.
(d) Each Reference Lender shall use its best efforts to furnish
quotations of rates to the Administrative Agent as contemplated hereby. If any
of the Reference Lenders shall be unable or otherwise fails to supply such
rates to the Administrative Agent upon its request, the rate of interest shall
be determined on the basis of the quotations of the remaining Reference Lenders
or Reference Lender.
3.5 Optional Prepayments of Revolving Credit Loans. The Company may
from time to time prepay any Revolving Credit Loans, in whole or in part,
without premium or penalty, by giving irrevocable notice to the Administrative
Agent and making such prepayment (i) if the Revolving Credit Loans to be
prepaid are ABR Loans, prior to 11:00 A.M., New York City time, on any Business
Day or, if such notice and prepayment are not so given and made prior to 11:00
A.M., upon at least one Business Day's irrevocable notice to the Administrative
Agent, (ii) if the Revolving Credit Loans to be prepaid are CD Rate Loans, upon
at least three Business Days' irrevocable notice to the Administrative Agent or
(iii) if the Revolving Credit Loans to be prepaid are Eurodollar Loans, upon at
least three Working Days' irrevocable notice to the Administrative Agent, in
each case specifying the date and amount of prepayment and whether such
Revolving Credit Loans are ABR Loans, CD Rate Loans or Eurodollar Loans or a
combination thereof, and if of a combination thereof, the amount of prepayment
allocable to each and if Eurodollar Loans or CD Rate Loans are to be prepaid,
the Tranche to be prepaid. Upon receipt of such notice, the Administrative
Agent shall promptly notify each Lender thereof. If such notice is given, the
Company shall make such prepayment, and the payment amount specified in such
notice shall be due and payable on the date specified therein, together with
accrued interest to such date on the amount prepaid. Partial prepayments
pursuant to this subsection 3.5 shall be in an aggregate principal amount of
$10,000,000 or a whole multiple of $5,000,000 in excess thereof.
3.6 Reduction of Commitments. (a) The Company shall have the
right, upon not less than three Business Days' notice to the Administrative
Agent, from time to time, to reduce the amount of the Commitments provided that
any such reduction shall be in an amount not less than $25,000,000 or a whole
multiple of $1,000,000 in excess thereof; and provided further that no such
reduction of the Commitments shall be permitted if, after giving effect to
prepayments of Revolving Credit Loans, replacements of Letters of Credit and
deposits of cash collateral pursuant to subsection 3.6(b), the aggregate
Extensions of Credit outstanding would exceed the aggregate Commitments, as so
reduced, or the aggregate Letter of Credit Obligations outstanding would exceed
50% of the aggregate Commitments, as so reduced. Upon receipt of any notice
pursuant to this subsection 3.6(a), the Administrative Agent shall promptly
notify each Lender thereof.
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(b) Any reduction of the Commitments pursuant to subsection 3.6(a)
shall (i) reduce permanently the amount of the Commitments then in effect, (ii)
be accompanied by (A) a prepayment of Revolving Credit Loans outstanding in an
amount equal to the excess, if any, of the aggregate Extensions of Credit
outstanding over the aggregate Commitments, as so reduced, and (B) a
replacement of outstanding Letters of Credit such that after giving effect to
such replacement, the aggregate Letter of Credit Obligations outstanding are
less than or equal to 50% of the aggregate Commitments, as so reduced. To the
extent that the aggregate Extensions of Credit exceed the aggregate
Commitments, as reduced, after Revolving Credit Loans have been prepaid in
accordance with the immediately preceding sentence, the Company shall (i)
replace outstanding Letters of Credit such that, after giving effect to such
replacement, the aggregate Extensions of Credit are less than or equal to the
aggregate Commitments, as reduced, and/or (ii) deposit in a cash collateral
account with the Administrative Agent on terms and conditions satisfactory to
the Administrative Agent and as cash collateral for the liability of the
Issuing Lender (whether direct or contingent) under any Letter of Credit
outstanding, an amount which shall be equal to the amount by which the
aggregate Extensions of Credit exceed the aggregate Commitments, as reduced.
Any amounts deposited in any cash collateral account may be withdrawn by the
Administrative Agent at any time to pay Obligations when due. The
Administrative Agent shall use its best efforts to invest any amounts so
deposited in United States Treasury bills or other Cash Equivalents designated
by the Company; provided that the Administrative Agent shall not be liable to
the Company for failure to so invest or for any losses suffered as a result of
any such investment or withdrawal. The unused portion of any amounts deposited
by the Company in any such cash collateral account pursuant to this subsection
3.6(b), and any earnings from investments of amounts on deposit therein, shall
be paid to the Company after sufficient Letters of Credit have expired undrawn
so that the aggregate Extensions of Credit shall no longer exceed the aggregate
Commitments as then reduced.
3.7 Pro Rata Treatment and Payments; Lending Offices. (a) Each
borrowing by the Company of Revolving Credit Loans hereunder, each conversion
or continuation of a Revolving Credit Loan under subsection 3.10, each payment
(including each prepayment) by the Company on account of principal of or
interest on Revolving Credit Loans, each payment by the Company on account of
fees and other amounts hereunder (except fees and other amounts referred to in
subsections 3.2(b), 3.3(b), 3.3(c), 3.8, 3.12, 3.13, 3.14 and 3.15) and any
reduction of the Commitments hereunder shall be made pro rata according to the
respective Commitment Percentages of the Lenders. All payments (including
prepayments) to be made by the Company on account of principal, interest, fees
and other amounts shall be made without set-off or counterclaim to the
Administrative Agent, for the account of the Lenders (except with respect to
the fees and other amounts referred to in subsections 3.2(b), 3.3(b), 3.3(c),
3.8, 3.12, 3.13, 3.14 and 3.15), at the Administrative Agent's Office, in
Dollars and in immediately available funds. The Administrative Agent shall
promptly distribute each such payment to each Lender in like funds as received.
If any payment hereunder (other than payments on the Eurodollar Loans or Index
Rate Competitive Loans) becomes due and payable on a day other than a Business
Day, such payment shall be extended to the next succeeding Business Day and,
with respect to payments of principal, interest thereon shall be payable at the
then applicable rate during such extension. If any payment on a Eurodollar
Loan or Index Rate Competitive Loan becomes due and payable on a day other than
a Working Day, the maturity thereof shall be extended to the next succeeding
Working
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Day (and, with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension) unless the result of
such extension would be to extend such payment into another calendar month in
which event such payment shall be made on the immediately preceding Working
Day.
(b) Eurodollar Loans and Index Rate Competitive Loans shall be made
by each Lender at its Eurodollar Lending Office and ABR Loans, CD Rate Loans
and Fixed Rate Competitive Loans shall be made by each Lender at its Domestic
Lending Office.
3.8 Capital Adequacy. In the event that any Lender shall have
reasonably determined that the applicability of any law, rule, regulation or
guideline adopted pursuant to or arising out of the July 1988 report of the
Basle Committee on Banking Regulations and Supervisory Practices entitled
"International Convergence of Capital Measurement and Capital Standards" or the
adoption after the date of this Agreement of any other law, rule, regulation or
guideline regarding capital adequacy, or any change therein or in the
interpretation or application thereof after the date of this Agreement or
compliance by such Lender with any request or directive regarding capital
adequacy (whether or not having the force of law) from any central bank or
governmental authority does or shall have the effect of reducing the rate of
return on such Lender's capital as a consequence of the Letters of Credit or
its unused Commitment hereunder to a level below that which such Lender could
have achieved but for such applicability, adoption, change or compliance
(taking into consideration such Lender's policies with respect to capital
adequacy) by an amount related to such Letters of Credit or unused Commitment
which is reasonably deemed by such Lender to be material, then from time to
time, promptly after submission by such Lender to the Company (with a copy to
the Administrative Agent) of a written request therefor, the Company shall pay
to such Lender such additional amount or amounts as will compensate such Lender
for such reduction. This covenant shall survive the termination of this
Agreement and payment in full of the Obligations.
3.9 Failure by Lenders to Make Funds Available. Unless the
Administrative Agent shall have been notified in writing by any Lender prior to
a Borrowing Date that such Lender will not make that amount which would
constitute its share of such borrowing on such Borrowing Date available to the
Administrative Agent, the Administrative Agent may assume that such Lender has
made such amount available to the Administrative Agent on such Borrowing Date,
and the Administrative Agent may, in reliance upon such assumption, make
available to the Company a corresponding amount. If such amount is made
available to the Administrative Agent on a date after such Borrowing Date, such
Lender shall pay to the Administrative Agent on demand an amount equal to the
product of (i) 1/2 of 1% above the daily average Federal funds rate during such
period as quoted by the Administrative Agent, times (ii) such Lender's share of
such borrowing, times (iii) a fraction the numerator of which is the number of
days that elapse from and including such Borrowing Date to the date on which
such Lender's share of such borrowing shall have become immediately available
to the Administrative Agent and the denominator of which is 360. A certificate
of the Administrative Agent submitted to any Lender with respect to any amounts
owing under this subsection 3.9 shall be conclusive in the absence of manifest
error. If such Lender's share of such borrowing is not in fact made available
to the Administrative Agent by such Lender within three Business Days of such
Borrowing Date, the Administrative Agent shall be
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entitled to recover such amount, on demand, from the Company with interest
thereon at the rate applicable to the Loans made on such Borrowing Date.
3.10 Conversion Options for Loans; Minimum Amount of Loans. (a)
The Company may elect from time to time to convert (i) Eurodollar Loans to ABR
Loans, CD Rate Loans or a combination thereof, by giving the Administrative
Agent at least one Business Day's prior irrevocable notice of such election if
electing one or more ABR Loans or at least two Business Days' prior irrevocable
notice if electing one or more CD Rate Loans; (ii) CD Rate Loans to Eurodollar
Loans, ABR Loans or a combination thereof, by giving the Administrative Agent
at least three Working Days' prior irrevocable notice of such election if
electing one or more Eurodollar Loans or at least one Business Day's prior
irrevocable notice of such election if electing one or more ABR Loans; or (iii)
ABR Loans to Eurodollar Loans, CD Rate Loans or a combination thereof, by
giving the Administrative Agent at least three Working Days' prior irrevocable
notice of such election if electing one or more Eurodollar Loans or at least
two Business Days' prior irrevocable notice if electing one or more CD Rate
Loans; provided that any such conversion of Eurodollar Loans or CD Rate Loans
shall only be made on the last day of the Interest Period with respect thereto.
Upon receipt of such notice, the Administrative Agent shall promptly notify
each Lender thereof. All or any part of outstanding Eurodollar Loans, CD Rate
Loans and ABR Loans may be converted in accordance with the terms hereof;
provided that (i) no Loan may be converted into a CD Rate Loan or a Eurodollar
Loan when any Event of Default has occurred and is continuing, (ii) partial
conversions shall be in an aggregate principal amount of $10,000,000 or a whole
multiple of $5,000,000 in excess thereof and (iii) any such conversion may only
be made if, after giving effect thereto, subsection 3.10(c) shall not have been
contravened.
(b) Any Eurodollar Loans or CD Rate Loans may be continued as such
upon the expiration of an Interest Period with respect thereto by compliance by
the Company with the notice provisions contained in subsection 3.10(a)
applicable with respect to each Type of Loan; provided that no Eurodollar Loans
or CD Rate Loans may be continued as such when any Event of Default has
occurred and is continuing, but shall be automatically converted to ABR Loans
on the last day of the last Interest Period for which a Eurodollar Rate or an
Adjusted CD Rate, as the case may be, was determined by the Administrative
Agent on or prior to the Administrative Agent's obtaining knowledge of such
Event of Default. The Administrative Agent shall notify the Lenders promptly
that such automatic conversion contemplated by this subsection 3.10(b) will
occur.
(c) All borrowings, conversions, payments and prepayments hereunder
shall be in such amounts and be made pursuant to such elections so that, after
giving effect thereto, the aggregate principal amount of any Tranche shall not
be less than $10,000,000.
3.11 Inability to Determine Interest Rate. (a) In the event that
the Administrative Agent or the Required Lenders shall have determined (which
determination shall be conclusive and binding upon the Company) that by reason
of circumstances affecting the interbank eurodollar market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for any
requested Interest Period with respect to (i) proposed Loans that the Company
has requested be made as Eurodollar Loans, (ii) Eurodollar Loans that will
result from the requested conversion of ABR Loans or CD Rate Loans into
Eurodollar Loans or
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(iii) the continuation of Eurodollar Loans beyond the expiration of the then
current Interest Period with respect thereto, the Administrative Agent shall
forthwith give telephonic notice of such determination (promptly confirmed
thereafter in writing) to the Company and the Lenders at least two Working Days
prior to, as the case may be, the requested Borrowing Date for such Eurodollar
Loans, the conversion date of such ABR Loan or CD Rate Loan, as the case may
be, or the last day of such Interest Period. If such notice is given (A) any
requested Eurodollar Loans shall be made as ABR Loans, (B) any ABR Loans or CD
Rate Loans that were to have been converted to Eurodollar Loans shall be
continued as or converted to ABR Loans or CD Rate Loans, as the case may be,
and (C) any outstanding Eurodollar Loans shall be converted, on the last day of
the then current Interest Period with respect thereto, to ABR Loans. Until
such notice has been withdrawn by the Administrative Agent, no further
Eurodollar Loans shall be made, and the Company shall not have the right to
convert ABR Loans or CD Rate Loans to Eurodollar Loans.
(b) In the event that the Administrative Agent or the Required
Lenders shall have determined (which determination shall be conclusive and
binding upon the Company) that by reason of circumstances affecting the
domestic certificate of deposit market, adequate and reasonable means do not
exist for ascertaining the CD Rate for any requested Interest Period with
respect to (i) proposed Loans that the Company has requested be made as CD Rate
Loans, (ii) CD Rate Loans that will result from the requested conversion of ABR
Loans or Eurodollar Loans into CD Rate Loans or (iii) the continuation of CD
Rate Loans beyond the expiration of the then current Interest Period with
respect thereto, the Administrative Agent shall forthwith give telephonic
notice of such determination (promptly confirmed thereafter in writing) to the
Company and the Lenders at least one Business Day prior to, as the case may be,
the requested Borrowing Date for such CD Rate Loans, the conversion date of
such ABR Loan or Eurodollar Loan, as the case may be, or the last day of such
Interest Period. If such notice is given, (A) any requested CD Rate Loans
shall be made as ABR Loans, (B) any ABR Loans or Eurodollar Loans that were to
have been converted to CD Rate Loans shall be continued as or converted to ABR
Loans or Eurodollar Loans, as the case may be, and (C) any outstanding CD Rate
Loans shall be converted, on the last day of the then current Interest Period
with respect thereto, to ABR Loans. Until such notice has been withdrawn by
the Administrative Agent, no further CD Rate Loans shall be made, and the
Company shall not have the right to convert ABR Loans or Eurodollar Loans to CD
Rate Loans.
3.12 Taxes. (a) Except as otherwise required by law, all payments
made by the Company hereunder shall be made free and clear of, and without
reduction for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding income and franchise taxes imposed (a) by the
United States of America or any political subdivision or taxing authority
thereof or therein (including Puerto Rico) or (b) by any jurisdiction in which
such Lender's Eurodollar Lending Office is located or any political subdivision
or taxing authority thereof or therein (such non-excluded taxes being called
"Foreign Taxes"). If any Foreign Taxes are required to be withheld from any
amounts payable to any Lender hereunder or under the Notes, the amounts so
payable to such Lender shall be increased to the extent necessary to yield to
such Lender (after payment of all Foreign Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement and its Note(s). Whenever any
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Foreign Tax is payable by the Company, as promptly as possible thereafter, the
Company shall send to the Administrative Agent, for the account of such Lender,
a certified copy of an original official receipt showing payment thereof. If
the Company fails to pay any Foreign Taxes when due to the appropriate taxing
authority or fails to remit to the Administrative Agent, for the account of the
Lenders, the required receipts or other required documentary evidence, in
either case for any reason other than any Lender's failure to comply with
subsection 3.12(b), the Company shall indemnify the Lenders for any incremental
taxes, interest or penalties that may become payable by any Lender as a result
of any such failure.
(b) Prior to the first Interest Payment Date each Lender that is not
incorporated under the laws of the United States of America or a state thereof
agrees that it will deliver to the Company and the Administrative Agent (i) two
duly completed copies of United States Internal Revenue Service Form 1001 or
4224 or successor applicable form, as the case may be, certifying in each case
that such Lender is entitled to receive payments under this Agreement and the
Notes payable to it, without deduction or withholding of any United States
federal income taxes, and (ii) an Internal Revenue Service Form W-8 or W-9 or
successor applicable form, as the case may be, to establish an exemption from
United States backup withholding tax. Each Lender which delivers to the
Company and the Administrative Agent a Form 1001 or 4224 and Form W-8 or W-9
pursuant to the next preceding sentence further undertakes to deliver to the
Company and the Administrative Agent two further copies of the said Form 1001
or 4224 and Form W-8 or W-9, or successor applicable forms, or other manner of
certification, as the case may be, on or before the date that any such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form previously delivered by it to the Company and
the Administrative Agent, and such extensions or renewals thereof as may
reasonably be requested by the Company or the Administrative Agent, certifying
in the case of a Form 1001 or 4224 that such Lender is entitled to receive
payments under this Agreement without deduction or withholding of any United
States federal income taxes, unless in any such cases an event (including
without limitation any change in treaty, law or regulation) has occurred prior
to the date on which any such delivery would otherwise be required which
renders all such forms inapplicable or which would prevent such Lender from
duly completing and delivering any such form with respect to it and such Lender
advises the Company that it is not capable of receiving payments without any
deduction or withholding of United States federal income tax, and in the case
of a Form W-8 or W-9, establishing an exemption from United States backup
withholding tax.
(c) The agreements in this subsection 3.12 shall survive the
termination of this Agreement and the payment of the Notes and all other
amounts payable hereunder.
(d) The Company shall not be required to pay any increased amount on
account of Foreign Taxes pursuant to this subsection 3.12 to any Lender to the
extent that such Foreign Taxes would not have been payable if such Lender had
furnished a form (properly and accurately completed in all material respects)
which it was otherwise required to furnish in accordance with this subsection
3.12, unless such failure results from any event subsequent to the date hereof
(including without limitation any change in treaty, law or regulation)
specified in the final sentence of subsection 3.12(b) and such Lender so
notifies the Company.
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3.13 Illegality. Notwithstanding any other provisions herein, if,
after the date hereof, any change in any Requirement of Law or in the
interpretation or application thereof, shall make it unlawful for any Lender to
make or maintain Eurodollar Loans or Index Rate Competitive Loans as
contemplated by this Agreement, (a) the commitment of such Lender hereunder to
make or maintain Eurodollar Loans or convert ABR Loans or CD Rate Loans to
Eurodollar Loans shall forthwith be suspended, (b) such Lender's Loans then
outstanding as Eurodollar Loans, if any, shall be converted automatically to
ABR Loans on the respective next succeeding Interest Payment Dates for such
Loans or within such earlier period as required by law and (c) the Company
shall, with respect to any Index Rate Competitive Loan of such Lender, take
such action as such Lender may reasonably request. Promptly upon becoming
aware that any such illegality with respect to Eurodollar Loans ceases to
exist, such Lender shall notify the Company and the Administrative Agent
thereof and, after such notice, such suspension shall cease to exist. The
Company hereby agrees promptly to pay any Lender, upon its demand, any
additional amounts necessary to compensate such Lender for any costs incurred
by such Lender in making any conversion in accordance with this subsection 3.13
(such Lender's notice of such costs, as certified to the Company through the
Administrative Agent, to be prima facie evidence of such costs in the absence
of manifest error).
3.14 Requirements of Law. (a) In the event that any change in any
Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority after
the date hereof (or, in the case of Index Rate Competitive Loans, made
subsequent to acceptance by the Company of such Loans):
(i) does or shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement, any Note or any Loans made by
it, or change the basis of taxation of payments to such Lender of
principal, commitment or facility fee, interest or any other amount
payable hereunder (except for changes in the rate of tax on the overall
net income of such Lender or its applicable Lending Office imposed by the
jurisdiction in which such Lender's principal executive office or the
applicable Lending Office is located);
(ii) does or shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, or deposits or other liabilities in or for the account of,
advances or loans by, or other credit extended by, or any other
acquisition of funds by, any office of such Lender which are not otherwise
included in the determination of the Eurodollar Rate, the Adjusted CD Rate
or the Applicable Index Rate, as the case may be; or
(iii) does or shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender
of making, renewing or maintaining advances or extensions of credit or to
reduce any amount receivable hereunder, in each case, in respect of its
Eurodollar Loans, CD Rate Loans or Index Rate Competitive Loans, then, in any
such case, the Company shall promptly pay such Lender, upon its demand, any
additional amounts necessary to compensate such Lender for such
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additional cost or reduced amount receivable which such Lender deems to be
material as reasonably determined by such Lender with respect to such
Eurodollar Loans, CD Rate Loans or Index Rate Competitive Loans.
(b) (i) In the event that any change in any Requirement of Law
shall either (A) impose, modify, deem or make applicable any reserve, special
deposit, assessment or similar requirement against Letters of Credit issued by
or participated in by any Lender or (B) impose on any Lender any other
condition regarding this Agreement or any Letter of Credit, and the result of
any event referred to in clause (A) or (B) above shall be to increase the cost
to such Lender of issuing, maintaining or participating in any Letter of
Credit, then the Company agrees, upon demand by such Lender, to promptly pay to
such Lender, from time to time as specified by such Lender, additional amounts
which shall be sufficient to compensate such Lender for such increased cost.
(ii) The Company agrees that the provisions of the foregoing
paragraph (b)(i) and the provisions of each Letter of Credit Application
providing for reimbursement or payment to the Issuing Lender in the event of
the imposition or implementation of, or increase in, any reserve, special
deposit or similar requirement in respect of the Letter of Credit relating
thereto shall apply equally to each Participating Lender in respect of its L/C
Participating Interest in such Letter of Credit.
(c) If a Lender or the Administrative Agent becomes entitled to
claim any additional amounts pursuant to this subsection 3.14 or subsection
3.15, it shall promptly notify the Company, through the Administrative Agent,
of the event by reason of which it has become so entitled. A certificate
submitted by such Lender, through the Administrative Agent, to the Company
shall be delivered to the Company at least three Business Days prior to the
date of any requested payment and shall be prima facie evidence of such amounts
in the absence of manifest error. This covenant shall survive the termination
of this Agreement and payment of the outstanding Obligations. Notwithstanding
the foregoing, no Lender shall be entitled to request compensation under this
subsection 3.14 with respect to any Index Rate Competitive Loan if it shall
have obtained actual knowledge of the change giving rise to such request at the
time of submission of such Lender's Competitive Loan Offer pursuant to which
such Competitive Loan shall have been made, unless notice of such Lender's
entitlement to such compensation shall have been furnished to the Company at or
prior to such time.
3.15 Indemnity. The Company agrees to indemnify each Lender and to
hold such Lender harmless from any loss (excluding loss of profits) or expense
which such Lender may sustain or incur as a consequence of (a) default by the
Company in payment of the principal of or interest on any Eurodollar Loans , CD
Rate Loans or Competitive Loans of such Lender, (b) default by the Company in
making a borrowing, continuation or conversion after the Company has given a
notice in accordance with subsection 2.3, 2.15 or 3.10, as the case may be, (c)
default by the Company in making any prepayment after the Company has given a
notice in accordance with the provisions of this Agreement and (d) a prepayment
or conversion of a Eurodollar Loan, CD Rate Loan or Competitive Loan on a day
which is not the last day of an Interest Period or the applicable Competitive
Loan Maturity Date, as the case may be, with respect thereto, in each of
clauses (a) through (d) including, but not limited to, any such loss or expense
arising from interest or fees payable by such Lender to lenders of
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funds obtained by it in order to maintain its Eurodollar Loans, CD Rate Loans
or Competitive Loans, as the case may be, hereunder. This covenant shall
survive termination of this Agreement and payment in full of the Obligations.
3.16 Lenders' Obligation to Mitigate. Each Lender agrees that, as
promptly as practicable after it becomes aware that it has been or will be
affected by the occurrence of an event or the existence of a condition
described under subsection 3.12, 3.13 or 3.14(a), it will, to the extent not
inconsistent with such Lender's generally applicable internal policies, use its
best efforts to make, fund or maintain the affected Eurodollar Loans, CD Rate
Loans or Competitive Loans, as the case may be, of such Lender through another
lending office of such Lender if as a result thereof the additional moneys
which would otherwise be required to be paid in respect of such Loans pursuant
to subsection 3.12, 3.13 or 3.14(a) would be materially reduced or the
illegality or other adverse circumstances which would otherwise require such
payment pursuant to subsection 3.12, 3.13 or 3.14(a) would cease to exist and
if, as determined by such Lender, in its sole discretion, the making, funding
or maintaining of such Loans through such other lending office would not
otherwise adversely affect such Loans or such Lender. The Company hereby
agrees to pay all reasonable expenses incurred by any Lender in utilizing
another lending office of such Lender pursuant to this subsection 3.16 if, upon
being notified by such Lender of its intention to change lending offices in
accordance with the preceding sentence, the Company requests such Lender to
take the steps specified in this subsection 3.16. If the Company fails to make
a request upon being so notified, such Lender shall have no obligations under
this subsection 3.16.
3.17 Replacement of Lender. If the Company is required to make a
payment to any Lender pursuant to subsection 3.8, 3.12 or 3.14, or the
obligation of any Lender to make Eurodollar Loans is suspended pursuant to
subsection 3.13, the Company may, with the prior written consent of the
Required Lenders (which consent may not be unreasonably withheld) and upon not
less than 15 Business Days' prior notice to the Administrative Agent,
immediately terminate the Commitment of such Lender and prepay such Lender's
Loans, together with accrued interest thereon and all other amounts payable
with respect thereto. Such termination shall not relieve the Company of its
Obligations to such Lender under subsection 3.15 or 10.5 in respect of periods
prior to such termination. The Required Lenders shall not withhold their
consent to any such termination if the Company, on terms and conditions
reasonably satisfactory to the Required Lenders, shall have located a banking
institution, reasonably satisfactory to the Required Lenders, which shall have
agreed to be substituted for such Lender on such terms and conditions as a
Lender under this Agreement.
SECTION 4. CONDITIONS OF LENDING
4.1 Conditions to the Initial Loans. The obligation of each Lender
to make its initial Loan and the obligation of the relevant Issuing Lender to
issue the initial Letter of Credit on or after the Effective Date shall be
subject to the satisfaction of the following conditions precedent:
(a) Agreement; Revolving Credit Notes and Competitive Loan Notes.
The Administrative Agent shall have received (i) a counterpart of this
Agreement for each Lender,
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duly executed by a Responsible Officer and (ii) an appropriate Revolving Credit
Note and Grid Competitive Loan Note, for each Lender, conforming to the
requirements hereof and duly executed by a Responsible Officer.
(b) Corporate Proceedings. The Administrative Agent shall have
received, with a copy for each Lender, a copy of the resolutions of the Board
of Directors of the Company (or duly authorized committee thereof) authorizing
the execution, delivery and performance of this Agreement, the Notes and the
borrowings provided for herein. Such resolutions shall be certified by the
Secretary or an Assistant Secretary of the Company, which certifications shall
state that the resolutions thereby certified have not been amended, modified,
revoked or rescinded and are in full force and effect as of such date.
(c) Legal Opinions. The Administrative Agent shall have received,
with a copy for each Lender, legal opinions, dated the Effective Date, of
Sullivan & Cromwell and the General Counsel of the Company or other counsel
satisfactory to the Lenders, substantially in the form of Exhibits G and H.
(d) Cancellation of Existing Facilities. The Administrative Agent
shall have received a copy of written irrevocable notices from the Company,
PEPL and TETCO terminating the Commitments (as defined in each of the Existing
Facilities) and directing the Agent (as so defined) to prepay by wire transfer,
in immediately available funds, in full any loans and other extensions of
credit then outstanding thereunder, together with accrued interest thereon, and
any unpaid facility fees then accrued and all other amounts then due, upon
receipt of the proceeds from the Loans or other funds available to or provided
by the Company, PEPL and/or TETCO (which in the aggregate shall be in an amount
at least sufficient to make all payments referred to in this subsection (d)).
(e) Additional Matters. The Administrative Agent shall have
received, with a copy for each Lender, such other certificates, opinions,
documents and instruments relating to the transactions contemplated hereby as
may have been reasonably requested by any Lender, and all corporate and other
proceedings, and all documents, instruments and other legal matters in
connection with the transactions contemplated by this Agreement shall be
reasonably satisfactory in form and substance to the Administrative Agent and
the Required Lenders and their respective counsel.
4.2 Conditions to All Loans and All Letters of Credit. The
obligation of each Lender to make any Loan, other than a conversion or
continuation of a Loan under subsection 3.10, or of the relevant Issuing Lender
to issue a Letter of Credit (including, without limitation, its initial Loans
requested to be made by it and, in the case of such Issuing Lender, its
obligation to issue the initial Letter of Credit), is subject to the
satisfaction of the following conditions precedent as of the date such Loan is
made or such Letter of Credit is issued:
(a) Non-Refunding Extensions of Credit. In the case of any Loan or
Letter of Credit which does not involve a Refunding Extension of Credit:
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(i) the representations and warranties made by the Company in this
Agreement shall be true and correct in all material respects on and as of
such date immediately prior to and after giving effect to such Extension
of Credit as if made on and as of such date, except to the extent such
representations and warranties relate solely to an earlier date or period;
(ii) no Default or Event of Default shall have occurred and be
continuing on such date or shall occur after giving effect to the Loans
requested to be made or the Letters of Credit requested to be issued; and
(iii) with respect to the issuance of any Letter of Credit, the
relevant Issuing Lender shall have received a Letter of Credit
Application, completed to the satisfaction of such Issuing Lender, and
such other certificates, documents and other papers and information as
such Issuing Lender may reasonably request.
(b) Refunding Extensions of Credit. In the case of any Loan or
Letter of Credit involving solely a Refunding Extension of Credit:
(i) no Event of Default shall have occurred and be continuing on
such date or shall occur after giving effect to the Loans requested to be
made or the Letter of Credit requested to be issued; and
(ii) with respect to the issuance of any Letter of Credit, the
relevant Issuing Lender shall have received a Letter of Credit
Application, completed to the satisfaction of such Issuing Lender, and
such other certificates, documents and other papers and information as
such Issuing Lender may reasonably request.
Each borrowing of Loans, other than a conversion or continuation of a Loan
under subsection 3.10, or issuance of a Letter of Credit under this Agreement,
shall constitute a representation or warranty by the Company hereunder as of
the date of such borrowing or such issuance that the conditions in clauses
(a)(i) and (ii) or in clause (b)(i) of this subsection 4.2 applicable thereto
have been satisfied. Each conversion of a Loan into a Eurodollar Loan or CD
Rate Loan under subsection 3.10 shall constitute a representation and warranty
by the Company hereunder as of the date of such conversion that no Event of
Default shall have occurred and be continuing on such date.
SECTION 5. REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this Agreement and to
make the Loans and to induce the Issuing Lenders to issue, and the
Participating Lenders to participate in, the Letters of Credit as herein
provided, the Company hereby represents and warrants to the Administrative
Agent and to each Lender that:
5.1 Financial Condition. The consolidated balance sheet of the
Company and its Subsidiaries as at December 31, 1994 and the related
consolidated statements of income, common stockholders' equity, and cash flows
for the year then ended, certified by KPMG
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Peat Marwick LLP, copies of which have been heretofore furnished to each
Lender, present fairly the consolidated financial position of the Company and
its Subsidiaries as at such date, and the consolidated results of their
operations and cash flows for the year then ended, in accordance with GAAP.
The unaudited consolidated balance sheet of the Company and its Subsidiaries as
of September 30, 1995, together with unaudited consolidated statements of
income and cash flows for the nine months ended September 30, 1994 and 1995,
included in the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995, present fairly the consolidated financial position of the
Company and its Subsidiaries as of September 30, 1995 and the consolidated
results of their operations and cash flows for the nine months ended September
30, 1994 and 1995, in conformity with GAAP applicable to Reports on Form 10-Q.
Since September 30, 1995, there has been no change in the consolidated
financial position or results of operations of the Company and its Subsidiaries
which is reasonably likely to have a material adverse effect on the ability of
the Company to repay the principal of and interest on the Loans and all other
amounts payable under this Agreement in accordance with the terms of this
Agreement and the Notes, except as set forth in, or contemplated by the
disclosures contained in, the SEC Reports.
5.2 Corporate Existence; Qualification. The Company (i) is a
corporation duly organized, validly existing and in good standing under the
laws of Delaware, (ii) has the corporate power and authority to own and operate
its properties, to lease the properties it operates as lessee and to conduct
the business in which it is currently engaged and (iii) is duly qualified as a
foreign corporation and is in good standing under the laws of each jurisdiction
where its ownership, lease or operation of property or the conduct of its
business requires such qualification and where the failure to be so qualified
and in good standing would have a material adverse effect on the business of
the Company and its Subsidiaries taken as a whole.
5.3 Corporate Power; Authorization; Enforceable Obligations. (a)
The Company has the corporate power and authority to execute, deliver and
perform this Agreement and the Notes. The Company has the corporate power and
authority to borrow hereunder and has taken all necessary corporate action to
authorize the borrowings on the terms and conditions of this Agreement and the
Notes. The Company has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement and the Notes prior to
the execution and delivery thereof.
(b) No consent or authorization of, or filing with or other act by
or in respect of, any Person (including, without limitation, any Governmental
Authority) is required in connection with the borrowings hereunder or with the
execution, delivery, performance, validity or enforceability of this Agreement
or the Notes or the consummation of the transactions contemplated hereby or
thereby, except (i) for consents, authorizations and filings which have been
obtained or made, as the case may be, and are in full force and effect, (ii)
which are not required to be obtained or made prior to the date on which this
representation is made or deemed made or (iii) the failure of which to obtain
or make (x) would not have a material adverse effect on the business of the
Company and its Subsidiaries taken as a whole or (y) would not materially
adversely affect the ability of the Company to perform its obligations under
this Agreement or the Notes.
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(c) This Agreement has been duly executed and delivered by the
Company and constitutes a valid and legally binding obligation of the Company
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles. The Notes have been duly authorized by the Company and, when
executed, issued and delivered pursuant hereto, will constitute valid and
legally binding obligations of the Company, enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles.
5.4 No Legal Bar. The execution, delivery and performance by the
Company of this Agreement and the Notes, the borrowings hereunder and the use
of the proceeds thereof will not violate any Requirement of Law or Contractual
Obligation of the Company except for such violations which would not have a
material adverse effect on the business of the Company and its Subsidiaries
taken as a whole, and will not result in, or require, the creation or
imposition of, any Lien on any of its properties or revenues pursuant to any
Requirement of Law or Contractual Obligation.
5.5 No Material Litigation. No litigation or proceeding of or
before any arbitrator or Governmental Authority is pending or, to the best
knowledge of the Company, threatened by or against the Company or any of its
Subsidiaries which is reasonably likely to have a material adverse effect on
the ability of the Company to repay the principal of and interest on the Loans
and all other amounts payable under this Agreement in accordance with the terms
of this Agreement and the Notes, except as set forth in, or contemplated by the
disclosures contained in, the SEC Reports.
5.6 Margin Regulations. No part of the proceeds of any Loans
hereunder will be used for any purpose which violates the provisions of
Regulation U of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect. The Company is not engaged nor will it
engage, principally, or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms under said
Regulation U.
5.7 ERISA. (i) No employee benefit plan established or maintained,
or to which contributions have been made, by the Company or any Commonly
Controlled Entity which is subject to Part 3 of Subtitle B of Title I of the
Employee Retirement Income Security Act of 1974 ("ERISA"), had an accumulated
funding deficiency as of the last day of the most recent fiscal year of such
plan ended prior to the date hereof, (ii) no material liability to the Pension
Benefit Guarantee Corporation has been incurred with respect to any such plan
by the Company and (iii) neither any such plan nor any trustee or administrator
of any such plan has engaged in a prohibited transaction which could subject
any such plan, or any such trustee or administrator, or any party dealing with
any such plan, to the tax or penalty on prohibited transactions imposed by
Section 4975 of the Code, except in any such case referred to in clause (i),
(ii) or (iii) which would not, individually or in the aggregate, have a
material adverse effect on the business of the Company and its Subsidiaries
taken as a whole. As used in this Agreement, the term "accumulated funding
deficiency" has the meaning assigned to
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such term in ERISA and the term "prohibited transaction" shall have the meaning
assigned to such term in said Section 4975.
5.8 Environmental Regulations. Except as set forth in, or
contemplated by the disclosures contained in, the SEC Reports, each of the
Company and its Subsidiaries is in compliance with all Requirements of Law
relating to pollution and environmental control in all jurisdictions in which
it is presently doing business, except to the extent that the failure to comply
therewith would not, individually or in the aggregate, have a material adverse
effect on the business of the Company and its Subsidiaries taken as a whole.
5.9 Investment Company Act, Public Utility Holding Company Act. The
Company is not an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended. The Company is not subject to any duty, obligation or liability as
a "holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
SECTION 6. AFFIRMATIVE COVENANTS
The Company agrees that, so long as the Commitments remain in effect,
any Loans or any Letter of Credit Obligations remain outstanding and unpaid or
any other amount is owing to any Lender or the Administrative Agent hereunder,
the Company shall, and, except in the case of the agreements set forth in
subsections 6.1, 6.2 and 6.7, shall cause each of its Significant Subsidiaries
to:
6.1 Financial Statements. Furnish to each Lender:
(a) within 120 days after the end of each fiscal year of the
Company, a copy of the audited consolidated balance sheet of the Company and
its consolidated Subsidiaries as at the end of such year and the related
consolidated statements of income and stockholders' equity and cash flows for
such year, setting forth in comparative form the figures for the previous year,
reported on without qualification arising out of the scope of the audit by
independent certified public accountants of nationally recognized standing
selected by the Company; and
(b) within 60 days after the end of each of the first three
quarterly periods of each fiscal year of the Company, a copy of the unaudited
consolidated balance sheets of the Company and its consolidated Subsidiaries as
at the end of each such quarter, the related unaudited consolidated statements
of income of the Company and its consolidated Subsidiaries for such quarter and
the portion of the fiscal year through such date and the related unaudited
consolidated statements of cash flows of the Company and its consolidated
Subsidiaries for the portion of the fiscal year through such date, setting
forth in each case in comparative form the figures for the corresponding prior
year-to-date period (subject to normal year-end audit adjustments).
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The Company covenants and agrees that all such financial statements shall be
prepared in accordance with GAAP (subject, in the case of interim statements,
to normal year-end audit adjustments and except that such interim statements
may be prepared in accordance with GAAP applicable to Reports on Form 10-Q)
applied consistently throughout the periods reflected therein (except as
disclosed therein).
6.2 Certificates; Other Information. Furnish to each Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsections 6.1(a) and (b), a certificate of a Responsible
Officer (i) stating that such Responsible Officer has obtained no knowledge of
any Default or Event of Default, except as specified in such certificate, (ii)
stating, to the best of such Responsible Officer's knowledge, that all such
financial statements have been prepared in accordance with GAAP (subject, in
the case of interim statements, to normal year-end audit adjustments and except
that such interim statements may have been prepared in accordance with GAAP
applicable to Reports on Form 10-Q) applied consistently throughout the periods
reflected therein (except as disclosed therein) and (iii) showing in detail the
calculations supporting such statements in respect of subsection 7.1;
(b) promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available
generally and all regular and periodic reports (other than on Form 11-K) and
all final registration statements (other than on Form S-8) and final
prospectuses, if any, filed by the Company with any securities exchange or with
the Securities and Exchange Commission or any Governmental Authority succeeding
to any of its functions; and
(c) promptly, such additional financial and other information as any
Lender may from time to time reasonably request through the Administrative
Agent.
6.3 Payment of Taxes. Pay and discharge, or cause the payment and
discharge of, all federal and all other material taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits,
or upon any properties belonging to it, prior to the date on which penalties
attach thereto, and all lawful claims which, if unpaid, might become a Lien
upon any properties of the Company or any of its Significant Subsidiaries;
provided that neither the Company nor any of its Significant Subsidiaries shall
be required to pay any such tax, assessment, charge, levy or claim which is
being contested in good faith and (if necessary) by proper proceedings if it
has maintained adequate reserves (in the good faith judgment of management of
the Company or the relevant Significant Subsidiary, as the case may be) with
respect thereto in accordance with GAAP.
6.4 Maintenance of Existence. Preserve, renew and keep in full
force and effect its corporate existence and take all reasonable action to
maintain all material rights, privileges and franchises necessary or desirable
in the normal conduct of its business (provided that the foregoing shall not
prevent (i) any merger or consolidation of any Subsidiary with, or any sale or
other disposition by any Subsidiary of any property or assets to, the Company
or a Wholly-Owned Subsidiary or (ii) the taking of, or failure to take, any
action which, in the opinion of the chief executive officer or chief financial
officer of the Company, will not
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materially adversely affect the ability of the Company to perform its
obligations hereunder); and comply with all Requirements of Law except to the
extent the same is being contested in good faith and except to the extent that
failure to comply therewith would not, in the aggregate, have a material
adverse effect on the business of the Company and its Subsidiaries taken as a
whole.
6.5 Maintenance of Property; Insurance. (a) Keep all property
useful and necessary in its business in good working order and condition,
normal wear and tear excepted, to the extent customary for companies in similar
businesses; and
(b) Maintain with financially sound insurance companies insurance on
all its property in at least such amounts and with such deductibles as are
usually maintained by, and against at least such risks as are usually insured
against in the same general area by, companies engaged in the same or a similar
business.
6.6 Inspection of Property; Books and Records; Discussions. Upon
reasonable notice to the Company by the Administrative Agent or 25% of the
Lenders given through the Administrative Agent and at the expense of the
relevant Lenders, permit representatives of any Lenders to visit and inspect
such of their properties and examine and make abstracts from any of its books
and records at any reasonable time and as often as may reasonably be desired,
and to discuss the business of the Company and its Subsidiaries with officers
and employees of the Company and its Subsidiaries and with its independent
certified public accountants. Each Lender shall hold all non-public
information obtained pursuant to this subsection 6.6 confidential in accordance
with its customary procedures in respect of confidential information and in any
event subject to subsection 10.10(e) may make any disclosure to a Transferee or
as required or requested by any Governmental Authority.
6.7 Notices. Promptly give notice to the Administrative Agent and
each Lender:
(a) of the occurrence of any Default or Event of Default; and
(b) of any litigation or proceeding affecting the Company or any of
its Subsidiaries (i) in which the amount claimed is $25,000,000 or more and not
covered by insurance or (ii) in which injunctive or similar relief is sought,
which in any such case referred to in clause (i) or (ii) if obtained would have
a material adverse effect on the business of the Company and its Subsidiaries
taken as a whole.
Each notice pursuant to this subsection 6.7 shall be accompanied by a statement
of a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action the Company or such Subsidiary proposes to take
with respect thereto.
SECTION 7. NEGATIVE COVENANTS
The Company hereby agrees that, so long as the Commitments remain in
effect, any Loans or any Letter of Credit Obligations remain outstanding and
unpaid or any other amount is owing to any Lender or the Administrative Agent,
the Company shall not, and, in the case
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of subsections 7.2, 7.5 and 7.6, shall not permit any of its Subsidiaries to,
directly or indirectly:
7.1 Maintenance of Consolidated Indebtedness to Consolidated
Capitalization Percentage Ratio of the Company. Permit the ratio (expressed as
a percentage) of (a) Consolidated Indebtedness to (b) Consolidated
Capitalization as at the end of any calendar quarter to be greater than 65%.
7.2 Limitation on Liens. Create, incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except:
(a) Liens for taxes, assessments, governmental charges or levies not
yet due or which are being contested in good faith and by appropriate
proceedings if adequate reserves (in the good faith judgment of the Company)
with respect thereto are maintained on the books of the Company in accordance
with GAAP;
(b) statutory Liens of landlords and carrier's, vendor's,
warehousemen's, mechanic's, materialmen's, repairmen's, or other like Liens
arising in the ordinary course of business if the obligations secured by such
Liens are not overdue for a period of more than 60 days or which are being
contested in good faith and (if necessary) by appropriate proceedings;
(c) pledges or deposits and Liens under bonds required in connection
with worker's compensation, unemployment insurance and other social security
legislation incurred in the ordinary course of business;
(d) Liens incurred or deposits to secure the performance of tenders,
bids, contracts (other than for borrowed money), leases, statutory obligations,
surety and appeal bonds, performance and return-of-money bonds and other
obligations of a like nature incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of the business of the Company;
(f) Liens arising from judgments or decrees in circumstances not
constituting an Event of Default under subsection 8.1(g);
(g) purchase money Liens securing obligations arising from the
acquisition by the Company of property, provided that the principal amount of
such obligations does not exceed the purchase price of such property;
(h) (A) Liens in existence on the date of this Agreement, (B) Liens
on any property existing at the time of acquisition thereof (including Liens on
any property acquired from a Person which is merged into the Company) and (C)
any extension, renewal or refunding of any Lien referred to in clause (A) or
(B), provided that no such Lien is extended to cover any
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additional property (other than replacement property) and that the amount of
Indebtedness secured thereby is not increased;
(i) Liens in respect of future demand charges or reservation charges
sold by the Company or any Subsidiary not exceeding $275,000,000 at any one
time;
(j) Liens in favor of the Company or any Subsidiary;
(k) Liens in favor of the Administrative Agent, any Issuing Lender
or the Lenders under this Agreement; and
(l) other Liens securing obligations such that the aggregate book
value (net of applicable reserves) of the assets securing such obligations does
not exceed at any one time an amount equal to 10% of Consolidated Tangible
Assets at such time.
7.3 Consolidation, Merger, Etc. Consolidate with, merge into or
sell, lease or otherwise dispose of its properties and assets as an entirety or
substantially as an entirety to any Person in one transaction or any series of
transactions.
7.4 Principal Subsidiaries. (a) Fail to own, directly or
indirectly, all of the outstanding shares of common stock of each of the
Principal Subsidiaries or (b) create, incur, assume or suffer to exist any Lien
upon any shares of common stock of any Principal Subsidiary owned by the
Company or any of its Subsidiaries except Liens of the nature referred to in
clauses (a), (f), (j) and (k) of subsection 7.2.
7.5 Lines of Business. Engage in any line of business which is
material to the Company and its Subsidiaries taken as a whole other than the
lines of business in which the Company and its Subsidiaries are now engaged and
other energy related lines of business.
7.6 Asset Sales. Make any Asset Sale in any fiscal year if such
Asset Sale, together with all other Asset Sales made during such fiscal year,
will result in Asset Sales of property or assets with an aggregate fair market
value (as determined in good faith by the Company) equal to or greater than 5%
of Consolidated Tangible Assets at the time of such Asset Sale.
SECTION 8. EVENTS OF DEFAULT
Upon the occurrence and during the continuance of any of the
following events:
(a) Payments. The Company shall fail to pay any principal of any
Loan when due (whether at stated maturity, by acceleration or otherwise); or
the Company shall fail to pay any interest on any Loan or any fee payable
hereunder within ten days after the same becomes due and payable in accordance
with the terms hereof; or
(b) Representations and Warranties. Any representation, warranty or
other statement made or deemed made by the Company herein or which is contained
in any
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certificate furnished at any time pursuant to Section 4 hereof shall prove to
have been untrue in any material respect on or as of the date made or deemed
made or furnished; or
(c) Certain Covenants. The Company shall default in the observance
or performance of any covenant or agreement contained in subsection 7.1, 7.3,
7.4, 7.5 or 7.6; or
(d) Other Covenants. The Company shall default in the observance or
performance of any other covenant or agreement contained in this Agreement, and
any such default referred to in this paragraph (d) shall continue unremedied
for a period of 30 days after written notice from the Administrative Agent at
the direction of the Required Lenders; or
(e) Cross-Default. The Company, any of its Significant Subsidiaries
or any Principal Subsidiary shall (i) default in any payment of principal of or
interest on any other Indebtedness for borrowed money or deferred Indebtedness
for the payment of the purchase price of property or assets purchased, in
excess of $100,000,000 in the aggregate, beyond the period of grace, if any,
provided in the agreement or instrument under which such Indebtedness was
created; or (ii) default in the observance or performance of any other
agreement or condition relating to any such Indebtedness or contained in any
agreement or instrument evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause, without the further giving of notice or the further lapse of time, if
required, such Indebtedness to become due prior to its stated maturity;
provided, however, that if either (i) such Indebtedness shall have been paid or
(ii) such default or other event shall be cured by the Company, such
Significant Subsidiary or such Principal Subsidiary, as the case may be, or
waived by the holders of such Indebtedness and any acceleration of maturity
having resulted from such default or other event or condition shall be
rescinded or annulled, in each case in accordance with the terms of such
agreement or instrument, without any modification of the terms of such
Indebtedness requiring the Company, such Significant Subsidiary or such
Principal Subsidiary, as the case may be, to furnish additional or other
security therefor or reducing the average life to maturity thereof or
increasing the principal amount thereof or any agreement by the Company, such
Significant Subsidiary or such Principal Subsidiary, as the case may be, to
furnish additional or other security therefor or to issue in lieu thereof
Indebtedness secured by additional or other collateral or with a shorter
average life to maturity or in a greater principal amount, then any default
hereunder by reason thereof shall be deemed to have been thereupon cured or
waived; or
(f) Bankruptcy or Reorganization Proceeding. (i) The Company, any
of its Significant Subsidiaries or any Principal Subsidiary shall commence any
case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (B) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its assets, or
the Company, any of its Significant Subsidiaries or any Principal Subsidiary
shall
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make a general assignment for the benefit of its creditors; or (ii) there shall
be commenced against the Company, any of its Significant Subsidiaries or any
Principal Subsidiary any case, proceeding or other action of a nature referred
to in clause (i) above which (A) results in the entry of an order for relief or
any such adjudication or appointment or (B) remains undismissed, undischarged
or unbonded for a period of 60 days; or (iii) there shall be commenced against
the Company, any of its Significant Subsidiaries or any Principal Subsidiary
any case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of an order for any
such relief which shall not have been vacated, discharged, stayed or bonded
pending appeal within 60 days from the entry thereof; or (iv) the Company, any
of its Significant Subsidiaries or any Principal Subsidiary shall take any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above;
or (v) any of the Company, any of its Significant Subsidiaries or any Principal
Subsidiary shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay their respective debts as they become due; or
(g) Judgments. One or more judgments or decrees for the payment of
money shall be entered against the Company or any of its Significant
Subsidiaries involving in the aggregate a liability (not paid or fully covered
by insurance, except for any reasonable deductible) of $25,000,000 or more and
there shall have been a period of 60 consecutive days during which a stay of
enforcement of such judgment or decree, by reason of a pending appeal or
otherwise, shall not be in effect or during which such judgment or decree shall
not have been vacated or discharged; or
(h) Change in Control of the Company. (i) Any Person or any Persons
acting together which would constitute a "group" for purposes of Section 13(d)
of the Exchange Act (a "Group"), together with any Affiliates thereof, shall
acquire direct or indirect beneficial ownership (as defined in Rule 13d-3 of
the Exchange Act) of 50% or more of the total voting power of all classes of
capital stock of the Company entitled to vote generally in the election of
directors of the Company or (ii) the election by any Person or Group, together
with any Affiliates thereof, of a sufficient number of its or their nominees to
the Board of Directors of the Company such that such nominees, when added to
any existing directors remaining on such Board of Directors after such election
who are Affiliates of such Person or Group, shall constitute a majority of such
Board of Directors; or
(i) ERISA. Any accumulated funding deficiency shall exist with
respect to any employee benefit plan established or maintained, or to which
contributions have been made, by the Company or any Commonly Controlled Entity
or the Company shall incur any material liability to the Pension Benefit
Guarantee Corporation with respect to any such plan or any such plan or trustee
or administrator thereof shall engage in a prohibited transaction, and in each
case such event or condition, together with all such other events or conditions
which have occurred and are continuing at such time, has a material adverse
effect on the ability of the Company to perform its obligations under this
Agreement or the Notes;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Company,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other
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amounts owing under this Agreement (including amounts payable in respect of
Letters of Credit whether or not the beneficiaries thereof shall have presented
the drafts and other documents required thereunder) and the Notes shall
immediately become due and payable and (B) if such event is any other Event of
Default, any of the following actions may be taken: (i) with the consent of
the Required Lenders, the Administrative Agent may, or upon the direction of
the Required Lenders, the Administrative Agent shall, by notice to the Company,
declare the Commitments to be terminated forthwith, whereupon the Commitments
shall immediately terminate; (ii) with the consent of the Required Lenders, the
Administrative Agent may, or upon the direction of the Required Lenders, the
Administrative Agent shall, by notice of default to the Company, declare the
Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement (including amounts payable in respect of Letters of Credit
whether or not the beneficiaries thereof shall have presented the drafts and
other documents required thereunder) and the Notes to be due and payable
forthwith, whereupon the same shall immediately become due and payable; and
(iii) the Administrative Agent may, and upon the direction of the Required
Lenders shall, exercise any and all remedies and other rights provided pursuant
to this Agreement. With respect to all Letters of Credit that shall not have
expired or with respect to which presentment for honor shall not have occurred,
upon the occurrence of an Event of Default, the Company shall deposit in a cash
collateral account opened by the Administrative Agent an amount equal to the
aggregate undrawn face amount of such Letters of Credit for application to
payments of drafts drawn thereunder, and the Administrative Agent shall use its
best efforts to invest such amounts so deposited in United States Treasury
bills or other Cash Equivalents designated by the Company; provided that the
Administrative Agent shall not be liable to the Company for failure to invest
or for any losses suffered as a result of any such investment or withdrawal.
The unused portion of such amounts, if any, shall be returned to the Company
after the respective expiry dates of the Letters of Credit and after all
Obligations are paid in full. Except as expressly provided above in this
Section 8, presentment, demand, protest and all other notices of any kind are
hereby expressly waived.
SECTION 9. THE ADMINISTRATIVE AGENT AND THE ISSUING LENDERS
9.1 Appointment. Each Lender hereby irrevocably designates and
appoints Chemical as the Administrative Agent of such Lender under this
Agreement, the Notes and each other agreement (if any) entered into pursuant to
this Agreement (collectively, the "Credit Documents") and Chemical and each
other Lender so designated hereunder as the Issuing Lenders under this
Agreement, and each such Lender irrevocably authorizes Chemical as the
Administrative Agent for such Lender and Chemical and each other Issuing Lender
as Issuing Lenders to take such action on its behalf under the provisions of
this Agreement and each other Credit Document and to exercise such powers and
perform such duties as are expressly delegated to the Administrative Agent or
the Issuing Lenders, as the case may be, by the terms of this Agreement and
each other Credit Document, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement, neither the Administrative Agent nor the Issuing Lenders shall
have any duties or responsibilities, except those expressly set forth herein
and in the other Credit Documents, or any fiduciary relationship with any
Lender, and no implied covenants,
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functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or otherwise exist against the Administrative Agent and the
Issuing Lenders.
9.2 Delegation of Duties. The Administrative Agent and the Issuing
Lenders may execute any of their respective duties under this Agreement or the
other Credit Documents by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
Neither the Administrative Agent nor any Issuing Lender shall be responsible
for the negligence or misconduct of any agents or attorneys-in-fact selected by
it with reasonable care.
9.3 Exculpatory Provisions. Neither the Administrative Agent nor
any Issuing Lender nor any of their respective officers, directors, employees,
agents, attorneys-in-fact or Affiliates shall be (a) liable for any action
lawfully taken or omitted to be taken by it or such Person under or in
connection with this Agreement or any other Credit Document (except for its or
such Person's own gross negligence or willful misconduct), or (b) responsible
in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Company or any officer thereof
contained in this Agreement or any other Credit Document or in any certificate,
report, statement or other document referred to or provided for in, or received
under or in connection with, this Agreement or any other Credit Document or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or any other Credit Document, or for any failure of the
Company or any other Person to perform its obligations hereunder or thereunder.
Neither the Administrative Agent nor any Issuing Lender shall be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Credit Document or to inspect the properties, books or
records of the Company or any of its Subsidiaries. This subsection 9.3 is
intended to govern the relationship between the Administrative Agent and the
Issuing Lenders, on the one hand, and the Lenders, on the other.
9.4 Reliance by Administrative Agent and the Issuing Lenders. The
Administrative Agent and the Issuing Lenders shall be entitled to rely, and
shall be fully protected in relying, upon any Note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy,
telex or teletype message, statement, order or other document or conversation
believed by any of them to be genuine and correct and to have been signed, sent
or made by the proper Person or Persons and upon advice and statements of legal
counsel (including, without limitation, counsel to the Company), independent
accountants and other experts selected by the Administrative Agent or an
Issuing Lender. The Administrative Agent may deem and treat the payee of any
Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Administrative Agent. The Administrative Agent and the Issuing Lenders shall
be fully justified in failing or refusing to take any action under this
Agreement or any other Credit Document unless any such Person shall first
receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative Agent and
the Issuing Lenders shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement and the other Credit Documents in
accordance with a request of the Required
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Lenders (or, if required by this Agreement, all of the Lenders), and such
request and any action taken or failure to act pursuant thereto shall be
binding upon all the Lenders and all future holders of the Notes.
9.5 Notice of Default. Neither the Administrative Agent nor any
Issuing Lender shall be deemed to have knowledge or notice of the occurrence of
any Default or Event of Default hereunder unless the Administrative Agent or
such Issuing Lender, as the case may be, has received notice from a Lender or
the Company referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event
that the Administrative Agent or an Issuing Lender receives such a notice, the
Administrative Agent shall give notice thereof to the Lenders. The
Administrative Agent and the Issuing Lenders shall take such action with
respect to such Default or Event of Default as shall be reasonably directed by
the Required Lenders; provided that unless and until the Administrative Agent
or the Issuing Lenders shall have received such directions, the Administrative
Agent and the Issuing Lenders may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Default or
Event of Default as they shall deem advisable in the best interests of the
Lenders.
9.6 Non-Reliance on Administrative Agent, Issuing Lenders and Other
Lenders. Each Lender expressly acknowledges that neither the Administrative
Agent nor the Issuing Lenders nor any of their respective officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Administrative Agent or the Issuing
Lenders hereafter taken, including any review of the affairs of the Company,
shall be deemed to constitute any representation or warranty by the
Administrative Agent or the Issuing Lenders to any Lender. Each Lender
represents to the Administrative Agent and the Issuing Lenders that it has,
independently and without reliance upon the Administrative Agent, the Issuing
Lenders or any other Lender and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of the Company and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon the Administrative Agent, the
Issuing Lenders 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 analysis, appraisals and decisions in taking or not taking action under
this Agreement or under the other Credit Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Company. Except for notices, reports and other documents expressly required to
be furnished to the Lenders by the Administrative Agent or an Issuing Lender
hereunder or under the other Credit Documents, neither the Administrative Agent
nor such Issuing Lender shall have any duty or responsibility to provide any
Lender with any credit or other information concerning the business,
operations, property, financial and other condition or creditworthiness of the
Company which may come into the possession of the Administrative Agent or the
Issuing Lenders or any of their respective officers, directors, employees,
agents, attorneys-in-fact or Affiliates.
9.7 Indemnification. The Lenders agree to indemnify the
Administrative Agent and the Issuing Lenders in their respective capacities as
such (to the extent not reimbursed by the
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Company and without limiting the obligation of the Company to do so), ratably
according to the respective amounts of their Commitments, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever which
may at any time (including without limitation at any time following the payment
of the Notes) be imposed on, incurred by or asserted against the Administrative
Agent or the Issuing Lenders in any way relating to or arising out of this
Agreement or any other Credit Document or any documents contemplated by or
referred to herein or therein or the transactions contemplated hereby or
thereby or any action taken or omitted by the Administrative Agent or the
Issuing Lenders under or in connection with any of the foregoing; provided that
no Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the Administrative Agent's or
an Issuing Lender's gross negligence or willful misconduct. The agreements in
this subsection 9.7 shall survive the payment of the Notes and all other
amounts payable hereunder.
9.8 Administrative Agent and Issuing Lenders in Their Individual
Capacities. The Administrative Agent, each Issuing Lender and their respective
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Company as though the Administrative Agent or such
Issuing Lender were not the Administrative Agent or an Issuing Lender,
respectively, hereunder. With respect to Loans made or renewed by it and any
Note issued to it, the Administrative Agent and the Issuing Lenders shall have
the same rights and powers under this Agreement as any Lender and may exercise
the same as though it were not the Administrative Agent or an Issuing Lender,
and the terms "Lender" and "Lenders" shall include the Administrative Agent and
the Issuing Lenders in their respective individual capacities.
9.9 Successor Administrative Agent and Issuing Lenders. The
Administrative Agent or any Issuing Lender may resign as Administrative Agent
or Issuing Lender upon 30 days' notice to the Company and the Lenders. If the
Administrative Agent or any Issuing Lender shall resign as Administrative Agent
or Issuing Lender under this Agreement, then the Required Lenders during such
30-day period shall appoint from among the Lenders a successor agent or issuing
bank for the Lenders, whereupon such successor agent or issuing bank shall
succeed to the rights, powers and duties of the Administrative Agent or Issuing
Lender being replaced and the term "Administrative Agent" or "Issuing Lender"
shall mean such successor agent or issuing bank, respectively, effective upon
its appointment, and the former Administrative Agent's or Issuing Lender's
rights, powers and duties as Administrative Agent or Issuing Lender shall be
terminated, without any other or further act or deed on the part of such former
Administrative Agent or Issuing Lender or any of the parties to this Agreement
or any holders of the Notes; provided that no successor agent or issuing bank
may be appointed by the Required Lenders without the prior written consent of
the Company, which consent shall not be unreasonably withheld. After any
retiring Administrative Agent's or Issuing Lender's resignation hereunder as
the Administrative Agent or an Issuing Lender, the provisions of this Section 9
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was the Administrative Agent or an Issuing Lender under this
Agreement.
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SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. Neither this Agreement, any Note, any
other Credit Document nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this
subsection 10.1. With the written consent of the Required Lenders, the
Administrative Agent and the Company may, from time to time, enter into written
amendments, supplements or modifications for the purpose of adding, deleting or
changing any provisions to this Agreement, the Notes or any other Credit
Document, or changing in any manner the rights of the Lenders or of the Company
hereunder or thereunder or waiving, on such terms and conditions as the
Administrative Agent may specify in such instrument, any of the requirements of
this Agreement, the Notes or any other Credit Document or any Default or Event
of Default and its consequences; provided that no such waiver and no such
amendment, supplement or modification shall (a) extend the Termination Date or
extend the maturity of any Loan or any installment thereof, or reduce the rate
or extend the time of payment of interest thereon, or reduce any fee payable to
the Lenders hereunder, or reduce the principal amount thereof, or increase the
amount of any Lender's Commitment or Commitment Percentage, or amend, modify or
waive any provision of this subsection 10.1 or reduce the percentage specified
in the definition of Required Lenders, or consent to the assignment or transfer
by the Company of any of its rights and obligations under this Agreement, in
each case without the written consent of all the Lenders or (b) amend, modify
or waive any provision of Section 9 without the written consent of the then
Administrative Agent or Issuing Lender affected by such amendment, modification
or waiver. Any such waiver and any such amendment, supplement or modification
shall apply to each of the Lenders equally and shall be binding upon the
Company, the Lenders, the Administrative Agent and all future holders of the
Notes. In the case of any waiver, the Company, the Lenders and the
Administrative Agent shall be restored to their former position and rights
hereunder and under the outstanding Notes, and any Default or Event of Default
waived shall be deemed to be cured and not continuing; but no such waiver shall
extend to any subsequent or other Default or Event of Default, or impair any
right consequent thereon.
10.2 Notices. Except as otherwise expressly provided herein, all
notices, requests and demands to or upon the respective parties hereto to be
effective shall be in writing (including by facsimile), and shall be deemed to
have been duly given or made when delivered by hand, or five days after being
deposited in the United States mail, postage prepaid, or, in the case of
facsimile notice, when sent, and telephonically confirmed, or, in the case of a
nationally recognized courier service, one Business Day after delivery to such
courier service, addressed as follows in the case of the Company and the
Administrative Agent, and as set forth on Schedule 1 in the case of the
Lenders, or to such other address as may be hereafter notified by the
respective parties hereto and any future holders of the Notes:
The Company: PanEnergy Corp
5400 Westheimer Court
Houston, Texas 77056-5310
Attention: Treasurer
Facsimile: (713) 627-4603
Confirmation: (713) 627-5900
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The Administrative Agent: Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: Energy Division
Facsimile: (212) 270-4892
Confirmation: (212) 270-3531
provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to subsections 2.3, 2.15, 3.5, 3.6 and 3.10 shall not
be effective until actually received.
10.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
10.4 Survival of Representations and Warranties. All
representations and warranties made hereunder and in any document, certificate
or statement delivered pursuant hereto or in connection herewith shall survive
the execution and delivery of this Agreement and the making of the Loans and
issuance of Letters of Credit hereunder.
10.5 Payment of Expenses and Taxes. The Company agrees (a) to pay
or reimburse the Administrative Agent for all the reasonable fees and
disbursements of counsel to the Administrative Agent incurred in connection
with the development, preparation and execution of, and any amendment,
supplement or modification to, this Agreement, the Notes and any other
documents prepared in connection herewith or therewith, and the consummation of
the transactions contemplated hereby and thereby, (b) to pay or reimburse each
Lender and the Administrative Agent for all their costs and expenses incurred
in connection with the enforcement or preservation of any rights under this
Agreement, the Notes and any such other documents, including, without
limitation, the fees and disbursements of counsel to the Administrative Agent,
and (c) to pay, indemnify and hold each Lender and the Administrative Agent
harmless from any and all recording and filing fees and any and all liabilities
with respect to, or resulting from any delay in paying, stamp, excise and other
similar taxes, if any, which may be payable or determined to be payable in
connection with the execution and delivery of, or consummation of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Agreement, the Notes and
any such other documents. This covenant shall survive the termination of this
Agreement and payment in full of the Obligations.
10.6 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Company, the Lenders, the Administrative Agent,
all future holders of the Notes and their respective successors and assigns,
except that the Company may not assign or
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transfer any of its rights or obligations under this Agreement without the
prior written consent of each Lender. No Lender may participate, assign or
sell any of its Credit Exposure (as defined in subsection 10.7) except as
required by operation of law, in connection with the merger, consolidation,
dissolution or sale of any Lender or the sale of all or substantially all of
the assets of such Lender or as provided in subsection 10.7, 10.8 or 10.9.
10.7 Participations. Any Lender may, in the ordinary course of its
commercial banking business and in accordance with applicable law, at any time
sell to one or more commercial banks or other entities ("Participants")
participating interests in any Loan owing to such Lender, any Note held by such
Lender, any L/C Participating Interest of such Lender, any part of the
Commitment of such Lender or any other interest of such Lender hereunder (in
respect of any such Lender, its "Credit Exposure"); provided, however, that,
except with the prior written consent of the Company and the Administrative
Agent (which in each case shall not be unreasonably withheld), after giving
effect to all of such sales by any Lender, and any other assignments permitted
under this subsection 10.7 and 10.8, such Lender shall continue to have
beneficial ownership of Credit Exposure equal to not less than 50% of its
Commitment; and provided, further, that no Participant (other than an Affiliate
of a Lender) shall be entitled under the relevant participation agreement to
require such Lender to take or omit to take any action hereunder, except, to
the extent any Participant has any interest directly affected thereby, that
extends the Termination Date or the final maturity of any Note or any
installment thereof or reduces the rate or extends the time of payment of
interest thereon, or reduces any fee payable to the Lenders hereunder, or
reduces the principal amount thereof, or changes the amount of any Lender's
Commitment Percentage, or increases the amount of any Lender's Commitment. In
the event of any such sale by a Lender of participating interests to a
Participant, such Lender's obligations under this Agreement shall remain
unchanged, such Lender shall remain solely responsible for the performance
thereof, such Lender shall remain the holder of any such Note or L/C
Participating Interest for all purposes under this Agreement, and the Company
and the Administrative Agent shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations under this
Agreement. The Company agrees that if amounts outstanding under this Agreement
and the Notes are due or unpaid, or shall have been declared or shall have
become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement, any Note and any
Letter of Credit to the same extent as if the amount of its participating
interest were owing directly to it as a Lender under this Agreement or any Note
or the Issuing Lender with respect to any Letter of Credit; provided that such
right of set-off shall be subject to the obligations of such Participant to
share with the Lenders, and the Lenders agree to share with such Participant,
as provided in subsection 10.11. The Company also agrees that each Participant
shall be entitled to the benefits of subsections 3.12, 3.13, 3.14 and 3.15 with
respect to its participation in the Commitments, the Loans and the Letters of
Credit outstanding from time to time; provided that no Participant shall be
entitled to receive any greater amount pursuant to such subsections than the
transferor Lender would have been entitled to receive in respect of the amount
of the participation transferred by such transferor Lender to such Participant
had no such transfer occurred.
10.8 Assignments. Any Lender may, in the ordinary course of its
commercial banking business and in accordance with applicable law, at any time
sell to any other Lender
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or any Affiliate thereof, and, subject to the limitations set forth in the
proviso to this sentence and with the consent of the Company and the
Administrative Agent (which in each case shall not be unreasonably withheld) to
one or more additional commercial banks or other financial institutions
("Purchasing Lenders") all or any part of its rights and obligations under this
Agreement and its Notes and with respect to the Letters of Credit, pursuant to
a Commitment Transfer Supplement, in the form of Exhibit I (a "Commitment
Transfer Supplement"), executed by such Purchasing Lender, such transferor
Lender (and, in the case of a Purchasing Lender that is not then a Lender or an
Affiliate thereof, by the Company and the Administrative Agent), and delivered
to the Administrative Agent for its acceptance and recording in the Register;
provided, however, that, except with the prior written consent of the Company
(which consent shall not be unreasonably withheld) or in connection with a
transfer pursuant to subsection 10.10(d), (i) the Commitment purchased by any
such Purchasing Lender that is not then a Lender shall be equal to or greater
than $15,000,000 and (ii) the transferor Lender which has transferred part of
its Commitment to any such Purchasing Lender that is not then a Lender shall
retain a Commitment, after giving effect to such sale, equal to or greater than
$15,000,000 in the aggregate. Upon such execution, delivery, acceptance and
recording, from and after the Transfer Effective Date determined pursuant to
such Commitment Transfer Supplement, (x) the Purchasing Lender thereunder shall
be a party hereto and, to the extent provided in such Commitment Transfer
Supplement, have the rights and obligations of a Lender hereunder with a
Commitment as set forth therein to the same extent as if it were an original
party hereto with the same Commitment Percentage set forth in such Commitment
Transfer Supplement and no further action by the Company, the Lenders or the
Administrative Agent shall be required in respect thereof except as otherwise
provided herein, and (y) the transferor Lender thereunder shall, to the extent
provided in such Commitment Transfer Supplement, be released from its
obligations under this Agreement (and, in the case of a Commitment Transfer
Supplement covering all or the remaining portion of a transferor Lender's
rights and obligations under this Agreement, such transferor Lender shall cease
to be a party hereto except, in respect of periods prior to such termination,
with respect to subsections 3.8, 3.14, 3.15 and 10.5). Such Commitment
Transfer Supplement shall be deemed to amend this Agreement to the extent, and
only to the extent, necessary to reflect the addition of such Purchasing Lender
and the resulting adjustment of Commitment Percentages arising from the
purchase by such Purchasing Lender of all or a portion of the rights and
obligations of such transferor Lender under this Agreement and its Notes and
with respect to the Letters of Credit. On or prior to the Transfer Effective
Date determined pursuant to such Commitment Transfer Supplement, the Company,
at the Company's expense, shall execute and deliver to the Administrative Agent
in exchange for each surrendered Note a new Note, to the order of such
Purchasing Lender, and each Issuing Lender shall execute and deliver new Letter
of Credit Participation Certificates, if appropriate, in each case in amounts
equal to its respective percentages of Commitments or, as appropriate, the
outstanding Loans as adjusted assumed by it pursuant to such Commitment
Transfer Supplement and, if the transferor Lender has retained a Commitment or
any Competitive Loans hereunder, a new Note or Notes to the order of the
transferor Lender in an amount or amounts equal to the Commitment and any
Competitive Loans retained by it hereunder. Such new Note or Notes shall be
dated the Effective Date and shall otherwise be in the form of the Note
replaced thereby. The Note surrendered by the transferor Lender shall be
returned by the Administrative Agent to the Company marked "cancelled". If any
Letter of Credit Participation Certificates have been issued to the transferor
Lender and are
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then outstanding, appropriate adjustments by virtue of the issuance of new
certificates to the Purchasing Lender and, if appropriate, the transferor
Lender shall be made as promptly as practicable after the Transfer Effective
Date.
10.9 Transfers of Competitive Loans. (a) Any Competitive Loan
Lender, in the ordinary course of its business and in accordance with
applicable law, at any time may assign to one or more banks or other entities
(each, a "Competitive Loan Assignee") any Competitive Loan owing to such
Competitive Loan Lender and any Individual Competitive Loan Note held by such
Lender evidencing such Competitive Loan, pursuant to a Competitive Loan
Assignment executed by the assignor Competitive Loan Lender and the Competitive
Loan Assignee.
(b) Upon such execution, from and after the date of such Competitive
Loan Assignment, the Competitive Loan Assignee shall be deemed, to the extent
of the assignment provided for in such Competitive Loan Assignment, and subject
to the provisions of subsections 10.9(c) and 10.9(d), to have the same rights
and benefits of payment and enforcement with respect to such Competitive Loan
and Individual Competitive Loan Note (including, without limitation, the
applicable rights set forth in subsections 3.12, 3.13, 3.14 and 3.15) and the
same rights of setoff and obligation to share pursuant to subsection 10.11 as
it would have had if it were a Competitive Loan Lender hereunder.
(c) Unless such Competitive Loan Assignment shall otherwise specify
and a copy of such Competitive Loan Assignment shall have been delivered to the
Administrative Agent for its acceptance and recording in the Register in
accordance with subsection 10.10(a), the assignor under the Competitive Loan
Assignment shall act as collection agent for the Competitive Loan Assignee
thereunder, and the Administrative Agent shall pay all amounts received from
the Company which are allocable to the assigned Competitive Loan or Individual
Competitive Loan Note directly to such assignor without any liability to such
Competitive Loan Assignee.
(d) A Competitive Loan Assignee under a Competitive Loan Assignment
shall not, by virtue of such Competitive Loan Assignment, become a party to
this Agreement or a "Competitive Loan Lender", or have any rights to consent to
or refrain from consenting to any amendment, waiver or other modification of
any provision of this Agreement or any related document; provided that (i) the
assignor under such Competitive Loan Assignment and such Competitive Loan
Assignee may, in their discretion, agree between themselves upon the manner in
which such assignor will exercise its rights under this Agreement and any
related document, and (ii) if a copy of such Competitive Loan Assignment shall
have been delivered to the Administrative Agent for its acceptance and
recording in the Register in accordance with subsection 10.10(a), no such
amendment, waiver or modification may reduce or postpone any payment of
principal or interest or modify the Competitive Loan Maturity Date in respect
of any Competitive Loan or Individual Competitive Loan Note assigned to such
Competitive Loan Assignee without the written consent of such Competitive Loan
Assignee.
(e) If a Competitive Loan Assignee has caused a Competitive Loan
Assignment to be recorded in the Register in accordance with subsection
10.10(a) such Competitive Loan Assignee may thereafter, in the ordinary course
of its business and in accordance with
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applicable law, assign the relevant Competitive Loans and Individual
Competitive Loan Notes to any Competitive Loan Lender, to any affiliate or
subsidiary of such Competitive Loan Assignee or to any other financial
institution that has total assets in excess of $1,000,000,000 and that in the
ordinary course of its business extends credit of the same type as the
Competitive Loans, and the foregoing provisions of this subsection 10.9 shall
apply, mutatis mutandis, to any such assignment by a Competitive Loan Assignee.
Except in accordance with the preceding sentence, Competitive Loans and
Individual Competitive Loan Notes may not be further assigned by a Competitive
Loan Assignee, subject to any legal or regulatory requirement that the
Competitive Loan Assignee's assets must remain under its control.
10.10 Register, Etc. (a) The Administrative Agent shall maintain
at its address referred to in subsection 10.2 a copy of each Commitment
Transfer Supplement and each Competitive Loan Assignment delivered to it and a
register (the "Register") for the recordation of (i) the names and addressees
of the Lenders and the Commitments of, and principal amount of the Loans owing
to and L/C Participating Interests of, each Lender from time to time and (ii)
with respect to each Competitive Loan Assignment delivered to the
Administrative Agent, the name and address of the Competitive Loan Assignee and
the principal amount of each Competitive Loan owing to such Competitive Loan
Assignee. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Company, the Administrative Agent and the Lenders may
treat each Person whose name is recorded in the Register as the owner of the
Loans recorded therein for all purposes of this Agreement. The Register shall
be available for inspection by the Company or any Lender or Competitive Loan
Assignee at any reasonable time and from time to time upon reasonable prior
notice.
(b) Upon its receipt of a Commitment Transfer Supplement executed by
a transferor Lender and a Purchasing Lender (and, in the case of a Purchasing
Lender that is not then a Lender or an Affiliate thereof, by the Company and
the Administrative Agent) together with payment by the Purchasing Lender to the
Administrative Agent of a registration and processing fee of $2,500, the
Administrative Agent shall (i) promptly accept such Commitment Transfer
Supplement and (ii) on the Transfer Effective Date determined pursuant thereto
(and as defined therein) record the information contained therein in the
Register and give notice of such acceptance and recordation to the Lenders and
the Company.
(c) Upon its receipt of a Competitive Loan Assignment executed by an
assignor Competitive Loan Lender and a Competitive Loan Assignee, together with
payment to the Administrative Agent of a registration and processing fee of
$2,500 (which shall not be payable by the Company), the Administrative Agent
promptly shall (i) accept such Competitive Loan Assignment, (ii) record the
information contained therein in the Register and (iii) give notice of such
acceptance and recordation to the assignor Competitive Loan Lender, the
Competitive Loan Assignee and the Company.
(d) If any Lender (or, if such Lender has participated all or any
part of its Loans or Commitments or assigned any of its Competitive Loans, any
of such Lender's Participants or Competitive Loan Assignees) does not agree
with a proposal of the Company for an amendment, waiver or consent in respect
of an issue described in clause (a) of the proviso to the second sentence of
subsection 10.1, the Company, with the consent of the Required Lenders, may
require that such Lender (and each of its Participants and Competitive Loan
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Assignees, if any) transfer all of its right, title and interest under this
Agreement and such Lender's Note or Notes to a bank identified by the Company
who agrees to assume the obligations of such Lender (a "Proposed Lender") for a
consideration equal to the outstanding principal amount of such Lender's Loans,
together with interest thereon to the date of such transfer and all other
amounts payable hereunder (including but not limited to amounts payable under
subsection 3.15) to such Lender on or prior to the date of such transfer. No
Lender shall withhold its consent to such a transfer if the fee and any
consideration paid to such transferee are reasonably acceptable to such Lender.
Subject to the execution and delivery of a Commitment Transfer Supplement, such
Proposed Lender shall be a "Lender" for all purposes hereunder.
(e) The Company authorizes each Lender to disclose to any
Participant, Competitive Loan Assignee or Purchasing Lender (each, a
"Transferee") and any prospective Transferee any and all financial information
in such Lender's possession concerning the Company which has been delivered to
such Lender by or on behalf of the Company pursuant to this Agreement or which
has been delivered to such Lender by or on behalf of the Company in connection
with such Lender's credit evaluation of the Company prior to entering into this
Agreement; provided that, if non-public information is furnished, each
Transferee shall execute and deliver to such Lender a confidentiality agreement
between such Lender and the Transferee, substantially in the form previously
approved by the Administrative Agent and the Company.
(f) If, pursuant to subsection 10.7, 10.8 or 10.9, any interest in
this Agreement or any Note or Letter of Credit is transferred to any Transferee
which is organized under the laws of any jurisdiction other than the United
States or any State thereof, the transferor Lender shall cause such Transferee
(unless such Transferee is a Lender purchasing under subsection 10.8)
concurrently with the effectiveness of such transfer, (i) to represent to the
transferor Lender (for the benefit of the transferor Lender, the Administrative
Agent and the Company) that under applicable law and treaties no taxes will be
required to be withheld by the Administrative Agent, the Company or the
transferor Lender with respect to any payments to be made to such Transferee,
in respect of the Loans or Letters of Credit, (ii) to furnish to the transferor
Lender, the Administrative Agent and the Company either U.S. Internal Revenue
Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein such
Participant claims entitlement to complete exemption from U.S. federal
withholding tax on all interest payments hereunder) and (iii) to agree (for the
benefit of the transferor Lender, the Administrative Agent and the Company) to
provide the transferor Lender, the Administrative Agent and the Company a new
Form 4224 or Form 1001 upon the obsolescence of any previously delivered form
and comparable statements in accordance with applicable U.S. laws and
regulations and amendments duly executed and completed by such Transferee, and
to comply from time to time with all applicable U.S. laws and regulations with
regard to such withholding tax exemption.
(g) Nothing herein shall prohibit any Lender from pledging or
assigning any Notes to any Federal Reserve Bank in accordance with applicable
law.
10.11 Adjustments; Set-Off. (a) If any Lender (a "Benefitted
Lender") shall at any time receive any payment in respect of all or part of its
Loans or L/C Participating Interests
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(other than pursuant to subsections 3.8, 3.12, 3.13, 3.14, 3.15, 3.17, 10.8,
10.9 or 10.10(d)), or interest thereon, or receive any collateral in respect
thereof or any amount under any guarantee in respect thereof (whether
voluntarily or involuntarily, by set-off, pursuant to events or proceedings of
the nature referred to in clause (f) of Section 8, or otherwise) in a greater
proportion than any such payment to and collateral received by any other
Lender, if any, in respect of such other Lender's Loans or L/C Participating
Interests, or interest thereon, such Benefitted Lender shall purchase for cash
from the other Lender such portion of each such other Lender's Loans or L/C
Participating Interests, or shall provide such other Lender with the benefits
of any such collateral, or the proceeds thereof, as shall be necessary to cause
such Benefitted Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; provided that if all
or any portion of such excess payment or benefits is thereafter recovered from
such Benefitted Lender, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without
interest. The Company agrees that each Lender so purchasing a portion of
another Lender's Loans or L/C Participating Interests may exercise all rights
of payment (including, without limitation, rights of set-off) with respect to
such portion as fully as if such Lender were the direct holder of such portion.
(b) In addition to any rights and remedies of the Lenders provided
by law, upon the occurrence of an Event of Default, each Lender shall have the
right, without prior notice to the Company, any such notice being expressly
waived by the Company to the extent permitted by applicable law, to set off and
apply against any indebtedness, whether matured or unmatured, of the Company to
such Lender, any amount owing from such Lender to the Company, and the
aforesaid right of set-off may be exercised by such Lender against the Company
or against any trustee in bankruptcy, debtor in possession, assignee for the
benefit of creditors, receiver or executor, judgment or attachment creditor of
the Company or against anyone else claiming through or against the Company or
such trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver or executor, judgment or attachment creditor,
notwithstanding the fact that such right of set-off shall not have been
exercised by such Lender prior to the making, filing or issuance, or service
upon such Lender of, or of notice of, any such petition, assignment for the
benefit of creditors, appointment or application for the appointment of a
receiver, or issuance of execution, subpoena, order or warrant. Each Lender
agrees promptly to notify the Company and the Administrative Agent 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.
10.12 Existing Facilities. Each Lender which is a party to the
Existing Facilities (the "Existing Lenders") agrees that the irrevocable notice
and direction to be delivered by the Company, PEPL and TETCO to each Lender and
the Administrative Agent pursuant to subsection 4.1(d) shall constitute
sufficient notice of the termination of the Commitments (as defined in each
Existing Facility) and the prepayment of any loans outstanding under the
Existing Facilities, and hereby waives any express notice requirements under
each Existing Facility in connection therewith.
10.13 Counterparts. This Agreement may be executed by one or more
of the parties to this Agreement on any number of separate counterparts and all
of said counterparts taken together shall be deemed to constitute one and the
same instrument. A set of the copies
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of this Agreement signed by all the parties shall be lodged with the Company
and the Administrative Agent.
10.14 GOVERNING LAW. THIS AGREEMENT, THE NOTES AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
10.15 SUBMISSION TO JURISDICTION; WAIVERS. THE COMPANY HEREBY
IRREVOCABLY AND UNCONDITIONALLY:
(A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT, OR FOR
RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE
NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK,
THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF
NEW YORK, AND THE APPELLATE COURTS FROM ANY THEREOF;
(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN
SUCH COURTS, AND WAIVES TRIAL BY JURY AND 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;
(C) AGREES THAT, IF IT SHALL NOT HAVE A REGISTERED AGENT FOR SERVICE
OF PROCESS IN THE STATE OF NEW YORK, THEN 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 OF MAIL),
AS THE CASE MAY BE, AT ITS ADDRESS SET FORTH IN SUBSECTION 10.2 OR AT SUCH
OTHER ADDRESS OF WHICH THE LENDERS SHALL HAVE BEEN NOTIFIED PURSUANT
THERETO; AND
(D) 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.
10.16 Limitation of Interest. It is expressly stipulated and agreed
to be the intent of the Company and each Lender at all times to comply with the
law applicable to such Lender in connection with the Credit Documents governing
the maximum rate or amount of interest payable on or in connection with the
Credit Documents. If the applicable law is ever judicially interpreted so as
to render usurious any amount called for under the Credit Documents, or
contracted for, charged, taken, reserved or received with respect to the Credit
Documents, or if acceleration of the maturity of the Loans or if any prepayment
by or on behalf of the Company results in the payment of any interest in excess
of that permitted by
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applicable law, then it is the Company's and such Lender's express intent that
all excess amounts theretofore collected by such Lender be credited on the
principal balance of the Loans (or, if such Loans have been or would thereby be
paid in full, refunded to the Company), and the provisions of the Credit
Documents immediately be deemed reformed and the amounts thereafter collectible
thereunder reduced as to such Lender, without the necessity of the execution of
any new document, so as to comply with applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder and thereunder.
The right to accelerate the maturity of the Loans does not include the right to
accelerate any interest which has not otherwise accrued on the date of such
acceleration, and the Lenders do not intend to collect any unearned interest in
the event of acceleration. All sums paid or agreed to be paid to each Lender
for the use, forbearance or detention of the indebtedness evidenced by the
Credit Documents shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full term of such
indebtedness until payment in full so that the rate or amount of interest on
account of such indebtedness does not exceed the applicable usury ceiling. As
used herein, the term "maximum rate" as to any Lender shall mean the maximum
non-usurious rate of interest which may be lawfully contracted for, charged,
taken, reserved or received by such Lender from the Company in connection with
the Loans evidenced hereby under applicable law.
10.17 Entire Agreement. This Agreement constitutes the entire
agreement and understanding among the parties hereto as to the subject matter
hereof and supersedes any previous agreement, oral or written, as to such
subject matter.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered in New York, New York by their proper and duly
authorized officers as of the day and year first above written.
PANHANDLE EASTERN CORPORATION,
doing business as PANENERGY CORP
By: [ILLEGIBLE]
-----------------------------------------
Title: Treasurer and Assistant Secretary
CHEMICAL BANK, as Administrative Agent,
as an Issuing Lender and as a Lender
By: /s/ JAMES H. RAMAGE
-----------------------------------------
Title: Vice President
BANK OF AMERICA ILLINOIS
By: [ILLEGIBLE]
-----------------------------------------
Title:
BANK OF MONTREAL
By: /s/ JULIA BUTHAM
-----------------------------------------
Title: Director
THE BANK OF NEW YORK
By: /s/ RAYMOND J. PALMER
-----------------------------------------
Title: Vice President
<PAGE> 70
THE BANK OF NOVA SCOTIA
By: /s/ F.C.H. ASHBY
-----------------------------------------
Title: Senior Manager Loan Operations
BARCLAYS BANK PLC
By: [ILLEGIBLE]
-----------------------------------------
Title: Director
CIBC, INC.
By: [ILLEGIBLE]
-----------------------------------------
Title: Authorized Signatory
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ CAROL E. HOLLEY
-----------------------------------------
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ HELEN A. CARR
-----------------------------------------
Title: Attorney in Fact
MELLON BANK, N.A.
By: /s/ E. MARO CUENOD, JR.
-----------------------------------------
Title: First Vice President
<PAGE> 71
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By: /s/ JOHN KANDYH
-----------------------------------------
Title: Vice President
NATIONSBANK OF TEXAS, N.A.
By: [ILLEGIBLE]
-----------------------------------------
Title: Senior Vice President
NATIONAL WESTMINSTER BANK PLC NEW YORK BRANCH
By: /s/ DAVID L. SMITH
-----------------------------------------
Title: Vice President
NATIONAL WESTMINSTER BANK PLC NASSAU BRANCH
By: /s/ DAVID L. SMITH
-----------------------------------------
Title: Vice President
BANK OF TOKYO LTD., DALLAS AGENCY
By: [ILLEGIBLE]
-----------------------------------------
Title: Vice President
<PAGE> 72
THE FUJI BANK, LIMITED (HOUSTON AGENCY)
By: [ILLEGIBLE]
-----------------------------------------
Title: Vice President & Senior Manager
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
By: /s/ JOHN SULLIVAN
-----------------------------------------
Title: Joint General Manager
THE ROYAL BANK OF CANADA
By: /s/ EVERETT M. HARNER
-----------------------------------------
Title: Manager
THE SANWA BANK, LIMITED, DALLAS AGENCY
By: /s/ BRAIN J. HEAGLER
-----------------------------------------
Title: Vice President
SOCIETE GENERALE, SOUTHWEST AGENCY
By: /s/ RICHARD A. GOULD
-----------------------------------------
Title: Vice President
<PAGE> 73
THE TORONTO-DOMINION BANK, HOUSTON AGENCY
By: /s/ WARREN FINLAY
-----------------------------------------
Title: Manager Credit
UNION BANK OF SWITZERLAND, HOUSTON AGENCY
By: /s/ DAN O. BOYLE
-----------------------------------------
Title: Managing Director
By: /s/ FINLEY BIGGERSTAFF
-----------------------------------------
Title: Assistant Treasurer
ARAB BANKING CORPORATION
By: /s/ STEPHEN A. PLAUCHE
-----------------------------------------
Title: Vice President
BANK OF SCOTLAND
By: /s/ CATHERINE M. ONIFFREY
-----------------------------------------
Title: Vice President
THE CHASE MANHATTAN BANK, N.A.
By: /s/ BETTYLOU J. ROBERT
-----------------------------------------
Title: Vice President
<PAGE> 74
CHRISTIANIA BANK
By: [ILLEGIBLE]
-----------------------------------------
Title: Vice President
By: /s/ CARL-PETTER SVENDSEN
-----------------------------------------
Title: First Vice President
FIRST INTERSTATE BANK OF TEXAS, N.A.
By: /s/ COLLIE O. MICHAELS
-----------------------------------------
Title: Vice President
THE BANK OF YOKOHAMA, LOS ANGELES AGENCY
By: [ILLEGIBLE]
-----------------------------------------
Title: Deputy General Manager
THE INDUSTRIAL BANK OF JAPAN TRUST COMPANY
By: [ILLEGIBLE]
-----------------------------------------
Title: Senior Vice President
THE MITSUBISHI BANK LIMITED, HOUSTON AGENCY
By: /s/ SHOJI HONDA
-----------------------------------------
Title: General Manager
<PAGE> 75
THE NORTHERN TRUST COMPANY
By: [ILLEGIBLE]
-----------------------------------------
Title: Commercial Realty Officer
THE SUMITOMO BANK LIMITED, HOUSTON AGENCY
By: /s/ HARUMITSU SEKI
-----------------------------------------
Title: General Manager
<PAGE> 76
Schedule 1
Schedules to
Credit Agreement
dated as of January 31, 1996
LENDING OFFICES
Chemical Bank
140 East 45th Street, 29th Floor
New York, NY 10017
Attn: Hilma Gabbidon
Telex: 166350
Answerback: TCBHOU
Telecopy: (212) 622-0002
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
Bank of America Illinois
231 South LaSalle Street, 10th Floor
Chicago, IL 60697
Attn: Amy Goldstein
Telecopy: (312) 974-9626
and
Bank of Montreal
115 South LaSalle Street
Chicago, IL 60603
Attn:
Telex:
Answerback:
Telecopy:
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
Bank of Montreal, Houston Agency
700 Louisiana, Suite 4400
Houston, TX 77002
Attn: Mark E. Peterson
<PAGE> 77
Telex: 775640
Answerback: BMOHOU
Telecopy: (713) 223-4007
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
The Bank of New York
One Wall Street
New York, NY 10286
Attn: Raymond J. Palmer
Telex: MCI 62763
Answerback: BONY UW
Telecopy: (212) 635-7923
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
The Bank of Nova Scotia-Atlanta Agency
600 Peachtree Street, N.E., Suite 2700
Atlanta, GA 30308
Attn: Claude Ashby
Telex: 00542319
Answerback: SCOTIABANK ATL
Telecopy: (404) 888-8998
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
With a copy to:
Bank of Nova Scotia, Houston Rep. Office
2430 Two Shell Plaza
Houston, TX 77002
Attn: R.R. Slaid
-2-
<PAGE> 78
Barclays Bank PLC
222 Broadway, 12th Floor
New York, NY 10038
Attn: Customer Service Unit
Telex: 126195
Answerback: BARCLADOM NYK
Telecopy: (212) 412-5002
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
CIBC, Inc.
2 Paces West
2727 Paces Ferry Road, Suite 1200
Atlanta, GA 30339
Attn: Adrianne Burch
Telex: 54-2413
Answerback: CANBANK ATL
Telecopy: (404) 319-4950
(404) 319-4951
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
The First National Bank of Boston
100 Federal Street, 01-15-4
Boston, MA 02110
Attn: Lee A. Merkle
Telex:
Answerback:
Telecopy: (617) 434-3652
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Bank of Boston
100 Federal St., 01-1B-12
Boston, MA 02110
-3-
<PAGE> 79
The First National Bank of Chicago
One First National Plaza
Chicago, IL 60670
Attn: Petroleum & Mining Division
Telex:
Answerback:
Telecopy: (312) 658-0880
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
Mellon Bank, N.A.
Three Mellon Bank Center
Pittsburgh, PA 15259
Attn: Loan Administration
Telex: 812367
Answerback: MELBNK
Telecopy: (412) 236-2027
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
Morgan Guaranty Trust Company of
New York
60 Wall Street
New York, NY 10260
Attn: John Kowalczuk
Telex: ITT 420230
Answerback: MGT UI
Telecopy: (212) 648-7612
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
-4-
<PAGE> 80
NationsBank of Texas, N.A.
700 Louisiana Street, 8th Floor
Houston, TX 77002
Attn: Loan Services
Telex: 6829317
Answerback: NATIONSBK-DAL
Telecopy: (713) 247-6432
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
National Westminster Bank PLC
175 Water Street, Level 21
New York, NY 10038
Attn: Gary Tenner
Telex: 233 222
Answerback: NWBUR
Telecopy: (212) 602-4180
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
Bank of Tokyo, Ltd., Dallas Agency
909 Fannin Street, Suite 1104
Houston, TX 77010
Attn: Michael G. Meiss
Telex:
Answerback:
Telecopy: (713) 658-8341
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
-5-
<PAGE> 81
The Fuji Bank, Limited (Houston Agency)
1 Houston Center, Suite 4100
1221 McKinney Street
Houston, TX 77010
Attn: Jenny Lin/Teri McPherson
Credit Contact: Charles van Ravenswaay
Telex: 790-026
Answerback: FUJIBANK HOU
Telecopy: (713) 759-0048
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
The Long-Term Credit Bank of Japan, Ltd.
165 Broadway
New York, NY 10006
Attn: Chikara Mano
Telex: 425722
Answerback: LTCB-UI
Telecopy: (212) 608-2371
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
The Royal Bank of Canada
1 Financial Square, 24th Floor
New York, NY 10005-3531
Attn: Rosemary Addonizio, Loans Administration
Telex: MCI 62519
Answerback: ROYBAN
Telecopy: (212) 428-2372
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
-6-
<PAGE> 82
The Sanwa Bank, Limited, Dallas Agency
4100W Texas Commerce Tower
2200 Ross Avenue
Dallas, TX 75201
Attn: Brian Heagler
Telex: 735282
Answerback: SANWABK DAL
Telecopy: (2214) 741-6535
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
Societe Generale, Southwest Agency
1111 Bagby, Suite 2020
Houston, Texas 77002
Attn: Richard A. Gould
Telex:
Answerback:
Telecopy: (713) 650-0824
Domestic Lending Office:
2001 Ross Avenue, Suite 4800
Dallas, Texas 75201
Attn: Ralph Saheb
Telecopy: (214) 979-1104
Eurodollar Lending Office:
Same as above
The Toronto-Dominion Bank, Houston Agency
909 Fannin, 17th Floor
Houston, TX 77010
Attn: Jeff Jones
Telex:
Answerback:
Telecopy: (713) 951-9921
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
-7-
<PAGE> 83
Union Bank of Switzerland, Houston Agency
1100 Louisiana Street, Suite 4500
Houston, TX 77002
Attn: Dan Boyle
Telex: 762 597
Answerback: UBSHOU
Telecopy: (713) 655-6555
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
Arab Banking Corporation (B.S.C.)
245 Park Avenue
New York, NY 10167
Attn: Loan Manager
Telex: 661978 WU
Answerback: ABC NY
Telecopy: (212) 599-8385
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
Bank of Scotland
565 Fifth Avenue
New York, NY 10017
Attn: Janet Taffe
Telex: 6801012
Answerback: UBIFORN
Telecopy: (212) 557-9460
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
Christiania Bank
-8-
<PAGE> 84
11 West 42nd Street, 7th Floor
New York, NY 10026
Attn: Jahn O. Roising
Telex: 824277
Answerback: CHRBK
Telecopy: (212) 827-4888
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
First Interstate Bank of Texas, N.A.
1000 Louisiana, 3rd Floor
Houston, TX 77002
Attn: Ann Rhoads
Telex: 166488
Answerback: FITXINTHOU
Telecopy: (713) 250-7912
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
The Bank of Yokohama, Ltd., Los Angeles Agency
777 So. Figueroa Street, Suite 700
Los Angeles, CA 90017
Attn: Mike Jackson
Telex: TWX9103213395
Answerback: HAMAGIN
Telecopy: (213) 236-0007
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
-9-
<PAGE> 85
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, NY 10081
Attn: Vito Cipriano
Telex: 62910 CMBUW
Telecopy: (212) 552-1687
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Cayman Islands, B.W.I.
c/o The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, NY 10081
The Industrial Bank of Japan Trust Company
245 Park Avenue
New York, NY 10167-0037
Attn: Ira Gottlieb
Telex: 425754
Answerback: IBTC UI
Telecopy: (212) 557-3581
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
The Mitsubishi Bank, Limited, Houston Agency
2 Houston Center, Suite 3100
909 Fannin Street
Houston, TX 77010
Attn: Barrie Hogue
Telex: 791211
Answerback: BISHIHOV
Telecopy: (713) 658-0116
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
-10-
<PAGE> 86
The Northern Trust Company
50 South LaSalle Street
Chicago, IL 60675
Attn: Mark A. Short
Telex: WUD 254419
Answerback: NORTRUST CGO
Telecopy: (312) 630-1566
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
The Sumitomo Bank, Limited, Houston Agency
NCNB Center
700 Louisiana, Suite 1750
Houston, TX 77002
Attn: Akihiko Yuasa
Telex: 774417
Answerback: SUMITBANK HOUA
Telecopy: (713) 759-0020
Domestic Lending Office:
Same as above
Eurodollar Lending Office:
Same as above
-11-
<PAGE> 87
Schedule 2
REVOLVING CREDIT COMMITMENTS
<TABLE>
<CAPTION>
Percentage
Commitment of
Lender (in millions) Commitments
-----
<S> <C> <C>
Chemical Bank $ 17.0 4.25%
Bank of America Illinois 18.5 4.625
Bank of Montreal 18.5 4.625
The Bank of New York 18.5 4.625
The Bank of Nova Scotia 18.5 4.625
Barclays Bank PLC 18.5 4.625
CIBC, Inc. 18.5 4.625
The First National Bank of Boston 18.5 4.625
The First National Bank of Chicago 18.5 4.625
Mellon Bank, N.A. 18.5 4.625
Morgan Guaranty Trust Company of New York 18.5 4.625
NationsBank of Texas, N.A. 18.5 4.625
National Westminster Bank PLC 18.5 4.625
Bank of Tokyo, Ltd., Dallas Agency 12.0 3.0
The Fuji Bank, Limited (Houston Agency) 12.0 3.0
The Long-Term Credit Bank of Japan, Ltd. 12.0 3.0
The Royal Bank of Canada 12.0 3.0
The Sanwa Bank, Limited, Dallas Agency 12.0 3.0
Societe Generale, Southwest Agency 12.0 3.0
The Toronto-Dominion Bank, Houston Agency 12.0 3.0
Union Bank of Switzerland, Houston Agency 12.0 3.0
Arab Banking Corporation (B.S.C.) 6.5 1.625
Bank of Scotland 6.5 1.625
Christiania Bank 6.5 1.625
First Interstate Bank of Texas, N.A. 6.5 1.625
The Bank of Yokohama, Ltd., Los Angeles Agency 6.5 1.625
The Chase Manhattan Bank, N.A. 6.5 1.625
The Industrial Bank of Japan Trust Company 6.5 1.625
The Mitsubishi Bank, Limited, Houston Agency 6.5 1.625
The Northern Trust Company 6.5 1.625
The Sumitomo Bank, Limited, Houston Agency 6.5 1.625
------ -----
Total $400.0 100.0%
====== =====
</TABLE>
<PAGE> 88
Schedule 3
EXCLUDED SALES OF ASSETS
PEPL's transmission and gathering system west of Haven, Kansas known as the
"West End System."
The two liquefied natural gas tankers owned by Lachmar, a Delaware partnership,
and related parts and equipment.
PEPL's headquarters building and related assets located at 5400 Westheimer
Court, Houston, Texas.
Transportation equipment and related facilities of the Company and its
Subsidiaries.
Any investment in any entity (other than the Principal Subsidiaries) in which
the Company and/or its Subsidiaries owns less than 100% of the equity interest.
<PAGE> 89
EXHIBIT A TO
CREDIT AGREEMENT
FORM OF COMPETITIVE LOAN CONFIRMATION
____________, 199__
Chemical Bank, as Administrative Agent
270 Park Avenue
New York, New York 10017
Reference is made to the Credit Agreement (Five Year Facility), dated
as of January 31, 1996, among the undersigned, the Lenders named therein, and
Chemical Bank, as Administrative Agent (as the same may be amended,
supplemented or otherwise modified from time to time, the "Credit Agreement").
Terms defined in the Credit Agreement and used herein shall have the meanings
given to them in the Credit Agreement.
In accordance with subsection 2.15(d) of the Credit Agreement, the
undersigned accepts and confirms the offers by Competitive Loan Lender(s) to
make Competitive Loans to the undersigned on ________________, 199__
[Competitive Loan Borrowing Date] under subsection 2.15(b) [index rate] or
2.15(c) [fixed rate] in the (respective) amount(s) set forth on the attached
list of Competitive Loans offered.
Very truly yours,
PANHANDLE EASTERN CORPORATION,
doing business as PANENERGY CORP
By:
-----------------------------------
Title:
[The Company must attach Competitive Loan Offer list prepared by Administrative
Agent with accepted amount entered by the Company to right of each Competitive
Loan Offer.]
A-1
<PAGE> 90
EXHIBIT B TO
CREDIT AGREEMENT
FORM OF COMPETITIVE LOAN OFFER
Chemical Bank, as Administrative Agent ____________, 199__
270 Park Avenue
New York, New York 10017
Reference is made to the Credit Agreement (Five Year Facility), dated
as of January 31, 1996, among Panhandle Eastern Corporation, a Delaware
corporation, doing business as PanEnergy Corp, the Lenders named therein, and
Chemical Bank, as Administrative Agent (as the same may be amended,
supplemented or otherwise modified from time to time, the "Credit Agreement").
Terms defined in the Credit Agreement and used herein shall have the meanings
given to them in the Credit Agreement. In accordance with subsection 2.15(b)
[index rate] or 2.15(c) [fixed rate] of the Credit Agreement, the undersigned
Competitive Loan Lender offers to make Competitive Loans thereunder in the
following amounts with the following maturity dates:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
Competitive Loan Borrowing
Date: _______________, 199__ Aggregate Maximum Amount $__________
- --------------------------------------------------------------------------------
Maturity Date 1: Maximum Amount: $_________________
_______________, 199__ $____________ offered at __________*
$____________ offered at __________*
- --------------------------------------------------------------------------------
Maturity Date 2: Maximum Amount: $_________________
_______________, 199__ $____________ offered at __________*
$____________ offered at __________*
- --------------------------------------------------------------------------------
Maturity Date 3: Maximum Amount: $_________________
_______________, 199__ $____________ offered at __________*
$____________ offered at __________*
- --------------------------------------------------------------------------------
</TABLE>
Very truly yours,
[NAME OF COMPETITIVE LOAN LENDER]
By
--------------------------------------
Name
------------------------------------
Title
-----------------------------------
Telephone No.
---------------------------
Fax No.
---------------------------------
__________________________________
* Insert the interest rate offered for the specified loan amount. In
the case of Index Rate Competitive Loans, insert a margin bid. In the
case of Fixed Rate Competitive Loans, insert a fixed rate bid.
B-1
<PAGE> 91
EXHIBIT C TO
CREDIT AGREEMENT
FORM OF COMPETITIVE LOAN REQUEST
_______________, 199__
Chemical Bank, as Administrative Agent
270 Park Avenue
New York, New York 10017
Reference is made to the Credit Agreement (Five Year Facility), dated
as of January 31, 1996, among the undersigned, the Lenders named therein, and
Chemical Bank, as Administrative Agent (as the same may be amended,
supplemented or otherwise modified from time to time, the "Credit Agreement").
Terms defined in the Credit Agreement and used herein shall have the meanings
given to them in the Credit Agreement.
This is [an Index Rate] [a Fixed Rate] Competitive Loan Reques(1)
pursuant to subsection 2.14(a) of the Credit Agreement requesting quotes for
the following Competitive Loans:
<TABLE>
<CAPTION>
=============================================================================================
Loan 1 Loan 2 Loan 3
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggregate Principal Amount $__________ $__________ $__________
- ---------------------------------------------------------------------------------------------
Borrowing Date
- ---------------------------------------------------------------------------------------------
Competitive Loan Maturity Date
- ---------------------------------------------------------------------------------------------
Interest Payment Dates
=============================================================================================
</TABLE>
Very truly yours,
PANHANDLE EASTERN CORPORATION,
doing business as PANENERGY CORP
By:
--------------------------------
Title:
__________________________________
(1) Pursuant to the Credit Agreement, a Competitive Loan Request may be
transmitted in writing (including by facsimile transmission), or by
telephone, immediately confirmed by facsimile transmission. In any case, a
Competitive Loan Request shall contain the information specified in the
second paragraph of this form.
C-1
<PAGE> 92
EXHIBIT D TO
CREDIT AGREEMENT
FORM OF LETTER OF CREDIT PARTICIPATION CERTIFICATE
__________, 19__
Name of Lender
Dear Sirs:
Pursuant to subsection 2.7 of the Credit Agreement (Five Year
Facility) dated as of January 31, 1996 (the "Credit Agreement"; terms defined
in the Credit Agreement being used herein with their respective defined
meanings) among Panhandle Eastern Corporation, a Delaware corporation, doing
business as PanEnergy Corp, the financial institutions parties thereto (the
"Lenders") and Chemical Bank, as Administrative Agent for the Lenders, the
undersigned hereby acknowledges receipt from you on the date hereof of an L/C
Participating Interest in the amount of ____________________ DOLLARS
($_________) in the following [Standby L/C] [Commercial L/C] and the Letter of
Credit Application relating thereto.
Very truly yours,
[ISSUING LENDER]
By:
--------------------------------
Title:
D-1
<PAGE> 93
EXHIBIT E TO
CREDIT AGREEMENT
FORM OF REVOLVING CREDIT NOTE
REVOLVING CREDIT NOTE
New York, New York
January 31, 1996
FOR VALUE RECEIVED, the undersigned, PANHANDLE EASTERN CORPORATION, a
Delaware corporation, doing business as PanEnergy Corp (the "Company"), hereby
unconditionally promises to pay on the Termination Date to the order of [NAME
OF LENDER] (the "Lender") at the office of Chemical Bank located at 270 Park
Avenue, New York, New York 10017, in lawful money of the United States of
America and in immediately available funds, the principal amount of the lesser
of (a) _________________________ DOLLARS ($________) and (b) the aggregate
unpaid principal amount of all Revolving Credit Loans made by the Lender to the
undersigned pursuant to subsection 2.1 of the Credit Agreement referred to
below.
The undersigned further agrees to pay interest in like money at such
office on the unpaid principal amount hereof from time to time from the date
hereof at the applicable rate per annum set forth in subsection 3.1 of the
Credit Agreement referred to below until any such amount shall become due and
payable (whether at the stated maturity, by acceleration or otherwise), and
thereafter on such overdue amount at the rate per annum set forth in subsection
3.1(e) of said Credit Agreement until paid in full (both before and after
judgment). Interest shall be payable in arrears on each Interest Payment Date,
commencing on the first such date to occur after the date hereof and upon
payment (including prepayment) in full of the unpaid principal amount hereof.
The holder of this Note is authorized to record the date, Type and
amount of each Loan made by the Lender pursuant to subsection 2.1 of said
Credit Agreement, the date and amount of each payment or prepayment of
principal with respect thereto, the length of each Interest Period with respect
to each Loan made and/or maintained as a Eurodollar Loan or CD Rate Loan and
the Eurodollar Rate or Adjusted CD Rate and each conversion made pursuant to
subsection 3.10 of said Credit Agreement on the schedules annexed hereto and
made a part hereof, or on a continuation thereof which shall be attached hereto
and made a part hereof, which recordation shall constitute prima facie evidence
of the accuracy of the information recorded; provided that failure by the
Lender to make any such recordation on this Note shall not affect the
obligations of the Company under this Note or said Credit Agreement.
This Note is one of the Revolving Credit Notes referred to in the
Credit Agreement (Five Year Facility) dated as of January 31, 1996 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement")
among Panhandle Eastern Corporation, doing business as PanEnergy Corp, the
Lender, the other financial institutions parties thereto, and Chemical Bank, as
Administrative Agent, is entitled to the benefits thereof and is subject
E-1
<PAGE> 94
to prepayment in whole or in part as provided therein. Terms used herein which
are defined in the Credit Agreement shall have such defined meanings unless
otherwise defined herein or unless the context otherwise requires.
Upon the occurrence of any one or more of the Events of Default
specified in said Credit Agreement, all amounts then remaining unpaid on this
Note shall become, or may be declared to be, immediately due and payable, all
as provided therein.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
PANHANDLE EASTERN CORPORATION,
doing business as PANENERGY CORP
By:
------------------------------------
Title:
E-2
<PAGE> 95
SCHEDULE A
to
Revolving Credit Note
LOANS, CONVERSIONS AND PAYMENTS
WITH RESPECT TO ABR LOANS
<TABLE>
<CAPTION>
Amount of ABR
Loans Made or Amount of ABR Loans
Converted from Paid or Converted into Unpaid Principal
Eurodollar Loans or Eurodollar Loans or Balance of
Date CD Rate Loans CD Rate Loans ABR Loans Notation Made by
- ---------- ------------------- ---------------------- ---------------- -----------------
<S> <C> <C> <C> <C>
- ---------- ------------------- ---------------------- ---------------- -----------------
- ---------- ------------------- ---------------------- ---------------- -----------------
- ---------- ------------------- ---------------------- ---------------- -----------------
- ---------- ------------------- ---------------------- ---------------- -----------------
- ---------- ------------------- ---------------------- ---------------- -----------------
- ---------- ------------------- ---------------------- ---------------- -----------------
- ---------- ------------------- ---------------------- ---------------- -----------------
- ---------- ------------------- ---------------------- ---------------- -----------------
- ---------- ------------------- ---------------------- ---------------- -----------------
- ---------- ------------------- ---------------------- ---------------- -----------------
- ---------- ------------------- ---------------------- ---------------- -----------------
- ---------- ------------------- ---------------------- ---------------- -----------------
- ---------- ------------------- ---------------------- ---------------- -----------------
- ---------- ------------------- ---------------------- ---------------- -----------------
- ---------- ------------------- ---------------------- ---------------- -----------------
</TABLE>
E-3
<PAGE> 96
SCHEDULE B
to
Revolving Credit Note
LOANS, CONVERSIONS AND PAYMENTS
WITH RESPECT TO EURODOLLAR LOANS
<TABLE>
<CAPTION>
Amount of Amount of Unpaid
Eurodollar Loans Interest Period Eurodollar Loans Principal
Made or Converted and Eurodollar Paid or Converted Balance of
from ABR Loans or Rate with Respect into ABR Loans or Eurodollar Notation
Date CD Rate Loans Thereto CD Rate Loans Loans Made By
- --------- -------------------- ---------------------- ------------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
- --------- -------------------- ---------------------- ------------------ ------------- ------------
- --------- -------------------- ---------------------- ------------------ ------------- ------------
- --------- -------------------- ---------------------- ------------------ ------------- ------------
- --------- -------------------- ---------------------- ------------------ ------------- ------------
- --------- -------------------- ---------------------- ------------------ ------------- ------------
- --------- -------------------- ---------------------- ------------------ ------------- ------------
- --------- -------------------- ---------------------- ------------------ ------------- ------------
- --------- -------------------- ---------------------- ------------------ ------------- ------------
- --------- -------------------- ---------------------- ------------------ ------------- ------------
- --------- -------------------- ---------------------- ------------------ ------------- ------------
- --------- -------------------- ---------------------- ------------------ ------------- ------------
- --------- -------------------- ---------------------- ------------------ ------------- ------------
- --------- -------------------- ---------------------- ------------------ ------------- ------------
- --------- -------------------- ---------------------- ------------------ ------------- ------------
- --------- -------------------- ---------------------- ------------------ ------------- ------------
</TABLE>
E-4
<PAGE> 97
SCHEDULE C
to
Revolving Credit Note
LOANS, CONVERSIONS AND PAYMENTS
WITH RESPECT TO CD RATE LOANS
<TABLE>
<CAPTION>
Amount of CD Rate
Amount of CD Rate Loans Paid or Unpaid
Loans Made or Converted into ABR Principal
Converted from Interest Period Loans or Balance of
ABR Loans or and CD Rate with Eurodollar Rate CD Rate Notation
Date Eurodollar Loans Respect Thereto Loans Loans Made By
- ------------- ------------------- ----------------- -------------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
- ------------- ------------------- ----------------- -------------------- ------------- -----------
- ------------- ------------------- ----------------- -------------------- ------------- -----------
- ------------- ------------------- ----------------- -------------------- ------------- -----------
- ------------- ------------------- ----------------- -------------------- ------------- -----------
- ------------- ------------------- ----------------- -------------------- ------------- -----------
- ------------- ------------------- ----------------- -------------------- ------------- -----------
- ------------- ------------------- ----------------- -------------------- ------------- -----------
- ------------- ------------------- ----------------- -------------------- ------------- -----------
- ------------- ------------------- ----------------- -------------------- ------------- -----------
- ------------- ------------------- ----------------- -------------------- ------------- -----------
- ------------- ------------------- ----------------- -------------------- ------------- -----------
- ------------- ------------------- ----------------- -------------------- ------------- -----------
- ------------- ------------------- ----------------- -------------------- ------------- -----------
- ------------- ------------------- ----------------- -------------------- ------------- -----------
</TABLE>
E-5
<PAGE> 98
EXHIBIT F-1 TO
CREDIT AGREEMENT
FORM OF GRID COMPETITIVE LOAN NOTE
COMPETITIVE LOAN NOTE
$400,000,000 New York, New York
January 31, 1996
FOR VALUE RECEIVED, the undersigned, PANHANDLE EASTERN CORPORATION, a
Delaware corporation, doing business as PanEnergy Corp (the "Company"), hereby
unconditionally promises to pay to the order of [NAME OF LENDER] (the
"Competitive Loan Lender") at the office of Chemical Bank located at 270 Park
Avenue, New York, New York 10017, in lawful money of the United States of
America and in immediately available funds, the principal amount of the lesser
of (a) FOUR HUNDRED MILLION DOLLARS ($400,000,000) and (b) the aggregate unpaid
principal amount of all Competitive Loans made by the Competitive Loan Lender
to the Borrower pursuant to subsection 2.13 of the Credit Agreement referred to
below. The principal amount of each Competitive Loan evidenced hereby shall be
payable on the Competitive Loan Maturity Date therefor set forth on the
schedule annexed hereto and made a part hereof or on a continuation of such
schedule which shall be attached hereto and made a part hereof (the "Grid").
The Company further agrees to pay interest in like money at such office on the
unpaid principal amount of each Competitive Loan evidenced hereby, at the rate
per annum set forth in respect of such Competitive Loan on the Grid, calculated
on the basis of a year of 360 days and actual days elapsed from the date of
such Competitive Loan until the due date thereof (whether at the stated
maturity, by acceleration or otherwise), and thereafter on such overdue amount
at the rate per annum set forth in subsection 3.1(e) of said Credit Agreement
until paid in full (both before and after judgment). Interest on each
Competitive Loan evidenced hereby shall be payable on the date or dates set
forth in respect of such Competitive Loan on the Grid. Competitive Loans
evidenced by this Note may not be prepaid.
The holder of this Note is authorized to record on the Grid the date,
amount, interest rate, Interest Payment Dates and Competitive Loan Maturity
Date in respect of each Competitive Loan made pursuant to subsection 2.13 of
said Credit Agreement, and amount of each payment of principal with respect
thereto. Each such recordation shall constitute prima facie evidence of the
accuracy of the information recorded; provided, that failure by the Competitive
Loan Lender to make any such recordation shall not affect the obligations of
the Company under this Note or said Credit Agreement.
This Note is one of the Competitive Loan Notes referred to in the
Credit Agreement (Five Year Facility) dated as of January 31, 1996 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement")
among Panhandle Eastern Corporation, a Delaware corporation, doing business as
PanEnergy Corp, the Competitive Loan Lender, the other banks and financial
institutions parties thereto, and Chemical Bank, as Administrative Agent and is
entitled to the benefits thereof. Terms used herein which are defined in the
Credit Agreement shall have such defined meanings unless otherwise defined
herein or unless the context otherwise requires.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts then remaining unpaid on this
Note shall become, or may be declared to be, immediately due and payable, all
as provided therein.
F-1-1
<PAGE> 99
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
PANHANDLE EASTERN CORPORATION,
doing business as PANENERGY CORP
By:
--------------------------------
Title:
F-1-2
<PAGE> 100
SCHEDULE OF COMPETITIVE LOANS
<TABLE>
<CAPTION>
Interest
Amount of Payment Maturity Payment Notation
Date Loan Interest Rate Dates Date Date Made by
- --------- ----------- ----------------- --------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
- --------- ----------- ----------------- --------------- ------------- ------------- -------------
- --------- ----------- ----------------- --------------- ------------- ------------- -------------
- --------- ----------- ----------------- --------------- ------------- ------------- -------------
- --------- ----------- ----------------- --------------- ------------- ------------- -------------
- --------- ----------- ----------------- --------------- ------------- ------------- -------------
- --------- ----------- ----------------- --------------- ------------- ------------- -------------
- --------- ----------- ----------------- --------------- ------------- ------------- -------------
- --------- ----------- ----------------- --------------- ------------- ------------- -------------
- --------- ----------- ----------------- --------------- ------------- ------------- -------------
- --------- ----------- ----------------- --------------- ------------- ------------- -------------
- --------- ----------- ----------------- --------------- ------------- ------------- -------------
- --------- ----------- ----------------- --------------- ------------- ------------- -------------
- --------- ----------- ----------------- --------------- ------------- ------------- -------------
</TABLE>
F-1-3
<PAGE> 101
EXHIBIT F-2 TO
CREDIT AGREEMENT
FORM OF INDIVIDUAL COMPETITIVE LOAN NOTE
INDIVIDUAL COMPETITIVE LOAN NOTE
$_______________ New York, New York
__________ ___, 199_
FOR VALUE RECEIVED, the undersigned, PANHANDLE EASTERN CORPORATION, a
Delaware corporation, doing business as PanEnergy Corp (the "Company"), hereby
unconditionally promises to pay on ___________, 199_ to the order of [NAME OF
LENDER] (the "Competitive Loan Lender") at the office of Chemical Bank located
at 270 Park Avenue, New York, New York 10017, in lawful money of the United
States of America and in immediately available funds, the principal sum of
________________ DOLLARS ($___________). The undersigned further agrees to pay
interest in like money at such office on the unpaid principal amount hereof
from time to time from the date hereof at the rate of __% per annum (calculated
on the basis of a year of 360 days and actual days elapsed) until the due date
hereof (whether at the stated maturity, by acceleration or otherwise), and
thereafter on such overdue amount at the rate per annum set forth in subsection
3.1(e) of the Credit Agreement (Five Year Facility) dated as of January 31,
1996 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement") among Panhandle Eastern Corporation, doing business as
PanEnergy Corp, the Competitive Loan Lender, the other financial institutions
parties thereto, and Chemical Bank, as Administrative Agent, until paid in full
(both before and after judgment). Interest shall be payable on the Interest
Payment Date or Dates determined as provided in subsections 3.1(d) and 3.1(f)
of the Credit Agreement.
This Note is one of the Individual Competitive Loan Notes referred to
in, is subject to and is entitled to the benefits of, the Credit Agreement,
which Credit Agreement, among other things, contains provisions for
acceleration of the maturity hereof upon the happening of certain stated
events. Terms used herein which are defined in the Credit Agreement shall have
such defined meanings unless otherwise defined herein or unless the context
otherwise requires. This Note may not be prepaid.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
PANHANDLE EASTERN CORPORATION,
doing business as PANENERGY CORP
By:
----------------------------------
Title:
F-2-1
<PAGE> 102
EXHIBIT G TO
CREDIT AGREEMENT
FORM OF OPINION OF SULLIVAN & CROMWELL
January 31, 1996
To the Lenders and the Administrative Agent
Referred to Below
Dear Sirs:
We have acted as special counsel to Panhandle Eastern
Corporation, a Delaware corporation, doing business as PanEnergy Corp (the
"Company"), in connection with the Credit Agreement (Five Year Facility), dated
as of January 31, 1996 (the "Credit Agreement"), among the Company, the several
financial institutions party thereto (the "Lenders") and Chemical Bank, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent"). All capitalized terms used herein which are not otherwise defined are
used herein with the meanings assigned to such terms in the Credit Agreement.
We have examined executed copies of the Credit Agreement, the
Revolving Credit Notes and the Competitive Loan Notes delivered on the date
hereof, as well as such records, certificates and other documents and such
questions of law as we have considered necessary or appropriate for the
purposes of this opinion.
Based upon the foregoing, we are of the opinion that:
1. The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware. The
Company has the corporate power and authority to own and operate its
properties, to lease the properties it operates as lessee and to conduct the
businesses in which it is currently engaged.
2. The Company has the corporate power and authority to
execute, deliver and perform the Credit Agreement and the Notes and has taken
all corporate action to authorize the execution, delivery and performance of
the Credit Agreement and the Notes.
3. No regulatory consent, authorization, approval or filing
is required to be obtained or made by the Company under the Federal laws of the
United States, the laws of the State of New York or the General Corporation Law
of the State of Delaware for the execution, delivery and performance of the
Credit Agreement and the Notes.
4. The Credit Agreement, the Revolving Credit Notes and the
Competitive Loan Notes delivered on the date hereof have been duly executed and
delivered by the Company and constitute valid and legally binding obligations
of the Company enforceable in accordance with their respective terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
G-1
<PAGE> 103
and similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles.
5. The execution, delivery and performance by the Company of
the Credit Agreement and the Notes will not (a) violate the Certificate of
Incorporation or By-Laws of the Company, (b) result in a default under or
breach of any indenture, loan agreement or other similar agreement or
instrument known to us to be binding upon the Company, (c) violate any Federal
law of the United States, any law of the State of New York or Delaware (in the
case of the State of Delaware, solely in respect of its General Corporation
Law), or any rule or regulation adopted by a Governmental Authority thereof, or
(d) result in, or require the creation or imposition of, any Lien on any
properties or revenues of the Company pursuant to any of the foregoing;
provided, however, that for purposes of this paragraph 5, we express no opinion
with respect to Federal or state securities laws, other anti-fraud laws and
fraudulent transfer laws; and provided, further, that insofar as performance by
the Company of its obligations under the Credit Agreement and the Notes is
concerned, we express no opinion as to bankruptcy, insolvency, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights.
6. Assuming the proceeds of the Loans are used solely for the
purposes set forth in the Credit Agreement, such Loans will not violate the
provisions of Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System.
7. The Company is not an "investment company" as that term is
defined in the Investment Company Act of 1940.
The foregoing opinion is limited to the Federal laws of the
United States, the laws of the State of New York and the General Corporation
Law of the State of Delaware, and we are expressing no opinion as to the effect
of the laws of any other jurisdiction.
We express no opinion as to the validity, binding effect or
enforceability of any provision in the Credit Agreement which purports to (i)
provide indemnification of any person for any claims, damages, liabilities or
expenses resulting from violation by such person of applicable securities laws,
(ii) grant any Lender rights of setoff other than as provided in Section 151 of
the Debtor & Creditor Law of the State of New York or (iii) preserve or
maintain the enforceability of the Credit Agreement where one or more
provisions contained therein is determined to be invalid, illegal or
unenforceable.
With your approval, we have also relied as to certain matters
on information obtained from public officials, officers of the Company or other
sources believed by us to be responsible and we have assumed that the Credit
Agreement has been duly authorized, executed and delivered by the parties
thereto other than the Company and that the signatures on all documents
examined by us are genuine, assumptions which we have not independently
verified.
Very truly yours,
SULLIVAN & CROMWELL
G-2
<PAGE> 104
EXHIBIT H TO
CREDIT AGREEMENT
FORM OF GENERAL COUNSEL'S OPINION
January 31, 1996
To the Lenders and the
Administrative Agent
Referred to Below
Dear Sirs:
I am General Counsel of Panhandle Eastern Corporation, a
Delaware corporation, doing business as PanEnergy Corp (the "Company"), and am
familiar with the Credit Agreement (Five Year Facility), dated as of January
31, 1996 (the "Credit Agreement"), among the Company, the several financial
institutions party thereto (the "Lenders") and Chemical Bank, as administrative
agent for the Lenders (in such capacity, the "Administrative Agent"). All
capitalized terms used herein which are not otherwise defined are used herein
with the meanings assigned to such terms in the opinion of Sullivan & Cromwell
delivered to you on the date hereof in connection with the Credit Agreement.
As General Counsel of the Company, I am generally familiar
with the organization and affairs of the Company. Lawyers in the Legal
Department of the Company have been asked, by me or others, to review legal
matters arising in connection with the Credit Agreement. Accordingly some of
the matters referred to herein have not been handled personally by me, but I
have been made familiar with the facts and circumstances and the applicable
law, and the opinions herein expressed are my own or the opinions of other
lawyers in which I concur. In rendering the opinions expressed herein, I or
lawyers in the Legal Department of the Company have examined such corporate
records, certificates and other documents and such questions of law as were
considered necessary or appropriate for the purposes hereof.
Based upon the foregoing, I am of the opinion that:
1. The Company is duly qualified to do business as a foreign
corporation in good standing in each jurisdiction where it is required to be so
qualified, except where any failure to be so qualified and in good standing
would not have a material adverse effect on the business of the Company and its
Subsidiaries taken as a whole.
2. Except as set forth in the SEC Reports, no litigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the best of my knowledge, threatened by or against the Company or any of its
Subsidiaries or against any of their respective properties or revenues which
would have a material adverse effect on the business of the Company and its
Subsidiaries taken as a whole.
H-1
<PAGE> 105
3. The execution, delivery and performance by the Company of
the Credit Agreement and the Notes will not violate any contract known to me to
be binding upon the Company, except for such violations which would not have a
material adverse effect on the business of the Company and its Subsidiaries
taken as a whole and will not result in or require the creation or imposition
of any Lien on any of its properties or revenues pursuant to any such contract.
With your approval, I have relied as to certain matters on
information obtained from public officials, officers of the Company, opinions
of local counsel or other sources believed by me to be responsible and I have
assumed that the signatures on all documents examined by me are genuine,
assumptions which I have not independently verified.
This opinion is solely for your benefit and the benefit of
your respective assignees and transferees permitted under the Credit Agreement
and the benefit of special counsel to the Administrative Agent and the benefit
of the Company's special counsel and may not be relied upon in any matter by
any other person without my written consent.
Very truly yours,
H-2
<PAGE> 106
EXHIBIT I TO
CREDIT AGREEMENT
FORM OF COMMITMENT TRANSFER SUPPLEMENT
COMMITMENT TRANSFER SUPPLEMENT, dated as of the date set forth in Item
1 of Schedule I hereto, among the Transferor Lender set forth in Item 2 of
Schedule I hereto (the "Transferor Lender"), each Purchasing Lender set forth
in Item 3 of Schedule I hereto (each, a "Purchasing Lender"), and CHEMICAL
BANK, as administrative agent for the Lenders under the Credit Agreement
described below (in such capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, this Commitment Transfer Supplement is being executed and
delivered in accordance with subsection 10.8 of the Credit Agreement (Five Year
Facility), dated as of January 31, 1996, among Panhandle Eastern Corporation, a
Delaware corporation, doing business as PanEnergy Corp (the "Borrower"), the
Transferor Lender, the other Lenders parties thereto and the Administrative
Agent (as from time to time amended, supplemented or otherwise modified in
accordance with the terms thereof, the "Credit Agreement"; terms defined
therein being used herein as therein defined);
WHEREAS, each Purchasing Lender (if it is not already a Lender party
to the Credit Agreement) wishes to become a Lender party to the Credit
Agreement; and
WHEREAS, the Transferor Lender is selling and assigning to each
Purchasing Lender, rights, obligations and commitments under the Credit
Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Upon receipt by the Administrative Agent of five counterparts of
this Commitment Transfer Supplement, to each of which is attached a fully
completed Schedule I and Schedule II, and each of which has been executed by
the Transferor Lender, each Purchasing Lender (and any other person required by
the Credit Agreement to execute this Commitment Transfer Supplement), the
Administrative Agent will transmit to the Borrower, the Transferor Lender and
each Purchasing Lender a Transfer Effective Notice, substantially in the form
of Schedule III to this Commitment Transfer Supplement (a "Transfer Effective
Notice"). Such Transfer Effective Notice shall set forth, inter alia, the date
on which the transfer effected by this Commitment Transfer Supplement shall
become effective (the "Transfer Effective Date"), which date shall be the fifth
Business Day following the date of such Transfer Effective Notice. From and
after the Transfer Effective Date each Purchasing Lender shall be a Lender
party to the Credit Agreement for all purposes thereof.
2. At or before 12:00 Noon, local time of the Transferor Lender, on
the Transfer Effective Date, each Purchasing Lender shall pay to the Transferor
Lender, in immediately available funds, an amount equal to the purchase price,
as agreed between the Transferor Lender and such Purchasing Lender (the
"Purchase Price"), of the portion being purchased by such Purchasing Lender
(such Purchasing Lender's "Purchased Percentage") of the outstanding principal
amount of the Loans, the Letter of Credit Obligations, the L/C Participating
Interests and other amounts owing to the
I-1
<PAGE> 107
Transferor Lender under the Credit Agreement and its Notes. Effective upon
receipt by the Transferor Lender of the Purchase Price from a Purchasing
Lender, without recourse, representation or warranty, each Purchasing Lender
hereby irrevocably purchases, takes and assumes from the Transferor Lender,
such Purchasing Lender's Purchased Percentage of the Commitments, the L/C
Participating Interests, the obligation to purchase L/C Participating Interests
and the presently outstanding Loans and other amounts owing to the Transferor
Lender under the Credit Agreement and its Notes together with all instruments,
documents and collateral security pertaining thereto; provided that such
Participating Lender's interest in any Letter of Credit outstanding on the
Transfer Effective Date shall be as set forth in subsection 2.7 of the Credit
Agreement.
3. The Transferor Lender has made arrangements with each Purchasing
Lender with respect to (i) the portion, if any, to be paid, and the date or
dates for payment, by the Transferor Lender to such Purchasing Lender of any
fees heretofore received by the Transferor Lender pursuant to the Credit
Agreement prior to the Transfer Effective Date and (ii) the portion, if any, to
be paid and the date or dates for payment, by such Purchasing Lender to the
Transferor Lender of fees or interest received by such Purchasing Lender
pursuant to the Credit Agreement and from and after the Transfer Effective
Date.
4. (a) All principal payments that would otherwise be payable from
and after the Transfer Effective Date to or for the account of the Transferor
Lender pursuant to the Credit Agreement and its Notes shall, instead, be
payable to or for the account of the Transferor Lender or the Purchasing
Lender, as the case may be, in accordance with their respective interest as
reflected in this Commitment Transfer Supplement.
(b) All interest, fees and other amounts that would otherwise
accrue for the account of the Transferor Lender from and after the Transfer
Effective Date pursuant to the Credit Agreement and its Notes shall, instead,
accrue for the account of, and be payable to, the Transferor Lender and the
Purchasing Lenders, as the case may be, in accordance with their respective
interests as reflected in this Commitment Transfer Supplement. In the event
that any amount of interest, fees or other amounts accruing prior to the
Transfer Effective Date was included in the Purchase Price paid by the
Purchasing Lender, the Transferor Lender and each Purchasing Lender will make
appropriate arrangements for payment by the Transferor Lender to such
Purchasing Lender of such amount upon receipt thereof from the Borrower.
5. On or prior to the Transfer Effective Date, the Transferor Lender
will deliver to the Administrative Agent its Notes. On or prior to the
Transfer Effective Date, the Borrower will deliver to the Administrative Agent
new Notes for each Purchasing Lender and the Transferor Lender, in each case in
principal amounts reflecting, in accordance with the Credit Agreement, the
principal amount of any Competitive Loans being transferred and their
respective Commitments (as adjusted pursuant to this Commitment Transfer
Supplement). As provided in subsection 10.8 of the Credit Agreement, each such
new Note shall be dated the Effective Date. In addition, on or prior to the
Transfer Effective Date, the Transferor Lender will deliver to the
Administrative Agent any Letter of Credit Participation Certificates issued by
an Issuing Lender to the Transferor Lender. On or prior to the Transfer
Effective Date, if applicable, each Issuing Lender shall deliver to the
Administrative Agent for each Purchasing Lender and the Transferor Lender new
Letter of Credit Participation Certificates, in each case in amounts
reflecting, in accordance with the Credit Agreement, their respective
Commitments (as adjusted pursuant to this Commitment Transfer Supplement).
Promptly
I-2
<PAGE> 108
after the Transfer Effective Date, the Administrative Agent will send to each
of the Transferor Lender and the Purchasing Lenders its new Notes and new
Letter of Credit Participation Certificates and will send to the Borrower the
superseded Notes of the Transferor Lender, marked "Cancelled".
6. Concurrently with the execution and delivery hereof, the
Transferor Lender will provide to each Purchasing Lender (if it is not already
a Lender party to the Credit Agreement) copies of all documents delivered to
such Transferor Lender on the Effective Date in satisfaction of the conditions
precedent set forth in the Credit Agreement.
7. Each of the parties to this Commitment Transfer Supplement agrees
that at any time and from time to time upon the written request of any other
party, it will execute and deliver such further documents and do such further
acts and things as such other party may reasonably request in order to effect
the purposes of this Commitment Transfer Supplement.
8. By executing and delivering this Commitment Transfer Supplement,
the Transferor Lender and each Purchasing Lender confirm to and agree with each
other and the Administrative Agent and the Lenders as follows: (i) other than
the representation and warranty that it is the legal and beneficial owner of
the interest being assigned hereby free and clear of any adverse claim, the
Transferor Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement, the Notes, the Letters of
Credit or any other instrument or document furnished pursuant thereto or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Credit Agreement, the Notes, the Letters of Credit or any other
instrument or document furnished pursuant thereto; (ii) the Transferor Lender
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of the Borrower or the performance or observance by
the Borrower of any of their respective obligations under the Credit Agreement,
the Notes, the Letters of Credit or any other instrument or document furnished
pursuant thereto; (iii) each Purchasing Lender confirms that it has received a
copy of the Credit Agreement, together with copies of the financial statements
referred to in subsection 5.1 and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into this Commitment Transfer Supplement; (iv) each Purchasing Lender will,
independently and without reliance upon the Administrative Agent, the
Transferor 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 the Credit Agreement; (v)
each Purchasing Lender appoints and authorizes the Administrative Agent and any
Issuing Lender to take such action as agent and issuing lender on its behalf
and to exercise such powers under the Credit Agreement as are delegated to the
Administrative Agent and Issuing Lenders by the terms thereof, together with
such powers as are reasonably incidental thereto, all in accordance with
Section 9 of the Credit Agreement; and (vi) each Purchasing Lender agrees that
it will perform in accordance with their terms all of the obligations which by
the terms of the Credit Agreement are required to be performed by it as a
Lender.
9. Each party hereto represents and warrants to and agrees with the
Administrative Agent that it is aware of and will comply with the provisions of
subsections 10.10(e) and (f) of the Credit Agreement.
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<PAGE> 109
10. Schedule II hereto sets forth the revised Commitments and
Commitment Percentages of the Transferor Lender and each Purchasing Lender as
well as administrative information with respect to each Purchasing Lender.
11. THIS COMMITMENT TRANSFER SUPPLEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Commitment
Transfer Supplement to be executed by their respective duly authorized officers
on Schedule I hereto as of the date set forth in Item 1 of Schedule I hereto.
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<PAGE> 110
SCHEDULE I
to
Commitment Transfer Supplement
COMPLETION OF INFORMATION AND SIGNATURES
FOR COMMITMENT TRANSFER SUPPLEMENT
Re: Credit Agreement (Five Year Facility), dated as of
January 31, 1996, with Panhandle Eastern Corporation,
doing business as PanEnergy Corp, as Borrower
<TABLE>
<S> <C> <C>
Item 1 (Date of Commitment Transfer [Insert date of Commitment Transfer
Supplement): Supplement]
Item 2 (Transferor Lender): [Insert name of Transferor Lender]
Item 3 (Purchasing Lender[s]): [Insert name[s] of Purchasing Lender[s]]
Item 4 (Signatures of Parties to Commitment
Transfer Supplement):
</TABLE>
, as
Transferor Lender
By
----------------------------------------
Title:
, as a
Purchasing Lender
By
----------------------------------------
Title:
, as a
Purchasing Lender
By
----------------------------------------
Title:
I-5
<PAGE> 111
Consented to and Acknowledged:
PANHANDLE EASTERN CORPORATION,
doing business as PANENERGY CORP
By
-------------------------------------
Title:
CHEMICAL BANK, As Administrative Agent
By
-------------------------------------
Title:
[Consents Required only when
Purchasing Lender is not already
a Lender or Affiliate thereof]
Accepted for Recordation
in Register:
CHEMICAL BANK, as Administrative Agent
By
-------------------------------------
Title:
Acknowledged:
[Acknowledgement from Issuing Lender (other
than Chemical Bank) required if such
Issuing Lender has outstanding Letter of
Credit Participation Certificates]
By
-------------------------------------
Title:
I-6
<PAGE> 112
SCHEDULE II
to
Commitment Transfer Supplement
LIST OF LENDING OFFICES, ADDRESS
FOR NOTICES AND COMMITMENT AMOUNTS
<TABLE>
<S> <C> <C>
[Name of Transferor Lender] Revised Commitment Amount: $___________
Revised Commitment Percentage: ___________
[Name of Purchasing Lender] New Commitment Amount: $___________
New Commitment Percentage: ___________
</TABLE>
Address for Notices:
[Address]
Attention:
Telex:
Answerback:
Telephone:
Telecopier:
Confirmation:
Eurodollar Lending Office:
- -----------------------------------
- -----------------------------------
- -----------------------------------
Domestic Lending Office:
- -----------------------------------
- -----------------------------------
- -----------------------------------
I-7
<PAGE> 113
SCHEDULE III
to
Commitment Transfer Supplement
Form of Transfer Effective Notice
To: Panhandle Eastern Corporation,
doing business as PanEnergy Corp
Insert Name of Transferor Lender and
each Purchasing Lender
The undersigned, as Administrative Agent [delegate of the
Administrative Agent performing administrative functions of the Administrative
Agent] under the Credit Agreement (Five Year Facility), dated as of January 31,
1996, among Panhandle Eastern Corporation, a Delaware corporation, doing
business as PanEnergy Corp, the Lenders parties thereto and Chemical Bank, as
Administrative Agent, acknowledges receipt of five executed counterparts of a
completed Commitment Transfer Supplement, as described in Schedule I hereto.
[Note: attach copy of Schedule I from Commitment Transfer Supplement.] Terms
defined in such Commitment Transfer Supplement are used herein as therein
defined.
1. Pursuant to such Commitment Transfer Supplement, you are advised
that the Transfer Effective Date will be ________________ [insert fifth
Business Day following date of Transfer Effective Notice].
2. Pursuant to such Commitment Transfer Supplement, the Transferor
Lender is required to deliver to the Administrative Agent on or before the
Transfer Effective Date its Notes and to each Issuing Lender any applicable
Letter of Credit Participation Certificates.
3. Pursuant to such Commitment Transfer Supplement, the Company is
required to deliver to the Administrative Agent on or before the Transfer
Effective Date the following Notes dated ____________________.
[Describe each new Note for Transferor Lender and Purchasing Lender as
to principal amount and payee]
4. Pursuant to such Commitment Transfer Supplement, each Issuing
Lender listed below is required to deliver to the Administrative Agent on or
before the Transfer Effective Date the following Letter of Credit Participation
Certificates:
5. Pursuant to such Commitment Transfer Supplement, each Purchasing
Lender is required to pay its Purchase Price to the Transferor Lender at or
before 12:00 noon on the Transfer Effective Date in immediately available
funds.
Very truly yours,
CHEMICAL BANK
By:
-------------------------------
Title:
I-8
<PAGE> 1
EXHIBIT 10.35
PANHANDLE EASTERN CORPORATION [LETTERHEAD]
America's Natural Gas Transportation Company
Paul M. Anderson
President and Chief Executive Officer
December 19, 1995
PERSONAL AND CONFIDENTIAL
Mr. James Hackett
3373 Delmonte Drive
Houston, Texas 77019
Dear Jim:
I am extending to you an offer of employment on behalf of Panhandle
Eastern Corporation (hereinafter "Company") and its affiliated companies. You
would serve in the capacity of Executive Vice President of the Company,
reporting directly to me. As such, you will have reporting to you the Chief
Financial Officer and the heads of Human Resources, Public Affairs, Strategic
Planning, Corporate Development and Regulatory Affairs and will represent these
functions on the Policy Committee. You will be required to devote your full
time and efforts to the business affairs of the Company and to conform with all
policies of the Company as they apply to an employee of such level.
If you accept this offer, you will report to work on January 2, 1996,
or such other date as we mutually agree. Employment is contingent upon your
successful completion of the Company's pre-employment screening procedures.
The compensation package is as follows:
o Base salary for the first two (2) years of employment of not
less than $350,000 per year.
o A bonus under the Company's Annual Cash Bonus Program for the
first year of employment of not less than $175,000.
o A restricted stock award under the Company's 1994 Long Term
Incentive Plan covering 75,000 shares of the Company's common
stock, with the restrictions lapsing as to 15,000 shares upon
completion of each of the first five (5) years of employment.
Attached is a copy of the Award Agreement. Please note that
Section 4(a) thereof has been revised from the version
previously furnished to you.
o A non-qualified stock option award under the Company's 1994
Long Term
<PAGE> 2
Mr. James Hackett
December 19, 1995
Page 2
Incentive Plan covering 50,000 shares of the Company's common
stock, with a per share option price equal to fair market
value at date of grant, that will become exercisable as to
16,666 shares upon completion of the first year of employment,
16,667 shares upon completion of the second year of employment
and 16,667 shares upon completion of the third year of
employment.
o Eligibility to participate in the Company's Key Executive
Deferred Compensation Plan, which, in conjunction with the
Company's 401(k) savings plan, currently permits deferral of
up to 15% of salary and bonus.
The employment may be terminated by you or the Company for any reason,
or for no reason, at any time. However, should your employment terminate
before the expiration of two years following your written acceptance of this
offer, for any reason whatsoever, other than (1) your resignation for reasons
other than disability, or (2) the termination of your employment by the Company
for cause, you shall be entitled to continuation of base salary for the
remainder of the two year period and, if before completion of one year of
employment, you shall be entitled to the $175,000 minimum cash bonus. For the
purposes of this paragraph, the term "cause" shall mean your willfully engaging
in conduct materially and demonstrably injurious to the property, business or
reputation of the Company and/or its affiliates, including, but not limited to,
fraud, misappropriation, commission of a felony or conflict of interest. For
purposes of the foregoing sentence, no conduct, whether by act or failure to
act, on your part will be considered "willfully" engaged in, unless done, or
omitted to be done, by you not in good faith and without reasonable belief that
your action or omission was in the interests of the Company and/or its
affiliates or not opposed to the interests of the Company and/or its
affiliates.
If you accept this offer, please sign in the space indicated below and
return one (1) signed original to me by no later than December 31, 1995.
Very truly yours,
/s/ PAUL ANDERSON
Accepted:
/s/ JAMES T. HACKETT 12/31/95
- ------------------------------
James Hackett Date
<PAGE> 1
EXHIBIT 10.36
RETIREMENT INCOME PLAN
OF
PANHANDLE EASTERN CORPORATION
AND
PARTICIPATING AFFILIATES
(AS AMENDED AND RESTATED
EFFECTIVE JANUARY 1, 1995)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C> <C> <C>
I - DEFINITIONS AND CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . I-1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
1.2 Employment Terminology . . . . . . . . . . . . . . . . . . . . . . . . . I-8
1.3 Number and Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . I-8
1.4 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-9
II - PURPOSE OF PLAN AND EFFECT
OF RESTATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1
2.1 Purpose of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1
2.2 Effect of Restatement . . . . . . . . . . . . . . . . . . . . . . . . . II-1
III - PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-1
3.1 Participation Eligibility . . . . . . . . . . . . . . . . . . . . . . . III-1
3.2 Commencement of Participation . . . . . . . . . . . . . . . . . . . . . III-1
IV - BENEFIT ACCRUAL SERVICE
AND CASH BALANCE ACCRUALS . . . . . . . . . . . . . . . . . . . . . . . . . . IV-1
4.1 Benefit Accrual Service . . . . . . . . . . . . . . . . . . . . . . . . IV-1
4.2 Cash Balance Accruals . . . . . . . . . . . . . . . . . . . . . . . . . IV-1
4.3 Break in Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV-2
4.4 Cash-Out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV-2
V - RETIREMENT BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-1
5.1 Normal Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . V-1
5.2 Early Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-1
VI - DISABILITY BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VI-1
6.1 Disability Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . VI-1
6.2 Post Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . VI-1
VII - SEVERANCE BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VII-1
7.1 No Benefits Unless Herein Set Forth . . . . . . . . . . . . . . . . . . VII-1
7.2 Severance Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . VII-1
7.3 Regular Vesting Service . . . . . . . . . . . . . . . . . . . . . . . . VII-3
7.4 Special Vesting Service . . . . . . . . . . . . . . . . . . . . . . . . VII-4
VIII - DEATH BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VIII-1
8.1 Before Annuity Starting Date . . . . . . . . . . . . . . . . . . . . . . VIII-1
8.2 After Annuity Starting Date . . . . . . . . . . . . . . . . . . . . . . VIII-5
8.3 Cash-Out of Death Benefit . . . . . . . . . . . . . . . . . . . . . . . VIII-5
8.4 Special Transitional Provision . . . . . . . . . . . . . . . . . . . . . VIII-6
IX - PAYMENT OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IX-1
9.1 Time of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . IX-1
9.2 Standard and Alternative Benefits for Members . . . . . . . . . . . . . IX-2
9.3 Level Income Option . . . . . . . . . . . . . . . . . . . . . . . . . . IX-4
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C> <C>
9.4 Cash-Outs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IX-4
9.5 Direct Rollover Election . . . . . . . . . . . . . . . . . . . . . . . . IX-5
9.6 Special Distribution Limitations . . . . . . . . . . . . . . . . . . . . IX-5
9.7 Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IX-6
9.8 Reemployment of Members . . . . . . . . . . . . . . . . . . . . . . . . IX-6
9.9 Actuarial Equivalency . . . . . . . . . . . . . . . . . . . . . . . . . IX-7
9.10 Benefit Payment Deduction Arrangements . . . . . . . . . . . . . . . . . IX-7
9.11 Commercial Annuities . . . . . . . . . . . . . . . . . . . . . . . . . . IX-8
9.12 Unclaimed Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . IX-8
9.13 Claims Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IX-8
X - SPECIAL BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X-1
10.1 Change of Control Benefits . . . . . . . . . . . . . . . . . . . . . . . X-1
10.2 July 31, 1989 Sale of Petrolane Incorporated . . . . . . . . . . . . . . X-2
10.3 Social Security Supplement . . . . . . . . . . . . . . . . . . . . . . . X-3
10.4 Supplemental Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . X-4
10.5 1995 Voluntary Early Retirement Program . . . . . . . . . . . . . . . . X-7
XI - GRANDFATHERED AND PROTECTED BENEFITS . . . . . . . . . . . . . . . . . . . . . XI-1
11.1 Panhandle Plan Prior to Effective Date . . . . . . . . . . . . . . . . . XI-1
11.2 Texas Eastern Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . XI-4
11.3 Algonquin Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . XI-7
XII - LIMITATIONS ON BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . XII-1
XIII - FUNDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . XIII-1
13.1 No Contributions by Members . . . . . . . . . . . . . . . . . . . . . . XIII-1
13.2 Company Contributions . . . . . . . . . . . . . . . . . . . . . . . . . XIII-1
13.3 Forfeitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . XIII-1
13.4 Payments to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . XIII-1
13.5 Return of Contributions . . . . . . . . . . . . . . . . . . . . . . . . XIII-1
XIV - ADMINISTRATION OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . XIV-1
14.1 Appointment of Committee . . . . . . . . . . . . . . . . . . . . . . . . XIV-1
14.2 Term, Vacancies, Resignation and Removal . . . . . . . . . . . . . . . . XIV-1
14.3 Officers, Records and Procedures . . . . . . . . . . . . . . . . . . . . XIV-1
14.4 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . XIV-1
14.5 Self-Interest of Members . . . . . . . . . . . . . . . . . . . . . . . . XIV-1
14.6 Compensation and Bonding . . . . . . . . . . . . . . . . . . . . . . . . XIV-1
14.7 Committee Powers and Duties . . . . . . . . . . . . . . . . . . . . . . XIV-2
14.8 Authorization, Delegation and Allocation . . . . . . . . . . . . . . . . XIV-2
14.9 Investment Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . XIV-3
14.10 Company to Supply Information . . . . . . . . . . . . . . . . . . . . . XIV-3
14.11 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . XIV-4
XV - ADMINISTRATION OF TRUST FUND . . . . . . . . . . . . . . . . . . . . . . . . . XV-1
15.1 Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . XV-1
15.2 Trust Fund Property . . . . . . . . . . . . . . . . . . . . . . . . . . XV-1
15.3 Funding Projections . . . . . . . . . . . . . . . . . . . . . . . . . . XV-1
15.4 Authorization of Benefit Payments . . . . . . . . . . . . . . . . . . . XV-1
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
XVI - TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . XVI-1
XVII - FIDUCIARY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . XVII-1
17.1 Article Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . XVII-1
17.2 General Allocation of Duties . . . . . . . . . . . . . . . . . . . . . . XVII-1
17.3 Fiduciary Duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . XVII-1
XVIII - ADOPTION BY CONTROLLED ENTITIES . . . . . . . . . . . . . . . . . . . . . . . XVIII-1
18.1 Approval of Directors . . . . . . . . . . . . . . . . . . . . . . . . . XVIII-1
18.2 Single Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . XVIII-1
18.3 Amendments, Termination and
Appointment of Committee and Trustee . . . . . . . . . . . . . . . . . XVIII-1
18.4 Transfer Between Participating Affiliates . . . . . . . . . . . . . . . XVIII-1
18.5 Termination of Participation . . . . . . . . . . . . . . . . . . . . . . XVIII-1
XIX - AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . XIX-1
XX - TERMINATION AND MERGER OR CONSOLIDATION . . . . . . . . . . . . . . . . . . . XX-1
20.1 Declaration of Intent . . . . . . . . . . . . . . . . . . . . . . . . . XX-1
20.2 Administration of the Plan in
Case of Termination . . . . . . . . . . . . . . . . . . . . . . . . . XX-1
20.3 Merger, Consolidation or Transfer . . . . . . . . . . . . . . . . . . . XX-1
XXI - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . XXI-1
21.1 Not Contract of Employment . . . . . . . . . . . . . . . . . . . . . . . XXI-1
21.2 Payments Solely from Trust Fund . . . . . . . . . . . . . . . . . . . . XXI-1
21.3 Alienation of Interest Forbidden . . . . . . . . . . . . . . . . . . . . XXI-1
21.4 No Benefits to the Company . . . . . . . . . . . . . . . . . . . . . . . XXI-1
21.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . XXI-1
21.6 Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . XXI-1
XXII - TOP-HEAVY STATUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . XXII-1
22.1 Article Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . XXII-1
22.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . XXII-1
22.3 Top-Heavy Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . XXII-3
22.4 Super Top-Heavy Status . . . . . . . . . . . . . . . . . . . . . . . . . XXII-4
22.5 Termination of Top-Heavy Status . . . . . . . . . . . . . . . . . . . . XXII-4
22.6 Effect of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . XXII-5
</TABLE>
(iii)
<PAGE> 5
RETIREMENT INCOME PLAN
OF
PANHANDLE EASTERN CORPORATION
AND
PARTICIPATING AFFILIATES
WHEREAS, PANHANDLE EASTERN CORPORATION and certain of its affiliates
have heretofore adopted the RETIREMENT INCOME PLAN OF PANHANDLE EASTERN
CORPORATION AND PARTICIPATING AFFILIATES (the "Plan") for the benefit of their
employees; and
WHEREAS, Panhandle Eastern Corporation and its affiliates which have
adopted the Plan desire to amend the Plan in several respects and to restate
the Plan, intending thereby to provide an uninterrupted and continuing program
of benefits;
NOW, THEREFORE, the Plan is hereby amended and restated in its
entirety as follows, with no interruption in time, effective as of January 1,
1995:
(iv)
<PAGE> 6
I.
DEFINITIONS AND CONSTRUCTION
1.1 DEFINITIONS. Where the following words and phrases appear in the
Plan, they shall have the respective meanings set forth below, unless their
context clearly indicates to the contrary.
(1) ACT: The "Employee Retirement Income Security Act of 1974, as
amended."
(2) ACTUARIAL EQUIVALENT OR ACTUARIALLY EQUIVALENT: Equality in value of
the aggregate amounts expected to be received under different times
and forms of payment based upon the following assumptions:
(i) for determining Actuarial Equivalence for a Member's Final
Average Pay Benefit in determining a form other than described
in (ii) below, the applicable assumptions shall be an 8% per
annum interest rate assumption and mortality rate assumptions
determined under the 1983 Group Annuity Table (83-GAM) for
males;
(ii) for determining Actuarial Equivalence for a Member's Final
Average Pay Benefit in determining (A) a present value of such
benefit, (B) the amount of any other payment of such benefit
made in a form other than a nondecreasing annuity (other than
an annuity that decreases merely because of the cessation or
reduction of Social Security supplements or qualified
disability payments, as defined in section 411(a)(9) of the
Code) payable for a period not less than the life of the
Member or, in the case of a "qualified preretirement survivor
annuity" (as that term is defined in section 417(c) of the
Code), the life of the Eligible Surviving Spouse, or (C) the
amount of a lump sum payment, the applicable assumptions shall
be the interest rate or rates which would be used by the
Pension Benefit Guaranty Corporation for purposes of
determining the present value of such Member's benefits under
the Plan if the Plan had terminated with insufficient assets
to provide benefits guaranteed by the Pension Benefit Guaranty
Corporation as of (A) if the Member's Annuity Starting Date
precedes the July 1 of the Plan Year in which such
distribution to such Member is paid, the January 1 of such
Plan Year or the July 1 of the preceding Plan Year, whichever
produces the greater lump sum payment and (B) if the Member's
Annuity Starting Date is on or after the July 1 of the Plan
Year in which such distribution to such Member is paid, the
January 1 or July 1 of such Plan Year, whichever produces the
greater lump sum payment and mortality rate assumptions
determined under the 1983 Group Annuity Table (83-GAM) for
males. The above notwithstanding, if the present value of
such benefit, utilizing the foregoing interest rate, exceeds
$25,000, in determining the amount of such payment, 120% of
the such foregoing interest rate shall be utilized; provided,
however, that in no event shall the present value of such
benefit determined by the use of 120% of the foregoing
interest rate result in a present value less than $25,000;
I-1
<PAGE> 7
(iii) for determining Actuarial Equivalence for a Member's Cash
Balance Accrual in determining a form other than as described
in (iv) or (v) below, the applicable assumptions shall be an
8% per annum interest rate assumption and mortality rate
assumptions determined under the 1983 Group Annuity Table
(83-GAM) for males;
(iv) for determining Actuarial Equivalence for a Member's Cash
Balance Accrual in determining (A) the present value of the
benefit, or (B) the amount of any other payment made in a form
other than a nondecreasing annuity (other than an annuity that
decreases merely because of the cessation or reduction of
Social Security supplements or qualified disability payments,
as defined in section 411(a)(9) of the Code) payable for a
period not less than the life of the Member or, in the case of
a "qualified preretirement survivor annuity" (as that term is
defined in section 417(c) of the Code), the life of the
Eligible Surviving Spouse, the applicable assumptions shall be
the annual rate of interest on 30-year Treasury securities as
of the first day of the Plan Year in which such determination
is made and the mortality rate assumptions determined under
the table prescribed by the Secretary of Treasury pursuant to
section 417(e)(3) of the Code;
(v) the amount of a lump sum payment attributable to a Member's
Cash Balance Benefit shall be the greater of (a) the dollar
value of the Member's Cash Balance Accrual as of the date of
determination of such lump sum payment or (b) the present
value of his Cash Balance Accrual as of the date of
determination of such lump sum payment determined by assuming
his Cash Balance Accrual is increased for the period between
such date of determination and the Member's Normal Retirement
Date by crediting accruals for such period pursuant to Section
4.2(b) but based upon the Interest Credit Rate as in effect as
of the end of the Plan Year immediately preceding the date of
determination of such lump payment, converting such projected
Cash Balance Accrual into a single life annuity for the life
of the Member commencing at such Normal Retirement Date and
determining the present value of such single life annuity
based upon the annual rate of interest on 30-year Treasury
securities as of the first day of the Plan Year in which such
determination is made and the mortality rate assumptions
determined under the table prescribed by the Secretary of
Treasury pursuant to section 417(e)(3) of the Code;
(vi) for determining Actuarial Equivalence for any purpose other
than as described in (i) through (v) above, an 8% per annum
interest rate assumption and mortality rate assumptions
determined under the 1983 Group Annuity Table (83-GAM) for
males.
(3) ALGONQUIN PLAN: The Employees' Retirement Plan of Algonquin Gas
Transmission Company as in effect prior to its merger into the Plan.
(4) ANNUITY STARTING DATE: With respect to each Member or beneficiary,
the first day of the first month for which an amount is payable to the
Member or beneficiary from the Trust Fund as an annuity or in any
other form.
I-2
<PAGE> 8
(5) AVERAGE ANNUAL COVERED COMPENSATION: The average (without indexing)
of the Social Security Taxable Wage Bases in effect for each calendar
year during the thirty-five year period ending with the last day of
the calendar year in which the Member attains (or will attain) Social
Security Retirement Age. For this purpose, the Social Security
Taxable Wage Base for the Plan Year in which the determination is
being made and for any subsequent Plan Year shall be assumed to be the
same as the Social Security Taxable Base in effect as of the beginning
of the Plan Year in which the determination is being made.
(6) AVERAGE ANNUAL PLAN COMPENSATION: The result obtained by (A) dividing
the total Plan Compensation paid to an Eligible Employee while
employed as an Eligible Employee by either a Final Average Pay
Employer or a Cash Balance Employer during a considered period by the
number of months for which Plan Compensation was received during the
considered period and (B) multiplying such amount by twelve. The
considered period shall be the sixty consecutive months of employment
within the last one hundred twenty months of employment after 1985
which yield the highest average Plan Compensation; provided, that if a
Member has less than sixty consecutive months of such employment, his
considered period shall be all of his completed months of such
employment. In determining the considered period for calculating
Average Annual Plan Compensation, periods during which the Member was
not employed by either a Final Average Pay Employer or a Cash Balance
Employer shall not be taken into account and months during which a
Member did not receive Compensation for a full month shall be taken
into account or disregarded in accordance with nondiscriminatory
criteria established by the Committee.
(7) BENEFIT ACCRUAL SERVICE: For each Member and as of any determination
date, the sum of all service credited for such Member pursuant to
Section 4.1.
(8) CASH BALANCE EMPLOYER: Each Controlled Entity which has adopted the
Plan to provide benefits for its Eligible Employees pursuant to the
Plan's Cash Balance Accrual formula.
(9) CASH BALANCE ACCRUAL: For each Member and as of any determination
date, the sum of all accruals credited for such Member pursuant to
Section 4.2.
(10) CASH BALANCE BENEFIT: The benefit determined under the Plan which is
attributable to a Member's Cash Balance Accruals.
(11) CODE: The Internal Revenue Code of 1986, as amended.
(12) COMMENCEMENT DATE: The date on which an Employee first performs an
Hour of Service.
(13) COMMITTEE: The administrative committee appointed by the Directors to
administer the Plan.
(14) COMPANY: Each Final Average Pay Employer and each Cash Balance
Employer.
(15) CONTROLLED ENTITY: Each corporation that is a member of a controlled
group of corporations, within the meaning of section 1563(a)
(determined without regard to sections 1563(a)(4) and
I-3
<PAGE> 9
1563(e)(3)(C)) of the Code, of which Panhandle Eastern Corporation is
a member, each trade or business (whether or not incorporated) with
which Panhandle Eastern Corporation is under common control and each
organization that is a member of an affiliated service group, within
the meaning of section 414(m) of the Code, of which Panhandle Eastern
Corporation is a member.
(16) DIRECT ROLLOVER: A payment by the Plan to an Eligible Retirement Plan
designated by a Distributee.
(17) DIRECTORS: The Board of Directors of Panhandle Eastern Corporation or
the Finance Committee of the Board of Directors of Panhandle Eastern
Corporation to the extent the powers of such board are exercised by
such committee.
(18) DISTRIBUTEE: Each (A) Member entitled to an Eligible Rollover
Distribution, (B) Member's surviving spouse with respect to the
interest of such surviving spouse in an Eligible Rollover
Distribution, and (C) former spouse of a Member who is an alternate
payee under a qualified domestic relations order, as defined in
section 414(p) of the Code, with regard to the interest of such former
spouse in an Eligible Rollover Distribution.
(19) EARLY RETIREMENT DATE: The first date upon which a Member has both
attained fifty-five years of age while employed and completed five or
more years of Benefit Accrual Service.
(20) EFFECTIVE DATE: January 1, 1995, as to this restatement of the Plan.
(21) ELIGIBLE EMPLOYEE: Any Employee of a Company other than (A) an
individual whose terms of employment are subject to collective
bargaining between a collective bargaining representative and the
Company unless there is in effect a collective bargaining agreement
that provides for coverage of such individual under the Plan, (B) an
individual (i) who is a nonresident alien who receives no earned
income from sources within the United States or (ii) who is otherwise
classified by the Company as Non-U.S. Payroll, (C) any Leased
Employee, or (D) an individual whose terms of employment are subject
to a written employment contract or agreement that provides that such
individual shall not be covered under the Plan.
(22) ELIGIBLE RETIREMENT PLAN: (A) With respect to a Distributee other
than a surviving spouse, an individual retirement account described in
section 408(a) of the Code, an individual retirement annuity described
in section 408(b) of the Code, an annuity plan described in section
403(a) of the Code, or a qualified plan described in section 401(a) of
the Code, which under its provisions accepts such Distributee's
Eligible Rollover Distribution and (B) with respect to a Distributee
who is a surviving spouse, an individual retirement account described
in section 408(a) of the Code or an individual retirement annuity
described in section 408(b) of the Code.
(23) ELIGIBLE ROLLOVER DISTRIBUTION: Any distribution of all or any
portion of the Plan benefit of a Distributee other than (A) a
distribution that is one of a series of substantially equal periodic
I-4
<PAGE> 10
payments (not less frequently than annually) made for the life (or
life expectancy) of the Distributee or the joint lives (or joint life
expectancies) of the Distributee and the Distributee's designated
beneficiary or for a specified period of ten years or more, (B) a
distribution to the extent such distribution is required under section
401(a)(9) of the Code, (C) the portion of a distribution that is not
includable in gross income (determined without regard to the exclusion
for net unrealized appreciation with respect to employer securities),
and (D) any other distribution so designated by the Internal Revenue
Service in revenue rulings, notices, and other guidance of general
applicability.
(24) ELIGIBLE SURVIVING SPOUSE: With respect to a Member who dies prior to
his Annuity Starting Date, a surviving spouse to whom a deceased
Member was married on the date of his death. With respect to a Member
who dies on or after his Annuity Starting Date, the spouse to whom a
deceased Member was married on his Annuity Starting Date.
(25) EMPLOYEE: Any individual employed by a Controlled Entity or any
Leased Employee.
(26) FINAL AVERAGE PAY EMPLOYER: Each Controlled Entity which has adopted
the Plan to provide benefits for its Eligible Employees pursuant to
the Plan's Final Average Pay Benefit formula.
(27) FINAL AVERAGE PAY BENEFIT: The benefit determined under the Plan
which is attributable to a Member's Benefit Accrual Service.
(28) HOUR OF SERVICE: An Hour of Service is each hour for which an
Employee is directly or indirectly paid, or entitled to payment, by a
Controlled Entity for the performance of duties.
(29) INTEREST CREDIT RATE: The one-year United States Treasury Bill rate
but not in excess of the annual rate of interest on 30-year United
States Treasury securities.
(30) LEASED EMPLOYEE: Any person who is not an employee of a Controlled
Entity but who performs services for a Controlled Entity pursuant to
an agreement (oral or written) between a Controlled Entity and any
leasing organization, provided that such person has performed such
services for the Controlled Entity or for related persons (within the
meaning of section 103(b)(6)(C) of the Code) on a substantially
full-time basis for a period of at least one year and such services
are of a type historically performed by the Controlled Entity's
employees in the Controlled Entity's field of business.
(31) MEMBER: Any individual who has met the eligibility requirements for
participation in the Plan as set forth in Article III herein.
(32) MONTHLY PLAN COMPENSATION: The Plan Compensation received by a Member
from a Cash Balance Employer for a calendar month.
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<PAGE> 11
(33) NORMAL RETIREMENT DATE: The later of the date upon which a Member
attains sixty-five years of age or the fifth anniversary of the date
as of which the Member commenced participation in the Plan.
(34) PERIOD OF SERVICE: Each period of an Employee's Service commencing on
his Commencement Date or a Reemployment Commencement Date, if
applicable, and ending on a Severance from Service Date.
Notwithstanding the foregoing, a period during which an Employee is
absent from Service by reason of the Employee's pregnancy, the birth
of a child of the Employee or the placement of a child with the
Employee in connection with the adoption of such child by the Employee
or for the purposes of caring for such child for the period
immediately following such birth or placement shall not constitute a
Period of Service between the first and second anniversary of the
first date of such absence. Further notwithstanding the foregoing, an
Employee's Period of Service shall include any period following his
termination of employment for which he receives a lump sum payment of
bank time, unused vacation or accrued vacation pay, pay in lieu of
notice of termination of employment or severance pay (other than
extraordinary severance pay owed pursuant to the terms of an executive
employment contract).
(35) PERIOD OF SEVERANCE: Each period of time commencing on an Employee's
Severance from Service Date and ending on a Reemployment Commencement
Date.
(36) PLAN COMPENSATION: The total of all wages, salaries, fees for
professional service and other amounts received in cash by a Member
for services actually rendered or labor performed for the Company
while an Eligible Employee and a Member to the extent such amounts are
includable in gross income (except that prior to January 1, 1996, an
executive bonus shall be deemed so includable in the year earned
rather than when paid), excluding, however, severance pay, vacation
pay at separation, reimbursements or other expense allowances, cash
and noncash fringe benefits, moving and relocation expenses and
allowances, transition pay, Company contributions to or payments from
this or any other deferred compensation program whether such program
is qualified under section 401(a) of the Code or nonqualified, welfare
benefits, amounts realized from the exercise of a stock option which
is not an incentive stock option within the meaning of section 422A of
the Code or when property described in section 83 of the Code is no
longer subject to a substantial risk of forfeiture, any amount
realized as a result of a disqualifying disposition within the meaning
of section 421(a) of the Code and any other amounts which receive
special tax benefits under the Code but are not hereinafter included;
provided that, for the purposes of this definition, elective
contributions made on a Member's behalf by the Company to the
Employees' Savings Plan of Panhandle Eastern Corporation and
Participating Affiliates, the Associated Natural Gas, Inc. Retirement
Savings Plan, the Panhandle Eastern Corporation SelectPlan or the
Associated Natural Gas, Inc. Cafeteria Plan that are not includable in
income under section 125, section 402(e)(3), section 402(h) or section
403(b) of the Code shall be included in his Plan Compensation. The
above notwithstanding, the Plan Compensation of any Member taken
into account for purposes of the Plan shall be limited to $150,000
for any calendar year (with such amount to be (i) adjusted
automatically to reflect any cost-of-living increases authorized by
section 401(a)(17) of the Code and (ii) prorated for a period
considered in determining Average Annual Plan C-
I-6
<PAGE> 12
ompensation of less than twelve months and to the extent otherwise
required by applicable law).
(37) PLAN OR PANHANDLE PLAN: The Retirement Income Plan of Panhandle
Eastern Corporation and Participating Affiliates, as amended from time
to time.
(38) PLAN YEAR: The twelve-consecutive month period commencing January 1
of each year.
(39) REEMPLOYMENT COMMENCEMENT DATE: The first date upon which an Employee
performs an Hour of Service following a Severance from Service Date.
(40) RETIREMENT: With respect to each Member, termination of his
employment on or after his Early Retirement Date or Normal Retirement
Date.
(41) SERVICE: The period of an Employee's employment with a Controlled
Entity.
(42) SEVERANCE FROM SERVICE DATE: The first date on which the Service of
an Employee terminates following his Commencement Date or a
Reemployment Commencement Date, if applicable. Notwithstanding the
foregoing, the Severance from Service Date of an Employee who is
absent from Service by reason of the Employee's pregnancy, the birth
of a child of the Employee or the placement of a child with the
Employee in connection with the adoption of such child by the Employee
or for purposes of caring for such child for the period immediately
following such birth or placement shall be the second anniversary of
the first date of such absence.
(43) SOCIAL SECURITY RETIREMENT AGE: The age used as the retirement age
under section 216(l) of the Social Security Act, applied without
regard to the age increase factor and as if the early retirement age
under such section was sixty-two.
(44) SOCIAL SECURITY TAXABLE WAGE BASE: The contribution and benefit base
under section 230 of the federal Social Security Act.
(45) TEXAS EASTERN PLAN: The Texas Eastern Retirement Plan as in effect
prior to its merger into the Plan.
(46) TOTALLY AND PERMANENTLY DISABLED: A Member who has terminated
employment by reason of disability shall be considered Totally and
Permanently Disabled if such Member is eligible for and receiving
either Social Security Disability Benefits under the federal Social
Security Act or disability benefits under any Company-sponsored
long-term disability plan. Upon application by the Member, the
Committee shall determine whether a Member has become Totally and
Permanently Disabled and shall so notify such Member within sixty days
thereafter. A Member shall be considered to have ceased to be Totally
and Permanently Disabled if, prior to his Normal Retirement Date, such
Member is no longer receiving either Social Security Disability
Benefits under the federal Social Security Act or disability benefits
under any Company-sponsored long-term disability plan.
I-7
<PAGE> 13
(47) TRUST: The trust established under the Trust Agreement to hold and
invest contributions made under the Plan and from which the Plan
benefits will be distributed.
(48) TRUST AGREEMENT: The agreement entered into between the Company and
the Trustee establishing the Trust.
(49) TRUST FUND: The funds and properties held pursuant to the provisions
of the Trust Agreement hereof for the use and benefit of the Members,
together with all income, profits and increments thereto.
(50) TRUSTEE: The Trustee or Trustees qualified and acting under the Trust
Agreement at any time.
(51) VESTED INTEREST: The percentage of a Member's Plan benefit which,
pursuant to the Plan, is nonforfeitable.
(52) VESTING SERVICE: The measure of service with the Company or a
Controlled Entity used in determining a Member's nonforfeitable right
to a benefit.
1.2 EMPLOYMENT TERMINOLOGY. Wherever appropriate herein, the terms
"employment", "employee", "employed" or other similar terminology refer to
being employed by any Controlled Entity and the terms "termination of
employment", "terminate employment", "employment terminated", "terminated" or
other similar terminology refer to no longer being employed by any Controlled
Entity.
1.3 NUMBER AND GENDER. Wherever appropriate herein, words used in
the singular shall be considered to include the plural and the plural to
include the singular. The masculine gender, where appearing in this Plan,
shall be deemed to include the feminine gender.
1.4 HEADINGS. The headings of Articles and Sections herein are
included solely for convenience and if there is any conflict between such
headings and the text of the Plan, the text shall control.
I-8
<PAGE> 14
II.
PURPOSE OF PLAN AND EFFECT OF RESTATEMENT
2.1 PURPOSE OF PLAN. The purpose of the Plan is to provide
retirement and incidental benefits for those Members who complete the required
period of employment with the Company. The benefits provided by the Plan will
be paid from the Trust Fund and will be in addition to any benefits the Members
may be entitled to receive pursuant to any other Company programs or pursuant
to the federal Social Security Act. The Plan and the Trust are established and
shall be maintained for the exclusive benefit of the Members and their
beneficiaries. No part of the Trust Fund can ever revert to the Company,
except as hereinafter provided in Section 13.5 and 20.2(c), or be used for or
diverted to purposes other than the exclusive benefit of the Members and their
beneficiaries.
2.2 EFFECT OF RESTATEMENT.
(a) Contrary Plan provisions notwithstanding, in no event
shall any Member's Plan benefit as of the later of the Effective Date or the
date of adoption of this restatement of the Plan be less than such Member's
Plan benefit under the terms of the Plan on the date immediately prior to the
later of the Effective Date or the date of adoption of this restatement of the
Plan determined based upon such Member's Plan Compensation and Benefit Accrual
Service as of such date.
(b) Except as otherwise provided in the Plan, all benefit
payments being made under the terms of the Plan as in effect prior to the
Effective Date shall continue to be made in the same amount and manner and
shall not be affected by the terms of this restated Plan.
(c) Except as otherwise specifically provided in the Plan or
as required by the Code or the Act, the terms of this restated Plan shall not
affect the amount of the Plan benefits of Members who do not complete an Hour
of Service on or after the Effective Date or the time or form of payment of
such benefits. Except as otherwise specifically provided in the Plan or as
required by the Code or the Act, the amount, time of payment, form of payment
and all other terms and conditions of the Plan benefit of any Member who does
not complete an Hour of Service on or after the Effective Date shall continue
to be governed by the terms of the Plan document or any predecessor plan
document as in effect at the time of such Member's termination of employment.
II-1
<PAGE> 15
III.
PARTICIPATION
3.1 PARTICIPATION ELIGIBILITY. Any Eligible Employee shall become a
Member upon the completion of one year of Vesting Service as computed in
accordance with Section 7.3. Notwithstanding the foregoing:
(a) an Eligible Employee who was a Member of the Plan on the
day prior to the Effective Date shall remain a Member of this
restatement of the Plan as of the Effective Date; and
(b) an Eligible Employee who was a Member of the Plan prior
to a termination of employment shall remain a Member upon his
reemployment as an Eligible Employee.
3.2 COMMENCEMENT OF PARTICIPATION. The Plan Membership of a Member
who is employed by a Final Average Pay Employer at the time he satisfies the
participation eligibility criteria of Section 3.1 shall commence retroactive to
his Commencement Date or, if later, the date he first became an Eligible
Employee. The Plan Membership of a Member who was employed by a Cash Balance
Employer as of January 1, 1995 and who had satisfied the participation
eligibility criteria of Section 3.1 as of January 1, 1995 shall commence as of
January 1, 1995. The Plan Membership of any other Member who is employed as an
Eligible Employee by a Cash Balance Employer at the time he satisfies the
participation eligibility criteria of Section 3.1 shall commence as of the
first day of the first month coincident with or immediately following his
satisfaction of such criteria. The Plan Membership of an Employee who has
completed one year of Vesting Service but who has not become a Member of the
Plan because he was not an Eligible Employee shall commence immediately upon
his becoming an Eligible Employee as a result of a change in his employment
status.
III-1
<PAGE> 16
IV.
BENEFIT ACCRUAL SERVICE
AND CASH BALANCE ACCRUALS
4.1 BENEFIT ACCRUAL SERVICE.
(a) For the period preceding the Effective Date, a Member
shall be credited with years of Benefit Accrual Service in an amount equal to
all years of service credited to him for accrual purposes under the Plan as it
existed on the day prior to the Effective Date.
(b) On and after the Effective Date, a Member shall be
credited with Benefit Accrual Service in an amount equal to his aggregate
Periods of Service except (1) no credit shall be given for Periods of Service
prior to the date the Member first becomes a Member of the Plan, (2) no credit
shall be given for Periods of Service completed while the Member is not an
Eligible Employee, (3) no credit shall be given for Periods of Service
completed while the Member is not employed by a Final Average Pay Employer and
(4) a Member shall receive credit for a fractional year of Benefit Accrual
Service based upon the number of days of Service in such fractional year.
(c) If a Member's employment terminates prior to his Normal
Retirement Date because he has become Totally and Permanently Disabled (whether
before or after the Effective Date) while he was an Eligible Employee and
employed by a Final Average Pay Employer, such Member shall be credited with
Benefit Accrual Service in an amount equal to the full and fractional years
included in the period prior to his Annuity Starting Date during which he is
Totally and Permanently Disabled.
(d) For purposes of determining a Member's Early Retirement
Date under Section 1.1(19), eligibility for a death benefit under Section
8.1(c) or 8.1(f), and whether a Member has completed at least five years of
Benefit Accrual Service under Section 6.1(c) only, Benefit Accrual Service
shall be deemed to include post-1994 service with a Cash Balance Employer as an
Eligible Employee which would have constituted Benefit Accrual Service had the
Member instead been employed by a Final Average Pay Employer and to include any
period for which a Member continues to receive Cash Balance Accruals pursuant
to Section 6.1(b).
4.2 CASH BALANCE ACCRUALS.
(a) For each Plan Year prior to the Plan Year including his
Annuity Starting Date, a Member who is employed at any time during such Plan
Year as an Eligible Employee by a Cash Balance Employer shall be credited with
a Cash Balance Accrual as of the last day of such Plan Year equal to 3% of such
Member's Monthly Plan Compensation for each full or partial month during such
Plan Year while he was so employed.
IV-1
<PAGE> 17
(b) For each Plan Year prior to the Plan Year including his
Annuity Starting Date, a Member (whether or not he is then an Eligible Employee
or then employed) shall be credited with a Cash Balance Accrual as of the last
day of such Plan Year equal to:
(i) his Cash Balance Accrual as of the end of the
immediately preceding Plan Year; multiplied by
(ii) the Interest Credit Rate as of the last day of
the immediately preceding Plan Year.
(c) For the Plan Year including his Annuity Starting Date, a
Member who is employed as an Eligible Employee by a Cash Balance Employer at
any time during such Plan Year shall be credited with a Cash Balance Accrual as
of the day immediately preceding his Annuity Starting Date equal to 3% of such
Member's monthly Plan Compensation for each month during such Plan Year while
he was so employed.
(d) For the Plan Year including his Annuity Starting Date, a
Member (whether or not he is then an Eligible Employee or then employed) shall
be credited with a Cash Balance Accrual as of the day immediately preceding his
Annuity Starting Date equal to:
(i) his Cash Balance Accrual as of the last day of
the immediately preceding Plan Year; multiplied by
(ii) the Interest Credit Rate as of the last day of
the immediately preceding Plan Year; multiplied by
(iii) a fraction, the numerator of which is the
number of full months during the Plan Year which were
prior to the Member's Annuity Starting Date and the
denominator of which is twelve.
(e) If a Member's employment terminates prior to his Annuity
Starting Date because he has become Totally and Permanently Disabled while
employed by a Cash Balance Employer as an Eligible Employee, such Member shall
be credited with Cash Balance Accrual credits for each Plan Year while he is
Totally and Permanently Disabled and prior to his Annuity Starting Date in
accordance with Paragraphs (a), (b), (c) and (d) above but based upon the rate
of Monthly Plan Compensation equal to the monthly average of his Plan
Compensation for the twelve-month period immediately preceding the date he
incurred his disability.
(f) No Cash Balance Accruals shall be credited for a Member
pursuant to this Section 4.2 for any period from and after his Annuity Starting
Date.
4.3 BREAK IN SERVICE. Contrary Plan provisions notwithstanding, if a
Member who does not have a Vested Interest terminates employment, his Benefit
Accrual Service and Cash Balance Accrual which were credited for his period of
employment prior to such termination shall be disregarded if
IV-2
<PAGE> 18
his years of Vesting Service prior to such termination of employment are
disregarded pursuant to Section 7.3(e).
4.4 CASH-OUT.
(a) If a Member terminates employment and has a 0% Vested
Interest or receives a lump sum distribution pursuant to Section 9.4, such
Member's Benefit Accrual Service and Cash Balance Accruals which were credited
for his period of employment prior to such termination shall be disregarded,
and such Member's nonvested Plan benefit shall become a forfeiture as of the
date of such distribution (or as of the date of termination of employment if
the Member has a 0% Vested Interest with such Member being considered to have
received a distribution of zero dollars on the date of his termination of
employment).
(b) Paragraph (a) above notwithstanding, if such terminated
Member is subsequently reemployed and either the Member had a 0% Vested
Interest at the time of his termination or the distribution previously made to
him was for less than the present value of his entire Plan benefit at the time
of such distribution, the Benefit Accrual Service and Cash Balance Accrual
which were disregarded and the forfeiture which occurred pursuant to Paragraph
(a) above shall be restored as of the date of reemployment unless such Benefit
Accrual Service and Cash Balance Accrual are disregarded pursuant to the
provisions of Section 4.3; provided, however, if such Member received a
distribution at the time of his termination, such restoration shall only be
made if such Member repays, within five years from the date the Member is
reemployed, the distributed amount plus interest thereon at the rate of 5% (or
at a rate which may later be specified by regulations or by law) per annum
compounded annually from the date of distribution to the date of repayment.
IV-3
<PAGE> 19
V.
RETIREMENT BENEFITS
5.1 NORMAL RETIREMENT.
(a) A Member whose employment terminates, for a reason other
than death, on or after his Normal Retirement Date shall be entitled to
receive, as of such date, a retirement benefit, payable at the time and in a
form provided in Article IX, which is the Actuarial Equivalent of a series of
monthly payments for his life commencing on the first day of the month
coinciding with or next following the date of his Retirement, each monthly
payment being equal to the sum of (1) and (2) below:
(1) one-twelfth of 1.25% of his Average Annual Plan
Compensation multiplied by his years of Benefit Accrual Service plus
0.35% of his Average Annual Plan Compensation in excess of 125% of his
Average Annual Covered Compensation multiplied by his years of Benefit
Accrual Service not in excess of thirty-five years; and
(2) the monthly payment amount derived by converting
his Cash Balance Accrual as of his Annuity Starting Date into a single
life annuity on an Actuarially Equivalent basis.
(b) With respect to any Member who is to receive his benefit
pursuant to Paragraph (a) above, such Member's Annuity Starting Date shall be
the first day of the month coinciding with or next following the date of the
Member's Retirement.
(c) The Committee shall furnish any Member who continues his
employment with any Controlled Entity beyond his Normal Retirement Date with
the notification described in section 2530.203-3 of the Labor Department
Regulations relating to the Act. Upon such Member's termination of employment,
his Article IX benefit shall be increased to the extent required, if at all,
under such regulations to avoid the effecting of a permanent withholding of
benefits during such Member's post Normal Retirement Date employment.
5.2 EARLY RETIREMENT.
(a) A Member whose employment terminates on or after his
Early Retirement Date and prior to his Normal Retirement Date, for a reason
other than because of death or because he has become Totally and Permanently
Disabled, shall be entitled to receive, as of such Member's Normal Retirement
Date, a retirement benefit, payable at the time and in a form provided in
Article IX, which is the Actuarial Equivalent of a series of monthly payments
for his life commencing on the first day of the month coinciding with or next
following his Normal Retirement Date, each monthly payment being equal to the
sum of (1) and (2) below:
V-1
<PAGE> 20
(1) one-twelfth of 1.25% of his Average Annual Plan
Compensation (determined as of the date of his termination of
employment) multiplied by his years of Benefit Accrual Service
(determined as of the date of his termination of employment) plus
0.35% of such Average Annual Plan Compensation in excess of 125% of
his Average Annual Covered Compensation (determined as of the date of
his termination of employment) multiplied by such years of Benefit
Accrual Service which are not in excess of thirty-five years; and
(2) the monthly payment amount derived by converting
his Cash Balance Accrual as of his Normal Retirement Date into a
single life annuity on an Actuarially Equivalent basis.
(b) If such Member requests the Committee to authorize the
commencement of his Article IX benefit as of the first day of the month
coinciding with or next following the date of his Retirement, or as of the
first day of any subsequent month which precedes his Normal Retirement Date,
such Member shall be entitled to receive his Article IX benefit as of the first
day of the month so requested, and the value thereof shall be the sum of (1)
and (2) below:
(1) the monthly amount determined pursuant to (a)(1)
above but reduced to reflect such Member's younger age and the earlier
commencement of payments by multiplying each such monthly payment in
accordance with the following schedule:
<TABLE>
<CAPTION>
*AGE AT COMMENCEMENT MULTIPLIER
------------------- ----------
<S> <C>
60 or older 100%
59 96.5%
58 93.0%
57 89.5%
56 86.0%
55 82.5%
</TABLE>
(*) If the age of a Member at the date on which the
benefit commences is a fractional number of years,
the percentage to be used will be obtained by a pro
rata adjustment as determined by the Committee; and
(2) the monthly payment amount derived by converting
his Cash Balance Accrual as of his selected Annuity Starting Date on
an Actuarially Equivalent basis.
Any request, pursuant to this Paragraph, for early commencement of benefit
payments must be made by filing with the Committee the form prescribed by the
Committee at least 30 days prior to the date of such commencement and no such
request may be withdrawn by a Member after commencement of payment of his
Article IX benefit.
V-2
<PAGE> 21
(c) With respect to any Member who is to receive his benefit
pursuant to Paragraph (a) above, such Member's Annuity Starting Date shall be
the first day of the month coincident with or next following his Normal
Retirement Date; provided that he has given the Committee at least thirty days
advance notice that he is electing such date as his Annuity Starting Date.
With respect to any Member who is to receive early commencement of his benefit
pursuant to Paragraph (b) above, such Member's Annuity Starting Date shall be
the first day of the month so requested.
V-3
<PAGE> 22
VI.
DISABILITY BENEFITS
6.1 DISABILITY BENEFITS.
(a) In the event a Member's employment terminates prior to
his Normal Retirement Date while he is an Eligible Employee and employed by a
Final Average Pay Employer because he has become Totally and Permanently
Disabled, such Member shall receive Benefit Accrual Service while he remains so
disabled prior to his Annuity Starting Date and shall be entitled to receive,
as of his selected Annuity Starting Date, a disability retirement benefit,
payable at the time and in a form provided in Article IX, which is the
Actuarial Equivalent of a series of monthly payments for his life commencing on
the Member's selected Annuity Starting Date, each monthly payment being equal
to the sum of (1) and (2) below:
(1) one-twelfth of 1.25% of the Average Annual Plan
Compensation he would have had if he had received during his period of
disability Plan Compensation equal to the monthly average of his Plan
Compensation for the twelve-month period immediately preceding the
date he incurred his disability multiplied by his years of Benefit
Accrual Service plus 0.35% of such Average Annual Plan Compensation in
excess of 125% of the Average Annual Covered Compensation he would
have had if he had received during period of his disability monthly
Plan Compensation equal to the monthly average of his Plan
Compensation for the twelve-month period immediately preceding the
date he incurred his disability multiplied by his years of Benefit
Accrual Service not in excess of thirty-five years; and
(2) the monthly payment amount derived by converting
his Cash Balance Accrual as of his Annuity Starting Date into a single
life annuity on an Actuarially Equivalent basis.
(b) In the event a Member's employment terminates prior to
his Normal Retirement Date while he is an Eligible Employee and employed by a
Cash Balance Employer because he has become Totally and Permanently Disabled,
such Member shall continue to receive Cash Balance Accruals pursuant to Section
4.2(e) while he remains so disabled prior to his Annuity Starting Date and
shall be entitled to receive, as of his selected Annuity Starting Date, a
disability retirement benefit, payable at the time and in a form provided in
Article IX, which is the Actuarial Equivalent of a series of monthly payments
for his life commencing on the Member's selected Annuity Starting Date, each
monthly payment being equal to the sum of (1) and (2) below:
(1) the monthly amount of any Final Average Pay
Benefit, if any, which, although, based upon Benefit Accrual Service
completed prior to becoming employed by the Cash Balance Employer,
shall reflect Average Annual Plan Compensation and Average Annual
Covered Compensation calculated as if he had received, while he
remained so disabled prior to his Annuity Starting Date, monthly Plan
Compensation equal to the monthly average
VI-1
<PAGE> 23
of his Plan Compensation for the twelve-month period immediately
preceding the date he became so disabled; and
(2) the monthly payment amount derived by converting
his Cash Balance Accrual as of his Annuity Starting Date into a single
life annuity on an Actuarially Equivalent basis.
(c) With respect to any Member who is to receive his benefit
pursuant to Paragraphs (a) or (b) above, such Member's Annuity Starting Date
shall be the first day of any month from and after the date he attains the age
of fifty-five as elected by such Member, provided that such Member has given
the Committee at least thirty days advance written notice of his selected
Annuity Starting Date, and if the Member has completed at least five years of
Benefit Accrual Service, the portion of his benefit computed under Paragraph
(a)(1) or (b)(1) above shall be reduced in accordance with the schedule
contained in Section 5.2(b)(1) instead of the schedule contained in Section
7.2(d)(1).
6.2 POST DISABILITY.
(a) If a Member who has been Totally and Permanently Disabled
ceases to be so disabled prior to his Annuity Starting Date, no disability
retirement benefits shall be paid to such Member pursuant to Section 6.1.
(b) In the event a Member ceases to be Totally and
Permanently Disabled prior to his Annuity Starting Date, for purposes of
determining eligibility for and the amount of any Plan benefit to which such
Member may subsequently become entitled, such Member shall be credited with
Vesting Service for the period he remained so disabled as if his employment had
continued through such period and, in the case of a Final Average Pay Benefit,
shall be assumed to have received during such period monthly Plan Compensation
equal to the monthly average of his Plan Compensation for the twelve-month
period immediately preceding the date he became Totally and Permanently
Disabled.
VI-2
<PAGE> 24
VII.
SEVERANCE BENEFITS
7.1 NO BENEFITS UNLESS HEREIN SET FORTH. Except as set forth in this
Article, upon termination of employment of a Member for any reason other than
Retirement, death or having become Totally and Permanently Disabled, such
Member shall acquire no right to any benefit from the Plan or the Trust Fund.
7.2 SEVERANCE BENEFIT.
(a) For purposes of this Section, a Member's Vested Interest
shall be determined by such Member's full years of Vesting Service in
accordance with the following schedule:
<TABLE>
<CAPTION>
FULL YEARS OF VESTING SERVICE VESTED INTEREST
----------------------------- ---------------
<S> <C>
Less than 5 years 0%
5 years or more 100%
</TABLE>
With respect to any Member who was a participant in the Plan on the day prior
to the Effective Date, in no event shall such Member's nonforfeitable
percentage after the Effective Date be less than such nonforfeitable percentage
would have been had the Plan provisions prior to such date been in effect.
(b) Paragraph (a) above notwithstanding, a Member shall have
a 100% Vested Interest upon attainment while employed of his Normal Retirement
Date.
(c) A Member whose employment terminates, for a reason other
than because of Retirement, death or having become Totally and Permanently
Disabled shall be entitled to receive, as of such Member's Normal Retirement
Date, a severance benefit, payable at the time and in a form provided in
Article IX, which is the Actuarial Equivalent of a series of monthly payments
for his life commencing on the first day of the month coinciding with or next
following his Normal Retirement Date, each monthly payment being equal to the
sum of (1) and (2) below:
(1) one-twelfth of 1.25% of his Average Annual Plan
Compensation (determined as of the date of his termination of
employment) multiplied by his years of Benefit Accrual Service
(determined as of the date of his termination of employment) plus
0.35% of such Average Annual Plan Compensation in excess of 125% of
his Average Annual Covered Compensation (determined as of the date of
his termination of employment) multiplied by such years of Benefit
Accrual Service not in excess of thirty-five years; and
(2) the monthly payment amount derived by converting
his Cash Balance Accrual as of his Normal Retirement Date into a
single life annuity on an Actuarially Equivalent basis.
VII-1
<PAGE> 25
(d) If the present value of a Member's Vested Interest in his
severance benefit exceeds $10,000 and such Member requests the Committee to
authorize the commencement of such benefit as of the first day of the month
coinciding with or next following his fifty-fifth birthday, or as of the first
day of any subsequent month which precedes his Normal Retirement Date, such
Member shall be entitled to receive his severance benefit as of the first day
of the month so requested and each monthly payment of such benefit shall be the
sum of (1) and (2) below:
(1) The monthly amount determined pursuant to (c)(1)
above, but reduced to reflect such Member's younger age and the
earlier commencement of payments by multiplying each such monthly
payment in accordance with the following schedule (prorated in the
case of fractional months):
<TABLE>
<CAPTION>
*AGE AT COMMENCEMENT MULTIPLIER
------------------- ----------
<S> <C>
65 or older 100%
64 93.3%
63 86.7%
62 80.0%
61 73.3%
60 66.7%
59 63.3%
58 60.0%
57 56.7%
56 53.3%
55 50.0%
</TABLE>
(*) If the age of a Member at the date on which the
benefit commences is a fractional number of years,
the percentage to be used will be obtained by a pro
rata adjustment as determined by the Committee; and
(2) the monthly payment amount derived by converting
his Cash Balance Accrual as of his selected Annuity Starting Date into
a single life annuity on an Actuarially Equivalent basis.
If the present value of a Member's Vested Interest in his severance benefit is
equal to or less than $10,000 but greater than $3,500 and such Member requests
the Committee to authorize the commencement of such benefit as of the first day
of the month coinciding with or next following the date of his termination of
employment, or as of the first day of any subsequent month which precedes his
Normal Retirement Date, such Member shall be entitled to receive his severance
benefit as of the first day of the month so requested and each monthly payment
of such benefit shall be the sum of (1) and (2) below:
(1) the monthly amount determined pursuant to (c)(1)
above, but actuarially reduced to reflect such Member's younger age
and the earlier commencement of payments;
VII-2
<PAGE> 26
(2) the monthly payment amount derived by converting
his Cash Balance Accrual as of his selected Annuity Starting Date into
a single life annuity commencing as of the selected Annuity Starting
Date on an Actuarially Equivalent basis.
Any request, pursuant to this Paragraph, for early commencement of benefit
payments must be made by filing with the Committee the form prescribed by the
Committee at least 30 days prior to the date of such commencement and no such
request may be withdrawn by a Member after commencement of payment of his
Article IX benefit.
(e) With respect to any Member who is to receive his benefit
pursuant to Paragraph (c) above, such Member's Annuity Starting Date shall be
the first day of the month coincident with or next following his Normal
Retirement Date. With respect to any Member who is to receive early
commencement of his benefit pursuant to Paragraph (d) above, such Member's
Annuity Starting Date shall be the first day of the month so requested;
provided that such Member has given the Committee at least thirty days advance
written notice of such selected Annuity Starting Date.
7.3 REGULAR VESTING SERVICE.
(a) For the period preceding the Effective Date, an Employee
shall be credited with Vesting Service in an amount equal to all service
credited to him for vesting purposes under the Plan as it existed on the day
prior to the Effective Date.
(b) On and after the Effective Date, subject to the remaining
Paragraphs of this Section, an Employee shall be credited with Vesting Service
in an amount equal to his aggregate Periods of Service whether or not such
Periods of Service are completed consecutively.
(c) Paragraph (b) above notwithstanding, if an Employee
terminates his Service (other than during a leave of absence) and subsequently
resumes his Service, if his Reemployment Commencement Date is within twelve
months of his Severance from Service Date, such Period of Severance shall be
treated as a Period of Service for purposes of Paragraph (b) above.
(d) Paragraph (b) above notwithstanding, if an Employee
terminates his Service during a leave of absence and subsequently resumes his
Service, if his Reemployment Commencement Date is within twelve months of the
beginning of such leave of absence, such Period of Severance shall be treated
as a Period of Service for purposes of Paragraph (b) above.
(e) In the case of an Employee who terminates employment at a
time when he does not have any Vested Interest but who then incurs a Period of
Severance which equals or exceeds the greater of (1) five years or (2) his
Period of Service prior to such Period of Severance, such Employee's Period of
Service completed before such Period of Severance shall be disregarded in
determining his years of Vesting Service.
7.4 SPECIAL VESTING SERVICE. For the period preceding the Effective
Date, any individual who was employed by Associated Natural Gas, Inc. shall be
credited with Vesting Service in an amount equal to all years of Service
credited to him for vesting purposes under the terms of the Associated Natural
Gas, Inc. Retirement Savings Plan for such period.
VII-3
<PAGE> 27
VIII.
DEATH BENEFITS
8.1 BEFORE ANNUITY STARTING DATE.
(a) Except as provided in this Section 8.1, no benefits shall
be paid pursuant to this Plan with respect to any Member who dies prior to his
Annuity Starting Date.
(b) If a Member dies on or after completing five years of
Vesting Service but prior to completing ten years of Benefit Accrual Service
(or ten years of Service which would have constituted Benefit Accrual Service
had the Member always been employed by a Final Average Pay Employer) and while
employed or while Totally and Permanently Disabled and is survived by an
Eligible Surviving Spouse, such Eligible Surviving Spouse shall be entitled to
receive a single life annuity consisting of monthly payments for the life of
the Eligible Surviving Spouse. The monthly payment amount of such single life
annuity shall be equal to the sum of (1) and (2) below:
(1) 50% of the monthly payment amount attributable
to the Final Average Pay Benefit the deceased Member would have
received if his Plan benefit expressed in the standard form described
in Section 9.2(a) had commenced as of the date of his death,
determined by applying the following early commencement multipliers in
lieu of the early commencement multipliers of Sections 5.2(b) and
7.2(d):
<TABLE>
<CAPTION>
AGE AT AGE AT
COMMENCEMENT MULTIPLIER COMMENCEMENT MULTIPLIER
<S> <C> <C> <C>
20 1 .8% 30 4.0
21 2 .0 31 4.4
22 2 .1 32 4.8
23 2 .3 33 5.2
24 2 .5 34 5.6
25 2 .7 35 6.1
26 2 .9 36 6.6
27 3 .2 37 7.2
28 3 .4 38 7.8
29 3 .7 39 8.5
40 9 .2% 50 21.9
41 10.0 51 24.0
42 10.9 52 26.4
43 11.9 53 28.9
44 12.9 54 31.8
</TABLE>
VIII-1
<PAGE> 28
<TABLE>
<S> <C> <C> <C>
45 14.1 55 82.5
46 15.4 56 86.0
47 16.8 57 89.5
48 18.3 58 93.0
49 20.0 59 96.5
60 or older 100.0; and
</TABLE>
(2) the monthly payment amount derived by converting
50% of the deceased Member's Cash Balance Accrual as of the date of
his death into a single life annuity on an Actuarially Equivalent
basis.
Payment of the survivor annuity provided by this Paragraph shall begin as of
the first day of the first month coinciding with or next following the Member's
date of death and shall end as of the first day of the month in which the death
of the Eligible Surviving Spouse occurs. Notwithstanding the foregoing, in the
absence of consent by such Member's Eligible Surviving Spouse, payment of such
survivor annuity may not begin prior to the date such Member would have reached
his Normal Retirement Date. In the event of such deferral, the amount of the
survivor annuity attributable to the deceased Member's Final Average Pay
Benefit shall be increased on an Actuarially Equivalent basis to reflect such
deferred commencement and the portion of such survivor annuity attributable to
the deceased Member's Cash Balance Benefit shall be increased by crediting Cash
Balance Accruals pursuant to Section 4.2 until commencement of payment of such
survivor annuity. No death benefit shall be paid pursuant to this Paragraph if
a deceased Member's Eligible Surviving Spouse elects to defer commencement of
payment of death benefits owed pursuant to this Paragraph and dies prior to
such commencement of payment.
(c) If a Member dies on or after completing ten years of
Benefit Accrual Service and while employed or while Totally and Permanently
Disabled and is survived by an Eligible Surviving Spouse, such Eligible
Surviving Spouse shall be entitled to receive a single life annuity consisting
of monthly payments for the life of the Eligible Surviving Spouse. The monthly
payment amount of such single life annuity shall be equal to the sum of (1) and
(2) below:
(1) 75% of the monthly payment amount attributable
to the Final Average Pay Benefit the deceased Member would have
received if his Plan benefit expressed in the form of a single life
annuity had commenced as of the date of his death without reduction
for commencement prior to his Normal Retirement Date; and
(2) the monthly payment amount derived by converting
75% of the deceased Member's Cash Balance Accrual as of the date of
his death into a single life annuity on an Actuarially Equivalent
basis.
Payment of the survivor annuity provided by this Paragraph shall begin with the
first day of the first month coinciding with or next following the Member's
date of death and shall end as of the first day of the month in which the death
of the Eligible Surviving Spouse occurs. Notwithstanding the foregoing, in the
absence of consent by such Member's Eligible Surviving Spouse, payment of such
VIII-2
<PAGE> 29
survivor annuity may not begin prior to the date such Member would have reached
his Normal Retirement Date. In the event of such deferral, the portion of such
survivor annuity attributable to the deceased Member's Cash Balance Benefit
shall be increased by crediting Cash Balance Accruals pursuant to Section 4.2
until commencement of payment of such survivor annuity. No death benefit shall
be paid pursuant to this Paragraph if a deceased Member's Eligible Surviving
Spouse elects to defer commencement of payment of death benefits owed pursuant
to this Paragraph and dies prior to such commencement of payment.
(d) A married Member with an Eligible Surviving Spouse shall
have a survivor annuity paid to his Eligible Surviving Spouse in the event such
Member dies with a Vested Interest before his Annuity Starting Date and if no
death benefit is payable pursuant to Paragraph (b) or Paragraph (c) above with
respect to such Member or if the death benefit provided pursuant to this
Paragraph (d) is greater than the death benefit provided by Paragraph (b) or
Paragraph (c), as applicable. The survivor annuity provided by this Paragraph
shall be a single life annuity consisting of monthly payments for the life of
the Eligible Surviving Spouse determined as follows:
(1) if such Member dies on or before reaching his
Early Retirement Date and Normal Retirement Date, the death benefit
such Eligible Surviving Spouse would have received had such deceased
Member terminated his employment on the earlier of his actual date of
termination of employment or his date of death, survived until the
earlier of his Early Retirement Date or Normal Retirement Date,
elected to begin receiving his Vested Interest in the standard form
described in Section 9.2(a) beginning immediately at the earlier of
his Early Retirement Date or Normal Retirement Date and died on the
day after the day on which he would have reached the earlier of his
Early Retirement Date or Normal Retirement Date; or
(2) if such Member dies after reaching his Early
Retirement Date or Normal Retirement Date while employed, the death
benefit such Eligible Surviving Spouse would have received had such
deceased Member elected to receive his Vested Interest in the standard
form described in Section 9.2(a) on the day prior to his date of
death; or
(3) if such Member's employment terminates before
such Member reaches his Early Retirement Date or Normal Retirement
Date and such Member dies after reaching his Early Retirement Date or
Normal Retirement Date, the death benefit such Eligible Surviving
Spouse would have received had such deceased Member elected to receive
his Vested Interest in the standard form described in Section 9.2(a)
beginning on the day prior to his date of death.
Payment of the survivor annuity provided by this Paragraph shall begin as of
the first day of the month coinciding with or next following the later of (1)
the Member's date of death or (2) the date the Member reached or would have
reached the earlier of his Early Retirement Date or Normal Retirement Date and
shall end as of the first day of the month in which the death of the Eligible
Surviving Spouse occurs; provided, however, that a Member's Eligible Surviving
Spouse may elect for payment of such survivor annuity to begin with the first
day of the first month coinciding with or next following the Member's date of
death, in which event the Cash Balance Accrual portion of such
VIII-3
<PAGE> 30
survivor annuity shall be based upon the deceased Member's Cash Balance Accrual
as of the date of his death and the Final Average Pay Benefit portion of such
survivor annuity shall be reduced by an Actuarially Equivalent basis to reflect
such earlier commencement. Notwithstanding the foregoing, in the absence of
consent by such Member's Eligible Surviving Spouse, payment of such survivor
annuity may not begin prior to the date such Member would have reached his
Normal Retirement Date. In the event of such deferral, the amount of the
survivor annuity shall be increased on an Actuarially Equivalent basis to
reflect such deferred commencement. No death benefit shall be paid pursuant to
this Paragraph if a deceased Member's Eligible Surviving Spouse elects to defer
commencement of payment of death benefits owed pursuant to this Paragraph and
dies prior to such commencement of payment.
(e) If a Member dies on or after completing five years of
Vesting Service and is not survived by an Eligible Surviving Spouse and is not
entitled to a death benefit pursuant to Paragraph (f) below, such Member's
beneficiary designated pursuant to Section 9.6 shall be entitled to receive a
single life annuity for the life of such designated beneficiary equal to the
monthly payment amount derived by converting 50% of the deceased Member's Cash
Balance Accrual as of the date of his death into a single life annuity on an
Actuarially Equivalent basis. Payment of the survivor annuity provided by this
Paragraph shall begin as of the first day of the first month coinciding with or
next following the Member's date of death and shall end as of the first day of
the month in which the death of the designated beneficiary occurs.
Notwithstanding the foregoing, the Member's designated beneficiary may defer
commencement of payment of survivor annuity until the first day of any month
preceding the date the deceased Member would have reached his Normal Retirement
Date. In the event of such deferral, the amount of the survivor annuity
payable to the Member's deceased beneficiary shall be increased by crediting
Cash Balance Accruals pursuant to Section 4.2 for the period between the date
of the deceased Member's death and the date of commencement of payment to the
designated beneficiary of such survivor annuity. No death benefit shall be
paid pursuant to this Paragraph if a deceased Member's designated beneficiary
elects to defer commencement of payment of death benefits owed pursuant to this
Paragraph and dies prior to such commencement of payment.
(f) If a Member dies on or after completing ten years of
Benefit Accrual Service and while employed or while Totally and Permanently
Disabled and is not survived by an Eligible Surviving Spouse, such deceased
Member's beneficiary designated pursuant to Section 9.6 shall be entitled to
receive a single life annuity consisting of monthly payments for the life of
the designated beneficiary equal to the monthly payment amount derived by
converting 75% of the deceased Member's Cash Balance Accrual as of the date of
his death into a single life annuity on an Actuarially Equivalent basis.
Payment of the survivor annuity provided by this Paragraph shall begin as of
the first day of the first month coinciding with or next following the Member's
date of death and shall end as of the first day of the month in which the death
of the designated beneficiary occurs. Notwithstanding the foregoing, the
Member's designated beneficiary may defer commencement of payment of survivor
annuity until the first day of any month preceding the date the deceased Member
would have reached his Normal Retirement Date. In the event of such deferral,
the amount of the survivor annuity payable to the Member's deceased beneficiary
shall be increased by crediting Cash Balance Accruals pursuant to Section 4.2
for the period between the date of the deceased Member's death and the date of
commencement of payment to the designated beneficiary of such survivor annuity.
No death benefit shall be paid pursuant to this Paragraph if a deceased
Member's designated
VIII-4
<PAGE> 31
beneficiary elects to defer commencement of payment of death benefits owed
pursuant to this Paragraph and dies prior to such commencement of payment.
8.2 AFTER ANNUITY STARTING DATE. With respect to any Member who dies
on or after his Annuity Starting Date, whether or not payment of his benefit
has actually begun, the only benefit payable pursuant to this Plan shall be
that, if any, provided for his beneficiary pursuant to the form of Article IX
benefit he was receiving or about to receive.
8.3 CASH-OUT OF DEATH BENEFIT.
(a) If a Member dies prior to his Annuity Starting Date and
his Eligible Surviving Spouse or beneficiary is entitled to a death benefit
pursuant to this Article VIII and the present value of such death benefit is
not in excess of $3,500, such present value shall be paid in a lump sum payment
in lieu of any other benefit herein provided and without regard to the spousal
consent requirement of Section 8.1. Any payment pursuant to this Paragraph (a)
shall be made as soon as administratively feasible following the Member's date
of death, but no later than the close of the second Plan Year following the
Plan Year in which such Member dies.
(b) If a Member dies prior to his Annuity Starting Date and
his Eligible Surviving Spouse or beneficiary is entitled to a death benefit
pursuant to Paragraph (b), (c), (e), or (f) of Section 8.1 and the present
value of such death benefit is more than $3,500, such Eligible Surviving Spouse
or beneficiary may elect to have such present value paid in a lump sum in lieu
of any other benefit herein provided. In the case of a death benefit payable
as a survivor annuity to a Member's Eligible Surviving Spouse, within a
reasonable time after written request by such Eligible Surviving Spouse for the
lump sum payment, the Committee shall provide to such Eligible Surviving Spouse
a written explanation of the survivor annuity form otherwise payable and the
financial effect of electing such lump sum payment.
8.4 SPECIAL TRANSITIONAL PROVISION. With respect to any married
former Member who terminated employment prior to August 23, 1984, if such
Member (1) had at least one Hour of Service in the first Plan Year beginning on
or after January 1, 1976, (2) had completed at least ten years of service under
the Plan, (3) had not reached the earlier of his Early Retirement Date or
Normal Retirement Date as of the date of his termination, and (4) has not
reached his Annuity Starting Date as of August 23, 1984, then such Member shall
have a survivor annuity paid to his Eligible Surviving Spouse in the event such
Member dies before his Annuity Starting Date. Such survivor annuity shall be
as described pursuant to Section 8.1(d) without regard to the death benefit
provided in Section 8.1(c).
VIII-5
<PAGE> 32
IX.
PAYMENT OF BENEFITS
9.1 TIME OF PAYMENT.
(a) Payment of benefits under the Plan to a Member (other
than death benefits payable pursuant to Article VIII) shall commence as of such
Member's Annuity Starting Date, but the first payment shall be made no earlier
than the expiration of the seven-day period that begins the day after the
information required to be furnished pursuant to Section 9.2(a) has been
furnished to the Participant.
(b) Plan provisions to the contrary notwithstanding,
commencement of a Member's benefit payments shall not occur:
(1) unless such Member consents (and, if such Member
has an Eligible Surviving Spouse, unless such Eligible Surviving
Spouse consents (with such consent being irrevocable) in accordance
with the requirements of section 417 of the Code and applicable
Treasury Regulations thereunder) within ninety days of his Annuity
Starting Date, prior to such Member's Normal Retirement Date;
(2) unless such Member elects, after the sixtieth
day following the close of the Plan Year during which such Member
attains, or would have attained, the age of sixty-five or, if later,
terminates employment; or
(3) at a time or in a manner inconsistent with the
provisions of section 401(a)(9) of the Code and applicable Treasury
Regulations thereunder and shall in no event occur:
(A) In the case of a Member who attains the
age of seventy and one-half prior to January 1, 1988 and is
not a "five-percent owner" (within the meaning of section
416(i) of the Code) at any time during the five Plan Year
period ending in the calendar year in which such Member
attains the age of seventy and one-half, after April 1st
following the later of (i) the calendar year in which such
Member attains the age of seventy and one-half, or (ii) the
calendar year in which such Member terminates his employment,
or if such Member becomes a "five-percent owner" following the
end of such five Plan Year period, April 1st of the calendar
year following the calendar year in which such Member becomes
a "five-percent owner;"
(B) In the case of a Member who does not
attain the age of seventy and one-half prior to January 1,
1988 or is a "five-percent owner" (within the meaning of
section 416(i) of the Code) at any time during the five Plan
Year period ending in the calendar year in which such Member
attains the age of seventy and one-half, after
IX-1
<PAGE> 33
April 1st of the calendar year following the calendar year in
which such Member attains the age of seventy and one-half; and
(C) In the case of a Member who becomes
entitled to a benefit pursuant to Article VIII, after the last
day of the five-year period following the death of such
Member; provided, however, if such Member's beneficiary is his
surviving spouse, the Annuity Starting Date may be deferred
until the date upon which such Member would have attained the
age of seventy and one-half, unless such surviving spouse dies
before payments commence, in which case the Annuity Starting
Date may not be deferred beyond the last day of the one-year
period following the death of such surviving spouse.
Further, the preceding provisions of this Section notwithstanding, a Member may
not elect to defer the receipt of his benefit hereunder to the extent that such
deferral creates a death benefit that is more than incidental within the
meaning of section 401(a)(9)(G) of the Code and applicable Treasury Regulations
thereunder.
(c) Consent of the Member's Eligible Surviving Spouse under
Paragraph (b)(1) shall not be required if the Member's benefit is to be paid in
the form of the standard benefit described in Section 9.2(a). The Committee
shall furnish certain information pertinent to a Member's consent under
Paragraph (b)(1) to each Member no less than thirty days (unless such
thirty-day period is waived by an affirmative election in accordance with
applicable Treasury Regulations) and no more than ninety days before his
Annuity Starting Date, and the furnished information shall include a general
description of the material features of, and an explanation of the relative
values of, the alternative forms of benefit available under the Plan and must
inform the Member of his right to defer his Annuity Starting Date and of his
transfer right pursuant to Section 9.5, if applicable.
(d) Subject to the provisions of Paragraph (b)(2) above, a
Member's Annuity Starting Date shall not occur while the Member is employed by
any Controlled Entity.
(e) Paragraphs (a), (b)(1) and (b)(2) notwithstanding, a
Member may elect to defer his Annuity Starting Date beyond the date specified
in such Paragraphs, subject to the provisions of Paragraph (b)(3), by
submitting to the Committee a written statement, signed by the Member, which
describes the benefit and the date on which the payment of such benefit shall
commence.
9.2 STANDARD AND ALTERNATIVE BENEFITS FOR MEMBERS.
(a) For purposes of Article V, VI or VII, the standard form
of benefit for any Member who is married on his Annuity Starting Date shall be
a joint and survivor annuity. Such joint and survivor annuity shall be an
annuity which is payable for the life of the Member with a survivor annuity for
the life of the Member's Eligible Surviving Spouse which shall be 50% of the
amount of the annuity payable during the joint lives of the Member and the
Eligible Surviving Spouse. The standard form of benefit for any Member who is
not married on his Annuity Starting Date shall be the benefit described in
Article V, VI or VII, whichever is applicable to such Member.
IX-2
<PAGE> 34
Any Member who would otherwise receive the standard form of benefit
may elect not to take his benefit in such form by executing the benefit
election form prescribed by the Committee during the election period described
below. Any election may be revoked and subsequent elections may be made or
revoked at any time during such election period.
The Committee shall furnish certain information pertinent to this
Section 9.2(a) election, to each Member no less than thirty days (unless such
thirty-day period is waived by an affirmative election in accordance with
applicable Treasury Regulations) and no more than ninety days before his
Annuity Starting Date. The furnished information shall be written in
nontechnical language and shall include an explanation of (1) the terms and
conditions of the standard benefit, (2) such Member's right to make an election
not to take his benefit in the standard form and the effect of such an
election, (3) the rights of such Member's Eligible Surviving Spouse, if any,
(4) the right to revoke any such election and the effect of such revocation,
(5) a general description of the eligibility conditions and other material
features of the alternative forms of benefit available pursuant to Paragraph
(c) below, and (6) sufficient additional information to explain the relative
values of such alternative forms of benefit. The period of time during which a
Member may make or revoke the election described in this Section 9.2(a) shall
be the ninety-day period ending on such Member's Annuity Starting Date provided
that such election may also be revoked at any time prior to the expiration of
the seven-day period that begins the day after the information required to be
furnished pursuant to this Paragraph has been furnished to the Member.
(b) Notwithstanding anything to the contrary herein, an
election by a married Member not to receive the standard benefit as provided in
Section 9.2(a) shall not be effective unless (1) such Member's Eligible
Surviving Spouse has consented thereto in writing (including consent to the
specific designated beneficiary, if any, to receive payments following the
Member's death and to the specific benefit form elected, if any, which
designation and election may not subsequently be changed by the Member without
spousal consent) and such consent acknowledges the effect of such election and
is witnessed by a Plan representative (other than the Member) or a notary
public, or (2) such consent may not be obtained because such Eligible Surviving
Spouse cannot be located or because of other circumstances described by
applicable Treasury Regulations. Any such consent by such Eligible Surviving
Spouse shall be irrevocable.
(c) For purposes of Article V, VI or VII, the benefit for any
Member who has elected not to receive the standard benefit set forth in Section
9.2(a) shall be paid in one of the following alternative forms to be selected
by such Member or, in the absence of such selection, by the Committee prior to
his Annuity Starting Date; provided, however, that the period and method of
payment of any such form shall be in compliance with the provisions of section
401(a)(9) of the Code and applicable Treasury Regulations thereunder:
(1) A single life annuity for the life of such
Member.
(2) An annuity for the life of the Member and
continuing at a 75% or 100% rate for the life of the Member's Eligible
Surviving Spouse; provided, however, that in no event shall the period
of payment of any such annuity exceed the greater of (A) the life
IX-3
<PAGE> 35
expectancy of the Member or (B) the joint life expectancy of the
Member and his designated beneficiary.
(3) A lump sum.
(4) An annuity for a term certain of five years or
ten years and continuous for the life of the Member if he survives
such term certain; provided, however, that the present value of the
payments actuarially expected to be made to the Member shall be more
than 50% of the present value of the total payments actuarially
expected to be made to the Member and his designated beneficiary; and
provided, further that the period of payment of such annuity shall not
exceed the greater of (A) the life expectancy of the Member or (B) the
joint life expectancy of the Member and his designated beneficiary.
9.3 LEVEL INCOME OPTION. If payment of a Member's Article IX benefit
commences prior to the earliest age as of which such Member will become
eligible for an Old-Age Insurance Benefit under the Social Security Act, any
portion of such Member's Article IX benefit is attributable to the period of
employment with a Final Average Pay Employer and such Member elects payment of
such Article IX benefit in the form of a single life annuity or an annuity for
the life of the Member and continuing at a 50% rate for the life of his
Eligible Surviving Spouse, at the request of the Member the amount of the
payments of the Article IX benefit may be adjusted so that an increased amount
will be paid prior to such age and a reduced amount thereafter; the purpose of
this adjustment is to enable the Member to receive, from this Plan and under
the Social Security Act, an aggregate income in approximately a level amount
for life.
9.4 CASH-OUTS. If a Member terminates his employment and the present
value of his Vested Interest is not in excess of $3,500, such present value
shall be paid to such terminated Member in lieu of any other benefit herein
provided and without regard to the consent requirements of Section 9.1(b)(1)
and the election and spousal consent requirements of Section 9.2. If a Member
terminates his employment and the present value of his Vested Interest is
greater than $3,500 but is not more than $10,000, such present value shall be
paid to such terminated Member in lieu of any other benefit herein provided if
the Member and the Member's Eligible Surviving Spouse, if any, consent to
payment of same in accordance with Sections 9.1(b)(1) and 9.2. Any such
payment shall be made as soon as administratively feasible following such
Member's termination of employment but not later than the close of the second
Plan Year following the Plan Year in which such Member terminated his
employment. The provisions of this Section shall not be applicable to a Member
following his Annuity Starting Date.
9.5 DIRECT ROLLOVER ELECTION.
(a) Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a Distributee's election under this
Section, a Distributee may elect, at the time and in the manner prescribed by
the Committee, to have all or any portion of an Eligible Rollover Distribution
paid directly to an Eligible Retirement Plan specified by the Distributee in a
Direct Rollover. The preceding sentence notwithstanding, if less than 100% of
the Member's Eligible Rollover Distribution is to be a Direct Rollover, the
amount of the Direct Rollover must be $500 or more. Prior to any
IX-4
<PAGE> 36
Direct Rollover pursuant to this Section, the Committee may require the
Distributee to furnish the Committee with a statement from the plan, account,
or annuity to which the benefit is to be transferred verifying that such plan,
account, or annuity is, or is intended to be, an Eligible Retirement Plan.
(b) No less than thirty days and no more than ninety days
before his Annuity Starting Date, the Committee shall inform the Distributee of
his Direct Rollover right pursuant to this Section. A distribution or Direct
Rollover of the Distributee's benefit may commence less than thirty days after
such notice is given, provided that (1) the Committee clearly informs the
Distributee that the Distributee has a right to a period of at least thirty
days after receiving the notice to consider the decision of whether or not to
elect a Direct Rollover and (2) the Distributee, after receiving the notice,
affirmatively elects either a distribution or a Direct Rollover or a
combination thereof.
9.6 SPECIAL DISTRIBUTION LIMITATIONS.
(a) For purposes of this Section, the following terms shall
have the following meanings:
(1) "Benefit" of a Member includes (A) loans from
the Plan in excess of the amounts set forth in section 72(p)(2)(A) of
the Code, (B) any periodic income from the Plan, (C) any Plan
withdrawal values payable to a living Member and (D) any death
benefits from the Plan not provided for by insurance on the Member's
life.
(2) "Current Plan Liabilities" means with respect to
a Plan Year the amount described in section 412(1)(7) for such Plan
Year.
(3) "Restricted Member" includes with respect to a
Plan Year any Member who during such Plan Year is (A) either a "highly
compensated employee," as such term is defined in section 414(q) of
the Code, or a "highly compensated former employee," as such term is
defined in section 414(q)(9) of the Code, and (B) is one of the
twenty-five most highly compensated (based on compensation, within the
meaning of section 414(s) of the Code, received from the Company or a
Controlled Entity) of such individuals.
(b) The annual payments from the Plan to a Restricted Member
for a Plan Year may not exceed an amount equal to the annual payments that
would be made on behalf of such Restricted Member under a single life annuity
that is the Actuarial Equivalent of the sum of (1) the Restricted Member's
Final Average Pay Benefit and Cash Balance Benefit and (2) the Restricted
Members' Benefits under the Plan other than his Final Average Pay Benefit and
Cash Balance Benefit. The provisions of this Paragraph shall not apply if
after payment to a Restricted Member of his Benefits, the value of the assets
of the Trust equals or exceeds 110% of the value of Current Plan Liabilities or
the value of his Benefits is less than 1% of the value of Current Plan
Liabilities.
IX-5
<PAGE> 37
9.7 BENEFICIARIES.
(a) Subject to the restrictions of Section 9.2(b), each
Member shall have the right to designate the beneficiary or beneficiaries to
receive any continuing payments in the event such Member's Article IX benefit
is payable in a form whereby payments could continue beyond such Member's
death. Each such designation shall be made on the form prescribed by the
Committee and shall be filed with the Committee. Any such designation may be
changed at any time prior to the Member's Annuity Starting Date by executing a
new designation and filing same with the Committee. If a Member's Article IX
benefit is payable in a form whereby payments could continue beyond such
Member's death, a Member may change such designation after his Annuity Starting
Date if, and only if, the amount of his monthly Plan benefit payments were not
determined in part by reference to the life of his designated beneficiary. If
no beneficiary designation is on file with the Committee at the time of the
death of the Member or such designation is not effective for any reason as
determined by the Committee, then the designated beneficiary or beneficiaries
to receive such continuing payments shall be as follows:
(1) If a Member leaves a surviving spouse, any death
benefit or continuing payments shall be paid to such surviving spouse;
(2) If a Member leaves no surviving spouse, any
death benefit or continuing payments shall be paid to such Member's
executor or administrator.
(b) Each Member shall have the right to designate the
beneficiary or beneficiaries to receive any benefit payable with respect to
such Member pursuant to Sections 8.1(e) and (f). Each such designation shall
be made on the form prescribed by the Committee and shall be filed with the
Committee. Any such designation may be changed at any time by executing a new
designation and filing same with the Committee. If no such designation is on
file with the Committee at the time of the death of the Member or such
designation is not effective for any reason as determined by the Committee,
then the designated beneficiary or beneficiaries to receive such continuing
payments shall be paid to such Member's executor or administrator.
9.8 REEMPLOYMENT OF MEMBERS.
(a) Upon reemployment on a full-time and permanent basis of a
Member who had previously terminated employment and who was to receive or had
begun to receive payment of his Article IX benefit, the payments of his Article
IX benefit shall be suspended during the period of such reemployment. Upon
reemployment on other than a full-time and permanent basis of a Member who had
previously terminated employment and who was to receive or had begun to receive
payment of his Article IX benefit, the payments of his Article IX benefit shall
continue as if such reemployment had not occurred. Upon termination of any
Member's reemployment, whether or not the payments of his Article IX benefit
were suspended during such reemployment, such Member's Article IX benefit shall
be computed pursuant to the applicable provisions of the Plan as follows:
(1) The Member's recomputed Article IX benefit shall
take into account all of the Member's years of Benefit Accrual Service
and all of the Member's Cash Balance
IX-6
<PAGE> 38
Accruals including years of Benefit Accrual Service and Cash Balance
Accruals earned during his period of reemployment and years of Benefit
Accrual Service and Cash Balance Accruals earned prior to his earlier
termination of employment.
(2) Such recomputed benefit shall then be reduced by
the Actuarial Equivalent of the accumulated benefit payments received
by the Member prior to his current termination of employment. Solely
for purposes of determining Actuarial Equivalence under this Paragraph
(a)(2), an interest rate of 5.0% shall be used in lieu of the rate
otherwise defined in Section 1.1(3).
(3) In no event shall the Member's recomputed
Article IX benefit be less than the Actuarial Equivalent of the
benefit the Member was to receive or was receiving as of his date of
employment.
(b) In the case of any such Member whose reemployment on a
full-time and permanent basis occurs on or after his Normal Retirement Date and
whose Article IX benefit payments are to be suspended pursuant to Paragraph (a)
above, the Committee shall furnish such Member with the notification described
in section 2530.203-3 of the Labor Department regulations relating to the Act.
Upon such Member's termination of reemployment, his Article IX benefit shall be
increased to the extent required, if at all, under such regulations to avoid
the effecting of a prohibited forfeitures of benefits by virtue of such
suspension during such Member's post-Normal Retirement Date reemployment.
9.9 ACTUARIAL EQUIVALENCY. With respect to any benefit payable
pursuant to the Plan with respect to a Member, whichever form of payment is
selected, the value of such benefit shall be the Actuarial Equivalent of the
Member's Plan benefit determined pursuant to Article V, VI, VII or VIII,
whichever is applicable.
9.10 BENEFIT PAYMENT DEDUCTION ARRANGEMENTS. Effective as of his
Annuity Starting Date or as of the first day of any subsequent month, a Member
or his beneficiary may direct the Plan to pay all or a designated portion of
his monthly Plan benefit payments to the administrator of the Panhandle Eastern
Corporation Medical and Dental Plans in payment of the contributions required
to be made by such Member or his beneficiary as a condition to coverage
thereunder. Any benefit payment deduction arrangement established pursuant to
this Section 9.10 shall be subject to the following conditions:
(i) the arrangement may be revoked at any time by the Member or his
beneficiary upon thirty days' written notice to the Committee;
(ii) the arrangement may not accelerate or otherwise affect the time
or form of payment of a Member's monthly Plan benefit payments; and
(iii) no amounts will be paid from the Plan to the administrator of
the Panhandle Eastern Corporation Medical and Dental Plans unless such
administrator has filed with the Committee a blanket acknowledgement
stating that the Panhandle Eastern Corporation Medical and
IX-7
<PAGE> 39
Dental Plans have no enforceable right in or to any Plan benefit
payment or portion thereof as a result of an arrangement established
pursuant to this Section 9.10 (except to the extent of payments
actually received pursuant to such arrangement).
9.11 COMMERCIAL ANNUITIES. In any case where a benefit is to be paid
in the form of an annuity, the Trustee may, upon proper direction by the
Committee, purchase a commercial annuity contract and distribute such contract
to the Member or beneficiary. Thereupon, the Plan shall have no further
liability with respect to the amount used to purchase the annuity contract and
such Member or beneficiary shall look solely to the company issuing such
contract for such annuity payments. All certificates for commercial annuity
benefits shall be nontransferable, except for surrender to the issuing company,
and no benefit thereunder may be sold, assigned, discounted or pledged (other
than as collateral for a loan from the company issuing same). Notwithstanding
the foregoing, the terms of any such commercial annuity contract shall conform
with the time of payment, form of payment and consent provisions of Articles
VIII and IX.
9.12 UNCLAIMED BENEFITS. In the case of a benefit payable on behalf
of a Member, if the Committee is unable to locate the Member or beneficiary to
whom such benefit is payable, upon the Committee's determination thereof, such
benefit shall be forfeited. Notwithstanding the foregoing, if subsequent to
any such forfeiture the Member or beneficiary to whom such benefit is payable
makes a valid claim for such benefit, such forfeited benefit shall be restored.
9.13 CLAIMS REVIEW. In any case in which a claim for Plan benefits
of a Member or beneficiary is denied or modified, the Committee shall within a
reasonable period of time after receipt of such claim, furnish to the claimant
a notice of its decision which shall:
(a) state the specific reason or reasons for the denial or
modification,
(b) provide specific reference to pertinent Plan provisions
on which the denial or modification is based,
(c) provide a description of any additional material or
information necessary for the Member, his beneficiary or
representative to perfect the claim and an explanation of why such
material or information is necessary, and
(d) explain the Plan's claim review procedure as contained
herein.
If such notice is not furnished to the claimant within a reasonable period of
time following receipt of the claim by the Committee, the claim shall be deemed
denied.
In the event a claim for benefits is denied or modified, if the
Member, his beneficiary or representative desires to have such denial or
modification reviewed, he must, within sixty days following receipt of the
notice of such denial or modification, submit a written request for review by
the Committee of its initial decision. Within sixty days following such
request for review the Committee shall, after providing a full and fair
hearing, render its final decision in writing to the Member, his beneficiary or
representative stating specific reasons for such decision. If special
IX-8
<PAGE> 40
circumstances require an extension of such sixty-day period, the Committee's
decision shall be rendered as soon as possible, but not later than 120 days
after receipt of the request for review. If an extension of time for review is
required, written notice of the extension shall be furnished to the Member,
beneficiary or representative prior to the commencement of the extension
period. The Committee's decision on review of an appealed claim shall be
communicated to the appealing claimant in writing, shall include specific
reasons for the decision, shall be written in a manner calculated to be
understood by the appealing claimant and shall include specific references to
the pertinent Plan provisions on which such decision was based. If the
Committee's decision on review of an appealed claim is not furnished to the
claimant within the sixty-day period following the appealing claimant's request
for review or the 120 days following such request if the sixty-day period is
extended, the appealed claim shall be deemed denied on review.
IX-9
<PAGE> 41
X.
SPECIAL BENEFITS
10.1 CHANGE OF CONTROL BENEFITS.
(a) A Member who is credited with five years of Vesting
Service but has not attained the age of fifty- five as of the date of his
termination of employment and
(1) Whose employment is involuntarily terminated
within three years after the effective date of a Change in Control (as
defined in Section 10.2 below) due to business changes, consolidation
of operations or elimination of positions; or
(2) Whose employment was terminated within three
years after the effective date of a Change in Control (as defined in
Section 10.2 below) and within sixty days after a reassignment to a
lower salary grade, a reduction in eligibility to participate in
employee benefit and compensation plans (including, but not limited
to, incentive bonus or stock option plans), a reduction in job
responsibility and/or authority, a request to relocate by more than
twenty-five miles or a relocation of regular assigned work place by
more than twenty-five additional miles from residence
shall be entitled to commencement of an Article IX benefit computed in the
manner described in Section 5.2(a) as of the first day of the month coinciding
with or next following his fifty-fifth birthday, or as of the first day of any
subsequent month which precedes his Normal Retirement Date, but reduced to the
percentage described in the following table instead of the table described in
Section 5.2(b) based upon the Member's years of Vesting Service and his age at
the date of such commencement of payment:
<TABLE>
<CAPTION>
Years of Service
Age (*) at ----------------------------------------
Date Benefit 25 Years 20 Years to 15 Years to Under
Commences & Over 25 Years 20 Years 15 Years
--------- -------- ------------ ----------- --------
<S> <C> <C> <C> <C>
65 or Older 100% 100% 100% 100%
64 100 99 98 97
63 100 98 96 94
62 100 97 94 91
61 97 94 91 88
60 94 91 88 85
59 91 88 85 82
58 88 85 82 79
57 85 82 79 76
56 82 79 76 73
55 79 76 73 70
</TABLE>
X-1
<PAGE> 42
(*) If the age of a Member at the date on which the benefit commences is a
fractional number of years, the percentage to be used will be obtained
by a pro rata adjustment as determined by the Committee.
(b) A For purposes of Paragraph (a) above, a "Change in
Control" shall mean a Change of Control of Panhandle Eastern Corporation. A
Change in Control shall be deemed to have occurred if: (i) a third person,
including a "group" as determined in accordance with Section 13(d)(3) of the
Securities Exchange Act of 1934, becomes the beneficial owner (as so
determined) of shares of Panhandle Eastern Corporation having 30% or more of
the total number of votes that may be cast for the election of directors of
Panhandle Eastern Corporation; or (ii) as a result of, or in connection with,
any cash tender or exchange offer, merger or other business combination, sale
of assets or contested election, or any combination of the foregoing
transactions (a "Transaction"), the persons who are directors of Panhandle
Eastern Corporation before the Transaction shall cease to constitute a majority
of the Board of Directors of Panhandle Eastern Corporation or any successor to
Panhandle Eastern Corporation; or (iii) all or substantially all of the assets
and business of Panhandle Eastern Corporation are sold, transferred or assigned
to, or otherwise acquired by, any other entity or entities.
10.2 SOCIAL SECURITY SUPPLEMENT.
(a) An Eligible Member who, on January 1, 1995, is both alive
and has not attained age 65, shall be entitled to a Social Security Supplement.
The Social Security Supplement shall be $70 for each month during the Benefit
Period, except that in the event of the Eligible Member's death or attainment
of age 65 during the Benefit Period, the Eligible Employee shall not be
entitled to the Social Security Supplement for any month following the month
during which such event occurred. Notwithstanding the foregoing, in the event
the Eligible Member's Normal or Early Retirement Benefit is paid as (i) a lump
sum or by distribution of a fully paid-up annuity contract, the Social Security
Supplement shall only be paid to the Eligible Member (or, if the Eligible
Member is deceased, to the Eligible Member's surviving spouse, otherwise to the
deceased Eligible Member's estate) for a particular calendar year during the
Benefit Period if the Eligible Member is alive on July 1 of that calendar year,
shall be paid in a single annualized payment (but curtailed to reflect any
anticipated attainment of age 65 during that calendar year) and shall be paid
as promptly following such date as administratively feasible and (ii) in an
annuity form, the Social Security Supplement shall only be paid to the Eligible
Member (or, if the Eligible Member is deceased, to the Eligible Member's
surviving spouse, otherwise to the deceased Eligible Member's estate) for a
particular calendar month during the Benefit Period if the Eligible Member is
alive on the first day of that calendar month and shall be paid as promptly
following such date as administratively feasible.
(b) In the case of an Eligible Member who dies during the
Benefit Period and who is survived by a spouse who has not attained age 65 and
to whom the Eligible Employee had been continuously married from the date as of
which the Eligible Member's Normal or Early Retirement Benefit had commenced to
be paid, such spouse shall be entitled to a Social Security Supplement. The
Social Security Supplement shall be $35 for each month during the remaining
portion of the Benefit Period that begins with the month immediately following
the month during which the Eligible Member died, except that in the event of
such spouse's death or attainment of age 65 during such remaining portion, such
spouse shall not be entitled to the Social Security Supplement for any month
following the month during which such event occurred. Notwithstanding the
foregoing, in the event
X-2
<PAGE> 43
the Eligible Member's Normal or Early Retirement Benefit is paid as (i) a lump
sum or by distribution of a fully paid-up annuity contract, the Social Security
Supplement shall only be paid to such spouse (or, if such spouse is deceased,
to such spouse's estate) for a particular calendar year during the Benefit
Period if such spouse is alive on July 1 of that calendar year, shall be paid
in a single annualized payment (but curtailed to reflect any anticipated
attainment of age 65 during that calendar year) and shall be paid as promptly
following such date as administratively feasible, and shall not be payable for
any portion of any calendar year for which another Social Security Supplement
or a Supplemental Benefit has been paid with respect to the Eligible Member,
and (ii) in an annuity form, the Social Security Supplement shall only be paid
to such spouse (or, if such spouse is deceased, to such spouse's estate) for a
particular calendar month during the Benefit Period if such spouse is alive on
the first day of that calendar month and shall be paid as promptly following
such date as administratively feasible.
(c) In the case of an Eligible Member who died before January
1, 1995, and who is survived by a spouse who has not attained age 65 and to
whom the Member had been continuously married from the date as of which the
Member's Normal or Early Retirement Benefit had commenced to be paid, such
spouse shall be entitled to a Social Security Supplement. The Social Security
Supplement shall be $35 for each month during the Benefit Period, except that
in the event of such spouse's death or attainment of age 65 during the Benefit
Period, such spouse shall not be entitled to a Social Security Supplement for
any month following the month during which such event occurred.
Notwithstanding the foregoing, in the event the Eligible Member's Normal or
Early Retirement Benefit has been paid as (i) a lump sum or by distribution of
a fully paid-up annuity contract, the Social Security Supplement shall only be
paid to such spouse (or, if such spouse is deceased, to such spouse's estate)
for a particular calendar year during the Benefit Period if such spouse is
alive on July 1 of that calendar year, shall be paid in a single annualized
payment (but curtailed to reflect any anticipated attainment of age 65 during
that calendar year) and shall be paid as promptly following such date as
administratively feasible and (ii) in an annuity form, the Social Security
Supplement shall only be paid to such spouse (or, if such spouse is deceased,
to such spouse's estate) for a particular calendar month during the Benefit
Period if such spouse is alive on the first day of that calendar month and
shall be paid as promptly following such date as administratively feasible.
(d) As used in this Section 10.2: the term "Eligible Member"
means a Member (but not a Member who (i) retired from Petrolane Inc. or any of
its subsidiaries or (ii) who prior to the attainment of age 55, retired from
Halcon SD Group Inc., subsequently renamed Process Research and Development
Company, or any of its subsidiaries) who became entitled to a Normal Retirement
Benefit or an Early Retirement Benefit that commenced to be paid prior to
February 1, 1991; the term "Benefit Period" means the twelve consecutive-month
period beginning January 1, 1995 and ending December 31, 1995; the term "Social
Security Supplement" means a benefit provided by this Section 10.2; and the
term "Supplemental Benefit" means a benefit provided by Section 10.3 of the
Plan.
10.3 SUPPLEMENTAL BENEFIT.
(a) An Eligible Member who, on January 1, 1995, is both alive
and has attained at least age 65, shall be entitled to a Supplemental Benefit.
The Supplemental Benefit shall be $35 for each month during the Benefit Period,
except that in the event the Eligible Member dies during the
X-3
<PAGE> 44
Benefit Period, the Eligible Member shall not be entitled to a Supplemental
Benefit for any month following the month during which such event occurred.
Notwithstanding the foregoing, in the event the Eligible Member's Normal or
Early Retirement Benefit is paid as (i) a lump sum or by distribution of a
fully paid-up annuity contract, the Supplemental Benefit shall only be paid to
the Eligible Member (or, if the Eligible Member is deceased, to the Eligible
Member's surviving spouse, otherwise to the Eligible Member's estate) for a
particular calendar year during the Benefit Period only if the Eligible Member
is alive on July 1 of that calendar year, shall be paid in a single annualized
payment and shall be paid as promptly following such date as administratively
feasible and (ii) in an annuity form, a Supplemental Benefit shall only be paid
to the Eligible Member (or, if the Eligible Member is deceased, to the Eligible
Member's surviving spouse, otherwise to the Eligible Member's estate) for a
particular calendar month during the Benefit Period if the Eligible Member is
alive on the first day of that calendar month and shall be paid as promptly
following such date as administratively feasible.
(b) In the case of an Eligible Member who attains age 65
during 1995, the Eligible Member shall be entitled to a Supplemental Benefit.
The Supplemental Benefit shall be $35 for each month during the remaining
portion of the Benefit Period that begins immediately after the month during
which the Eligible Member attained age 65, except that in the event the
Eligible Member dies during the Benefit Period, the Eligible Member shall not
be entitled to a Supplemental Benefit for any month following the month during
which such event occurred. Notwithstanding the foregoing, in the event the
Eligible Member's Normal or Early Retirement Benefit is paid as (i) a lump sum
or by distribution of a fully paid-up annuity contract, a Supplemental Benefit
shall only be paid to the Eligible Member (or, if the Eligible Member is
deceased, to the Eligible Member's surviving spouse, otherwise to the Eligible
Member's estate) for a particular calendar year during the Benefit Period if
the Eligible Member is alive on July 1 of that calendar year, shall be paid in
a single annualized payment (but curtailed to reflect any anticipated
attainment of age 65 during that calendar year) and shall be paid as promptly
following such date as administratively feasible, and shall not be payable for
any portion of any calendar year for which a Social Security Supplement has
been paid with respect to the Eligible Member and (ii) in an annuity form, a
Supplemental Benefit shall only be paid to the Eligible Member (or, if the
Eligible Member is deceased, to the Eligible Member's surviving spouse,
otherwise to the Eligible Member's estate) for a particular calendar month
during the Benefit Period if the Eligible Member is alive on the first day of
that calendar month and shall be paid as promptly following such date as
administratively feasible.
(c) In the case of an Eligible Member who has died before
January 1, 1995, and who is survived by a spouse who before or during 1995
attains age 65 and to whom the Member had been continuously married from the
date as of which the Member's Normal or Early Retirement Benefit had commenced
to be paid, such spouse shall be entitled to a Supplemental Benefit. The
Supplemental Benefit shall be $17.50 for each month during the Benefit Period
or, if such spouse attains age 65 during the Benefit Period, for each month
during the portion of the Benefit Period that begins immediately after the
month during which such spouse attained age 65, except that in the event such
spouse dies during the Benefit Period, the Supplemental Benefit shall not be
paid for any month following the month during which such event occurred.
Notwithstanding the foregoing, in the event the respective Member's Normal or
Early Retirement Benefit has been paid as (i) a lump sum or by distribution of
a fully paid-up annuity contract, a Supplemental Benefit shall only be paid to
such spouse (or, if such spouse is deceased, to such spouse's estate) for a
particular calendar year during the Benefit Period if such spouse is alive on
July 1 of that calendar year, shall be paid in a single
X-4
<PAGE> 45
annualized payment (but curtailed to reflect any anticipated attainment of age
65 during that calendar year) and shall be paid as promptly following such date
as administratively feasible, and shall not be payable for any portion of any
calendar year for which a Social Security Supplement or another Supplemental
Benefit was paid with respect to the Eligible Member and (ii) in an annuity
form, a special benefit payment shall only be paid to such spouse (or, if such
spouse is deceased, to such spouse's estate) for a particular calendar month
during the Benefit Period if such spouse is alive on the first day of that
calendar month and shall be paid as promptly following such date as
administratively feasible.
(d) In the case of an Eligible Member who has died during
1995 and who is survived by a spouse who before or during 1995 attains age 65
and to whom the Member had been continuously married from the date as of which
the Member's Normal or Early Retirement Benefit had commenced to be paid, such
spouse shall be entitled to a Supplemental Benefit. The Supplemental Benefit
shall be $17.50 for each month during which the portion of the Benefit Period
that begins immediately after the month during which the later of the Eligible
Member's death or such spouse's attainment of age 65 occurs, except that in the
event such spouse dies during the Benefit Period, such spouse shall not be
entitled to a Supplemental Benefit for any month following the month during
which such event occurred. Notwithstanding the foregoing, in the event the
Eligible Member's Normal or Early Retirement Benefit has been paid as (i) a
lump sum or by distribution of a fully paid-up annuity contract, a Supplemental
Benefit shall only be paid to such spouse (or, if such spouse is deceased, to
such spouse's estate) for a particular calendar year during the Benefit Period
if such spouse is alive on July 1 of that calendar year, shall be paid in a
single annualized payment (but curtailed to reflect any anticipated attainment
of age 65 during that calendar year) and shall be paid as promptly following
such date as administratively feasible, and shall not be payable for any
portion of any calendar year for which a Social Security Supplement or another
Supplemental Benefit was paid with respect to the Eligible Member and (ii) in
an annuity form, a Supplemental Benefit payment shall only be paid to such
spouse (or, if such spouse is deceased, to the such spouse's estate) for a
particular calendar month during the Benefit Period if such spouse is alive on
the first day of that calendar month and shall be paid as promptly following
such date as administratively feasible.
(e) As used in Section 10.3: the term "Eligible Member"
shall mean a Member (but not a Member who (i) retired from Petrolane Inc. or
any of its subsidiaries or (ii) who prior to attainment of age 55, retired from
Halcon SD Group Inc., subsequently renamed Process Research and Development
Company, or any of its subsidiaries) who became entitled to a Normal Retirement
Benefit or an Early Retirement Benefit that commenced to be paid prior to
February 1, 1991; the term "Benefit Period" means the consecutive-month period
beginning January 1, 1995; the term "Social Security Supplement" means a
benefit provided by Section 10.2 of the Plan; and the term "Supplemental
Benefit" means a benefit provided by this Section 10.3.
10.4 1995 VOLUNTARY EARLY RETIREMENT PROGRAM.
(a) Plan provisions to the contrary notwithstanding, any Member
(i) who, during 1995, attains age 50 or any
greater age,
X-5
<PAGE> 46
(ii) who currently is actively participating in
the Plan and is employed by (A) National
Helium Corporation at a Liberal, Kansas work
location, (B) Centana Energy Corporation (but
excluding Gulf Coast Field Service Units at
Winnie, Spindletop, and Port Arthur, Texas),
or (iii) Associated Natural Gas, Inc. (but
only if transferred from 1 Source Energy,
Inc. on January 1, 1995),
(iii) who irrevocably elects to terminate
employment March 31, 1995 (or such later
date, but not beyond July 31, 1995, as the
employing Company may request) and whose
employment terminates pursuant to such
election,
shall be entitled to have Plan benefits determined in accordance with Sections
10.4(b) and 10.4(c).
(b) A Member who meets the requirements of Section 10.4(a)
shall be entitled to receive, as of such Member's Normal Retirement Date, a
Final Average Pay Benefit which is the Actuarial Equivalent of a Pension
commencing on the first day of the month coinciding with or next following the
Member's Normal Retirement Date, each monthly payment of such Pension being
computed in the manner provided in Section 5.1(a)(1) considering his Average
Annual Plan Compensation and Average Annual Covered Compensation, to the date
of his termination of employment, and his Benefit Accrual Service to the date
of his termination of employment, plus five years of additional Benefit Accrual
Service (or such shorter period of additional Benefit Accrual Service that does
not cause total Benefit Accrual Service to exceed thirty-five years). If such
Member requests the Committee to authorize the commencement of his Plan benefit
as of the first day of the month coinciding with or next following the date of
his Retirement, or as of the first day of any subsequent month which precedes
his Normal Retirement Date, such Member shall be entitled to receive his Plan
benefit as of the first day of the month so requested, and the value of the
Final Average Pay Benefit portion thereof shall be the Actuarial Equivalent of
a Pension commencing on the first day of the month so requested, each monthly
payment of the Final Average Pay Benefit portion thereof being computed in the
manner provided in Paragraph (a) above, but reduced to reflect such Member's
younger age and the earlier commencement of payments by multiplying each such
monthly payment in accordance with the following schedule:
<TABLE>
<CAPTION>
*Age at Commencement Multiplier
------------------- ----------
<S> <C>
55 or older 100%
54 96.5%
53 93.0%
52 89.5%
51 86.0%
49-50 82.5%
</TABLE>
(*) If the age of a Member at the date on which
the benefit commences is a fractional number
of years, the percentage to be used will be
obtained by a pro rate adjustment as
determined by the Company.
X-6
<PAGE> 47
(c) A Member who meets the requirements of Section 10.4(a)
and whose Annuity Starting Date precedes September 1, 1995 shall be entitled to
have the lump sum payment of the Final Average Pay Benefit portion of his Plan
benefit determined on the basis of an Applicable Interest Rate no less
favorable to the Member than the interest rate or rates which would be used by
the Pension Benefit Guaranty Corporation for purposes of determining the
present value of such Member's benefits under the Plan if the Plan had
terminated with insufficient assets to provide benefits guaranteed by the
Pension Benefit Guaranty Corporation as of July 1, 1994, or January 1, 1995,
whichever produces the greater lump sum payment.
X-7
<PAGE> 48
XI.
GRANDFATHERED AND PROTECTED BENEFITS
11.1 PANHANDLE PLAN PRIOR TO EFFECTIVE DATE.
(a) Any Member who was a participant in the Panhandle Plan on
December 31, 1990 other than an individual who became a participant in the
Panhandle Plan on December 31, 1990 by reason of the merger as of such date of
the Texas Eastern Plan or the Algonquin Plan into the Panhandle Plan and who
terminates employment after he has both attained the age of fifty-five and
completed five or more years of Vesting Service and who requests early
commencement of his Article IX benefit pursuant to Section 5.2(b) shall receive
the greater of the monthly benefit computed in accordance with Section 5.2(b)
or the Actuarial Equivalent of a single life annuity for the life of the Member
based upon his accrued benefit under the Panhandle Plan as of December 31, 1990
and reduced in accordance with the following table:
<TABLE>
<CAPTION>
Years of Service
---------------------------------------
Age (*) at 25 Years 20 Years to 15 Years to Under
Retirement & Over 25 Years 20 Years 15 Years
---------- -------- ------------ ----------- --------
<S> <C> <C> <C> <C>
65 or Older 100% 100% 100% 100%
64 100 99 98 97
63 100 98 96 94
62 100 97 94 91
61 97 94 91 88
60 94 91 88 85
59 91 88 85 82
58 88 85 82 79
57 85 82 79 76
56 82 79 76 73
55 79 76 73 70
</TABLE>
(*) If the age of a Member at the date on which the
benefit commences is a fractional number of years,
the percentage to be used will be obtained by a pro
rata adjustment as determined by the Committee.
(b) Any Member of the Panhandle Plan who was Totally and
Permanently Disabled as of December 31, 1990 other than an individual who
became a participant in the Panhandle Plan on December 31, 1990 by reason of
the merger as of such date of the Texas Eastern Plan or the Algonquin Plan into
the Panhandle Plan may elect commencement of his Article IX benefit as of the
XI-1
<PAGE> 49
first day of the month coinciding with or next following the date he attains
the age of fifty-five or as of the first day of any subsequent month which
precedes his Normal Retirement Date and the value thereof shall be the
Actuarial Equivalent of a single life annuity for the life of the Member
commencing on the date so elected, each monthly payment being computed in the
manner provided in Section 6.2(a) but without credit for Benefit Accrual
Service and Cash Balance Accruals that would have been credited for the period
from and after the date of such commencement. The payments of such benefit
which are attributable to the Member's Final Average Pay Benefit shall be
reduced in accordance with the table described in Paragraph (a) above. Any
request for such early commencement must be received by the Committee not less
than sixty days prior to the proposed date of commencement of the benefit.
(c) Any Member who was a participant in the Panhandle Plan on
December 31, 1990 other than an individual who became a participant in the
Panhandle Plan on December 31, 1990 by reason of the merger as of such date of
the Texas Eastern Plan or the Algonquin Plan into the Panhandle Plan and who
terminates employment with a Vested Interest and who requests commencement of
his Article IX benefit pursuant to Section 7.2(d) shall receive the greater of
the monthly benefit computed in accordance with Section 7.2(d) or the Actuarial
Equivalent of a single life annuity for the life of the Member based upon his
accrued benefit under the Panhandle Plan as of December 31, 1990 and reduced in
accordance with the following table:
<TABLE>
<CAPTION>
* Age at Date Percent of Normal
Benefit Commences Retirement Income Benefit
----------------- -------------------------
<S> <C>
55 50.0
56 53.3
57 56.7
58 60.0
59 63.3
60 66.7
61 73.3
62 80.0
63 86.7
64 93.3
65 or older 100.0
</TABLE>
(*) If the age of a Member at the date on which the
benefit commences is a fractional number of years,
the percentage to be used will be obtained by a pro
rata adjustment as determined by the Committee.
(d) If a surviving spouse annuity pursuant to Section 8.1 is
not payable or if the surviving spouse benefit provided in this Section is
greater, a Member who was a Member of the Panhandle Plan on December 31, 1990
other than an individual who became a participant in the
XI-2
<PAGE> 50
Panhandle Plan on December 31, 1990 by reason of the merger as of such date of
the Texas Eastern Plan or the Algonquin Plan into the Panhandle Plan and who
dies on or before his Annuity Starting Date shall be entitled to a death
benefit paid to his Eligible Surviving Spouse equal to (i) or (ii) as follows:
(i) A monthly benefit for 120 months of an amount
equal to 50% of the Member's monthly accrued benefit under the
Panhandle Plan as of December 31, 1990 or
(ii) A monthly benefit for the life of the Member's
Eligible Surviving Spouse in accordance with the following table:
<TABLE>
<CAPTION>
Percent of Member's
Accrued Monthly Benefit
* Age at Time Under the Panhandle Plan
Of Member's Death As Of December 31, 1990
----------------- -----------------------
<S> <C>
65 or older 50.0
64 48.5
63 47.0
62 45.5
61 44.0
60 42.5
59 41.0
58 39.5
57 38.0
56 36.5
55 35.0
54 33.5
53 32.0
52 30.5
51 or younger 29.0
</TABLE>
(*) Age of Spouse to be determined by nearest birthday.
(e) Any Member who was a participant in the Panhandle Plan on
December 31, 1990 other than an individual who became a participant in the
Panhandle Plan on December 31, 1990 by reason of the merger as of such date of
the Texas Eastern Plan or the Algonquin Plan into the Panhandle Plan may elect
to receive the portion of his Article IX benefit which is equal to his accrued
benefit under the Panhandle Plan as of December 31, 1990 in the form of an
annuity for the joint lives of the Member and any person designated by the
Member and continuing at a 50%, 75% or 100% rate (as selected by the Member)
for a term certain of five years to such designated person following
XI-3
<PAGE> 51
the death of the Member, with the remainder of such Article IX benefit being
paid in the form selected by the Member pursuant to Section 9.2; provided,
however, that if such annuity is other than an annuity for the joint lives of
the Member and his spouse, the present value of payments actuarially expected
to be received by the Member shall be more than 50% of the present value of the
total payments actuarially expected to be made to the Member and his designated
beneficiary under the Plan and, provided further, that in no event shall the
period of payment of such annuity exceed the greater of (A) the life expectancy
of the Member or (B) the joint life expectancy of the Member and his designated
beneficiary. Any election pursuant to this Paragraph (e) shall be subject to
the election and consent requirements of Section 9.2.
11.2 TEXAS EASTERN PLAN.
(a) The Normal Retirement Date of a Member of the Texas
Eastern Plan on December 30, 1990 and who was also an Employee of Texas Eastern
Corporation or an affiliate thereof on December 31, 1987 shall be the date he
attains the age of sixty-five.
(b) In the case of a Member who was entitled to special
benefits provided to Pilots under the Texas Eastern Plan, such Member shall at
all times be entitled to a minimum Plan benefit which is the Actuarial
Equivalent of a single life annuity for the life of the Member equal to the
benefit to which he would have been entitled under the terms of the Texas
Eastern Plan as in effect on December 31, 1988 had his employment terminated on
such date. Such minimum benefit, if payable in lieu of the benefit otherwise
payable pursuant to the Plan shall commence at such times and be subject to
such reductions as were applicable with respect to Pilot benefits under the
terms of the Texas Eastern Plan as in effect on December 31, 1988. Such
minimum benefit, if it becomes the basis of a death benefit in lieu of the
benefit otherwise established pursuant to the Plan shall commence at such times
and be subject to such reductions as were applicable with respect to Pilot
death benefits under the terms of the Plan as in effect on December 31, 1988.
(c) Any Member who was a participant in the Texas Eastern
Plan on December 30, 1990 and who terminates employment on or after his Normal
Retirement Date or because he is Totally and Permanently Disabled shall be
entitled to a minimum Plan benefit which is the Actuarial Equivalent of a
single life annuity for the life of the Member commencing on the first day of
the month coinciding with or next following the date of his termination of
employment. The amount of each monthly payment of such single life annuity
(prior to payment of any 50% surviving spouse benefit) shall be $50.00;
provided, however, that such amount shall be reduced by 1/3 of 1% for each full
month by which the Member is less than sixty years of age on the date his
benefits are to commence.
(d) Any Member who was a participant in the Texas Eastern
Plan on December 30, 1990 and who terminates employment with a Vested Interest
and who requests commencement of his Plan benefit pursuant to Section 7.2(d)
shall receive the greater of the monthly benefit computed in accordance with
Section 7.2(d) or the Actuarial Equivalent of a single life annuity for the
life of the Member based upon his accrued benefit under the Texas Eastern Plan
as of December 30, 1990 and reduced in accordance with the following table:
XI-4
<PAGE> 52
<TABLE>
<CAPTION>
Reduction
Age Factor
--- ----------
<S> <C>
55 .3330
56 .3683
57 .4081
58 .4529
59 .5037
60 .5612
61 .6267
62 .7016
63 .7873
64 .8860
65 1.0000
</TABLE>
(e) The provisions of this Paragraph (e) shall control with
respect to any Member of the Plan who was required or permitted to make
contributions to the Plan at any time prior to the Effective Date. For
purposes of this Paragraph (e), the portion of such Member's Plan benefit which
is derived from such contributions ("Contribution Benefit") shall be based upon
the sum of (i) his aggregate contributions made to the Plan, plus (ii) for the
period preceding January 1, 1988, interest on such contributions accrued at the
rate provided by the Plan to January 1, 1988, plus (iii) interest on the sum of
the amounts determined under (i) and (ii) above, compounded annually, at a rate
equal to 120% of the Federal mid-term rate (as in effect for the first month of
a Plan Year) for the period beginning January 1, 1988 and ending on the date of
determination of the Member's Contribution Benefit, and at the rate provided in
Section 1.1(3) of the Plan for calculating the present value of a benefit (as
of the determination date) for the period beginning with the determination date
and ending on the date upon which the Member would reach Normal Retirement
Date, expressed as an annual benefit in the form of a single life annuity
(without ancillary benefits) commencing as of the Member's Normal Retirement
Date, calculated using the interest rate provided in Section 1.1(3)(ii) of the
Plan for determining the present value of a benefit (as of the determination
date). In determining the Actuarial Equivalent of a Member's Contribution
Benefit to reflect the form of benefit as provided under the Plan, the
actuarial adjustment factors adopted by the actuary for the Plan shall be those
factors, if any, prescribed by Treasury Regulations. The Actuarial Equivalent
of a Member's Contribution Benefit shall, in all cases, be reduced by an amount
which is the Actuarial Equivalent of the accumulated value of any benefit
payments received by or on behalf of such Member pursuant to the Plan and not
otherwise repaid into the Plan. The Actuarial Equivalent of a Member's
Contribution Benefit shall be nonforfeitable at all times and in no event shall
the amount of any benefit to which a Member or his beneficiary is entitled
pursuant to the Plan, be less than the Actuarial Equivalent of such Member's
Contribution Benefit. Each Member whose employment is terminated for any
reason other than Retirement, death or because he has bd
XI-5
<PAGE> 53
eDotally and Permanently Disabled and whose Vested Interest is 0% as of the
date his employment is terminated shall be entitled to receive, as of such
Member's Normal Retirement Date, a Plan benefit commencing on the first day of
the month coinciding with or next following such Member's Normal Retirement
Date which is the Actuarial Equivalent of such Member's Contribution Benefit.
If a Member dies prior to his Annuity Starting Date and is not entitled to a
death benefit pursuant to Article VIII, such deceased Member's beneficiary,
designated in accordance with Section 9.6, shall be entitled to a death benefit
the amount of which is the Actuarial Equivalent of such deceased Member's
Contribution Benefit. Such death benefit shall be payable in one lump sum as
soon as practicable after such deceased Member's death. If a Member dies on or
after his Annuity Starting Date, such deceased Member's beneficiary, designated
in accordance with Section 9.6, shall be entitled to a death benefit the amount
of which is the Actuarial Equivalent of such deceased Member's Contribution
Benefit, reduced by an amount which is the Actuarial Equivalent of the sum of
(1) the accumulated value of the payments received, and (2) the present value
of the payments to be received by such deceased Member and his annuitant or
designated beneficiary under the applicable form of Article IX benefit. Such
death benefit shall be payable in one lump sum as soon as practicable after
such deceased Member's death. In the event a survivor annuity is to be paid to
a Member's Eligible Surviving Spouse pursuant to Article VIII and such survivor
annuity is determined solely by an amount equal to such Member's Contribution
Benefit, such Eligible Surviving Spouse may elect, in lieu of such surviving
spouse annuity, a lump sum payment of such amount. Within a reasonable time
after written request by an Eligible Surviving Spouse, the Committee shall
provide to such Eligible Surviving Spouse a written explanation, in
nontechnical language, of such survivor annuity form and the lump sum option
which may be selected along with the financial effect of each such form. In
the event of any such election by such Eligible Surviving Spouse, such lump sum
payment shall be made as soon as practicable thereafter.
(f) Any Member who was a participant in the Texas Eastern
Plan on December 30, 1990 may elect to receive the portion of his Plan benefit
which is equal to his accrued benefit under the Texas Eastern Plan as of
December 30, 1990 in the form of an annuity consisting of monthly payments for
a term certain of fifteen years and continuous for the life of the Member if he
survives such term certain, with the remainder of such benefit being paid in
the form selected by the Member pursuant to Section 9.2, provided that the
present value of the payments actuarially expected to be made to the Member
shall be more than 50% of the present value of the total payments actuarially
expected to be made to the Member and his designated beneficiary under the Plan
and, provided further, that in no event shall the period of payment of such
annuity exceed the greater of (A) the life expectancy of the Member or (B) the
joint life expectancy of the Member and his designated beneficiary. Any
election pursuant to this Paragraph (f) shall be subject to the election and
consent requirements of Section 9.2.
11.3 ALGONQUIN PLAN.
(a) Any Member who was a participant in the Algonquin Plan on
December 30, 1990 and who terminates employment prior to his Normal Retirement
Date but on or after his Early Retirement Date and who requests commencement of
his Article IX benefit pursuant to Section 5.2(b) shall receive the greater of
the monthly benefit computed in accordance with Section 5.2(b) or the Actuarial
Equivalent of a single life annuity for the life of the Member based upon his
accrued
XI-6
<PAGE> 54
benefit under the Algonquin Plan as of December 30, 1990 but reduced by 1/12th
of 5% for each month in excess of thirty- six months by which such commencement
preceded the date the Member would attain the age of sixty-five to reflect such
Member's younger age and the earlier commencement of payments; provided,
however, that such reduction shall not be applicable if (i) the Member had
attained the age of sixty-two and had completed at least twenty-five years of
Benefit Accrual Service as of the date of termination of his employment or (ii)
the commencement date selected by the Member is within thirty-six months of the
date he would attain the age of sixty-five.
(b) Any Member who was a participant in the Algonquin Plan on
December 30, 1990 may elect to receive the portion of his Plan benefit which is
equal to his accrued benefit under the Algonquin Plan as of December 30, 1990
in the form of an annuity for a term certain of ten years following his Normal
Retirement Date or his Early Retirement Date and continuous for the life of
such Member if he survives such term certain; provided, however, that if such
annuity is other than an annuity for the joint lives of the Member and his
spouse, the present value of payments actuarially expected to be received by
the Member shall be more than 50% of the present value of the total payments
actuarially expected to be made to the Member and his designated beneficiary
under the Plan and, provided further, that in no event shall the period of
payment of such annuity exceed the greater of (A) the life expectancy of the
Member or (B) the joint life expectancy of the Member and his designated
beneficiary. Any election pursuant to this Paragraph (e) shall be subject to
the election and consent requirements of Section 9.2.
XI-7
<PAGE> 55
XII.
LIMITATIONS ON BENEFITS
Contrary Plan provisions notwithstanding, the benefit of a Member
under the Plan shall not exceed the maximum benefit permitted pursuant to
section 415(b) of the Code (as adjusted in accordance with the provisions of
section 415(d) of the Code). In the case of a Member who also participated in
a defined contribution plan of the Company, the benefit of such Member under
this Plan shall be reduced to the extent necessary to prevent the limitation
set forth in section 415(e) of the Code from being exceeded. For purposes of
determining whether the Plan benefit of a Member exceeds the limitations
provided in this Section, all defined benefit plans of the Company are to be
treated as one defined benefit plan and all defined contribution plans of the
Company are to be treated as one defined contribution plan. In addition, all
defined benefit plans and defined contribution plans of Controlled Entities
shall be aggregated for this purpose. For purposes of this Paragraph only, a
"Controlled Entity" (other than an affiliated service group member within the
meaning of section 414(m) of the Code) shall be determined by application of a
more than 50% control standard in lieu of an 80% control standard. For
purposes of this Article XII, the "limitation year" (as that term is defined in
Treasury Regulation section 1.415-2(b)) shall be the Plan Year. In no event
shall a Member's benefit under the Plan as limited pursuant to the provisions
of this Article XII and applicable provisions of the Code for periods from and
after January 1, 1995 be less than such Member's benefit under the Plan
determined as of December 31, 1994.
XII-1
<PAGE> 56
XIII.
FUNDING
13.1 NO CONTRIBUTIONS BY MEMBERS. The Plan is to be funded solely
from contributions by the Company and Members are neither required nor
permitted to make contributions to this Plan.
13.2 COMPANY CONTRIBUTIONS. The Company, acting under the advice of
the actuary for the Plan, intends but does not guarantee to make contributions
to the Trust in such amount and at such times as are required to maintain the
Plan and Trust for its Employees in compliance with the provisions of section
412 of the Code. All contributions made by the Company to the Trust shall be
used to fund benefits under the Plan or to pay expenses of the Plan and Trust
and shall be irrevocable, except as otherwise provided in Sections 13.5 and
20.2(c).
13.3 FORFEITURES. All forfeitures arising under the Plan will be
applied to reduce the Company's contributions thereunder and shall not be used
to increase the benefits any Member would otherwise receive under the Plan at
any time prior to termination of the Plan.
13.4 PAYMENTS TO TRUSTEE. The Company's contributions shall be paid
directly to the Trustee. On or about the date of any such payment, the
Committee shall be informed as to the amount of such payment.
13.5 RETURN OF CONTRIBUTIONS. Anything to the contrary herein
notwithstanding, the Company's contributions are contingent upon the
deductibility of such contributions under section 404 of the Code. To the
extent that a deduction for contributions is disallowed, such contributions
shall, upon the written demand of the Company, be returned to the Company by
the Trustee within one year after the date of disallowance, reduced by any net
losses of the Trust Fund attributable thereto but not increased by any net
earnings of the Trust Fund attributable thereto. Moreover, if Company
contributions are made under a mistake of fact, such contributions shall, upon
the written demand of the Company, be returned to the Company by the Trustee
within one year after the payment thereof, reduced by any net losses of the
Trust Fund attributable thereto but not increased by any net earnings of the
Trust Fund attributable thereto.
XIII-1
<PAGE> 57
XIV.
ADMINISTRATION OF THE PLAN
14.1 APPOINTMENT OF COMMITTEE. The general administration of the
Plan shall be vested in the Committee which shall be appointed by the Directors
and shall consist of one or more persons. For purposes of the Act, the
Committee shall be the Plan "administrator" and shall be the "named fiduciary"
with respect to the general administration of the Plan.
14.2 TERM, VACANCIES, RESIGNATION AND REMOVAL. Each member of the
Committee shall serve until he resigns or is removed by the Directors. If at
any time and for any reason there is a vacancy on the Committee, the Directors
shall appoint a substitute member to fill such vacancy.
At any time during his term of office, a member of the Committee may
resign by giving written notice to the Directors and the Committee, such
resignation to become effective upon the appointment of a substitute member or,
if earlier, the lapse of thirty days after such notice is given as herein
provided. At any time during his term of office, and for any reason, a member
of the Committee may be removed by the Directors.
14.3 OFFICERS, RECORDS AND PROCEDURES. The Committee may select
officers and may appoint a secretary who need not be a member of the Committee.
The Committee shall keep appropriate records of its proceedings and the
administration of the Plan. The Committee shall designate the person or
persons who shall be authorized to sign for the Committee and, upon such
designation, the signature of such person or persons shall bind the Committee.
14.4 MEETINGS. The Committee shall hold meetings upon such notice
and at such time and places as it may from time to time determine. Notice to a
member shall not be required if waived. A majority of the members of the
Committee duly appointed shall constitute a quorum for the transaction of
business. Actions taken by the Committee at any meeting where a quorum is
present shall be by vote of a majority of those present at such meeting and
entitled to vote. Actions may be taken without a meeting upon written consent
signed by a majority of the members of the Committee.
14.5 SELF-INTEREST OF MEMBERS. No member of the Committee shall have
any right to vote or decide upon any matter relating solely to himself under
the Plan or to vote in any case in which his individual right to claim any
benefit under the Plan is particularly involved. In any case in which a
Committee member is so disqualified to act, and the remaining members cannot
agree, the Directors shall appoint a temporary substitute member to exercise
all the powers of the disqualified member concerning the matter in which he is
disqualified.
14.6 PLAN COMPENSATION AND BONDING. The members of the Committee
shall not receive compensation with respect to their services for the
Committee. To the extent required by the Act or other applicable law, or
required by the Company, members of the Committee shall furnish bond or
security for the performance of their duties hereunder.
XIV-1
<PAGE> 58
14.7 COMMITTEE POWERS AND DUTIES. The Committee shall supervise the
administration and enforcement of the Plan according to the terms and
provisions hereof and shall have all powers necessary to accomplish these
purposes, including, but not by way of limitation, the right, power, authority
and duty to be exercised in its sole discretion:
(a) to make rules, regulations and bylaws for the
administration of the Plan which are not inconsistent with the terms
and provisions hereof;
(b) to construe all terms, provisions, conditions and
limitations of the Plan, and, in all cases, the construction necessary
for the Plan to qualify under the applicable provisions of the Code
shall control;
(c) to correct any defect or supply any omission or reconcile
any inconsistency that may appear in the Plan, in such manner and to
such extent as it shall deem expedient to effectuate the purposes of
the Plan;
(d) to employ and compensate such accountants, attorneys,
investment advisors and other agents and employees as the Committee
may deem necessary or advisable in the proper and efficient
administration of the Plan;
(e) to determine all questions relating to eligibility;
(f) to determine the amount, manner and time of payment of
any benefits hereunder and to prescribe procedures to be followed by
distributees in obtaining benefits;
(g) to prepare, file and distribute, in such manner as the
Committee determines to be appropriate, such information and material
as is required by the reporting and disclosure requirements of the
Act;
(h) to make a determination as to the right of any person to
a benefit under the Plan;
(i) to issue directions to the Trustee concerning all
benefits which are to be paid from the Trust Fund pursuant to the
provisions of the Plan; and
(j) to receive and review reports from the Trustee as to the
financial condition of the Trust Fund, including its receipts and
disbursements.
14.8 AUTHORIZATION, DELEGATION AND ALLOCATION.
(a) The Committee may expressly authorize one or more of its
members or one or more Employees the right and power to exercise and fulfill on
behalf of the Committee any of its powers and duties. From and after such
authorization and until such authorization is revoked by the Committee, the
actions of the authorized individual(s) shall constitute the actions of the
Committee in full as to the delegated powers and duties.
XIV-2
<PAGE> 59
(b) The Committee may assign or allocate to one or more
Employees certain ministerial responsibilities (which may include benefit
determinations, claims processing, reporting and disclosure activities) in
connection with the on-going operation and administration of the Plan. In
acting pursuant to such assignment or allocation, such Employees shall not
constitute fiduciaries of the Plan for purposes of the Act but, rather, shall
be acting as agent of the Committee which shall remain fully responsible for
such actions.
(c) The Committee may delegate to any designee it deems
advisable any or all of the powers and duties of the Committee to be exercised
by such designee in a fiduciary capacity. Such delegation must be in writing,
specifying the powers or duties being delegated, and must be accepted in
writing by the designee. Upon such delegation and acceptance, the delegating
Committee members shall have no liability for the acts or omissions of any such
designee, as long as the delegating Committee members do not violate their
fiduciary responsibility in making or continuing such delegation.
14.9 INVESTMENT MANAGER. The Committee may, in its sole discretion,
appoint an "investment manager," with power to manage, acquire or dispose of
any asset of the Plan and to direct the Trustee in this regard, so long as:
(1) the investment manager is (A) registered as an
investment adviser under the Investment Advisers Act of 1940, (B) a
bank, as defined in the Investment Advisers Act of 1940, or (C) an
insurance company qualified to do business under the laws of more than
one state; and
(2) such investment manager acknowledges in writing
that he is a fiduciary with respect to the Plan.
Upon such appointment, the Committee shall not be liable for the acts of the
investment manager, as long as the Committee does not violate its fiduciary
responsibility in making or continuing such appointment. Notwithstanding
anything to the contrary herein contained, the Trustee shall follow the
directions of such investment manager and shall not be liable for the acts or
omissions of such investment manager. The investment manager may be removed by
the Committee at any time and within its sole discretion.
14.10 COMPANY TO SUPPLY INFORMATION. The Company shall supply full
and timely information to the Committee relating to the Plan Compensation of
all Members, their ages, their Retirement, death or other cause for termination
of employment and such other pertinent facts as the Committee may require. The
Company shall advise the Trustee of such of the foregoing facts as are deemed
necessary for the Trustee to carry out the Trustee's duties under the Plan.
When making a determination in connection with the Plan, the Committee shall be
entitled to rely upon the aforesaid information furnished by the Company.
14.11 INDEMNIFICATION. The Company shall indemnify and hold harmless
each member of the Committee and any other person acting on its behalf, against
any and all expenses and liabilities arising out of his or her administrative
functions or fiduciary responsibilities, excepting only expenses
XIV-3
<PAGE> 60
and liabilities arising out of the individual's own willful misconduct.
Expenses against which such person shall be indemnified hereunder include,
without limitation, the amounts of any settlement or judgment, costs, counsel
fees and related charges reasonably incurred in connection with a claim
asserted or a proceeding brought or settlement thereof.
XIV-4
<PAGE> 61
XV.
ADMINISTRATION OF TRUST FUND
15.1 PAYMENT OF EXPENSES. All expenses incident to the
administration of the Plan and Trust, including but not limited to, actuarial,
legal, accounting, premiums to the Pension Benefit Guaranty Corporation,
Trustee fees, expenses of the Committee and the cost of furnishing any bond or
security required of the Committee, may be paid by the Company and, if not paid
by the Company, shall be paid by the Trustee from the Trust Fund and, until
paid, shall constitute a claim against the Trust Fund which is paramount to the
claims of Members and beneficiaries; provided, however, that in the event the
Trustee's compensation is to be paid, pursuant to this Section, from the Trust
Fund, any individual serving as Trustee who already receives full-time pay from
an employer or an association of employers whose employees are participants in
the Plan, or from an employee organization whose members are participants in
the Plan, shall not receive any additional compensation for serving as Trustee.
15.2 TRUST FUND PROPERTY.
(a) All contributions heretofore made and hereafter made
under this Plan shall be paid to the Trustee and shall be held, invested and
reinvested by the Trustee. All property and funds of the Trust Fund, including
income from investments and from all other sources, shall be retained for the
exclusive benefit of Members, as provided in the Plan, and shall be used to pay
benefits to Members or their beneficiaries, or to pay expenses of
administration of the Plan and Trust Fund to the extent not paid by the
Company.
(b) No Member shall have any title to any specific asset in
the Trust Fund. No Member shall have any right to, or interest in, any assets
of the Trust Fund upon termination of his employment or otherwise, except as
provided from time to time under this Plan, and then only to the extent of the
benefits payable to such Member out of the assets of the Trust Fund.
15.3 FUNDING PROJECTIONS. The Committee shall periodically obtain
cash flow projections from the actuary for the Plan and shall supply them to
the Trustee so that an appropriate investment policy may be maintained. The
Committee shall notify the Trustee of any anticipated significant changes in
the number or composition of Members in the Plan or any other matter (including
a change in the contribution level) which would have a significant impact on
the expected cash flow requirements.
15.4 AUTHORIZATION OF BENEFIT PAYMENTS. The Committee shall issue
directions to the Trustee concerning all benefits which are to be paid from the
Trust Fund pursuant to the provisions of the Plan. All distributions hereunder
shall be made in cash or in the form of a commercial annuity contract.
XV-1
<PAGE> 62
XVI.
TRUSTEE
As a means of administering the amounts contributed by the Company
and, prior to cessation of Member Contributions, the Members, the Company has
entered into a Trust Agreement with the Trustee. The Trustee shall be the
"named fiduciary" with respect to investment of the Trust Fund's assets. The
Trust Agreement may be amended, from time to time, as the Company deems
advisable in order to effectuate the purpose of the Plan. No Trustee shall be
required to furnish any bond or security for the performance of its powers and
duties unless the applicable law makes the furnishing of such bond or security
mandatory.
XVI-1
<PAGE> 63
XVII.
FIDUCIARY PROVISIONS
17.1 ARTICLE CONTROLS. This Article shall control over any contrary,
inconsistent or ambiguous provisions contained in the Plan.
17.2 GENERAL ALLOCATION OF DUTIES. Each fiduciary with respect to
the Plan shall have only those specific powers, duties, responsibilities and
obligations as are specifically given him under the Plan. The Directors shall
have the sole authority to appoint and remove the Trustee or members of the
Committee. Except as otherwise specifically provided, the Committee shall have
the sole responsibility for the administration of the Plan, which
responsibility is specifically described herein. Except as otherwise
specifically provided, the Trustee shall have the sole responsibility for the
administration, investment and management of the assets held under the Plan.
It is intended under the Plan that each fiduciary shall be responsible for the
proper exercise of his own powers, duties, responsibilities and obligations
hereunder and shall not be responsible for any act or failure to act of another
fiduciary except to the extent provided by law or as specifically provided
herein.
17.3 FIDUCIARY DUTY. Each fiduciary under the Plan, including but
not limited to the Committee and the Trustee as "named fiduciaries," shall
discharge his duties and responsibilities with respect to the Plan:
(a) solely in the interest of the Members, for the exclusive
purpose of providing benefits to Members, and their beneficiaries, and
defraying reasonable expenses of administering the Plan;
(b) with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims;
(c) by diversifying the investments of the Plan so as to
minimize the risk of large losses, unless under the circumstances it
is prudent not to do so; and
(d) in accordance with the documents and instruments
governing the Plan insofar as such documents and instruments are
consistent with applicable law.
No fiduciary shall cause the Plan or Trust Fund to enter into a "prohibited
transaction" as provided in section 4975 of the Code.
XVII-1
<PAGE> 64
XVIII.
ADOPTION BY CONTROLLED ENTITIES
18.1 APPROVAL OF DIRECTORS. It is contemplated that Controlled
Entities may adopt this Plan. Any such Controlled Entity, whether or not
presently existing, may become, upon approval of the Directors, a party hereto
by appropriate action of its board of directors or noncorporate counterpart.
18.2 SINGLE PLAN. For purposes of the Code and the Act, the Plan as
adopted by Panhandle Eastern Corporation and the adopting Controlled Entities
shall constitute a single plan rather than a separate plan of each of Panhandle
Eastern Corporation and the adopting Controlled Entities. All assets of the
Plan (other than dedicated annuity contracts) shall be available to pay
benefits to all Members and their beneficiaries.
18.3 AMENDMENTS, TERMINATION AND APPOINTMENT OF COMMITTEE AND
TRUSTEE. The power to amend the Plan or to terminate the Plan shall be
exercised by Panhandle Eastern Corporation alone. Nevertheless, any Controlled
Entity adopting the Plan may, with the consent of the Directors, incorporate in
its adoption agreement or in an amendment document specific provisions relating
to the operation of the Plan, and such provisions shall become a part of the
Plan as to such Controlled Entity only. The power to appoint or otherwise
affect the Committee or the Trustee shall be exercised by the Directors alone.
18.4 TRANSFER BETWEEN PARTICIPATING AFFILIATES. If a Member
participates in the Plan while employed by more than one Controlled Entity
which has adopted the Plan, the costs of providing that portion of the benefits
payable to or on behalf of such Member shall be apportioned among such entities
based upon the Benefit Accrual Service, Cash Balance Accruals, and Plan
Compensation applicable to such employment, as determined by Panhandle Eastern
Corporation.
18.5 TERMINATION OF PARTICIPATION. Any Controlled Entity which has
adopted the Plan may, by appropriate action of its board of directors or
noncorporate counterpart and with the consent of the Directors, terminate its
participation in the Plan. Moreover, the Directors may, in their discretion,
terminate a Controlled Entity's Plan participation at any time.
XVIII-1
<PAGE> 65
XIX.
AMENDMENTS
No amendment of the Plan may be made which would vest in the Company,
directly or indirectly, any interest in or control of the Trust Fund. No
amendment may be made which would vary the Plan's exclusive purpose of
providing benefits to Members, and their beneficiaries, and defraying
reasonable expenses of administering the Plan or which would permit the
diversion of any part of the Trust Fund from that exclusive purpose. No
amendment shall be made which would reduce any then nonforfeitable interest of
a Member. No amendment shall increase the duties or responsibilities of the
Trustee unless the Trustee consents thereto in writing. Subject to these
limitations and any other limitations contained in the Act or the Code,
Panhandle Eastern Corporation may from time to time unilaterally amend, in
whole or in part, any or all provisions of the Plan on behalf of itself and the
other Controlled Entities which have adopted the Plan. Panhandle Eastern
Corporation's right to amend the Plan may be exercised by resolution of its
Board of Directors, the Finance Committee of its Board of Directors (or any
successor committee) or its Policy Committee, and any such amendment of the
Plan shall be set forth in writing. Specifically, but not by way of
limitation, Panhandle Eastern Corporation may unilaterally make any amendment
necessary to acquire and maintain a qualified status for the Plan under the
Code, whether or not retroactive, on behalf of itself and the other Controlled
Entities which have adopted the Plan.
XIX-1
<PAGE> 66
XX.
TERMINATION AND MERGER OR CONSOLIDATION
20.1 DECLARATION OF INTENT. Panhandle Eastern Corporation has
established the Plan with the bona fide intention and expectation that from
year to year the Company will be able to, and will deem it advisable to, make
its contributions as herein provided. However, Panhandle Eastern Corporation
realizes that circumstances not now foreseen, or circumstances beyond its
control, may make it either impossible or inadvisable to continue to make
Company contributions to the Trustee. Therefore, Panhandle Eastern Corporation
shall have the power to terminate the Plan or partially terminate the Plan at
any time hereafter with respect to Employees, or any group of Employees, of any
Controlled Entity or of all Controlled Entities. Each member of the Committee,
the Trustee and all affected Members shall be notified of such termination or
partial termination.
20.2 ADMINISTRATION OF THE PLAN IN CASE OF TERMINATION.
(a) If the Plan is terminated or partially terminated, the
Vested Interest of each affected Member shall be 100%, effective as of the
termination date.
(b) Upon termination of the Plan, the affected assets of the
Trust Fund shall be liquidated and distributed in accordance with section 4044
of the Act and the time of payment, manner of payment and consent provisions of
Articles VIII and IX.
(c) Upon termination of the Plan and notwithstanding any
other provisions of the Plan, after the satisfaction of all liabilities of the
Plan to the affected Members and beneficiaries, Panhandle Eastern Corporation
shall receive any remaining amount resulting from any variations between actual
requirements and actuarially expected requirements.
20.3 MERGER, CONSOLIDATION OR TRANSFER. This Plan or Trust Fund may
not merge or consolidate with, or transfer its assets or liabilities to, any
other plan, unless immediately thereafter each Member would, in the event such
other plan terminated, be entitled to a benefit which is equal to or greater
than the benefit to which he would have been entitled if the Plan were
terminated immediately before the merger, consolidation or transfer.
XX-1
<PAGE> 67
XXI.
MISCELLANEOUS
21.1 NOT CONTRACT OF EMPLOYMENT. The adoption and maintenance of
this Plan shall not be deemed to be a contract between the Company and any
person or to be consideration for the employment of any person. Nothing herein
contained shall be deemed to give any person the right to be retained in the
employ of the Company or to restrict the right of the Company to discharge any
person at any time nor shall the Plan be deemed to give the Company the right
to require any person to remain in the employ of the Company or to restrict any
person's right to terminate his employment at any time.
21.2 PAYMENTS SOLELY FROM TRUST FUND. All benefits payable under the
Plan shall be paid or provided for solely from the Trust Fund and neither the
Company nor the Trustee assumes any liability or responsibility for the
adequacy thereof. The Committee or the Trustee may require execution and
delivery of such instruments as are deemed necessary to assure proper payment
of any benefits.
21.3 ALIENATION OF INTEREST FORBIDDEN. Except as otherwise provided
with respect to "qualified domestic relations orders" pursuant to section
206(d) of the Act and sections 401(a)(13) and 414(p) of the Code and except as
otherwise provided under other applicable law, no right or interest of any kind
in any benefit shall be transferable or assignable by any Member or any
beneficiary or be subject to anticipation, adjustment, alienation, encumbrance,
garnishment, attachment, execution or levy or any kind. Plan provisions to the
contrary notwithstanding, the Committee shall comply with the terms and
provisions of any "qualified domestic relations orders" and shall establish
appropriate procedures to effect the same.
21.4 NO BENEFITS TO THE COMPANY. No part of the corpus or income of
the Trust Fund shall be used for any purpose other than the exclusive purpose
of providing benefits for the Members and their beneficiaries and defraying
reasonable expenses of administrating the Plan. Anything to the contrary
herein notwithstanding, the Plan shall never be construed to vest any rights in
the Company other than those specifically given hereunder.
21.5 SEVERABILITY. If any provision of this Plan shall be held
illegal or invalid for any reason, said illegality or invalidity shall not
affect the remaining provisions hereof; instead, each provision shall be fully
severable and the Plan shall be construed and enforced as if said illegal or
invalid provision had never been included herein.
21.6 JURISDICTION. The situs of the Plan is Texas. All provisions
of the Plan shall be construed in accordance with the laws of Texas except to
the extent preempted by federal law.
XXI-1
<PAGE> 68
XXII.
TOP-HEAVY STATUS
22.1 ARTICLE CONTROLS. Any Plan provisions to the contrary
notwithstanding, the provisions of this Article XXII shall control to the
extent required to cause the Plan to comply with the requirements imposed under
section 416 of the Code.
22.2 DEFINITIONS. For purposes of this Article, the following terms
and phrases shall have these respective meanings:
(a) ACCOUNT BALANCE: As of any Valuation Date, the aggregate
amount credited to an individual's account or accounts under a
qualified defined contribution plan maintained by the Company or a
Controlled Entity (excluding employee contributions which were
deductible within the meaning of section 219 of the Code and rollover
or transfer contributions made after December 31, 1983 by or on behalf
of such individual to such plan from another qualified plan sponsored
by an entity other than the Company or a Controlled Entity), increased
by (1) the aggregate distributions made to such individual from such
plan during a five-year period ending on the Determination Date and
(2) the amount of any contributions due as of the Determination Date
immediately following such Valuation Date.
(b) ACCRUED BENEFIT: As of any Valuation Date, the present
value (computed on the basis of the assumptions specified in Paragraph
(c) below) of the cumulative accrued benefit (excluding the portion
thereof which is attributable to employee contributions which were
deductible pursuant to section 219 of the Code, to rollover or
transfer contributions made after December 31, 1983 by or on behalf of
such individual to such plan from another qualified plan sponsored by
an entity other than the Company or a Controlled Entity, to
proportional subsidies or to ancillary benefits) of an individual
under a qualified defined benefit plan maintained by the Company or a
Controlled Entity increased by (1) the aggregate distributions made to
such individual from such plan during a five-year period ending on the
Determination Date and (2) the estimated benefit accrued by such
individual between such Valuation Date and the Determination Date
immediately following such Valuation Date. Solely for the purpose of
determining top-heavy status, the Accrued Benefit of an individual
shall be determined under (1) the method, if any, that uniformly
applies for accrual purposes under all qualified defined benefit plans
maintained by the Company and the Controlled Entities, or (2) if there
is no such method, as if such benefit accrued not more rapidly than
under the slowest accrual rate permitted under section 411(b)(1)(C) of
the Code.
(c) ACTUARIAL EQUIVALENT: Equality in value of the aggregate
amounts expected to be received under different times and forms of
payment based upon the interest and mortality rate assumptions set
forth in Section 1.1(3)(i).
(d) AGGREGATION GROUP: The group of qualified plans
maintained by the Company and each Controlled Entity consisting of (1)
each plan in which a Key Employee participates
XXII-1
<PAGE> 69
and each other plan which enables a plan in which a Key Employee
participates to meet the requirements of sections 401(a)(4) or 410 of
the Code, or (2) each plan in which a Key Employee participates, each
other plan which enables a plan in which a Key Employee participates
to meet the requirements of sections 401(a)(4) or 410 of the Code and
any other plan which the Company elects to include as a part of such
group; provided, however, that the Company may not elect to include a
plan in such group if its inclusion would cause the group to fail to
meet the requirements of sections 401(a)(4) or 410 of the Code.
(e) ANNUAL RETIREMENT BENEFIT: A benefit payable annually in
the form of a single life annuity for the life of a Member (with no
ancillary benefits) beginning at his Normal Retirement Date.
(f) AVERAGE REMUNERATION FOR HIS HIGH FIVE YEARS: The result
obtained by dividing the total Remuneration paid to a Member during a
considered period by the number of years for which such Remuneration
was received. The considered period shall be the five consecutive
Years of Service during which the Member was both an active Member in
the Plan and had the greatest Remuneration from the Company; provided,
however, that if the Member has less than five-consecutive Years of
Service, such shorter period shall be deemed his considered period.
(g) DETERMINATION DATE: For the first Plan Year of any plan,
the last day of such Plan Year and for each subsequent Plan Year of
such plan, the last day of the preceding Plan Year.
(h) KEY EMPLOYEE: A "key employee" as defined in section
416(i) of the Code and the Treasury Regulations thereunder.
(i) PLAN YEAR: With respect to any plan, the annual
accounting period used by such plan for annual reporting purposes.
(j) REMUNERATION: Compensation within the meaning of section
415(c)(3) of the Code, as limited by section 401(a)(17) of the Code.
(k) VALUATION DATE: With respect to any Plan Year of any
defined contribution plan, the most recent date within the
twelve-month period ending on a Determination Date as of which the
trust fund established under such plan was valued and the net income
(or loss) thereof allocated to participants' accounts. With respect
to any Plan Year of any defined benefit plan, the most recent date
within a twelve-month period ending on a Determination Date as of
which the plan assets were valued for purposes of computing plan costs
for purposes of the requirements imposed under section 412 of the
Code.
(l) YEARS OF SERVICE: Shall be determined under the rules of
section 411(a)(4), (5) and (6) of the Code except that Years of
Service beginning prior to January 1, 1984 and Years of Service for
any Plan Year for which the Plan was not top-heavy shall be
disregarded.
XXII-2
<PAGE> 70
22.3 TOP-HEAVY STATUS.
(a) The Plan shall be deemed to be top-heavy for a Plan Year
commencing after December 31, 1983, if, as of the Determination Date for such
Plan Year, (1) the sum of Accrued Benefits of Members who are Key Employees
exceeds 60% of the sum of Accrued Benefits of all Members unless an Aggregation
Group including the Plan is not top- heavy or (2) an Aggregation Group
including the Plan is top-heavy. An Aggregation Group shall be deemed to be
top-heavy as of a Determination Date if the sum (computed in accordance with
section 416(g)(2)(B) of the Code and the Treasury Regulations promulgated
thereunder) of (1) the Account Balances of Key Employees under all defined
contribution plans included in the Aggregation Group and (2) the Accrued
Benefits of Key Employees under all defined benefit plans included in the
Aggregation Group exceeds 60% of the sum of the Account Balances and the
Accrued Benefits of all individuals under such plans. Notwithstanding the
foregoing, the Account Balances and Accrued Benefits of individuals who are not
Key Employees in any Plan Year but who were Key Employees in any prior Plan
Year shall not be considered in determining the top-heavy status of the Plan
for such Plan Year. Further, notwithstanding the foregoing, for purposes of
determining top-heavy status for Plan Years commencing after December 31, 1984,
the Account Balances and Accrued Benefits of individuals who have not performed
services for the Company at any time during the five-year period ending on the
applicable Determination Date shall not be considered.
(b) If the Plan is determined to be top-heavy for a Plan
Year, the Vested Interest of each Member who is credited with an Hour of
Service during such Plan Year shall be determined in accordance with the
following schedule:
<TABLE>
<CAPTION>
YEARS OF VESTING SERVICE VESTED INTEREST
------------------------ ---------------
<S> <C>
Less than 2 years 0%
2 years 20%
3 years 40%
4 years 60%
5 years or more 100%
</TABLE>
(c) If the Plan is determined to be top-heavy for a Plan
Year, the Article IX benefit of each Member who is not a Key Employee shall in
no event be less than the Actuarial Equivalent of an Annual Retirement Benefit
equal to the lesser of:
(1) 2% of his Average Remuneration for His High Five
Years multiplied by his Years of Service; or
(2) 20% of his Average Remuneration for His High
Five Years.
The minimum benefit required to be accrued for a Plan Year pursuant to this
Paragraph for a Member shall be accrued regardless of whether such Member has
terminated his employment with the Company prior to the end of such Plan Year.
Notwithstanding the foregoing, no benefit shall be accrued pursuant to this
Paragraph for a Plan Year with respect to a Member who is a participant in
XXII-3
<PAGE> 71
another defined benefit plan sponsored by the Company or a Controlled Entity if
such Member accrues under such defined benefit plan (for the Plan Year of such
plan ending with or within the Plan Year of this Plan) a benefit which is at
least equal to the benefit described in section 416(c)(1) of the Code.
Notwithstanding the foregoing, no benefit shall be accrued pursuant to this
Paragraph for a Plan Year with respect to a Member who is a participant in a
defined contribution plan sponsored by the Company or a Controlled Entity if
such Member receives under such defined contribution plan (for the Plan Year of
such plan ending with or within the Plan Year of this Plan) a contribution
which is equal to or greater than 5% of such Member's Remuneration for such
Plan Year. If the preceding sentence is not applicable, the requirements of
this Paragraph shall be met by providing a minimum benefit under the Plan
which, when considered with the benefit provided under such defined
contribution plan as an offset, is at least equal to the minimum benefit
provided pursuant to this Paragraph. For this purpose, the actuarial
assumptions specified in the Plan shall be utilized to determine the value of
such offset as of the applicable Determination Date.
(d) If the Plan is determined to be top-heavy for a Plan
Year, but is not determined to be super top- heavy for such Plan Year, the
Committee may elect for the Plan to provide the special minimum benefit
described in this Paragraph in order to comply with the provisions of section
416(h)(2) of the Code. If the Committee so elects for the Plan to provide such
special minimum benefit, the Article IX benefit of each Member who is not a Key
Employee shall in no event be less than the Actuarial Equivalent of an Annual
Retirement Benefit equal to the lesser of:
(1) 3% of his Average Remuneration for His High Five
Years multiplied by his Years of Service; or
(2) a percentage (not to exceed 30%) of his Average
Remuneration for His High Five Years equal to 20% increased by 1% for
each Year of Service credited to such Member.
22.4 SUPER TOP-HEAVY STATUS. The Plan shall be deemed to be super
top-heavy for a Plan Year if the Plan would be top-heavy for such Plan Year if
"90%" were substituted for "60%" in each place that it appears in Section
22.3(a).
22.5 TERMINATION OF TOP-HEAVY STATUS. If the Plan has been deemed to
be top-heavy for one or more Plan Years and thereafter ceases to be top-heavy,
the provisions of this Article XXII shall cease to apply to the Plan effective
as of the Determination Date on which it is deemed to no longer be top-heavy.
Notwithstanding the foregoing, the Vested Interest of each Member who is a
Member on such Determination Date or who has terminated his employment but has
not incurred a One-Year Break-in-Service as of such Determination Date shall
not be reduced and, with respect to each Member who has three or more years of
Vesting Service on such Determination Date, the Vested Interest of each such
Member shall continue to be determined in accordance with the schedule set
forth in Section 22.3(b). Further notwithstanding the foregoing, the Article
IX benefit of a Member shall in no event be less than the Actuarial Equivalent
of the benefit determined in accordance with Sections 22.3(c) or 22.3(d), if
applicable, as of the last Determination Date on which the Plan was deemed to
be top-heavy.
XXII-4
<PAGE> 72
22.6 EFFECT OF ARTICLE. Notwithstanding anything contained herein to
the contrary, the provisions of this Article shall automatically become
inoperative and of no effect to the extent not required by the Code or the Act.
XXII-5
<PAGE> 73
EXECUTED on this ______ day of _________________, 1995.
PANHANDLE EASTERN CORPORATION
By
------------------------------------
CASH BALANCE EMPLOYERS: FINAL AVERAGE PAY EMPLOYERS:
ASSOCIATED NATURAL GAS, INC. ALGONQUIN GAS TRANSMISSION COMPANY
By By
-------------------------------- ------------------------------------
ALGONQUIN LNG, INC.
By
------------------------------------
CENTANA ENERGY CORPORATION
(ON AND AFTER JULY 1, 1995, CENTANA
ENERGY CORPORATION CEASED TO BE A
FINAL AVERAGE PAY EMPLOYER EXCEPT FOR
BENEFIT ACCRUALS UNDER ARTICLE
VI FOR THEN-DISABLED EMPLOYEES)
By
------------------------------------
PANHANDLE EASTERN PIPE LINE COMPANY
By
------------------------------------
(v)
<PAGE> 74
TEXAS EASTERN PRODUCTS PIPELINE
COMPANY
By
------------------------------------
TEXAS EASTERN TRANSMISSION
CORPORATION
By
------------------------------------
TRUNKLINE GAS COMPANY
By
------------------------------------
TRUNKLINE LNG COMPANY
By
------------------------------------
PANENERGY INFORMATION SERVICES
COMPANY
(FORMERLY 1 SOURCE INFORMATION SERVICES
COMPANY)
By
------------------------------------
PAN SERVICE COMPANY
By
------------------------------------
(vi)
<PAGE> 1
EXHIBIT 10.37
RETIREMENT INCOME PLAN OF
PANHANDLE EASTERN CORPORATION
AND PARTICIPATING AFFILIATES
AMENDMENT 1
Pursuant to its authority under Article XIX of the Retirement Income
Plan of Panhandle Eastern Corporation and Participating Affiliates(the "Plan"),
Panhandle Eastern Corporation hereby amends the Plan, effective January 1,
1996, in the following respects:
1. Section 10.2 of the Plan is revised in its entirety effective January
1, 1996, to read as follows:
10.2 SOCIAL SECURITY SUPPLEMENT
(a) An Eligible Member who, on January 1, 1996, is
both alive and has not attained age 65, shall be entitled to a Social
Security Supplement. The Social Security Supplement shall be $70 for
each month during the Benefit Period, except that in the event of the
Eligible Member's death or attainment of age 65 during the Benefit
Period, the Eligible Member not be entitled to the Social Security
Supplement for any month following the month during which such event
occurred. Notwithstanding the foregoing, in the event the Eligible
Member's Normal or Early Retirement Benefit is paid as (i) a lump sum
or by distribution of a fully paid-up annuity contract, the Social
Security Supplement shall only be paid to the Eligible Member (or if
the Eligible member is deceased, to the Eligible Member's surviving
spouse, otherwise to the deceased Eligible Member's estate) for a
particular calendar year during the Benefit Period if the Eligible
Member is alive on July 1 of that calendar year, shall be paid in a
single annualized payment (but curtailed to reflect any anticipated
attainment of age 65 during that calendar year) and shall be paid as
promptly following such date as administratively feasible and (ii) in
an annuity form, the Social Security Supplement shall only be paid to
the Eligible Member (or, if the Eligible Member is deceased, to the
Eligible Member's surviving spouse, otherwise to the deceased Eligible
Member's estate) for a particular calendar month during the Benefit
Period if the Eligible Member is alive on the first day of that
calendar month and shall be paid as promptly following such date as
administratively
1
<PAGE> 2
feasible.
(b) In the case of an Eligible Member who dies
during the Benefit Period and who is survived by a spouse who has not
attained age 65 and to whom the Eligible Member the date as of which
the Eligible Member's Normal or Early Retirement Benefit had commenced
to be paid, such spouse shall be entitled to a Social Security
Supplement. The Social Security Supplement shall be $35 for each
month during the remaining portion of the Benefit Period that begins
with the month immediately following the month during which the
Eligible Member died, except that in the event of such spouse's death
or attainment of age 65 during such remaining portion, such spouse
shall not be entitled to the Social Security Supplement for any month
following the month during which such event occurred. Notwithstanding
the foregoing, in the event the Eligible Member's Normal or Early
Retirement Benefit is paid as (i) a lump sum or by distribution of a
fully paid-up annuity contract, the Social Security Supplement shall
only be paid to such spouse (or, if such spouse is deceased, to such
spouse's estate) for a particular calendar year during the Benefit
Period if such spouse is alive on July 1 of that calendar year, shall
be paid in a single annualized payment (but curtailed to reflect any
anticipated attainment of age 65 during that calendar year) and shall
be paid as promptly following such date as administratively feasible,
and shall not be payable for any portion of any calendar year for
which another Social Security Supplement or a Supplemental Benefit has
been paid with respect to the Eligible Member, and (ii) in an annuity
form, the Social Security Supplement shall only be paid to such spouse
(or, if such spouse is deceased, to such spouse's estate) for a
particular calendar month during the Benefit Period if such spouse is
alive on the first day of that calendar month and shall be paid as
promptly following such date as administratively feasible.
(c) In the case of an Eligible Member who died before
January 1, 1996, and who survived by a spouse who has not attained age
65 and to whom the Member had been continuously married from the date
as of which the Member's Normal or Early Retirement Benefit had
commenced to be paid, such spouse shall be entitled to a Social
Security Supplement. The Social
2
<PAGE> 3
Security Supplement shall be $35 for each month during the Benefit
Period, except that in the event of such spouse's death or attainment
of age 65 during the Benefit Period, such spouse shall not be entitled
to a Social Security Supplement for any month following the month
during which such event occurred. Notwithstanding the foregoing, in
the event the Eligible Member's Normal or Early Retirement Benefit has
been paid as (i) a lump sum or by distribution of a fully paid-up
annuity contract, the Social Security Supplement shall only be paid to
such spouse (or, if such spouse is deceased, to such spouse's estate)
for a particular calendar year during the Benefit Period if such
spouse is alive on July 1 of that calendar year, shall be paid in a
single annualized payment (but curtailed to reflect any anticipated
attainment of age 65 during that calendar year) and shall be paid as
promptly following such date as administratively feasible and (ii) in
an annuity form, the Social Security Supplement shall only be paid to
such spouse (or, if such spouse is deceased, to such spouse's estate)
for a particular calendar month during the Benefit Period if such
spouse is alive on the first day of that calendar month and shall be
paid as promptly following such date as administratively feasible.
(d) As used in this Section 10.2: the term "Eligible
Member" means a Member (but not a Member who (i) retired from
Petrolane Inc. or any of its subsidiaries or (ii) who prior to the
attainment of age 55, retired from Halcon SD Group Inc., subsequently
renamed Process Research and Development Company, or any of its
subsidiaries) who became entitled to a Normal Retirement Benefit or an
Early Retirement Benefit that commenced to be paid prior to February
1, 1991; the term "Benefit Period" means the twelve consecutive-month
period beginning January 1, 1996 and ending December 31, 1996; the
term "Social Security Supplement" means a benefit provided by this
Section 10.2; and the term "Supplemental Benefit" means a benefit
provided by Section 10.3 of the Plan.
2. Section 10.3 of the Plan is revised in its entirety to read as
follows:
10.3 SUPPLEMENTAL BENEFIT.
(a) An Eligible Member who, on January 1,
3
<PAGE> 4
1996 is both alive and has attained at least age 65, shall be entitled
to a Supplemental Benefit. The Supplemental Benefit shall be $35 for
each month during the Benefit Period, except that in the event the
Eligible Member dies during the Benefit Period, the Eligible Member
shall not be entitled to a Supplemental Benefit for any month
following the month during which such event occurred. Notwithstanding
the foregoing, in the event the Eligible Member's Normal or Early
Retirement Benefit is paid as (i) a lump sum or by distribution of a
fully paid-up annuity contract, the Supplemental Benefit shall only be
paid to the Eligible Member (or, if the Eligible Member is deceased,
to the Eligible Member's surviving spouse, otherwise to the Eligible
Member's estate) for a particular calendar year during the Benefit
Period only if the Eligible Member is alive on July 1 of that calendar
year, shall be paid in a single annualized payment and shall be paid
as promptly following such date as administratively feasible and (ii)
in an annuity form, a Supplemental Benefit shall only be paid to the
Eligible Member (or, if the Eligible Member is deceased, to the
Eligible Member's surviving spouse, otherwise to the Eligible Member's
estate) for a particular calendar month during the Benefit Period if
the Eligible Member is alive on the first day of that calendar month
and shall be paid as promptly following such date as administratively
feasible.
(b) In the case of an Eligible Member who attains age
65 during 1996, the Eligible Member shall be entitled to a
Supplemental Benefit. The Supplemental Benefit shall be $35 for each
month during the remaining portion of the Benefit Period that begins
immediately after the month during which the Eligible Member attained
age 65, except that in the event the Eligible Member dies during the
Benefit Period, the Eligible Member shall not be entitled to a
Supplemental Benefit for any month following the month during which
such event occurred. Notwithstanding the foregoing, in the event the
Eligible Member's Normal or Early Retirement Benefit is paid as (i) a
lump sum or by distribution of a fully paid-up annuity contract, a
Supplemental Benefit shall only be paid to the Eligible Member (or, if
the Eligible Member is deceased, to the Eligible Member's surviving
spouse, otherwise to the Eligible Member's estate) for a particular
calendar year during the Benefit Period if the Eligible Member
4
<PAGE> 5
is alive on July 1 of that calendar year, shall be paid in a single
annualized payment and shall be paid as promptly following such date
as administratively feasible, and shall not be payable for any portion
of any calendar year for which a Social Security Supplement has been
paid with respect to the Eligible Member and (ii) in an annuity form,
a Supplemental Benefit shall only be paid to the Eligible Member (or,
if the Eligible Member is deceased, to the Eligible Member's surviving
spouse, otherwise to the Eligible Member's estate) for a particular
calendar month during the Benefit Period if the Eligible Member is
alive on the first day of that calendar month and shall be paid as
promptly following such date as administratively feasible.
(c) In the case of an Eligible Member who has died
before January 1, 1996, and who survived by a spouse who before or
during 1996 attains age 65 and to whom the Member had been
continuously married from the date as of which the Member's Normal or
Early Retirement Benefit had commenced to be paid, such spouse shall
be entitled to a Supplemental Benefit. The Supplemental Benefit shall
be $17.50 for each month during the Benefit Period or, if such spouse
attains age 65 during the Benefit Period, for each month during the
portion of the Benefit Period that begins immediately after the month
during which such spouse attained age 65, except that in the event
such spouse dies during the Benefit Period, the Supplemental Benefit
shall not be paid for any month following the month during which such
event occurred. Notwithstanding the foregoing, in the event the
respective Member's Normal or Early Retirement Benefit has been paid
as (i) a lump sum or by distribution of a fully paid-up annuity
contract, a Supplemental Benefit shall only be paid to such spouse
(or, if such spouse is deceased, to such spouse's estate) for a
particular calendar year during the Benefit Period if such spouse is
alive on July 1 of that calendar year, shall be paid in a single
annualized payment and shall be paid as promptly following such date
as administratively feasible, and shall not be payable for any portion
of any calendar year for which a Social Security Supplement or another
Supplemental Benefit was paid with respect to the Eligible Member and
(ii) in an annuity form, a special benefit payment shall only be paid
to such spouse (or, if such spouse is deceased, to
5
<PAGE> 6
such spouse's estate) for a particular calendar month during the
Benefit Period if such spouse is alive on the first day of that
calendar month and shall be paid as promptly following such date as
administratively feasible.
(d) In the case of an Eligible Member who has died
during 1996 and who is survived by a spouse who before or during 1996
attains age 65 and to whom the Member had been continuously married
from the date as of which the Member's Normal or Early Retirement
Benefit had commenced to be paid, such spouse shall be entitled to a
Supplemental Benefit. The Supplemental Benefit shall be $17.50 for
each month during which the portion of the Benefit Period that begins
immediately after the month during which the later of the Eligible
Member's death or such spouse's attainment of age 65 occurs, except
that in the event such spouse dies during the Benefit Period, such
spouse shall not be entitled to a Supplemental Benefit for any month
following the month during which such event occurred. Notwithstanding
the foregoing, in the event the Eligible Member's Normal or Early
Retirement Benefit has been paid as (i) a lump sum or by distribution
of a fully paid-up annuity contract, a Supplemental Benefit shall only
be paid to such spouse (or, if such spouse is deceased, to such
spouse's estate) for a particular calendar year during the Benefit
Period if such spouse is alive on July 1 of that calendar year, shall
be paid in a single annualized payment and shall be paid as promptly
following such date as administratively feasible, and shall not be
payable for any portion of any calendar year for which a Social
Security Supplement or another Supplemental Benefit was paid with
respect to the Eligible Member and (ii) in an annuity form, a
Supplemental Benefit payment shall only be paid to such spouse (or, if
such spouse is deceased, to the such spouse's estate) for a particular
calendar month during the Benefit Period if such spouse is alive on
the first day of that calendar month and shall be paid as promptly
following such date as administratively feasible.
(e) As used in Section 10.3: the term "Eligible
Member" shall mean a Member (but not a Member who (i) retired from
Petrolane Inc. or any of its subsidiaries or (ii) who prior to
attainment of age 55, retired from Halcon SD Group Inc., subsequently
renamed
6
<PAGE> 7
Process Research and Development Company, or any of its subsidiaries)
who became entitled to a Normal Retirement Benefit or an Early
Retirement Benefit that commenced to be paid prior to February 1,
1991: the term "Benefit Period" means the consecutive-month period
beginning January 1, 1996; the term "Social Security Supplement" means
a benefit provided by Section 10.2 of the Plan; and the term
"Supplemental Benefit" means a benefit provided by this Section 10.3.
7
<PAGE> 8
IN WITNESS WHEREOF, this amendment to the Plan is executed this _______ day of
December, 1995 on behalf of Panhandle Eastern Corporation.
PANHANDLE EASTERN CORPORATION
By:
------------------------------
Its: Senior Vice President
8
<PAGE> 1
EXHIBIT 10.38
RETIREMENT INCOME PLAN OF
PANHANDLE EASTERN CORPORATION
AND PARTICIPATING AFFILIATES
AMENDMENT 2
Pursuant to its authority under Article XIX of the Retirement Income
Plan of Panhandle Eastern Corporation and Participating Affiliates (the
"Plan"), Panhandle Eastern Corporation hereby amends the Plan, effective
January 1, 1996, in the following respects:
1. Section 7.2 of the Plan is revised by redesignating Paragraph (e)
thereof as Paragraph (f) thereof.
2. Section 7.2 of the Plan is revised by adding thereto a new Paragraph
(e) thereof reading in its entirety as follows:
(e) In the case of a Member (1) who becomes entitled to a
severance benefit pursuant to the Paragraph (c) above, on account of
termination of employment occurring on or after January 1, 1996, and
(2) who, at the time of such termination, is credited with ten or more
full years of Vesting Service and has attained age 50, the following
schedule shall be substituted for the schedule contained in Paragraph
(d)(1) above:
<TABLE>
<CAPTION>
*Age at Commencement Multiplier
------------------- ----------
<S> <C>
60 or older 100%
59 96.5%
58 93.0%
57 89.5%
56 86.0%
55 82.5%
</TABLE>
(*) If the age of a Member at the date on which the benefit
commences is a fractional number of years, the percentage to
be used will be obtained by pro rata adjustment as determined
by the Committee.
IN WITNESS WHEREOF, this amendment to the Plan is executed this
__________ day of January, 1996 on behalf of Panhandle Eastern Corporation.
PANHANDLE EASTERN CORPORATION
By:
-----------------------------------
Its:
---------------------------------
<PAGE> 1
PANENERGY CORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information is provided to facilitate increased understanding of
the 1995, 1994 and 1993 consolidated financial statements and accompanying
notes of PanEnergy Corp (PEC), formerly Panhandle Eastern Corporation, and its
subsidiaries (the Company). The discussion of the Company's "Operating
Environment and Outlook" addresses key trends and future plans. Material
period-to-period variances in the consolidated statement of income are
discussed under "Results of Operations." The "Capital Resources, Liquidity and
Financial Position" section analyzes cash flows and financial position.
Throughout these discussions, management addresses items that are reasonably
likely to materially affect future liquidity or earnings.
OPERATING ENVIRONMENT AND OUTLOOK
The changing environment resulting from the restructuring of the natural gas
industry in the post-Order 636 environment has led to industry consolidations
and created additional growth opportunities for the Company. One such
opportunity was the Company's December 1994 merger with Associated Natural Gas
Corporation, now PanEnergy Natural Gas Corporation (PanEnergy Natural Gas).
Potential for growth was further assisted by the Federal Energy Regulatory
Commission's (FERC's) announcement in 1994 that it would not exercise
jurisdiction over natural gas gathering activities operated separately from
natural gas pipeline activities. This decision allowed previously regulated
providers of natural gas gathering, processing, storage and marketing services
to be more competitive with service providers not regulated by FERC.
The Company integrated the PanEnergy Natural Gas operations in 1995
and continued its growth strategy of expanding non-jurisdictional businesses,
while also continuing to advance interstate natural gas pipeline
market-expansion projects and providing new services to customers. The new
PanEnergy Corp name reflects the broad range of energy services now provided by
the Company.
In the Energy Services segment, the Company continued to grow through
acquisitions, expansions and joint ventures in 1995 and will continue this
growth in 1996 and beyond. In late January 1996, the Company signed a
non-binding letter of intent with certain Mobil Corporation (Mobil) affiliates
to combine marketing operations of both companies into a new joint venture and
for the Company to purchase Mobil's interests in certain gathering, processing
and associated facilities for approximately $300 million.
In 1995, the Field Services group, which gathers, aggregates, stores
and processes natural gas and also markets natural gas liquids (NGLs), added
significant processing and gathering facilities in Colorado, New Mexico, Texas
and the Gulf of Mexico. In addition, mid-continent gathering facilities were
transferred in 1995 from Natural Gas Transmission to the Field Services group.
The Gas and Power Services group, the energy marketing and risk management
services provider of Energy Services, expanded its activities through the
acquisition of Continental Energy Marketing Company (Continental) of Calgary,
Canada. In late 1995, the Company combined its natural gas and electric power
marketing activities to further capitalize on future opportunities for meeting
the complete energy needs of customers.
[BAR CHART]
Commensurate with this growth, Energy Services generated 69% of the
Company's consolidated revenues in 1995 as compared with 63% in 1994. This
segment should continue to contribute the majority of the Company's revenues as
it expands in the future.
In the Natural Gas Transmission segment, which consists of Texas
Eastern Transmission Corporation (TETCO), Algonquin Gas Transmission Company
(Algonquin), Panhandle Eastern Pipe Line Company (PEPL) and Trunkline Gas
Company (Trunkline), traditional pipeline sales services ceased in 1994 and all
services are now offered on an unbundled basis. Additionally, Order 636
requires use of the straight fixed-variable rate design which makes earnings
less sensitive to throughput changes. The new rate design has caused the
percentage of throughput related to firm transportation contracts for the
Natural Gas Transmission segment to rise from 64% in 1993 to 88% in 1995. The
Company's pipelines have not experienced any significant reductions in firm
26
<PAGE> 2
capacity sold; however, they continue to offer selective discounting to
maximize revenues from existing capacity.
[BAR CHART]
The Natural Gas Transmission companies continue to advance selective
projects that provide expanded services to meet the specific needs of
customers in the current unbundled environment. These projects include
WinterNet and EnergyPlus, designed to meet the winter-seasonal and peak-demand
service requirements of customers in the Northeast, Mid-Atlantic and Southeast
markets.
As the new environment has evolved, industry participants have
indicated a desire for greater standardization of pipeline tariffs. The
Company, responding to these concerns, filed with FERC in 1995 to increase the
level of standardization of the Company's four interstate pipelines' gas
tariffs to enhance the nationwide transportation of natural gas. PEPL and
Trunkline have begun to combine operations to provide standard operating
practices and services to customers. This consolidation will contribute to an
approximate 7% reduction in the Company's work force. The related cost of
termination benefits, to be recognized in the first quarter 1996, are expected
to be substantially offset by resulting savings throughout the remainder of
1996.
The Company plans to continue to pursue strategic opportunities that
emerge in the U.S. and internationally via additional joint ventures, expansion
projects and acquisitions in both the Natural Gas Transmission and the Energy
Services segments.
RESULTS OF OPERATIONS
The Company reported 1995 consolidated net income of $303.6 million, or $2.03
per share on 149.7 million average common shares outstanding. This compares
with consolidated net income in 1994 of $225.2 million, or $1.51 per share on
148.7 million shares, and $171.6 million, or $1.21 per share on 142.4 million
shares, in 1993.
The continued strong performance of the Natural Gas Transmission
segment and the successful integration of the PanEnergy Natural Gas operations
into the growing Energy Services segment helped the Company achieve a 35%
increase in net income in 1995 as compared to 1994.
OPERATING INCOME ANALYSIS
CONSOLIDATED OPERATING INCOME BY SEGMENT
<TABLE>
<CAPTION>
MILLIONS 1995 1994 1993
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Natural Gas Transmission
TETCO $294.1 $264.7 $181.9(1)
Algonquin 73.3 65.9 56.0
PEPL 143.9 151.1 124.8
Trunkline 45.6 47.7 53.3
---------------------------------
Total 556.9 529.4 416.0
---------------------------------
Energy Services
Field Services 80.6 49.2 57.9
Gas and Power Services 16.7 16.6 12.3
Crude Oil 8.8 9.0 3.0
---------------------------------
Total 106.1 74.8 73.2
---------------------------------
Parent, Other and Eliminations 5.7 (18.9)(2) 2.6
---------------------------------
Consolidated Operating Income $668.7 $585.3 $491.8
=========================================================================
</TABLE>
(1) Includes a $100 million charge reflecting TETCO's settlement
of Order 636 implementation and other issues.
(2) Includes nonrecurring merger costs of $16.2 million.
The rate of inflation in the United States has been relatively low in
1995 and recent years, and has not had a material impact on the Company. Under
the ratemaking process applicable to regulated portions of the Company's
business, recovery of plant costs through depreciation and the allowed return
on plant investment is limited to historical cost, which is significantly less
than current replacement cost.
NATURAL GAS TRANSMISSION
Operating income from the Natural Gas Transmission segment totaled $556.9
million in 1995, representing a $27.5 million increase from 1994 operating
income, which was $113.4 million higher than 1993 results.
This segment's revenues continued to decline due to the elimination of
merchant services during 1994. The resulting $177.9 million decrease in gross
sales revenue in 1995 as compared with 1994 was offset by a related reduction
in the cost of natural gas sold. Increases in transportation revenue have
resulted from expanded services and the recovery of eligible costs resulting
from the implementation of FERC Order 636 (transition costs).
TETCO, Algonquin, PEPL and Trunkline are subject to the accounting
requirements of Statement of Financial Accounting Standards (SFAS) No. 71,
"Accounting for the Effects of Certain Types of Regulation." Accordingly,
certain costs have been deferred as regulatory assets for amounts recoverable
from customers, including costs related to environmental matters, Order 636
transition, take-or-pay contracts, certain employee benefits and early
retirement of debt.
27
<PAGE> 3
TEXAS EASTERN TRANSMISSION CORPORATION
<TABLE>
<CAPTION>
MILLIONS 1995 1994 1993
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Transportation Revenue $774.2 $719.2 $574.3
--------------------------------
Sales Revenue - - 225.8
Gas Purchased - - 96.2
--------------------------------
Net Sales Revenue - - 129.6
Storage and Other Revenue 100.2 107.5 105.5
--------------------------------
TOTAL NET REVENUES 874.4 826.7 809.4
Operating Expenses 436.4 420.9 486.7
Depreciation and Amortization 143.9 141.1 140.8
--------------------------------
OPERATING INCOME $294.1 $264.7 $181.9
- -----------------------------------------------------------------------
VOLUMES (Bcf)*
Transports 1,192 1,155 1,045
Sales - - 33
--------------------------------
Total Deliveries 1,192 1,155 1,078
=======================================================================
</TABLE>
*Billion cubic feet
Operating income for TETCO increased $29.4 million in 1995 as compared
with 1994. Transportation revenue increased $55 million, or 8%, reflecting new
expansion projects, including ITP (Integrated Transportation Program), FTS-7
and FTS-8, which were placed in service in late 1994. Also contributing to the
increase were $43 million of higher transition costs recoveries, partially
offset by $16 million of lower PCB (polychlorinated biphenyl) cost recoveries.
These higher net cost recoveries of $27 million were offset by a corresponding
increase in operating expenses. Operating expenses in 1995 also included a $40
million charge for higher transition cost estimates, as well as a $33 million
reduction for lower-than-projected PCB cleanup costs incurred. Operating
expenses, excluding transition and PCB costs, declined primarily due to a $5
million charge to income in 1994 related to the Edison, New Jersey pipeline
rupture and cost-management initiatives in 1995.
Operating income increased $82.8 million in 1994 as compared with
1993. Operating income in 1993 included a charge of $100 million for the
FERC-approved settlement that resolved issues related primarily to Order 636
transition costs and bundled merchant services. The $17.3 million increase in
net revenues in 1994 compared with 1993 was primarily attributable to
transition cost recoveries, partially offset by a reduction in interruptible
transportation revenues. These transition cost recoveries were offset by
related increases in expenses in 1994.
ALGONQUIN GAS TRANSMISSION COMPANY
<TABLE>
<CAPTION>
MILLIONS 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Transportation Revenue $144.7 $132.0 $109.9
---------------------------------
Sales Revenue - - 59.6
Gas Purchased - - 46.8
---------------------------------
Net Sales Revenue - - 12.8
Storage and Other Revenue 7.4 12.4 13.0
---------------------------------
TOTAL NET REVENUES 152.1 144.4 135.7
Operating Expenses 51.3 54.5 56.9
Depreciation and Amortization 27.5 24.0 22.8
---------------------------------
OPERATING INCOME $ 73.3 $ 65.9 $ 56.0
- ------------------------------------------------------------------------
VOLUMES (Bcf)
Transports 322 279 236
Sales - - 2
---------------------------------
Total Deliveries 322 279 238
========================================================================
</TABLE>
Algonquin's operating income increased $7.4 million in 1995 compared
with 1994. Expansion projects, including ITP, as well as expanded services to
local distribution companies and an electric power generator contributed
approximately $9 million of additional income in 1995. This increase was
partially offset by lower income from resolutions of regulatory issues which
totaled $4 million in 1995, versus $8 million in 1994.
Algonquin's 1994 operating income rose $9.9 million from 1993. This
increase reflected an $8.7 million rise in net revenues including $8 million
related to the settlement of a prior-year rate case and certain other
regulatory issues. Net revenues generated from new incremental projects more
than offset revenue declines related to restructured services.
PANHANDLE EASTERN PIPE LINE COMPANY
<TABLE>
<CAPTION>
Millions 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Transportation Revenue $304.8 $315.3 $276.8
---------------------------------
Sales Revenue - - 98.7
Gas Purchased - - 42.7
---------------------------------
Net Sales Revenue - - 56.0
Storage and Other Revenue 66.9 72.4 54.8
---------------------------------
TOTAL NET REVENUES 371.7 387.7 387.6
Operating Expenses 193.1 206.5 228.9
Depreciation and Amortization 34.7 30.1 33.9
---------------------------------
OPERATING INCOME $143.9 $151.1 $124.8
- ------------------------------------------------------------------------
VOLUMES (Bcf)
Transports 659 620 581
Sales - - 22
---------------------------------
Total Deliveries 659 620 603
========================================================================
</TABLE>
28
<PAGE> 4
PEPL's operating income decreased $7.2 million in 1995 as compared
with 1994. The comparison for the year includes the effects of $20.4 million of
income recorded in 1995 for the resolution of certain regulatory matters,
offset by $34.5 million recorded in 1994 for similar resolutions. The sale of
gathering assets to an affiliated Field Services subsidiary in August 1995
resulted in lower revenues and expenses of approximately $11.4 million and
$10.2 million, respectively, as compared with 1994. Excluding the impact of
these items, PEPL's revenues from its core business were stable and earnings
improved due to lower operating expenses. Depreciation and amortization
increased due to a 1994 rate reduction amounting to $2.9 million and
depreciation on market-expansion projects.
PEPL's 1994 operating income increased $26.3 million over 1993,
reflecting increased firm transportation contracts (including several new
long-term contracts), the partial resolution of several prior-year regulatory
and gas supply issues, as well as reduced expenses. These improvements were
partially offset by the impact of the elimination of seasonal rates effective
May 1, 1993. Contributing to the transportation revenue increase in 1994 was
$21.1 million related to the partial resolution of two prior-year regulatory
proceedings. Operating expenses decreased primarily as a result of
cost-containment efforts and the 1994 reversal of $13.4 million of provisions
established for regulatory and gas supply matters that were partially resolved.
TRUNKLINE GAS COMPANY
<TABLE>
<CAPTION>
Millions 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Transportation Revenue $151.2 $166.2 $138.7
---------------------------------
Sales Revenue - 177.9 293.4
Gas Purchased - 177.9 238.6
---------------------------------
Net Sales Revenue - - 54.8
Storage and Other Revenue 8.9 9.9 10.0
---------------------------------
TOTAL NET REVENUES 160.1 176.1 203.5
Operating Expenses 92.1 106.8 128.5
Depreciation and Amortization 22.4 21.6 21.7
---------------------------------
OPERATING INCOME $ 45.6 $ 47.7 $ 53.3
- ------------------------------------------------------------------------
VOLUMES (Bcf)
Transports 499 531 536
Sales* - - 66
---------------------------------
Total Deliveries 499 531 602
========================================================================
</TABLE>
*Excludes 89 Bcf and 41 Bcf for 1994 and 1993, respectively, which are reported
as transports.
Operating income for Trunkline decreased $2.1 million in 1995 as
compared with 1994, primarily resulting from $4 million of revenues recorded in
1994 related to a contract settlement. Decreased transportation revenue, due to
lower volumes attributable to warmer weather during the first half of 1995, was
offset by lower operating costs. Sales revenue and associated gas purchased
costs declined $177.9 million as a result of the elimination of Trunkline's
merchant function in late 1994.
Operating income decreased $5.6 million in 1994 as compared with 1993,
primarily due to reduced interruptible transportation revenue and volumes in
the supply area. Trunkline's sales revenue diminished as a result of the
expiration of its unbundled sales contracts on October 31, 1994, as well as a
$15.5 million rate settlement benefit recognized in 1993. The effect of the
rate settlement was partially offset by a $13 million charge related to a
fixed-price gas sales contract which expired in 1994. During 1993, the Company
purchased natural gas futures, options and swaps to mitigate the financial
impacts of its unbundled sales contracts.
ENERGY SERVICES
Operating income for the Energy Services segment in 1995 was $106.1 million, a
42% increase over 1994 income of $74.8 million. Operating income in 1995
represented 16% of the Company's consolidated operating income, as compared
with 13% in 1994.
[BAR CHART]
In addition to providing gathering, processing and storage services,
this segment also markets natural gas and petroleum products and began
marketing electric power and providing various services to the electric power
industry in 1995. Marketing of natural gas and petroleum products generates
significant revenue.
RISK MANAGEMENT. The Company uses financial instruments to reduce its
exposure to market fluctuations in the price and transportation costs of
natural gas and petroleum products. The Company's market exposure arises from
inventory balances and fixed-price purchase and sale commitments that extend
for periods of up to 10 years which are entered into to support the Company's
operating activities. The weighted average life of the Company's price risk
portfolio was four months at December 31, 1995. The Company's general strategy
is to hedge price and location risk with futures, swaps and options; however,
net open positions in terms of price, volume and specified delivery point do
occur. In addition to hedging activities, the Company also engages in trading
of such instruments. During 1995 and 1994, the Company recognized gains of
$10.5 million and $0.7 million, respectively, from risk management activities.
The Company manages open positions with
29
<PAGE> 5
strict policies which limit its exposure to market risk and require reporting
potential financial exposure to management on a daily basis. These policies
include risk tolerance limits using statistically-weighted price movements to
calculate a daily earnings at risk (DEAR) as well as a total value at risk
(VAR) measurement.
New York Mercantile Exchange (Exchange) traded futures and option
contracts are guaranteed by the Exchange and have nominal credit risk. On all
other transactions, the Company is exposed to credit risk in the event of
nonperformance by the counterparties. For each counterparty, the Company
analyzes their financial condition prior to entering into an agreement,
establishes credit limits and monitors the appropriateness of these limits on
an ongoing basis. See Note 6 of the Notes to Consolidated Financial Statements.
FIELD SERVICES
<TABLE>
<CAPTION>
Millions 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $804.6 $730.1 $574.2
Products Purchased 598.6 551.5 407.6
---------------------------------
NET REVENUE 206.0 178.6 166.6
Operating Expenses 88.1 101.2 87.4
Depreciation and Amortization 37.3 28.2 21.3
---------------------------------
OPERATING INCOME $ 80.6 $ 49.2 $ 57.9
- ------------------------------------------------------------------------
VOLUMES
Natural Gas Gathered/
Processed (Bcf/d)(1) 1.9 1.6 1.4
NGL Production (MBbl/d)(2) 54.8 49.4 42.0
========================================================================
</TABLE>
(1) Billion cubic feet per day
(2) Thousand barrels per day
Field Services' operating income increased $31.4 million, or 64%, for
1995 as compared with 1994. Net revenues increased $27.4 million, or 15%,
resulting from higher natural gas processing margins, gathering volumes and
liquids production. Gas processing margins improved due to lower replacement
gas prices, which declined approximately 21% in 1995. NGL average prices were
up 9% in 1995 which also contributed to higher margins. Gas volumes gathered
and processed increased 19% due to acquisitions and additional well
connections. NGL production increased 11%, primarily resulting from
acquisitions and higher efficiencies at the National Helium Corporation
(National Helium) plant. Operating expenses were more than $13 million lower in
1995, primarily benefitting from cost-saving efficiencies from merging certain
field operations in late 1994 and early 1995.
Operating income for Field Services was down $8.7 million in 1994 from
1993. Higher net revenues from increased volumes were offset by higher
depreciation and operating expenses resulting from acquisitions. The rise in
volumes related to a 14% growth in natural gas gathered and processed and
higher NGL production. NGL production in 1994 included a full year of
operations at the Oklahoma Hillsboro plant as well as increases at the National
Helium plant and the Weld County, Colorado facility. These increases were
partially offset by lower NGL prices in 1994 as compared with 1993.
GAS AND POWER SERVICES
<TABLE>
<CAPTION>
MILLIONS 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $1,876.5 $1,644.3 $1,323.0
Gas Purchased 1,827.3 1,606.4 1,294.7
---------------------------------
NET REVENUE 49.2 37.9 28.3
Operating Expenses 30.1 18.3 13.4
Depreciation and Amortization 2.4 3.0 2.6
---------------------------------
OPERATING INCOME $ 16.7 $ 16.6 $ 12.3
- ------------------------------------------------------------------------
Natural Gas Marketed (Bcf/d) 3.5 2.7 2.1
Gas Unit Margin ($/Mcf)* .039 .037 .037
========================================================================
</TABLE>
* Dollars per thousand cubic feet
Gas and Power Services' operating income was $16.7 million in 1995
versus $16.6 million in 1994. Net revenues increased $11.3 million as a result
of a 30% increase in marketed volumes, partly resulting from the Continental
acquisition. Including risk management gains, overall gas unit margins improved
slightly to $0.039 per Mcf from $0.037 per Mcf in 1994. The net revenue
increase was offset by higher operating expenses attributable to expanded
operations, including start-up costs for the electric power marketing area in
1995.
Operating income increased $4.3 million in 1994 from 1993 as volumes
aggregated and marketed rose 29%. The growth in volumes was attributable to
increased activity in the Midwest, as well as the expansion of certain acquired
operations in the western United States and Canada.
CRUDE OIL
<TABLE>
<CAPTION>
MILLIONS 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $978.8 $580.3 $555.4
Products Purchased 953.8 560.1 545.4
---------------------------------
NET REVENUE 25.0 20.2 10.0
Operating Expenses 13.2 9.1 6.2
Depreciation and Amortization 3.0 2.1 0.8
---------------------------------
OPERATING INCOME $ 8.8 $ 9.0 $ 3.0
- ------------------------------------------------------------------------
Crude Oil Pipeline
Volumes (MBbl/d) 76.2 52.0 32.5
NGL Pipeline
Volumes (MBbl/d) 16.5 16.0 2.8
========================================================================
</TABLE>
Crude Oil's operating income decreased slightly to $8.8 million for
1995. Higher crude oil trading and pipeline volumes contributed to a $398.5
million increase in gross revenues and a $4.8 million, or 24%, increase in net
revenues, which was offset by higher expenses.
30
<PAGE> 6
Operating income increased $6 million in 1994 from 1993 as a result of
higher crude oil unit margins and pipeline volumes in 1994. NGL pipeline
volumes increased to 16 MBbl/d from 2.8 MBbl/d in 1993 primarily due to the
acquisition of Dean Pipeline, an NGL transportation system in South Texas, in
November 1993. The higher net revenues in 1994 were partially offset by higher
expenses.
PARENT, OTHER AND ELIMINATIONS
LNG PROJECT. Operating income for the LNG Project increased $12
million comparing 1995 with 1994. A $10.4 million provision reversal recorded
in 1995 and higher liquefied natural gas (LNG) tanker charter revenues
contributed to the increase. Both of the LNG tankers are under charters that
extend through the first quarter 1996.
Operating income for the LNG Project decreased $6.6 million in 1994
compared to 1993. This decrease was primarily the result of lower LNG tanker
charter revenues.
OTHER. Operating income in 1995 for other activities improved from
1994 due to the $16.2 million non-recurring charge recorded in 1994 for the
PanEnergy Natural Gas merger, partially offset by higher expenses in 1995 for
PanEnergy Information Services. Included in the amounts discussed above are
intercompany transactions that do not impact consolidated operating income.
OTHER INCOME AND DEDUCTIONS. The increase of $27.9 million in net
other income and deductions in 1995 compared with 1994 was primarily the result
of higher gains on sales of assets and increased earnings from investments in
affiliates in 1995. Net other income and deductions decreased $34.9 million in
1994 as compared with 1993 primarily from a gain on the sale of certain assets
recorded in 1993.
A summary of equity in earnings of unconsolidated affiliates follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
Millions 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
National Methanol Company $22.5 $26.2 $ 3.3
Midland Cogeneration Venture 11.6 2.8 (1.6)
Northern Border Partners, L.P. 7.2 4.5 13.9
TEPPCO Partners, L.P. 6.4 3.6 0.8
Other affiliates 2.9 3.8 (0.3)
---------------------------------
Total $50.6 $40.9 $16.1
========================================================================
</TABLE>
The increase in earnings from investments in affiliates in 1995 was
primarily attributable to an $8.8 million increase in earnings from Midland
Cogeneration Venture resulting from higher revenue from increased capacity
availability and lower fuel costs. Equity in earnings from National Methanol
Company (National Methanol) decreased $3.7 million reflecting lower average
methanol margins, partially offset by a full year's sales of MTBE (methyl
tertiary butyl ether) in 1995, versus four months' sales in 1994. Methanol
margins, which increased throughout 1994 and the first quarter of 1995,
declined during the remainder of 1995, with fourth quarter 1995 margins 29%
lower than the fourth quarter of 1994.
The improvement in net other income and deductions in 1995 also
includes an $8.1 million gain resulting from the sale of the Company's
investment in Seagull Shoreline System in the third quarter 1995, as well as
the 1994 write-off of $3.8 million of costs related to the Liberty Pipeline
Project.
The decrease of $34.9 million in net other income in 1994 compared
with 1993 was primarily the result of a $48.2 million gain on the sale of a
partial interest in Northern Border Partners, L.P. (Northern Border) in 1993
and resulting lower equity in earnings from Northern Border in 1994. In
addition, 1994 results include the write-off of costs expended on the Liberty
Pipeline Project. Partially offsetting the declines were $23 million in higher
earnings from National Methanol, reflecting higher methanol margins during
1994.
INTEREST EXPENSE. Interest expense in 1995 decreased slightly compared
with 1994 primarily as a result of lower interest on rate refunds, partially
offset by higher average debt balances outstanding in 1995.
[BAR CHART]
Consolidated interest expense decreased $37.5 million in 1994 compared
with 1993. This reduction reflected the effects of lower interest rates and
reduced average debt balances outstanding between 1994 and 1993. Proceeds from
the sale of assets and common stock were used for the early retirement of four
issues of relatively high-interest debt in the last nine months of 1993.
INCOME TAX. The effective tax rates for 1995, 1994 and 1993 differed
from the statutory federal income tax rates primarily because of the effect of
state income taxes.
31
<PAGE> 7
CAPITAL RESOURCES, LIQUIDITY AND FINANCIAL POSITION
OPERATING CASH FLOW
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
MILLIONS 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Net Cash Flows Provided by
Operating Activities $573.1 $448.0 $769.5
- ------------------------------------------------------------------------
</TABLE>
Operating cash flows increased $125.1 million from 1994 to 1995. This
increase primarily reflects higher 1995 earnings as well as lower cash
requirements for transition cost payments in excess of recoveries. Increases in
accounts receivable, related to higher levels of gas marketing activities, were
mostly offset by corresponding increases in accounts payable.
Operating cash flows decreased $321.5 million from 1993 to 1994. This
decrease reflected the 1993 sales of inventory and $173.5 million of LNG
project settlement receivables, along with net cash outflows in 1994 related to
transition cost payments and recoveries. These decreases were partially offset
by lower interest costs in 1994.
ORDER 636 TRANSITION COSTS. With implementation of Order 636 and the
elimination of pipeline merchant services, the Company's interstate natural gas
pipelines are incurring certain costs related to the transition, primarily
TETCO's gas purchase contract commitments. At December 31, 1995, TETCO's gross
commitments under gas purchase contracts that do not contain market-sensitive
pricing provisions were approximately $160 million, $115 million, $60 million
and $25 million for the years 1996 through 1999, respectively, with no
significant amounts thereafter. These estimates reflect significant assumptions
regarding deliverability and natural gas prices.
On August 1, 1994, TETCO implemented a FERC-approved settlement that
resolved regulatory issues related primarily to Order 636 transition costs and
a number of other issues related to services prior to Order 636. In 1994, TETCO
refunded $84 million to customers pursuant to the settlement. TETCO's final and
nonappealable settlement provides for the recovery of certain transition costs
through volumetric and reservation charges through 2002 and beyond, if
necessary. Pursuant to the settlement, TETCO will absorb a certain portion of
the transition costs, the amount of which continues to be subject to change
dependent upon natural gas prices and deliverability levels. In 1993, the
Company established an additional provision of $100 million ($60.2 million
after tax) to reflect the impact of the settlement. In the fourth quarter
1995, based upon producers' discoveries of additional natural gas reserves,
TETCO increased its estimated liabilities for transition costs by $125.8
million. Under the terms of the existing settlement, regulatory assets were
increased by $85.8 million and TETCO recognized a $40 million charge to
operating expenses ($26 million after tax). PEPL's transition cost recoveries,
which are subject to certain challenges pending before FERC, will occur through
1998.
At December 31, 1995 and 1994, the Company's interstate pipelines had
recorded approximately $70 million and $310 million (1995), and $35 million and
$300 million (1994) of current and long-term regulatory assets, respectively,
representing transition costs incurred or estimated to be incurred that will be
recovered. At December 31, 1995 and 1994, the Company had recorded estimated
current and long-term liabilities related to Order 636 transition costs of
approximately $125 million and $165 million (1995), and $125 million and $105
million (1994), respectively.
During the next two years, above-market gas purchase contract payments
by TETCO are expected to exceed transition cost collections from customers. Net
cash receipts related to transition costs are expected to occur in periods
thereafter. Cash requirements related to transition costs will be funded by
cash from operations and/or available credit facilities.
The Company believes the exposure associated with gas purchase
contract commitments and the termination of the Company's pipeline merchant
services is substantially mitigated by transition cost recoveries pursuant to
TETCO's settlement, Order 636 and other mechanisms.
ENVIRONMENTAL MATTERS. TETCO is currently conducting PCB assessment
and cleanup programs at certain of its compressor station sites under
conditions stipulated by a U.S. Consent Decree and agreements reached with
certain states. Cleanup work provided for by the Consent Decree and state
agency agreements is expected to continue until 1998. Groundwater monitoring
activities will continue beyond 1998. These programs are not expected to
interrupt or diminish TETCO's operational ability to deliver natural gas to
customers.
At December 31, 1995 and 1994, TETCO had current and long-term
liabilities recorded of $44.9 million and $168.3 million (1995) and $56.4
million and $289.1 million (1994), respectively, for remaining estimated
cleanup costs. These cost estimates represent gross cleanup costs expected to
be incurred by TETCO, have not been discounted or reduced by customer
recoveries and do not include fines, penalties or third-party claims. Estimated
liabilities for remaining PCB cleanup costs were reduced by $77.6 million in
the fourth quarter 1995 as a result of lower-than-projected cleanup costs
incurred on completed sites. TETCO is recovering 57.5% of cleanup costs in
rates pursuant to a stipulation and agreement approved by FERC in 1992. As a
result of the reduction in estimated cleanup costs, the related regulatory
assets were reduced $44.6 million. TETCO's share of the cleanup estimate was
lowered which resulted in a $33 million decrease to operating expenses ($21.5
million after tax). At December 31, 1995 and 1994, TETCO had current and
long-term regulatory assets
32
<PAGE> 8
recorded of $17 million and $101.7 million (1995) and $18.6 million and $177.1
million (1994), respectively, representing costs to be recovered from
customers.
In addition, the Company has identified environmental contamination at
up to 53 sites on the PEPL and Trunkline systems and is undertaking cleanup
programs at these sites. The contamination resulted from the past use of
lubricants containing PCBs and the prior use of wastewater collection
facilities and other on-site disposal areas. Soil and sediment testing, to
date, has detected no significant off-site contamination. The Company has
communicated with the Environmental Protection Agency and appropriate state
regulatory agencies on these matters. In August 1995, Trunkline entered into a
consent order under a cleanup program with the Tennessee Department of
Environment and Conservation for the cleanup of its Tennessee facility.
Cleanups in other states by PEPL and Trunkline are also proceeding. The
environmental cleanup programs are expected to continue until 2002.
At December 31, 1995 and 1994, the Company had undiscounted
liabilities recorded of $68.9 million and $70 million, respectively, relating
to PEPL and Trunkline PCB, wastewater and disposal area cleanup programs and
had regulatory assets recorded of $79.2 million and $82.4 million,
respectively, representing costs to be recovered from customers.
The Company believes it will be able to fund the TETCO, PEPL and
Trunkline PCB and other cleanup costs from recoveries from customers and other
cash flows.
LITIGATION. In connection with a rupture and fire that occurred on
TETCO's 36-inch natural gas pipeline on March 23, 1994 in Edison, New Jersey,
claims have been made and numerous lawsuits have been filed in the Superior
Court of New Jersey, Middlesex County against TETCO and other private and
governmental entities by or on behalf of hundreds of individuals and general
businesses. These claimants seek compensatory damages for personal injuries
and/or property losses, as well as punitive damages. The property insurers of
an apartment complex adjacent to the asphalt plant where the rupture occurred
also have filed suits against TETCO and other defendants in Superior Court
seeking to recover amounts paid under pertinent policies of insurance. Quality
Materials, Inc., the owner of the asphalt plant, has filed suit in the U.S.
District Court for the District of New Jersey against TETCO seeking to recover
unspecified property damages, lost income and punitive damages. TETCO has filed
a counterclaim against Quality Materials, Inc.
The findings of an investigation of the incident by the Company and
the National Transportation Safety Board (NTSB) indicate third-party damage to
be the cause of the rupture. Additionally, an NTSB report found that TETCO's
pipeline operations met or exceeded federal safety regulations. The Company
recorded a $5 million after-tax charge in 1994 for costs related to this
incident that are not recoverable under the Company's insurance policies.
On August 30, 1995, two plaintiffs filed a lawsuit with class action
allegations in the 58th Judicial District Court, Jefferson County, Texas,
against PEC, Texas Eastern Corporation (TEC) and TETCO, among other defendants.
Plaintiffs seek recovery of compensatory and punitive damages, in unspecified
amounts, for personal injuries and property damage resulting from alleged
exposure to PCBs.
Additionally, TETCO, as well as certain other PEC subsidiaries in some
of the cases, are defendants in several other private plaintiff suits in
various courts. These suits seek relief for actual and punitive damages that
allegedly resulted from the release of PCBs and other hazardous substances in
violation of federal and state laws. The Company is defending itself vigorously
in all the above suits.
OTHER MATTERS. The U.S. Department of the Interior announced its
intention to seek additional royalties from gas producers as a result of
payments received by such producers in connection with past take-or-pay
settlements, and buyouts and buydowns of gas sales contracts with natural gas
pipelines. The Company's pipelines, with respect to certain producer contract
settlements, may be contractually required to reimburse or, in some instances,
to indemnify producers against such royalty claims. The potential liability of
the producers to the government and of the pipelines to the producers involves
complex issues of law and fact which are likely to take a substantial period of
time to resolve. If the Company's pipelines ultimately have to reimburse or
indemnify the producers, the Company's pipelines will file with FERC to recover
a portion of these costs from pipeline customers.
The Company expects to generate sufficient future taxable income from
operations to fully utilize deferred tax assets, net of valuation allowance,
including full utilization of the investment tax credit (ITC) carryforward in
1996. However, if needed, the Company could implement tax-planning strategies
to accelerate approximately $140 million of taxable income prior to expiration
of the ITC. The statutory expiration of the ITC accumulated as of December 31,
1995 is as follows: 1997 - $8.9 million; 1998 - $5.9 million; thereafter - $9.7
million.
The carrying value of LNG project assets is expected to be recovered
through estimated future cash flows. Current estimates of future cash flows
are based on significant business relationships and assumptions of future
natural gas prices, supply availability and demand for LNG, which are subject
to change.
The Company believes the regulatory, environmental and legal issues
discussed above will not have a material adverse effect on the Company's
consolidated results of operations, financial position or liquidity.
33
<PAGE> 9
INVESTING CASH FLOW
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
MILLIONS 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Net Cash Flows Used in
Investing Activities $419.7 $584.0 $156.1
- ------------------------------------------------------------------------
</TABLE>
Cash flows used in investing activities decreased in 1995 by $164.3
million as compared with 1994 primarily resulting from $122.2 million of lower
capital expenditures in 1995 and decreased tax payments for past asset sales.
Compared with 1994, net cash used by investing activities was
significantly lower in 1993 as a result of $196.9 million of lower capital and
investment expenditures in 1993, approximately $147 million of cash proceeds
received in 1993 from the sale of a partial interest in Northern Border and $40
million from the sale of the Wattenberg system.
CAPITAL AND INVESTMENT EXPENDITURES - 1995. Capital and investment
expenditures totaled $442.3 million in 1995, compared with $563.7 million for
1994. Market-expansion projects represented approximately 60% of 1995 total
expenditures. Expenditures in 1995 included the acquisition of a natural gas
gathering and processing system in central Colorado for approximately $60
million. Expenditures in 1994 included the purchase of certain intrastate
natural gas pipeline, storage and processing facilities in south Texas for more
than $100 million.
[BAR CHART]
CAPITAL AND INVESTMENT EXPENDITURES - 1996 AND BEYOND. The Company
currently expects to invest approximately $400 million in 1996 capital and
investment expenditures, with approximately 60% for Natural Gas Transmission
and 30% for Energy Services, with the remainder budgeted for international and
other development projects. The Company's 1996 base expenditure plans include
approximately $200 million for market-expansion projects by the Natural Gas
Transmission and Energy Services segments. Projects are also planned which
would expand the Company's international business, including a proposed joint
pipeline project along with several partners to access natural gas reserves
located near offshore Nova Scotia. This project, the Maritimes and Northeast
Pipeline Project, is planned to be in full operation in 1999. The Company,
along with five other international energy companies, is also participating in
the development of an integrated gas and power project to be located near
Aguaytia, Peru.
Expenditures related to the proposed transactions with Mobil announced
in January 1996 are not included in the aforementioned budgeted expenditures
and percentages.
The Company has submitted plans to the appropriate state and/or
federal agencies in order to fully comply with the Clean Air Act Amendments of
1990 (the Amendments). While regulatory review of these plans is currently
underway, the Company estimates that remaining capital expenditures necessary
to comply with the requirements of the Amendments and associated regulations
total approximately $20 million. Management believes any expenditures necessary
will be eligible for recovery in rates.
The Company formed a joint venture in 1994 with a subsidiary of
Western Gas Resources, Inc. that will provide gathering, processing and
marketing services for natural gas producers. Each partner will contribute to
the venture certain pipeline and gas processing facilities within Oklahoma.
FERC approved the transfer in 1995, subject to certain conditions of which the
Company has requested clarification.
ASSET SALES. The Company sold its investment in the Seagull Shoreline
System in 1995 for approximately $13 million. In addition, the Company has
received approval from FERC to sell certain gathering assets to Anadarko
Gathering Company for approximately $23 million. The sale is expected to be
completed in the first quarter 1996.
In 1990, the Internal Revenue Service (IRS) issued regulations which
disallow for tax purposes losses incurred in the Company's 1989 sales of
certain TEC assets. Consequently, the Company established a provision in 1990
for this and certain other issues, resulting in an increase in goodwill and the
deferred income tax liability. Following further discussions with the IRS, the
Company in 1994 revised its estimates with respect to the disallowed loss issue
and in 1995 with respect to other issues. As a result, the Company reduced the
related goodwill and deferred income tax liability by approximately $200
million and $100 million in 1994 and 1995, respectively. Investing cash flows
for 1995 and 1994 include payments by the Company of $12 million and $41
million, respectively, for prior year tax liabilities primarily related to
asset sales.
OTHER. The Company has formed a limited liability corporation, Altra
Energy Technologies L.L.C., with Williams Companies, Inc. that will provide
electronic information products and services for the energy industry. The
Company contributed the assets of one of its subsidiaries to the new venture in
January 1996.
34
<PAGE> 10
FINANCING CASH FLOW
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
MILLIONS 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Net Cash Flows Provided by (Used in)
Financing Activities $(135.9) $208.3 $(578.0)
- ------------------------------------------------------------------------
</TABLE>
Cash flows provided by financing activities decreased $344.2 million
from 1994 to 1995. Debt issuances in 1995, which include $200 million of
long-term debt and a $145 million net increase in short-term bank borrowings,
were $210.6 million lower than 1994. Debt retirements in 1995 increased $35.1
million and included repayment of $185 million of the Company's bank credit
facility as well as early redemption of $125 million of PEPL's 9-7/8%
debentures.
Cash flows provided by financing activities increased $786.3 million
from 1993 to 1994. During 1993, significant debt retirements were made,
including early redemption of $500 million of high-interest rate long-term debt
and retirement of amounts outstanding under revolving credit agreements.
Proceeds from stock issuances, asset and receivable sales, and other cash
available were used to retire this debt.
DEBT AND CREDIT FACILITIES. PEC entered into two new variable-rate,
bank credit agreements, dated January 31, 1996, that permit PEC to borrow up to
$400 million under a five-year facility and $400 million under a 364-day
facility. In conjunction with these new agreements, PEC canceled its previous
$600 million agreement and TETCO and PEPL canceled their combined $200 million
agreements.
[BAR CHART]
COMMON STOCKHOLDERS' EQUITY. In 1993, PEC sold 10 million shares of
common stock priced at $21.25 per share, resulting in net proceeds to the
Company of $204.5 million, which was applied toward the early redemption of
debt.
In the determination of the amount of dividends to be paid to common
stockholders, management and the board of directors regularly review, among
other factors, the Company's projected operating results, cash flows and
financial position. The board of directors increased the quarterly dividend
from $0.21 to $0.225 per common share effective with the 1995 first quarter.
Under the most restrictive covenants contained in the Company's debt
agreements, $899.9 million of PEC's consolidated common stockholders' equity
was available for the payment of dividends at December 31, 1995.
FINANCING REQUIREMENTS. Dividends and debt repayments for the next
year, along with operating and investing requirements, are expected to be
funded by cash from operations, debt issuances, periodic sales of trade
receivables with limited recourse and/or available credit facilities. As of the
date of this report, PEC, TETCO and PEPL each have effective shelf registration
statements with the Securities and Exchange Commission for the issuance of $100
million of unsecured debt securities.
ACCOUNTING STANDARDS
SFAS No. 123, "Accounting for Stock-Based Compensation," was issued in October
1995. This standard addresses the timing and measurement of stock-based
compensation expense. The Company has elected to retain the approach of
Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued
to Employees," (the intrinsic value method) for recognizing stock-based expense
in the consolidated financial statements. The Company will adopt SFAS No. 123
in 1996 with respect to the disclosure requirements set forth therein for
companies retaining the intrinsic value approach of APB No. 25.
35
<PAGE> 11
PANENERGY CORP AND SUBSIDIARIES
REPORT OF MANAGEMENT
The management of PanEnergy Corp and subsidiary companies (the Company)
acknowledges its responsibility for the integrity of the financial statements
and related information contained in this Annual Report. The consolidated
financial statements have been prepared in conformity with generally accepted
accounting principles appropriate to our business activities.
The management of the Company also acknowledges its responsibility for
maintaining adequate internal controls. Accordingly, accounting systems and
related internal controls are maintained to provide reasonable assurance that
assets are protected from loss or unauthorized use, that transactions and
events are recorded properly and that adequate accounting records are
maintained. The Corporate Auditing Department, which is independent of
operational management, monitors the design and implementation of internal
control systems and compliance with Company policies.
The Company's independent auditors, KPMG Peat Marwick LLP, have
audited the consolidated financial statements. Their audit was conducted in
accordance with generally accepted auditing standards, which includes the
consideration of the Company's internal controls to the extent necessary to
form an independent opinion on the consolidated financial statements prepared
by management.
The Company has established statements of corporate policy relating to
conflict of interest and conduct of business and receives from appropriate
employees confirmation of compliance with these policies.
The Audit Committee of the Board of Directors, which is composed of
Directors who are not officers or employees, meets at least three times
annually to review the work of the independent auditors, management and the
Corporate Auditing Department, and to consider management's performance of its
financial reporting responsibility. The independent auditors, as well as the
director of the Corporate Auditing Department, are afforded an opportunity to
present to the Audit Committee their opinions in the absence of management
personnel. The Audit Committee reports regularly to the Board of Directors the
results of its meetings and its recommendations, including that for the
selection of the independent auditors.
/S/ PAUL ANDERSON
Paul Anderson
President and Chief Executive Officer
/s/ PAUL F. FERGUSON, JR.
Paul F. Ferguson, Jr.
Senior Vice President and
Chief Financial Officer
KPMG PEAT MARWICK LLP, CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS' REPORT
The Board of Directors
PanEnergy Corp
(formerly Panhandle Eastern Corporation-See Note 1):
We have audited the accompanying consolidated balance sheets of PanEnergy Corp
and Subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of income, common stockholders' equity and cash flows for each of
the years in the three-year period ended December 31, 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
PanEnergy Corp and Subsidiaries at December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995 in conformity with generally accepted
accounting principles.
/s/ KPMG PEAT MARWICK LLP
Houston, Texas
January 23, 1996
36
<PAGE> 12
PANENERGY CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------------------
MILLIONS, EXCEPT PER SHARE AMOUNTS 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING Sales of natural gas and petroleum products $3,397.2 $3,044.0 $3,046.7
REVENUES Transportation and storage of natural gas 1,500.6 1,432.8 1,181.8
Other 69.7 108.3 73.5
------------------------------------------
OPERATING REVENUES (Note 4) 4,967.5 4,585.1 4,302.0
- -----------------------------------------------------------------------------------------------------------------------
COSTS AND Natural gas and petroleum products purchased 3,131.2 2,829.4 2,575.6
EXPENSES Operating and maintenance (Note 4) 598.4 570.6 663.8
General and administrative (Note 2) 207.0 258.8 237.1
Depreciation and amortization (Note 9) 279.0 257.0 250.8
Miscellaneous taxes 83.2 84.0 82.9
------------------------------------------
Total 4,298.8 3,999.8 3,810.2
------------------------------------------
OPERATING INCOME 668.7 585.3 491.8
- -----------------------------------------------------------------------------------------------------------------------
OTHER INCOME Equity in earnings of unconsolidated affiliates (Note 8) 50.6 40.9 16.1
AND DEDUCTIONS Gains (losses) on sales of assets, net (Notes 6 and 8) 8.7 (4.3) 42.4
Interest and miscellaneous income 21.0 21.1 26.9
Miscellaneous deductions (6.1) (11.4) (4.2)
------------------------------------------
Total 74.2 46.3 81.2
------------------------------------------
GROSS INCOME 742.9 631.6 573.0
- -----------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE Interest on long-term debt (Note 10) 225.0 218.3 252.1
AND INCOME TAX Interest on rate refund provisions (Note 4) 5.0 12.3 7.9
Other interest 11.5 14.4 22.5
------------------------------------------
Total 241.5 245.0 282.5
------------------------------------------
INCOME BEFORE INCOME TAX 501.4 386.6 290.5
Income Tax (Note 5) 197.8 161.4 118.9
------------------------------------------
NET INCOME $ 303.6 $ 225.2 $ 171.6
=======================================================================================================================
=======================================================================================================================
COMMON SHARES Average common shares outstanding (Note 12) 149.7 148.7 142.4
Earnings per common share $ 2.03 $ 1.51 $ 1.21
=======================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
37
<PAGE> 13
PANENERGY CORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET-ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------
MILLIONS 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CURRENT ASSETS Cash and cash equivalents $ 50.8 $ 33.3
Accounts and notes receivable (Note 6)
Customers 487.7 349.4
Other 17.4 19.2
Inventory and supplies (Note 7) 135.8 124.1
Current deferred income tax (Note 5) 80.8 78.4
Other (Notes 4, 7 and 13) 239.8 206.8
---------------------------
Total 1,012.3 811.2
- -----------------------------------------------------------------------------------------------------------------------
INVESTMENTS Affiliates 164.3 160.1
Other 65.8 72.7
---------------------------
Total (Note 8) 230.1 232.8
- -----------------------------------------------------------------------------------------------------------------------
PLANT, PROPERTY Original cost 8,400.7 8,039.9
AND EQUIPMENT Accumulated depreciation and amortization (3,250.9) (3,032.1)
---------------------------
Net plant, property and equipment (Note 9) 5,149.8 5,007.8
- -----------------------------------------------------------------------------------------------------------------------
DEFERRED CHARGES Goodwill, net (Notes 1 and 5) 239.7 342.4
Prepaid pension (Note 15) 259.3 239.8
Other (Notes 1, 4 and 13) 736.1 873.5
---------------------------
Total 1,235.1 1,455.7
- -----------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $7,627.3 $7,507.5
=======================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
38
<PAGE> 14
PANENERGY CORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET-LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------------
MILLIONS 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CURRENT LIABILITIES Long-term debt due within one year (Note 10) $ 179.6 $ 4.1
Notes payable 145.0 -
Accounts payable 391.2 349.4
Rate refund provisions (Note 4) 53.6 60.2
Accrued interest 69.1 65.0
Accrued wages and benefits 64.7 61.2
Taxes payable (Note 5) 65.0 53.8
Other (Notes 4, 7 and 13) 355.2 352.4
----------------------------------
Total 1,323.4 946.1
- -----------------------------------------------------------------------------------------------------------------------
DEFERRED LIABILITIES Deferred income tax (Note 5) 1,182.9 1,184.5
AND CREDITS Other (Notes 4 and 13) 802.1 978.0
----------------------------------
Total 1,985.0 2,162.5
- -----------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT Notes payable 1,244.2 1,417.3
Debentures 519.4 618.4
Revenue bonds 328.0 328.0
----------------------------------
Total (Note 10) 2,091.6 2,363.7
- -----------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND
CONTINGENT LIABILITIES (Notes 4, 5, 6, 8, 11, 13, 14 and 15)
- -----------------------------------------------------------------------------------------------------------------------
COMMON STOCKHOLDERS' Common stock, 150.2 million (1995) and 149.1 million (1994)
EQUITY shares issued and outstanding, 300 million shares authorized,
$1 par value per share 150.2 149.1
Paid-in capital 2,219.7 2,199.8
Retained earnings (deficit) (142.6) (313.7)
----------------------------------
Total (Note 12) 2,227.3 2,035.2
- -----------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,627.3 $ 7,507.5
=======================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
39
<PAGE> 15
PANENERGY CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMMON STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------------------
MILLIONS, EXCEPT PER SHARE AMOUNTS 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCK Balance at beginning of year $ 149.1 $ 147.6 $ 135.7
Sale of stock - - 10.0
Stock issued for purchase of assets 0.1 0.5 -
Dividend reinvestment and employee stock plans 0.1 0.6 1.3
Stock option plans and awards 0.9 0.4 0.7
Retirement of stock - - (0.1)
----------------------------------------
BALANCE AT END OF YEAR (Note 12) $ 150.2 $ 149.1 $ 147.6
- ------------------------------------------------------------------------------------------------------------------------
PAID-IN CAPITAL Balance at beginning of year $ 2,199.8 $ 2,168.2 $1,936.2
Excess of proceeds over par value of common stock
Sale of stock - - 194.5
Stock issued for purchase of assets 2.4 9.5 -
Dividend reinvestment and employee stock plans 0.4 14.3 28.6
Stock option plans and awards 16.6 6.5 9.7
Unearned compensation 0.5 1.3 (1.5)
Retirement of stock - - (2.0)
Other items - - 2.7
----------------------------------------
BALANCE AT END OF YEAR (Note 12) $ 2,219.7 $ 2,199.8 $2,168.2
- ------------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS Balance at beginning of year $ (313.7) $ (436.4) $ (515.1)
(DEFICIT) Net income 303.6 225.2 171.6
Conform fiscal year end of PanEnergy Natural Gas - 0.5 -
Common stock dividends paid, $0.885, $0.84 and $0.80
in 1995, 1994 and 1993, respectively (132.5) (103.0) (92.9)
----------------------------------------
BALANCE AT END OF YEAR (Note 12) $ (142.6) $ (313.7) $ (436.4)
- ------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKHOLDERS' EQUITY $ 2,227.3 $ 2,035.2 $1,879.4
========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
40
<PAGE> 16
PANENERGY CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------------------
MILLIONS 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING Net income $ 303.6 $ 225.2 $171.6
ACTIVITIES Adjustments to reconcile net income to operating
cash flows-
Depreciation and amortization 279.0 257.0 250.8
Deferred income tax expense 109.2 114.8 15.2
Earnings of unconsolidated affiliates, net of
distributions (7.9) (29.1) (1.8)
Liquefied natural gas project settlement - 0.5 194.7
Order 636 settlement provision - - 100.0
Gain on sale of investments, net (8.1) - (49.8)
Net pension benefit (19.5) (20.0) (17.2)
Other non-cash items in net income (20.7) (17.3) 8.5
Net change in operating assets
and liabilities (detail below) (62.5) (83.1) 97.5
-----------------------------------
NET CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES 573.1 448.0 769.5
- ------------------------------------------------------------------------------------------------------------------------
INVESTING Capital expenditures (433.1) (555.3) (366.8)
ACTIVITIES Investment expenditures (9.2) (8.4) -
Other investment decreases (increases) 7.7 (36.3) 161.6
Property sales, retirements and other 14.9 16.0 49.1
-----------------------------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (419.7) (584.0) (156.1)
- ------------------------------------------------------------------------------------------------------------------------
FINANCING Retirement of debt (314.1) (279.0) (991.0)
ACTIVITIES Issuance of debt 200.0 574.0 298.3
Net increase (decrease) in notes payable 145.0 (18.4) (21.1)
Common stock issuance 16.5 17.6 235.1
Dividends paid (132.5) (103.0) (92.9)
Other (50.8) 17.1 (6.4)
-----------------------------------
NET CASH FLOWS PROVIDED BY (USED IN)
FINANCING ACTIVITIES (135.9) 208.3 (578.0)
- ------------------------------------------------------------------------------------------------------------------------
NET CHANGE IN CASH Increase in cash and cash equivalents 17.5 72.3 35.4
Cash flows of PanEnergy Natural Gas
for the three months ended December 31, 1994 - (116.6) -
Cash and cash equivalents, beginning of year 33.3 77.6 42.2
-----------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 50.8 $ 33.3 $ 77.6
========================================================================================================================
NET CHANGE IN OTHER Accounts and notes receivable $(149.2) $ 58.9 $ 19.5
OPERATING ASSETS Inventory and supplies (11.7) 4.4 86.9
AND LIABILITIES Other current assets 92.7 116.4 24.4
Rate refund provisions 14.1 35.0 (18.8)
Accounts payable 89.0 (71.3) (5.1)
Other current liabilities (8.5) (105.0) (42.5)
Transition cost recoveries (payments), net (85.2) (104.9) 65.2
Other deferred charges and liabilities, net (3.7) (16.6) (32.1)
-----------------------------------
Total $ (62.5) $ (83.1) $ 97.5
========================================================================================================================
SUPPLEMENTAL Cash paid for interest (net of amount capitalized) $ 222.9 $ 221.0 $268.4
DISCLOSURES Cash paid for income tax 78.5 46.0 49.9
========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
41
<PAGE> 17
PANENERGY CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INDEX
<TABLE>
<S> <C> <C>
1. Accounting Policies Summary . . . . . . . . . . . 42
2. Business Combination . . . . . . . . . . . . . . . 43
3. Business Segments . . . . . . . . . . . . . . . . 43
4. Natural Gas Revenues and Regulatory Matters . . . 44
5. Income Tax . . . . . . . . . . . . . . . . . . . . 45
6. Financial Instruments and Risk Management . . . . 46
7. Inventory and Gas Imbalances . . . . . . . . . . . 48
8. Investments . . . . . . . . . . . . . . . . . . . 48
9. Plant, Property and Equipment . . . . . . . . . . 49
10. Debt and Credit Facilities . . . . . . . . . . . . 50
11. Leases and Other Commitments . . . . . . . . . . . 50
12. Common Stock . . . . . . . . . . . . . . . . . . . 50
13. Environmental Matters . . . . . . . . . . . . . . 51
14. Litigation . . . . . . . . . . . . . . . . . . . . 52
15. Pension and Other Benefits . . . . . . . . . . . . 52
</TABLE>
1. ACCOUNTING POLICIES SUMMARY
The accounting policies are presented to assist the reader in evaluating the
consolidated financial statements of PanEnergy Corp (PEC), formerly Panhandle
Eastern Corporation, and its subsidiaries (the Company). The corporate name
change is subject to shareholders' approval at the Company's 1996 Annual
Meeting of stockholders. Certain amounts for prior years have been reclassified
in the consolidated financial statements to conform to the current
presentation.
The Company is one of North America's leading energy companies,
involved in the transportation, storage, gathering and processing of natural
gas. The Company is also a leading marketer of natural gas, electricity,
liquefied petroleum gases and related energy services, and has holdings in
pipeline and other natural gas-related businesses worldwide.
The interstate natural gas transmission operations of Texas Eastern
Transmission Corporation (TETCO), Algonquin Gas Transmission Company
(Algonquin), Panhandle Eastern Pipe Line Company (PEPL) and Trunkline Gas
Company (Trunkline), and the liquefied natural gas (LNG) facilities of
Trunkline LNG Company, are subject to the rules, regulations and accounting
procedures of the Federal Energy Regulatory Commission (FERC). TETCO,
Algonquin, PEPL and Trunkline meet the criteria and, accordingly, follow the
reporting and accounting requirements of Statement of Financial Accounting
Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of
Regulation."
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements
include the accounts of PEC and all significant subsidiaries. All significant
intercompany items have been eliminated in consolidation. Investments in 20% to
50%-owned affiliates and in less than 20%-owned affiliates where the Company
has general partnership interests and significant influence over operations are
accounted for on the equity method. See Note 8.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements.
Certain amounts of reported revenues and expenses are also affected by these
estimates and assumptions. Actual results could differ from those estimates.
REVENUE RECOGNITION. The Company recognizes transportation and storage
revenues in the period service is provided and revenues on sales of natural gas
and petroleum products in the period of delivery. When rate cases are pending
final FERC approval, a portion of the revenues collected by each interstate
natural gas pipeline is subject to possible refunds. The Company has
established adequate reserves where required for such cases. See Note 4 for a
summary of significant pending rate cases before FERC and related regulatory
matters.
GAS SUPPLY COSTS. Provisions are made in the consolidated statement of
income for all estimated future losses associated with maintaining pipeline gas
supply, including take-or-pay payments, contract settlements, and buyout and
buydown costs. See Note 4 for a discussion of pipeline gas supply and other
costs related to the FERC Order 636 transition.
COMMODITY PRICE RISK MANAGEMENT. Gains and losses related to commodity
derivatives which qualify as hedges of commodity commitments are recognized in
income when the underlying hedged physical transaction closes and are included
in natural gas and petroleum products purchased in the consolidated statement
of income. Gains and losses related to such instruments, to the extent settled
in cash, are reported as other deferred credits or charges, as appropriate, in
the consolidated balance sheet. Gains and losses on derivatives that do not
qualify as hedges are recognized on a current basis and are also included in
natural gas and petroleum products purchased. See Note 6.
CASH AND CASH EQUIVALENTS. All liquid investments with maturities at
date of purchase of three months or less are considered cash equivalents.
42
<PAGE> 18
PLANT, PROPERTY AND EQUIPMENT. Plant, property and equipment is stated
at original cost, which does not purport to represent replacement or realizable
value. The Company in 1995 adopted SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of," with no
impact to the Company's consolidated financial statements. Assets are grouped
and evaluated based on the ability to identify separate cash flows generated
therefrom.
At the time FERC-regulated properties are retired, the original cost
plus the cost of retirement, less salvage, is charged to accumulated
depreciation and amortization. When entire FERC-regulated operating units are
sold or non-regulated properties are retired or sold, the plant and related
accumulated depreciation and amortization accounts are reduced and any gain or
loss is credited or charged to income, unless otherwise permitted by FERC.
Depreciation of plant, property and equipment is generally computed
using the straight-line method. The LNG facilities are depreciated using a
modified unit-of-production method based on the life of the project's LNG
supply contract. See Note 9.
AMORTIZATION OF GOODWILL. The Company amortizes goodwill related to
the purchase of Texas Eastern Corporation (TEC) in 1989 and goodwill related to
certain natural gas gathering, transmission and processing facilities on a
straight-line basis over 40 years and 15 years, respectively. Accumulated
amortization of goodwill at December 31, 1995 and 1994 was $96.1 million and
$86.6 million, respectively. See Note 5.
EARLY RETIREMENT OF DEBT. The Company defers certain costs and losses
related to the early retirement of long-term debt of its FERC-regulated
subsidiaries, and amortizes such amounts as they are recovered through rates.
At December 31, 1995 and 1994, other deferred charges included $54.7 million
and $62.4 million, respectively, of such costs.
INTEREST COST CAPITALIZATION. The Company capitalizes interest on
major projects during construction. The rates used by regulated companies are
calculated pursuant to FERC rules and include an allowance for equity funds.
DEFERRED INCOME TAX. The Company follows the asset and liability
method of accounting for income tax as prescribed by SFAS No. 109, "Accounting
for Income Taxes." Under this method, the effect of a change in tax rates on
deferred tax assets and liabilities is recognized in income in the period the
rate change is enacted. See Note 5.
COMMON STOCK OPTIONS AND AWARDS. The Company follows the intrinsic
value method of accounting for common stock options and awards issued to
employees. See Note 12.
EARNINGS PER COMMON SHARE. The computation of earnings per common
share is based on the monthly weighted average number of shares of common stock
outstanding. Convertible debt and unexercised stock options do not have a
dilutive effect on the reported amount of earnings per common share. See Note
12.
2. BUSINESS COMBINATION
ASSOCIATED NATURAL GAS CORPORATION
On December 15, 1994, a wholly-owned subsidiary of PEC merged with Associated
Natural Gas Corporation, now PanEnergy Natural Gas Corporation (PanEnergy
Natural Gas), on a tax-free, stock-for-stock basis. As a result, PanEnergy
Natural Gas became a wholly-owned PEC subsidiary and the merger was accounted
for under the pooling of interests method of accounting for a business
combination. Nonrecurring expenses recorded in the fourth quarter 1994 as a
direct result of the merger totaled $16.2 million ($14.2 million after tax).
The consolidated financial statements for all periods prior to the
merger were restated in 1994 to include the results of PanEnergy Natural Gas
for the twelve months ended September 30. Effective with the date of the
merger, the fiscal year end of PanEnergy Natural Gas was changed from September
30 to December 31 to conform to PEC's fiscal year end. PanEnergy Natural Gas'
net income for the three months ended December 31, 1994 was recorded directly
to retained earnings. In addition, cash activity of PanEnergy Natural Gas for
the three months ended December 31, 1994 is shown separately on the
consolidated statement of cash flows.
3. BUSINESS SEGMENTS
The Company's operations are classified into two major business segments.
The Natural Gas Transmission segment is involved in the interstate
transportation and storage of natural gas. Principal markets are utilities,
marketers and end-users serving the Mid-Atlantic, New England and Midwest
areas.
The Energy Services segment is involved in the purchasing, gathering,
processing, marketing and intrastate transportation of natural gas, natural gas
liquids (NGLs), crude oil and electricity. Gathering, processing and
transportation services are provided to producers, refiners and a variety of
wholesale and retail customers located in the Mid-Continent, Gulf Coast and
Rocky Mountain areas. The principal markets for natural gas marketing services
are industrial end-users and utilities located throughout the United States, in
Canada and, to a lesser extent, the United Kingdom.
"Corporate and Other" includes, among other things, corporate
investments and the Company's LNG project, which imports LNG from Algeria,
stores and regasifies LNG, and provides worldwide LNG shipping services.
Intersegment eliminations are also included in Corporate and Other.
43
<PAGE> 19
Selected financial data for the Company's segments follows.
Identifiable assets are those assets used in the Company's operations in each
segment.
<TABLE>
<CAPTION>
REVENUES
----------------------------------
CAPITAL AND
INTER- DEPRECIATION OPERATING INVESTMENT IDENTIFIABLE
MILLIONS UNAFFILIATED SEGMENT TOTAL & AMORTIZATION INCOME (LOSS) EXPENDITURES ASSETS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Natural Gas
Transmission
1995 $1,473.0 $ 53.1 $1,526.1 $228.5 $556.9 $227.0 $5,352.6
1994 1,637.5 44.8 1,682.3 216.8 529.4 303.4 5,655.8
1993 1,797.2 86.8 1,884.0 219.2 416.0(1) 292.1 6,105.3
Energy Services
1995 3,447.1 0.5 3,447.6 42.7 106.1 202.6 1,404.5
1994 2,892.8 60.2 2,953.0 33.3 74.8 254.5 1,118.7
1993 2,415.9 36.4 2,452.3 24.7 73.2 71.9 822.3
Corporate
and Other
1995 47.4 (53.6) (6.2) 7.8 5.7 12.7 870.2
1994 54.8 (105.0) (50.2) 6.9 (18.9)(2) 5.8 733.0
1993 88.9 (123.2) (34.3) 6.9 2.6 2.8 680.2
- ------------------------------------------------------------------------------------------------------------------------
Consolidated
1995 $4,967.5 $ - $4,967.5 $279.0 $668.7 $442.3 $7,627.3
1994 4,585.1 - 4,585.1 257.0 585.3(2) 563.7 7,507.5
1993 4,302.0 - 4,302.0 250.8 491.8(1) 366.8 7,607.8
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes a $100 million charge reflecting TETCO's settlement of Order 636
implementation and other issues.
(2) Includes nonrecurring merger costs of $16.2 million.
4. NATURAL GAS REVENUES AND REGULATORY MATTERS
FERC ORDER 636 AND TRANSITION COSTS
During 1993, the Company's interstate natural gas pipelines began providing
restructured services pursuant to FERC Order 636. This order, which is on
appeal to the courts, requires pipeline service restructuring that unbundles
sales, transportation and storage services. Order 636 allows pipelines to
recover eligible costs resulting from implementation of the order (transition
costs).
On August 1, 1994, TETCO implemented a FERC-approved settlement that
resolved regulatory issues related primarily to Order 636 transition costs and
a number of other issues related to services prior to Order 636. In 1994, TETCO
refunded $84 million to customers pursuant to the settlement. TETCO's final and
nonappealable settlement provides for the recovery of certain transition costs
through volumetric and reservation charges through 2002 and beyond, if
necessary. Pursuant to the settlement, TETCO will absorb a certain portion of
the transition costs, the amount of which continues to be subject to change
dependent upon natural gas prices and deliverability levels. In 1993, the
Company established an additional provision of $100 million ($60.2 million
after tax) to reflect the impact of the settlement. In the fourth quarter
1995, based upon producers' discoveries of additional natural gas reserves,
TETCO increased its estimated liabilities for transition costs by $125.8
million. Under the terms of the existing settlement, regulatory assets were
increased by $85.8 million and TETCO recognized a $40 million charge to
operating expenses ($26 million after tax). PEPL's transition cost recoveries,
which are subject to certain challenges pending before FERC, will occur through
1998.
At December 31, 1995 and 1994, the Company's interstate pipelines had
recorded approximately $70 million and $310 million (1995), and $35 million and
$300 million (1994) of current and long-term regulatory assets, respectively,
representing transition costs incurred or estimated to be incurred that will be
recovered. At December 31, 1995 and 1994, the Company had recorded estimated
current and long-term liabilities related to Order 636 transition costs of
approximately $125 million and $165 million (1995), and $125 million and $105
million (1994), respectively.
In the past, during the normal course of business, the Company's
interstate pipelines entered into certain gas purchase contracts containing
take-or-pay provisions, which may expose the Company to financial risk. PEPL
and Trunkline are currently collecting certain take-or-pay settlement costs
with respect to such contracts through volumetric surcharges with interest
through 1997. Trunkline intends to file after 1997 for further recovery of
amounts not fully recovered by these surcharges. The Company had recorded
approximately $22.8 million and $26.7 million at December 31, 1995 and 1994,
respectively, for such amounts.
44
<PAGE> 20
The U.S. Department of the Interior announced its intention to seek
additional royalties from gas producers as a result of payments received by
such producers in connection with past take-or-pay settlements, and buyouts and
buydowns of gas sales contracts with natural gas pipelines. The Company's
pipelines, with respect to certain producer contract settlements, may be
contractually required to reimburse or, in some instances, to indemnify
producers against such royalty claims. The potential liability of the producers
to the government and of the pipelines to the producers involves complex issues
of law and fact which are likely to take a substantial period of time to
resolve. If the Company's pipelines ultimately have to reimburse or indemnify
the producers, the Company's pipelines will file with FERC to recover a portion
of these costs from pipeline customers.
The Company believes the exposure associated with gas purchase
contract commitments and the termination of the Company's pipeline merchant
services is substantially mitigated by transition cost recoveries pursuant to
TETCO's settlement, Order 636 and other mechanisms. As a result, the Company
believes that Order 636 transition cost issues and take-or-pay settlement
matters will not have a material adverse effect on future consolidated results
of operations or financial position.
JURISDICTIONAL TRANSPORTATION AND SALES RATES
ALGONQUIN. In July 1994, FERC approved Algonquin's settlement of its
1993 rate case and certain other regulatory issues. The settlement resolved
certain Order 636 service restructuring issues, transition cost recovery
methodology and rate design issues remanded to FERC by the U.S. Court of
Appeals. Additionally, the settlement provides for a partial roll-in of rates
over six years, through limited rate filings in May 1996 and 1999 to reflect
changes in net plant, property and equipment.
PEPL. On April 1, 1992 and November 1, 1992, PEPL placed into effect,
subject to refund, general rate increases. FERC issued an order on May 25, 1995
on the earlier rate proceeding and PEPL has requested rehearing of certain
matters in that order. On February 5, 1996, FERC issued an order on the latter
rate proceeding, which the Company is reviewing.
Effective April 1, 1989, PEPL placed into effect, subject to refund,
sales and transportation rates reflecting a restructuring of rates, including
seasonal rate structures. On December 7, 1995, FERC issued an order, subject to
rehearing, which addressed all remaining matters on the rate proceeding, with
no additional refunds due customers.
As a result of the resolution of certain proceedings, PEPL in 1994
recorded operating income of $23.9 million and interest reductions of $1.1
million and in 1995 recorded operating income of $15.5 million and interest
reductions of $5.1 million.
TRUNKLINE. On September 1, 1994, Trunkline placed into effect, subject
to refund, a general rate increase as a result of a filing made in accordance
with terms of a rate case settlement in 1993. A settlement resolving this rate
case became effective February 1, 1996.
On January 30, 1996, Trunkline filed a subsequent general rate
increase seeking a March 1, 1996 effective date.
OTHER. The Company's pipelines, pursuant to FERC requirements,
requested FERC approval to record the impact of adopting SFAS No. 109,
including the recognition of a portion of the impact as an increase to
stockholders' equity. The FERC accounting branch has denied approval of certain
of these requests pending future rate proceedings, and the Company's pipelines,
where approval has been denied, have filed for rehearing. While it is not known
when FERC will address this issue, the Company believes the ultimate resolution
of this matter will not have a material adverse effect on consolidated
financial position.
5. INCOME TAX
Income tax recognized in the consolidated statement of income is summarized as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
MILLIONS 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $ 67.8 $ 40.6 $ 86.7
State 13.8 6.0 17.6
Foreign 7.0 - -
---------------------------------
Total current 88.6 46.6 104.3
---------------------------------
Deferred
Federal 91.8 94.6 13.0
State 17.4 20.2 1.6
---------------------------------
Total deferred 109.2 114.8 14.6
---------------------------------
Total income tax $197.8 $161.4 $118.9
=================================
</TABLE>
Deferred income tax in 1993 included a net charge of $8.6 million for
enacted changes in federal and state tax laws and rates, and a benefit of $4.8
million for changes in the beginning of the year valuation allowance.
45
<PAGE> 21
Total income tax differs from the amount computed by applying the
federal income tax rate to income before income tax. The reasons for this
difference are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
MILLIONS 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income tax rate 35% 35% 35%
=================================
Income tax, computed at the
statutory rate $175.5 $135.3 $101.7
Adjustments resulting from-
State income tax, net of federal
income tax effect 20.3 17.0 12.2
Cumulative effect of federal
rate change - - 9.2
Goodwill amortization 3.2 4.1 6.0
Changes in valuation allowance - - (4.8)
Insurance premiums (5.8) (4.1) (4.4)
Other items, net 4.6 9.1 (1.0)
---------------------------------
Total income tax $197.8 $161.4 $118.9
=================================
Effective tax rate 39.4% 41.7% 40.9%
=================================
</TABLE>
The tax effects of temporary differences that resulted in deferred
income tax assets and liabilities, and a description of the significant
financial statement items that created these differences are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
MILLIONS 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C>
Deferred liabilities and credits $ 263.0 $ 321.8
Investment tax credit carryforward 24.5 71.7
Alternative minimum tax credit carryforward 78.6 78.1
Other accrued liabilities 104.3 98.3
Rate refund provisions 17.3 20.2
Deferred revenue - LNG project 22.1 24.4
State deferred income tax, net of federal
tax effect 15.8 15.9
Other 20.8 13.5
-----------------------
Total deferred income tax assets 546.4 643.9
Valuation allowance and other tax reserves (142.5) (250.5)
-----------------------
Net deferred income tax assets 403.9 393.4
-----------------------
Plant, property and equipment (914.0) (899.6)
Deferred charges (252.6) (287.3)
Investments (90.7) (81.4)
State deferred income tax, net of federal
tax effect (100.9) (92.3)
Prepaid pension (90.7) (83.9)
Other (57.1) (55.0)
-----------------------
Total deferred income tax liabilities (1,506.0) (1,499.5)
-----------------------
Net deferred income tax liability,
inclusive of current amounts $(1,102.1) $(1,106.1)
=======================
</TABLE>
If tax benefits relating to the valuation allowance for deferred
income tax assets and other tax reserves are recognized subsequent to December
31, 1995, approximately $40.9 million will be allocated to goodwill.
The investment tax credit carryforward, which is expected to be fully
utilized in 1996, will begin to expire in 1997 and will be extinguished in 2002
if not utilized sooner. The alternative minimum tax credit carryforward can be
carried forward indefinitely.
In 1990, the Internal Revenue Service (IRS) issued regulations which
disallow for tax purposes losses incurred in the Company's 1989 sales of
certain assets that were acquired in the purchase of TEC. Consequently, the
Company established a provision in 1990 for this and certain other issues,
resulting in an increase in goodwill and deferred income tax liability.
Following further discussions with the IRS, the Company in 1994 revised its
estimates with respect to the disallowed loss issue and in 1995 with respect to
other issues. As a result, the Company reduced the related goodwill and
deferred income tax liability by approximately $200 million and $100 million in
1994 and 1995, respectively.
6. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
APPROXIMATE
MILLIONS BOOK VALUE FAIR VALUE
- ---------------------------------------------------------------------------
ASSETS (LIABILITIES)
<S> <C> <C> <C>
DECEMBER 31, 1995
Cash Note 1 $ 50.8 $ 50.8
Other current receivables 17.4 17.4
Other investments Note 8 44.8 44.7 (1)
Notes payable (145.0) (145.0)(2)
Long-term debt Note 10 (2,271.2) (2,551.5)(2)
Foreign currency
exchange contract 32.7 34.0 (3)
Interest rate swaps - 0.9 (3)
December 31, 1994
Cash Note 1 $ 33.3 $ 33.3
Other current receivables 19.2 19.2
Other investments Note 8 54.3 51.0 (1)
Long-term debt Note 10 (2,367.8) (2,410.2)(2)
Foreign currency
exchange contract 22.4 21.7 (3)
Interest rate swaps - 2.1 (3)
</TABLE>
(1) The fair value of these financial instruments, which include insurance
contracts and long-term receivables, is based on determinations by
insurance companies and discounted cash flows, as applicable.
(2) Based on quoted market prices for the same or similar issues,
discounted cash flows and/or rates currently available to the Company
for debt with similar terms and remaining maturities.
(3) Represents estimated amounts the Company would receive if agreements
were settled, considering current market rates and the
creditworthiness of the parties to the agreements.
The Company has implemented an agreement to sell with limited
recourse, on a continuing basis, current accounts receivable at a discount. The
Company received $100 million for accounts receivable sold that remained
outstanding at December 31, 1995. In 1993, the Company sold LNG project
settlement receivables, with limited recourse. At December 31, 1995, $64.7
million remained outstanding on the LNG settlement receivables sold. In the
opinion of management, the probability that the Company will be required to
perform under these recourse provisions is remote.
46
<PAGE> 22
The following financial instruments have no book value associated with
them and there are no fair values readily determinable since quoted market
prices are not available: recourse provisions of the First Mortgage Notes (Note
8) and the LNG project settlement and trade receivable sales, the Northern
Border Pipeline Company (Northern Border Pipeline) transportation agreement
guarantee (Note 8) and the Petrolane Incorporated (Petrolane) lease
indemnification (Note 11).
The Company enters into certain financial instrument arrangements in
order to reduce the market risks inherent in the operations of the business. As
of December 31, 1995, the Company had outstanding a foreign currency exchange
contract with a $54 million notional amount that reduces the impact of changes
in currency exchange rates and interest rates on the Swiss Franc bonds. The
contract expires in 1996 concurrent with maturity of the bonds and has the
effect of fixing the currency exchange and interest rates for these 100 million
Swiss Franc bonds at $0.54 per Swiss Franc and 9.26%, respectively. The
long-term debt and the exchange contract valuation accounts are adjusted at the
end of each period to reflect the current exchange rate.
At December 31, 1995, the Company had two interest rate swaps for a
total outstanding notional amount of approximately $64.7 million that were
entered into as a result of the sale of the LNG project settlement receivables.
Pursuant to these swaps, the Company makes payments to the counterparty at a
rate based on LIBOR (London Interbank Offered Rates) and receives payments
based on the FERC prime rate. The notional amount decreases as the outstanding
balance of the settlement receivables decreases, and the swaps terminate in
conjunction with collection of the receivables, which will be no later than
1998. Other interest expense is adjusted for the net amount of these swap
receipts and payments.
PRICE RISK MANAGEMENT. At December 31, 1995, the Company held or
issued several instruments that reduce the Company's exposure to market
fluctuations in the price and transportation costs of natural gas and petroleum
products. The Company's market exposure arises from inventory balances and
fixed-price purchase and sale commitments that extend for periods of up to 10
years which are entered into to support the Company's operating activities. The
weighted average life of the Company's price risk portfolio was four months at
December 31, 1995. The Company's general strategy is to hedge price and
location risk with futures, swaps and options; however, net open positions in
terms of price, volume and specified delivery point do occur. In addition to
hedging activities, the Company also engages in the trading of such
instruments. The Company manages open positions with strict policies which
limit its exposure to market risk and require reporting potential financial
exposure to management on a daily basis. These policies include risk tolerance
limits using statistically-weighted price movements to calculate a daily
earnings at risk (DEAR) as well as a total value at risk (VAR) measurement.
Natural gas futures require the Company to buy or sell natural gas at
a fixed price. Over-the-counter swap agreements require the Company to receive
or make payments based on the difference between a specified price and the
actual price of natural gas. The Company uses futures and swaps to manage
margins on offsetting fixed-price purchase or sale commitments for physical
quantities of natural gas. Natural gas options held to hedge price risk provide
the right, but not the requirement, to buy or sell natural gas at a fixed
price. The Company utilizes options to manage margins and to limit overall
price risk exposure.
At December 31, 1995 and 1994, the Company had outstanding futures,
swaps and options for net purchases of 56.1 billion cubic feet (Bcf) and 36.5
Bcf of natural gas, respectively, which offset the risk of price fluctuations
under fixed-price commitments to sell natural gas. Net positions of the Company
for financial instruments held are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
NOTIONAL FAIR NOTIONAL FAIR
MILLIONS AMOUNT VALUE AMOUNT VALUE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hedging activity $122.8 $107.4 $74.8 $64.4
Trading activity 16.8 17.3 43.6 44.3
</TABLE>
The gains, losses and costs related to the hedging instruments
described above are not recognized until the underlying physical transaction
occurs. At December 31, 1995 and 1994, the Company had unrecognized net losses
of $15.4 million and $10.4 million, respectively, related to financial
instruments which are offset by corresponding unrecognized net gains from the
Company's obligations to sell physical quantities of gas.
During 1995 and 1994, the Company recognized gains of $10.5 million
and $0.7 million, respectively, from risk management activities. The average
fair values of net instruments held or issued for trading purposes was $12.3
million and $4.4 million during 1995 and 1994, respectively.
47
<PAGE> 23
MARKET AND CREDIT RISK. New York Mercantile Exchange (Exchange) traded
futures and option contracts are guaranteed by the Exchange and have nominal
credit risk. On all other transactions described above, the Company is exposed
to credit risk in the event of nonperformance by the counterparties. For each
counterparty, the Company analyzes their financial condition prior to entering
into an agreement, establishes credit limits and monitors the appropriateness
of these limits on an ongoing basis. The change in market value of
Exchange-traded futures and options contracts requires daily cash settlement in
margin accounts with brokers. Swap contracts and most other over-the-counter
instruments are generally settled at the expiration of the contract term and
may be subject to margin requirements with the counterparty. At December 31,
1995 and 1994, the Company had $14.3 million and $30.8 million, respectively,
in margin cash accounts to service these financial instruments of which $2
million and $4.7 million, respectively, was available for general corporate
purposes.
The Company has a concentration of receivables due from customers
throughout the United States and Canada. These include, among others, gas and
electric utilities and their affiliates, as well as industrial customers. These
concentrations of customers may affect the Company's overall credit risk in
that certain customers may be similarly affected by changes in economic,
regulatory or other factors. Trade receivables are generally not
collateralized; however, the Company analyzes customers' credit positions prior
to extending credit.
7. INVENTORY AND GAS IMBALANCES
A summary of inventory and supplies by category follows:
<TABLE>
<CAPTION>
DECEMBER 31
MILLIONS 1995 1994
- ------------------------------------------------------------
<S> <C> <C>
Gas held for resale $ 30.1 $ 9.4
Crude oil 10.6 11.2
NGLs 11.2 2.3
Materials and operating supplies 83.9 101.2
---------------------
Total inventory and supplies $135.8 $124.1
=====================
</TABLE>
Inventory and supplies are recorded at the lower of cost or market
using the average cost method and the last-in first-out method, and do not
exceed recoverable cost. Materials and operating supplies includes gas held for
operations.
The consolidated balance sheet includes in-kind balances as a result
of differences in gas volumes received and delivered. At December 31, 1995 and
1994, other current assets and other current liabilities included $29.1 million
and $19.1 million (1995), and $35 million and $11.5 million (1994),
respectively, for these imbalances.
8. INVESTMENTS
AFFILIATES
The Company has investments in the following companies that are accounted for
using the equity method. These investments include undistributed earnings of
$76.7 million in 1995 and $69.7 million in 1994 related to 50% or less owned
entities.
INVESTMENTS IN AFFILIATES
<TABLE>
<CAPTION>
DECEMBER 31
MILLIONS % OWNERSHIP 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C> <C>
National Methanol Company 25.00 $ 54.9 $ 70.7
Northern Border Partners, L.P. 8.45 34.4 33.5
TEPPCO Partners, L.P. 10.45 23.8 22.6
Midland Cogeneration Venture 14.34 20.6 9.1
Other affiliates Various 30.6 24.2
---------------------
Total investments in affiliates $164.3 $160.1
=====================
</TABLE>
EQUITY IN EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
MILLIONS 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
National Methanol Company $22.5 $26.2 $ 3.3
Northern Border Partners, L.P. 7.2 4.5 13.9
TEPPCO Partners, L.P. 6.4 3.6 0.8
Midland Cogeneration Venture 11.6 2.8 (1.6)
Other affiliates 2.9 3.8 (0.3)
--------------------------------
Total equity in earnings $50.6 $40.9 $16.1
================================
</TABLE>
Distributions and dividends received amounted to $42.7 million, $11.7
million and $14.2 million in 1995, 1994 and 1993, respectively.
Summarized combined balance sheet and income statement information of
the entities that are accounted for using the equity method are as follows:
<TABLE>
<CAPTION>
MILLIONS 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Current assets $ 506.3 $ 525.1 $ 396.0
Noncurrent assets 4,280.2 4,453.0 4,506.7
----------------------------------
Total $4,786.5 $4,978.1 $4,902.7
==================================
LIABILITIES AND EQUITY
Current liabilities $ 395.2 $ 424.2 $ 356.4
Noncurrent liabilities 3,239.7 3,609.7 3,734.4
Equity 1,151.6 944.2 811.9
----------------------------------
Total $4,786.5 $4,978.1 $4,902.7
==================================
INCOME
Operating revenues $1,390.0 $1,221.9 $1,029.2
Operating expenses 855.3 763.9 656.2
Net income 264.4 226.8 103.4
</TABLE>
48
<PAGE> 24
NATIONAL METHANOL COMPANY (NATIONAL METHANOL). National Methanol,
doing business as Ibn Sina, is a joint venture that owns and operates a
methanol plant and an MTBE (methyl tertiary butyl ether) plant in Jubail, Saudi
Arabia. Both plants are among the largest such plants in the world, producing
900,000 metric tons of methanol and 800,000 metric tons of MTBE in 1995.
Methanol is a chemical made principally from natural gas which is used as a
feedstock for glues, paints, fibers and MTBE. MTBE is made from methanol and
field butanes, and is used as a gasoline additive which causes gasoline to burn
cleaner and more efficiently, thus reducing harmful vehicle emissions.
NORTHERN BORDER PARTNERS, L.P. Northern Border Partners, L.P. is a
master limited partnership (MLP) that owns 70% of Northern Border Pipeline, a
partnership operating a pipeline transporting natural gas from Canada to the
Midwest area of the United States. The Company has general partner interests as
well as subordinated and common limited partnership interests, totaling 8.45%,
in Northern Border Partners, L.P., and through the MLP, an effective 5.95%
ownership interest in Northern Border Pipeline.
During 1993, the Company sold 74% of its MLP limited partner units,
resulting in a fourth quarter gain of $48.2 million ($28.7 million after tax).
The Company received net proceeds of approximately $147 million that were used
for the repayment of debt and general corporate purposes.
Under the terms of a settlement related to a transportation agreement
between PEPL and Northern Border Pipeline, PEPL guarantees payment to Northern
Border Pipeline under a transportation agreement by an affiliate of Pan-Alberta
Gas Limited. The transportation agreement requires estimated total payments of
$163.4 million for the years 1996 through 2001. In the opinion of management,
the probability that PEPL will be required to perform under this guarantee is
remote.
TEPPCO PARTNERS, L.P. TEPPCO Partners, L.P. is an MLP that owns and
operates a petroleum products pipeline. A subsidiary partnership of the MLP has
$349.5 million in First Mortgage Notes outstanding with recourse to the general
partner, a subsidiary of PEC. These notes have annual principal payments due
through 2010. In the opinion of management, the probability that the subsidiary
of PEC will be required to perform under this recourse provision is remote.
MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP (MCV). MCV converted
an incomplete nuclear plant to a dual-purpose energy unit that uses natural gas
to generate electricity and produce industrial process steam. The Company has a
general partnership interest in MCV.
OTHER INVESTMENTS
Other investments include real estate holdings and financial
instruments, such as insurance contracts and long-term receivables that are
recorded at cost in the consolidated balance sheet.
9. PLANT, PROPERTY AND EQUIPMENT
A summary of plant, property and equipment by classification follows:
<TABLE>
<CAPTION>
DEPRECIATION DECEMBER 31
MILLIONS % RATES 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Transmission 1.60 - 6.67 $6,044.8 $5,796.9
Gathering 1.30 - 6.67 511.9 449.1
Processing 4.00 - 5.00 144.1 133.2
Underground storage 1.87 - 3.50 488.3 465.2
LNG facilities -* 600.3 599.8
LNG vessels 2.78 - 2.86 150.9 144.5
General plant 2.53 - 33.33 318.5 302.7
Construction work
in progress - 141.9 148.5
---------------------
Total plant, property
and equipment $8,400.7 $8,039.9
=====================
</TABLE>
* Modified unit-of-production method.
A summary of plant, property and equipment, net of accumulated
depreciation, by classification follows:
<TABLE>
<CAPTION>
DECEMBER 31
MILLIONS 1995 1994
- ------------------------------------------------------------
<S> <C> <C>
Transmission $3,798.4 $3,761.6
Gathering 208.1 120.5
Processing 97.9 91.9
Underground storage 368.8 355.5
LNG project 321.4 319.7
General plant 213.3 210.1
Construction work in progress 141.9 148.5
----------------------
Net plant, property and equipment $5,149.8 $5,007.8
======================
</TABLE>
The carrying value of LNG project assets is expected to be recovered
through estimated future cash flows. Current estimates of future cash flows
are based on significant business relationships and assumptions of future
natural gas prices, supply availability and demand for LNG, which are subject
to change.
49
<PAGE> 25
10. DEBT AND CREDIT FACILITIES
A summary of long-term debt is as follows:
<TABLE>
<CAPTION>
DECEMBER 31
MILLIONS 1995 1994
- -------------------------------------------------------------
<S> <C> <C>
PEC
8 5/8% debenture maturing 2025 $ 100.0 $ -
Bonds
7 3/4% revenue maturing 2022 328.0 328.0
Swiss Franc (9.26%) maturing 1996 86.7 76.4
Notes
Medium Term, Series A,
8.5-9% maturing 1996-1997 139.0 139.0
8 5/8% maturing 1999 100.0 100.0
7 1/4% maturing 2005 100.0 -
Revolving Credit Agreement - 185.0
Unamortized Discount (5.8) (9.7)
------------------------
Total PEC 847.9 818.7
------------------------
TETCO
Debentures
10 1/8% maturing 2011 100.0 100.0
10% maturing 2011 150.0 150.0
Notes
10 3/8% maturing 2000 200.0 200.0
10% maturing 2001 100.0 100.0
8% maturing 2002 100.0 100.0
8 1/4% maturing 2004 100.0 100.0
Medium Term, Series A, 7.64-9.07%
maturing 1999-2012 100.0 100.0
Unamortized Discount (29.5) (31.6)
------------------------
Total TETCO 820.5 818.4
------------------------
ALGONQUIN
Notes
8.795-8.936% maturing 1996 50.0 50.0
9.13% maturing 2001-2003 100.0 100.0
Unamortized Discount (1.0) (2.1)
------------------------
Total Algonquin 149.0 147.9
------------------------
PEPL
7 7/8% note maturing 2004 100.0 100.0
Debentures
9 7/8% maturing 1996 - 125.0
7.95% maturing 2023 100.0 100.0
7.2% maturing 2024 100.0 100.0
Unamortized Discount (0.8) (1.0)
------------------------
Total PEPL 299.2 424.0
------------------------
PANHANDLE GATHERING COMPANY
4% note maturing 1996 4.5 4.5
------------------------
PANENERGY NATURAL GAS
Notes
12.75% maturing 1995 - 4.0
9.55% maturing 1996-1999 55.0 55.0
9% convertible maturing 1997-2004 10.0 10.0
6.3% maturing 1999-2003 40.0 40.0
9.9% maturing 2000-2003 45.0 45.0
Other 0.1 0.3
------------------------
Total PanEnergy Natural Gas 150.1 154.3
------------------------
LESS CURRENT MATURITIES (179.6) (4.1)
------------------------
TOTAL LONG-TERM DEBT $2,091.6 $2,363.7
========================
</TABLE>
The interest rates indicated were in effect on principal balances
outstanding at December 31, 1995. Interest costs capitalized in 1995, 1994 and
1993 were $3.8 million, $4.6 million and $3.8 million, respectively.
Required sinking fund and installment payments applicable to long-term
debt are as follows:
<TABLE>
<CAPTION>
Millions
-------------------------------
<S> <C>
1996 $179.6
1997 145.8
1998 31.3
1999 188.3
2000 236.8
</TABLE>
PEC, TETCO and PEPL have effective shelf registration statements with
the Securities and Exchange Commission for the issuance of $100 million each of
unsecured debt securities. At December 31, 1995, the Company had $145 million
of short-term borrowings from banks outstanding with a weighted average
interest rate of 6.28%.
CREDIT AGREEMENTS. PEC entered into two new variable-rate, bank credit
agreements, dated January 31, 1996, that permit PEC to borrow up to $400
million under a five-year facility and $400 million under a 364-day facility.
In conjunction with these new agreements, PEC canceled its previous $600
million agreement and both TETCO and PEPL canceled their combined $200 million
agreements.
11. LEASES AND OTHER COMMITMENTS
The Company utilizes assets under operating leases in several areas of
operations. Consolidated rental expense amounted to $34.7 million, $30.6
million and $28.7 million in 1995, 1994 and 1993, respectively. Minimum rental
payments under the Company's various operating leases for the years 1996
through 2000 are $30 million, $26.3 million, $18.8 million, $15.6 million and
$12.4 million, respectively. Thereafter, payments aggregate $52.1 million
through 2011.
In connection with the sale of Petrolane in 1989, TEC agreed to
indemnify Petrolane against certain obligations for guaranteed leases and
environmental matters. Certain of the lease obligations relate to Petrolane's
divestiture of supermarket operations prior to its acquisition by TEC and as of
December 31, 1995 total approximately $72.8 million over the remaining terms of
the leases, which expire in 2006. In the opinion of management, the probability
that TEC will be required to perform under this indemnity provision is remote.
12. COMMON STOCK
STOCK ISSUANCES. On December 15, 1994, PEC issued 28.4 million shares
of common stock in exchange for 100% of the common stock of PanEnergy Natural
Gas. See Note 2. In June 1993, PEC sold 10 million shares of common stock
priced at $21.25 per share, resulting in net proceeds to the Company
50
<PAGE> 26
of $204.5 million. Proceeds from the offering were applied towards the early
redemption, also in June, of $176 million of outstanding debentures.
STOCK OPTIONS. Transactions under various stock option and incentive
plans are summarized as follows:
<TABLE>
<CAPTION>
SHARES OPTION PRICES
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding Dec. 31, 1993 1,761,207 $12.19 - $30.63
Granted 337,300 20.00 - 24.25
Exercised (60,737) 12.19 - 19.06
Expired (33,666) 16.38 - 30.63
PanEnergy Natural Gas* 1,574,546 10.13 - 18.07
------------
Outstanding Dec. 31, 1994 3,578,650 10.13 - 30.63
Granted 919,350 20.88 - 24.56
Exercised (1,030,033) 10.13 - 25.31
Expired (59,469) 16.38 - 30.63
------------
OUTSTANDING DEC. 31, 1995 3,408,498 10.13 - 30.63
============
Exercisable at December 31
1993 911,707 $12.19 - $30.63
1994 2,863,183 10.13 - 30.63
1995 2,293,308 10.13 - 30.63
</TABLE>
* Represents conversion of stock options outstanding of PanEnergy Natural
Gas into equivalent PEC options.
STOCK AWARDS. Under the Company's 1990 Long Term Incentive Plan, there
were 3 million shares of PEC common stock reserved for issuance to key
employees. Awards representing 92,600 and 114,750 common shares, along with
dividend equivalents, were granted to key employees during 1991 and 1990,
respectively. Common shares are issued over a period of two to six years
pursuant to these awards. In addition, in 1993 and 1991, respectively, 300,000
and 40,000 common shares were issued as restricted stock awards, with
restrictions being removed over periods of three and four years, respectively.
Pursuant to the merger of PanEnergy Natural Gas with PEC, all restrictions were
removed in 1994 and 1995 on approximately 106,900 equivalent PEC shares that
had been previously issued under a PanEnergy Natural Gas incentive plan.
CONVERTIBLE DEBT. The Company's 9% convertible notes entitle the
holders, at their option, to convert the notes into 451,875 shares of PEC
common stock. This conversion right contains various anti-dilution provisions,
including a provision to adjust the conversion rate if PEC sells shares at a
price less than the current market price. See Note 10.
RESTRICTIONS ON DIVIDENDS. Under the most restrictive covenants
contained in the Company's debt agreements, $899.9 million of PEC's
consolidated common stockholders' equity was available for the payment of
dividends at December 31, 1995.
13. ENVIRONMENTAL MATTERS
TETCO. TETCO is currently conducting PCB (polychlorinated biphenyl)
assessment and cleanup programs at certain of its compressor station sites
under conditions stipulated by a U.S. Consent Decree. The programs include on-
and off-site assessment, installation of on-site source control equipment and
groundwater monitoring wells, and on- and off-site cleanup work. TETCO expects
to complete the cleanup programs at up to 89 sites in as many as 14 states by
1998. Groundwater monitoring activities will continue beyond 1998.
In addition, TETCO has been conducting PCB cleanup work at certain on-
and off-site areas pursuant to separate agreements with the states of
Pennsylvania and New Jersey. These agreements generally impose cleanup levels
that are more stringent than those required by the U.S. Consent Decree.
In 1987, the Commonwealth of Kentucky instituted suit in state court
against TETCO, alleging improper disposal of PCBs at TETCO's three compressor
station sites in Kentucky. This suit, which is still pending, seeks penalties
for violations of Kentucky environmental statutes. The Company previously
established a reserve for potential fines and penalties. In 1991, TETCO and the
Commonwealth executed a consent order in which TETCO agreed to perform site
assessments at its sites in Kentucky, and this work has been substantially
completed. TETCO completed cleanup of one of its Kentucky sites in 1994,
another in 1995 and intends to complete the final site in 1996.
At December 31, 1995 and 1994, TETCO had current and long-term
liabilities recorded of $44.9 million and $168.3 million (1995) and $56.4
million and $289.1 million (1994), respectively, for remaining estimated
cleanup costs. These cost estimates represent gross cleanup costs expected to
be incurred by TETCO, have not been discounted or reduced by customer
recoveries and do not include fines, penalties or third-party claims. Estimated
liabilities for remaining PCB cleanup costs were reduced by $77.6 million in
the fourth quarter 1995 as a result of lower-than-projected cleanup costs
incurred on completed sites. TETCO is recovering 57.5% of cleanup costs in
rates pursuant to a stipulation and agreement approved by FERC in 1992. As a
result of the reduction in estimated cleanup costs, the related regulatory
assets were reduced $44.6 million. TETCO's share of the cleanup estimate was
lowered which resulted in a $33 million decrease to operating expenses ($21.5
million after tax). At December 31, 1995 and 1994, TETCO had current and
long-term regulatory assets recorded of $17 million and $101.7 million (1995)
and $18.6 million and $177.1 million (1994), respectively, representing costs
to be recovered from customers.
51
<PAGE> 27
PEPL AND TRUNKLINE. The Company has identified environmental
contamination at up to 53 sites on the PEPL and Trunkline systems and is
undertaking cleanup programs at these sites. The contamination resulted from
the past use of lubricants containing PCBs and the prior use of wastewater
collection facilities and other on-site disposal areas. Soil and sediment
testing, to date, has detected no significant off-site contamination. The
Company has communicated with the Environmental Protection Agency and
appropriate state regulatory agencies on these matters. In August 1995,
Trunkline entered into a consent order under a cleanup program with the
Tennessee Department of Environment and Conservation for the cleanup of its
Tennessee facility. Cleanups in other states by PEPL and Trunkline are also
proceeding. The environmental cleanup programs are expected to continue until
2002.
At December 31, 1995 and 1994, the Company had undiscounted
liabilities recorded of $68.9 million and $70 million, respectively, relating
to PEPL and Trunkline PCB, wastewater and disposal area cleanup programs and
had regulatory assets recorded of $79.2 million and $82.4 million,
respectively, representing costs to be recovered from customers.
The federal and state cleanup programs are not expected to interrupt
or diminish the Company's ability to deliver natural gas to customers. The
Company believes the ultimate resolution of matters relating to the
environmental issues discussed above will not have a material adverse effect on
consolidated results of operations or financial position.
14. LITIGATION
In connection with a rupture and fire that occurred on TETCO's 36-inch natural
gas pipeline on March 23, 1994 in Edison, New Jersey, claims have been made and
numerous lawsuits have been filed in the Superior Court of New Jersey,
Middlesex County against TETCO and other private and governmental entities by
or on behalf of hundreds of individuals and general businesses. These claimants
seek compensatory damages for personal injuries and/or property losses, as well
as punitive damages. The property insurers of an apartment complex adjacent to
the asphalt plant where the rupture occurred also have filed suits against
TETCO and other defendants in Superior Court seeking to recover amounts paid
under pertinent policies of insurance. Quality Materials, Inc., the owner of
the asphalt plant, has filed suit in the U.S. District Court for the District
of New Jersey against TETCO seeking to recover unspecified property damages,
lost income and punitive damages. TETCO has filed a counterclaim against
Quality Materials, Inc.
The findings of an investigation of the incident by the Company and
the National Transportation Safety Board (NTSB) indicate third-party damage to
be the cause of the rupture. Additionally, an NTSB report found that TETCO's
pipeline operations met or exceeded federal safety regulations. The Company
recorded a $5 million after-tax charge in 1994 for costs related to this
incident that are not recoverable under the Company's insurance policies.
On August 30, 1995, two plaintiffs filed a lawsuit with class action
allegations in the 58th Judicial District Court, Jefferson County, Texas,
against PEC, TEC and TETCO, among other defendants. Plaintiffs seek recovery of
compensatory and punitive damages, in unspecified amounts, for personal
injuries and property damage resulting from alleged exposure to PCBs.
Additionally, TETCO, as well as certain other PEC subsidiaries in some of the
cases, are defendants in several other private plaintiff suits in various
courts. These suits seek relief for actual and punitive damages that allegedly
resulted from the release of PCBs and other hazardous substances in violation
of federal and state laws.
The Company expects the resolution of all the above matters will not
have a material adverse effect on consolidated results of operations or
financial position.
The Company is also involved in various other legal actions and claims
arising in the normal course of business. Based upon its current assessment of
the facts and the law, management does not believe that the outcome of any such
action or claim will have a material adverse effect upon the consolidated
financial position of the Company. However, these actions and claims in the
aggregate seek substantial damages against the Company and are subject to the
uncertainties inherent in any litigation. The Company is defending itself
vigorously in all the above suits.
15. PENSION AND OTHER BENEFITS
PENSION BENEFITS. PEC has a non-contributory trusteed pension plan
covering certain employees with a minimum of one year vesting service. The plan
provides pension benefits (i) for eligible employees of certain subsidiaries
that are generally based on an employee's years of benefit accrual service and
highest average eligible earnings, and (ii) commencing January 1, 1995, for
eligible employees of certain other subsidiaries that are generally based on
the employee's actual eligible earnings and accrued interest. The Company's
policy is to fund amounts, as necessary, on an actuarial basis to provide
assets sufficient to meet benefits to be paid to plan members.
52
<PAGE> 28
The components of the net pension benefit are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
MILLIONS 1995 1994 1993
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Actual return on plan assets $159.8 $ (2.1) $ 73.6
Amount deferred (93.4) 67.4 (13.4)
----------------------------------
Expected return on plan assets 66.4 65.3 60.2
Service cost benefits earned
during the period (11.4) (12.4) (10.7)
Interest cost on projected
benefit obligations (36.8) (35.8) (35.0)
Net amortization 2.9 2.9 2.7
----------------------------------
Net pension benefit $ 21.1 $ 20.0 $ 17.2
==================================
</TABLE>
The following sets forth the pension plan's funded status and the net
asset recognized by the Company:
<TABLE>
<CAPTION>
DECEMBER 31
MILLIONS 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C>
Plan assets at fair value
(principally common stock and
fixed income securities) $790.0 $676.9
---------------------
Actuarial present value of
benefit obligations:
Vested 363.1 335.7
Nonvested 17.6 14.9
---------------------
Accumulated obligations 380.7 350.6
Effects of projected future
compensation levels 107.5 85.1
---------------------
Projected obligations 488.2 435.7
---------------------
Plan assets in excess of
projected obligations 301.8 241.2
Unrecognized net asset (41.7) (46.4)
Unrecognized net loss (gain) (23.0) 21.0
Unrecognized prior service cost 22.2 24.0
---------------------
Prepaid pension $259.3 $239.8
=====================
</TABLE>
Assumptions used in the Company's pension accounting are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994 1993
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.5% 8.5% 7.5%
Rate of increase in
compensation levels 5.0 5.0 5.0
Expected long-term rate of
return on plan assets 9.5 9.5 9.5
</TABLE>
The Company also sponsors employee savings plans which cover
substantially all employees. The Company expensed plan contributions of $12.9
million, $13 million and $12.2 million in 1995, 1994 and 1993, respectively.
OTHER POSTRETIREMENT BENEFITS. The Company's postretirement benefits
consist of certain health care and life insurance benefits. Substantially all
employees of certain subsidiaries may become eligible for these benefits when
they reach retirement age while working for such companies and have attained 10
years of specified service. The benefits are provided through contributory and
noncontributory trusteed benefit plans.
The Company accrues such benefit costs over the active service period
of employees to the date of full eligibility for the benefits. The net
unrecognized transition obligation, resulting from the implementation of
accrual accounting, is being amortized over approximately 20 years commencing
with 1993.
It is the Company's general policy to fund accrued postretirement
health care costs. The retiree life insurance plan is fully funded based on
actuarially-determined requirements. FERC policy generally allows, subject to
individual pipeline proceedings, for current rate recovery of funded accrued
postretirement benefit costs including amortization of the transition
obligation. Pending FERC approval for recovery, the Company's pipelines have
deferred certain postretirement benefit costs.
The components of the net postretirement benefits cost are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
MILLIONS 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Actual return on plan assets $ 14.9 $ 0.3 $ 4.4
Amount deferred (8.9) 5.3 0.5
---------------------------------
Expected return on plan assets 6.0 5.6 4.9
Service cost benefits earned
during the period (1.7) (2.2) (1.6)
Interest cost on accumulated
obligations (16.3) (15.6) (15.0)
Net amortization and deferral (2.7) (2.9) (2.9)
---------------------------------
Net postretirement benefits cost $(14.7) $(15.1) $(14.6)
=================================
</TABLE>
53
<PAGE> 29
The following sets forth the postretirement benefit plans' funded status and
the net liability recognized by the Company:
<TABLE>
<CAPTION>
DECEMBER 31
MILLIONS 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement
benefit obligations:
Retirees $(182.9) $(162.1)
Fully eligible active plan participants (2.5) (2.6)
Other active plan participants (37.2) (30.7)
----------------------
Accumulated obligations (222.6) (195.4)
Plan assets at fair value* 86.4 67.4
----------------------
Accumulated obligations in excess
of plan assets (136.2) (128.0)
Unrecognized transition obligations 101.4 106.9
Unrecognized net loss 26.7 11.6
----------------------
Net postretirement benefits liability $ (8.1) $ (9.5)
======================
</TABLE>
* Principally common stocks, corporate bonds and U.S. government and agency
bonds.
The assumed health care cost trend rate used to estimate
postretirement benefits was 9% for 1996. The health care cost trend rate is
expected to decrease, with a 5.5% ultimate trend rate expected to be achieved
by 1999. The effect of a 1% increase in the assumed health care cost trend rate
for each future year is $0.7 million on the annual aggregate of the service and
interest cost components of net periodic postretirement benefit cost and $9.4
million on the accumulated postretirement benefit obligation at December 31,
1995. Other assumptions used in postretirement benefit accounting are as
follows:
<TABLE>
<CAPTION>
December 31
1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.5% 8.5% 7.5%
Rate of increase in
compensation levels 5.0 5.0 5.0
Expected long-term rate
of return on plan assets 9.5 9.5 9.5
Assumed tax rate, health care
portion only 39.6 39.6 39.6
</TABLE>
OTHER POSTEMPLOYMENT BENEFITS. The Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits," effective January 1, 1994.
This standard requires accruals for benefits provided by the Company to certain
former or inactive employees. The Company's pipelines have received permission
from FERC to defer such costs, pending resolution of present and future rate
filings requesting recovery. The earnings impact of this change in accounting
policy was not significant.
54
<PAGE> 30
PANENERGY CORP AND SUBSIDIARIES
CONSOLIDATED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
QUARTERS ENDED
----------------------------------------------------------------
1995 MILLIONS, EXCEPT PER SHARE AMOUNTS MARCH 31 JUNE 30 SEPT. 30 DEC. 31
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME Operating revenues $ 1,232.1 $ 1,283.3 $ 1,133.7 $ 1,318.4
Operating expenses 1,055.4 1,122.3 975.1 1,146.0
----------------------------------------------------------------
Operating income 176.7 161.0 158.6 172.4
Other income, net of deductions 22.9 13.9 22.3 15.1
Interest expense 60.8 62.6 57.9 60.2
----------------------------------------------------------------
Income before income tax 138.8 112.3 123.0 127.3
Income tax 54.7 44.8 49.4 48.9
----------------------------------------------------------------
Net income $ 84.1 $ 67.5 $ 73.6 $ 78.4
- -----------------------------------------------------------------------------------------------------------------
COMMON Average common shares outstanding 149.2 149.5 149.9 150.1
SHARES Earnings per common share $ 0.56 $ 0.45 $ 0.49 $ 0.52
=================================================================================================================
1994
- -----------------------------------------------------------------------------------------------------------------
INCOME Operating revenues $ 1,147.7 $ 1,144.8 $ 1,124.2 $ 1,168.4
Operating expenses 983.8 998.9 987.5 1,029.6(1)
----------------------------------------------------------------
Operating income 163.9 145.9 136.7 138.8
Other income, net of deductions 3.4 11.4 9.4 22.1
Interest expense 58.2 60.4 60.3 66.1
----------------------------------------------------------------
Income before income tax 109.1 96.9 85.8 94.8
Income tax 44.3 40.8 34.7 41.6
----------------------------------------------------------------
Net income $ 64.8 $ 56.1 $ 51.1 $ 53.2(1)
- -----------------------------------------------------------------------------------------------------------------
COMMON Average common shares outstanding 148.1 148.6 149.0 149.1
SHARES Earnings per common share $ 0.44 $ 0.38 $ 0.34 $ 0.36
=================================================================================================================
</TABLE>
(1) Includes nonrecurring merger costs of $16.2 million ($14.2 million after
tax).
55
<PAGE> 31
PANENERGY CORP AND SUBSIDIARIES
SUMMARY OF SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------------------------------------------
MILLIONS, EXCEPT PER SHARE AMOUNTS 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCOME OPERATING REVENUES $ 4,967.5 $ 4,585.1 $ 4,302.0 $ 3,881.3(1) $ 3,409.5
COSTS AND EXPENSES
Natural gas and petroleum
products purchased 3,131.2 2,829.4 2,575.6 2,058.9 1,773.1
Operating and maintenance 598.4 570.6 663.8(2) 577.1 561.9
Depreciation and amortization 279.0 257.0 250.8 258.9 268.8
Other costs and expenses 290.2 342.8 (3) 320.0 337.9 345.1
---------------------------------------------------------------------
OPERATING INCOME $ 668.7 $ 585.3 $ 491.8 $ 648.5 $ 460.6
INTEREST EXPENSE $ 241.5 $ 245.0 $ 282.5 $ 307.2(1) $ 344.6
NET INCOME $ 303.6 $ 225.2(3) $ 171.6(2)(4) $ 202.0(1) $ 99.4
AVERAGE COMMON SHARES OUTSTANDING 149.7 148.7 142.4(5) 134.6 122.5
EARNINGS PER COMMON SHARE $ 2.03 $ 1.51 $ 1.21 $ 1.50 $ 0.81
DIVIDENDS PER COMMON SHARE $ 0.885 $ 0.84 $ 0.80 $ 0.80 $ 0.80
- -------------------------------------------------------------------------------------------------------------------------
BALANCE PLANT, PROPERTY AND EQUIPMENT $ 8,400.7 $ 8,039.9 $ 7,523.4 $ 7,360.2 $ 7,092.5
SHEET Accumulated depreciation and amortization (3,250.9) (3,032.1) (2,826.7) (2,753.8) (2,658.3)
---------------------------------------------------------------------
Net plant, property and equipment $ 5,149.8 $ 5,007.8 $ 4,696.7 $ 4,606.4 $ 4,434.2
TOTAL ASSETS $ 7,627.3 $ 7,507.5 $ 7,607.8 $ 7,714.9 $ 7,441.5
CAPITAL STRUCTURE
Long-term debt due within one year $ 179.6 $ 4.1 $ 66.5 $ 196.3 $ 224.7
Notes payable 145.0 - 18.4 41.7 -
Long-term debt 2,091.6 2,363.7 2,085.5 2,615.6 2,372.4
Common stockholders' equity 2,227.3 2,035.2 1,879.4 1,556.8 1,406.3
---------------------------------------------------------------------
TOTAL CAPITALIZATION $ 4,643.5 $ 4,403.0 $ 4,049.8 $ 4,410.4 $ 4,003.4
BOOK VALUE PER COMMON SHARE $ 14.83 $ 13.65 $ 12.73 $ 11.47 $ 10.61
DEBT TO CAPITALIZATION RATIO 52% 54% 54% 65% 65%
- -------------------------------------------------------------------------------------------------------------------------
CASH FLOWS OPERATING CASH FLOW $ 573.1 $ 448.0 $ 769.5 $ 147.6 $ 358.2
CAPITAL EXPENDITURES $ 433.1 $ 555.3 $ 366.8 $ 356.0 $ 284.1
Investment Expenditures 9.2 8.4 - 1.8 -
---------------------------------------------------------------------
Total $ 442.3 $ 563.7 $ 366.8 $ 357.8 $ 284.1
- -------------------------------------------------------------------------------------------------------------------------
OPERATING NATURAL GAS TRANSMISSION VOLUMES, Bcf(6) 2,629 2,498 2,400 2,378 2,130
ENERGY SERVICES VOLUMES
Natural gas gathered/processed, Bcf/d(7) 1.9 1.6 1.4 1.2 1.1
Natural gas marketed, Bcf/d(8) 3.5 2.7 2.1 1.7 1.2
NGL production, thousand barrels/day 54.8 49.4 42.0 32.6 25.2
=========================================================================================================================
</TABLE>
(1) Includes revenues for the LNG project settlement of $88.6 million and
$17.5 million in reduced interest expense ($57.7 million after tax).
(2) Includes a $100 million charge ($60.2 million after tax) reflecting
TETCO's settlement of Order 636 implementation and other issues.
(3) Includes nonrecurring merger costs of $16.2 million ($14.2 million after
tax).
(4) Includes a gain of $48.2 million ($28.7 million after tax) resulting
from the sale of a partial interest in Northern Border Partners, L.P.
(5) Includes the issuance of 10 million shares of common stock in June 1993.
(6) Billion cubic feet at 14.73 pounds per square inch atmospheric pressure.
(7) Billion cubic feet per day.
(8) Includes Gas and Power Services volumes only.
See the Notes to Consolidated Financial Statements for a
discussion of material contingencies
56
<PAGE> 32
PanEnergy Corp. Common Stock Data by Quarters
<TABLE>
<CAPTION>
Dividends Paid
1995 Quarters High Low Per Share
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
First $23 1/4 $18 3/4 $0.210
- ----------------------------------------------------------------------------
Second 25 7/8 22 7/8 0.225
- ----------------------------------------------------------------------------
Third 27 1/2 23 3/8 0.225
- ----------------------------------------------------------------------------
Fourth 28 7/8 24 3/8 0.225
============================================================================
</TABLE>
<TABLE>
<CAPTION>
1994 Quarters
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
First $25 1/2 $20 5/8 $0.21
- ----------------------------------------------------------------------------
Second 22 1/4 18 1/4 0.21
- ----------------------------------------------------------------------------
Third 23 1/2 19 1/2 0.21
- ----------------------------------------------------------------------------
Fourth 23 5/8 19 1/2 0.21
============================================================================
</TABLE>
* PanEnergy's common stock is listed for trading under the symbol PEL on the
New York and Pacific Stock Exchanges.
* There were 26,911 stockholder accounts at December 31, 1995.
* See Page 35 for an explanation of the dividend policy and Note 12 of the
Notes to Consolidated Financial Statements on Page 51 for a discussion of
restrictions on dividends.
Debt Ratings
<TABLE>
<CAPTION>
Moody's Standard Duff Fitch
Investors & & Investors
Service Poor's Phelps Service
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TETCO Baa1 BBB BBB+ BBB+
PEPL Baa1 BBB BBB+ BBB+
PEC Baa2 BBB- BBB BBB
</TABLE>
<PAGE> 33
APPENDIX TO EXHIBIT 13
PANENERGY CORP AND SUBSIDIARIES
Descriptions of Graphics Contained Within
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Located on page 26, a bar chart titled "Capital/Investment Expenditures"
depicts capital and investment expenditures for the years 1993, 1994 and 1995.
Each bar contains two sections, representing Market Expansion and Other as
follows: $160 million and $207 million (1993); $412 million and $152 million
(1994); and $260 million and $182 million (1995), respectively. The following
caption appears below the chart: "Market-expansion projects again represented
the majority of capital spending in 1995."
Located on page 27, a bar chart titled "Natural Gas Transmission Transportation
Revenue" depicts transportation revenue for the years 1993, 1994 and 1995. Each
bar contains two sections, representing the demand and commodity portions as
follows: $706 million and $360 million (1993); $1,086 million and $223 million
(1994); and $1,121 million and $234 million (1995), respectively. The following
caption appears below the chart: "Transportation revenue increased upon
elimination of merchant services and has remained steady since."
Located on page 29, a bar chart titled "Energy Services Revenues" depicts
operating revenues of $2,452 million, $2,953 million and $3,448 million for the
years 1993, 1994 and 1995, respectively. The following caption appears below
the chart: "Increased natural gas and crude oil marketed volumes continue to
add to revenue growth."
Located on page 31, a bar chart titled "Interest Expense" depicts interest
expense for the years 1993, 1994 and 1995. Each bar contains two sections,
representing interest expense on Long-term debt and Other as follows: $252
million and $31 million (1993); $218 million and $27 million (1994); and $225
million and $17 million (1995), respectively. The following caption appears
below the chart: "Interest expense has declined as the Company's financial
position improved."
Located on page 34, a bar chart titled "Capital/Investment Expenditures"
depicts capital and investment expenditures for the years 1993, 1994 and 1995.
Each bar contains sections representing the Natural Gas Transmission segment,
the Energy Services segment and Other. The sections of the bars are
proportioned, in the order previously described, as follows: $292 million, $72
million and $3 million (1993); $303 million, $255 million and $6 million
(1994); and $227 million, $202 million and $13 million (1995), respectively.
The following caption appears below the chart: "Significant Energy Services
capital expenditures have fueled the group's growth."
Located on page 35, a bar chart titled "Capitalization" depicts capitalization
as of December 31, 1993, 1994 and 1995. Each bar contains two sections,
representing Debt and Equity as follows: $2,171 million and $1,879 million
(1993); $2,368 million and $2,035 million (1994); and $2,416 million and $2,227
million (1995), respectively. The following caption appears below the chart:
"Debt as a percentage of capitalization dropped to 52% in 1995."
<PAGE> 1
Exhibit 23
ACCOUNTANTS' CONSENT
The Board of Directors
Panhandle Eastern Corporation d/b/a PanEnergy Corp:
We consent to incorporation by reference in the Registration Statements
listed below of PanEnergy Corp of our report dated January 23, 1996, relating
to the consolidated balance sheets of PanEnergy Corp and Subsidiaries as of
December 31, 1995 and 1994, and the related consolidated statements of income,
common stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1995, which report is included herein.
1. Form S-8 Registration Statements for the following:
(A) 1989 Nonemployee Directors Stock Option Plan (No. 33-28912)
(B) 1977 Non-Qualified Stock Option Plan (No. 2-61225)
(C) 1982 Key Employee Stock Option Plan (No. 2-79180)
(D) Special Recognition Bonus Plan (No. 33-35253)
(E) 1990 Long Term Incentive Plan (No. 33-35251)
(F) Employees' Savings Plan (No. 33-36698)
(G) Employees' Savings Plan (No. 33-41079)
(H) 1994 Long-Term Incentive Plan (No. 33-55119)
2. Form S-3 Registration Statements for the following:
(A) Dividend Reinvestment and Stock Purchase Plan (No. 33-28914)
(B) Debt Securities (No. 33-56337)
KPMG PEAT MARWICK LLP
Houston, Texas
March 28, 1996
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Officers
and/or Directors of PANHANDLE EASTERN CORPORATION (the "Company"), a Delaware
corporation, do hereby constitute and appoint PAUL F. FERGUSON, JR., CARL B.
KING and ROBERT W. REED, and each of them, their true and lawful attorney and
agent to do any and all acts and things, and execute any and all instruments
which, with the advice of Counsel, said attorney and agent may deem necessary
or advisable to enable the Company to comply with the Securities Act of 1934,
as amended, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with the filing under said Act of the Form
10-K Annual Report with the Securities and Exchange Commission, including
specifically, but without limitation thereof, to sign their names as Officers
and/or Directors of the Company to the Form 10-K Report, and to any instrument
or document filed as a part of, or in connection with, said Form 10-K Report or
Amendment thereto; and the undersigned do hereby ratify and confirm all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have subscribed these
presents this 28th day of March, 1996
/s/ DENNIS HENDRIX /s/ GEORGE L. MAZANEC
- -------------------------- --------------------------
Dennis Hendrix George L. Mazanec
/s/ PAUL M. ANDERSON /s/ PAUL F. FERGUSON, JR.
- -------------------------- ---------------------------
Paul M. Anderson Paul F. Ferguson, Jr.
Senior Vice President and
Chief Financial Officer
/s/ SANDRA P. MEYER
- --------------------------
Sandra P. Meyer
Vice President and
Controller
(Principal Accounting Officer)
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Officer
and/or Director of PANHANDLE EASTERN CORPORATION (the "Company"), a Delaware
corporation, does hereby constitute and appoint PAUL F. FERGUSON, JR., CARL B.
KING, and ROBERT W. REED, and each of them, his true and lawful attorney and
agent to do any and all acts and things, and execute any and all instruments
which, with the advice of Counsel, said attorney and agent may deem necessary
or advisable to enable the Company to comply with the Securities Act of 1934,
as amended, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with the filing under said Act of the Form
10-K Annual Report with the Securities and Exchange Commission, including
specifically, but without limitation thereof, to sign his name as Officer
and/or Director of the Company to the Form 10-K Report, and to any instrument
or document filed as a part of, or in connection with, said Form 10-K Report or
Amendment thereto; and the undersigned does hereby ratify and confirm all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 28th day of March, 1996
/s/ RALPH S. O'CONNOR
- ----------------------------
Ralph S. O'Connor
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Officer
and/or Director of PANHANDLE EASTERN CORPORATION (the "Company"), a Delaware
corporation, does hereby constitute and appoint PAUL F. FERGUSON, JR., CARL B.
KING, and ROBERT W. REED, and each of them, his true and lawful attorney and
agent to do any and all acts and things, and execute any and all instruments
which, with the advice of Counsel, said attorney and agent may deem necessary
or advisable to enable the Company to comply with the Securities Act of 1934,
as amended, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with the filing under said Act of the Form
10-K Annual Report with the Securities and Exchange Commission, including
specifically, but without limitation thereof, to sign his name as Officer
and/or Director of the Company to the Form 10-K Report, and to any instrument
or document filed as a part of, or in connection with, said Form 10-K Report or
Amendment thereto; and the undersigned does hereby ratify and confirm all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 28th day of March, 1996
/s/ ANN MAYNARD GRAY
- ----------------------------
Ann Maynard Gray
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Officer
and/or Director of PANHANDLE EASTERN CORPORATION (the "Company"), a Delaware
corporation, does hereby constitute and appoint PAUL F. FERGUSON, JR., CARL B.
KING, and ROBERT W. REED, and each of them, his true and lawful attorney and
agent to do any and all acts and things, and execute any and all instruments
which, with the advice of Counsel, said attorney and agent may deem necessary
or advisable to enable the Company to comply with the Securities Act of 1934,
as amended, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with the filing under said Act of the Form
10-K Annual Report with the Securities and Exchange Commission, including
specifically, but without limitation thereof, to sign his name as Officer
and/or Director of the Company to the Form 10-K Report, and to any instrument
or document filed as a part of, or in connection with, said Form 10-K Report or
Amendment thereto; and the undersigned does hereby ratify and confirm all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 28th day of March, 1996
/s/ HAROLD S. HOOK
- ----------------------------
Harold S. Hook
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Officer
and/or Director of PANHANDLE EASTERN CORPORATION (the "Company"), a Delaware
corporation, does hereby constitute and appoint PAUL F. FERGUSON, JR., CARL B.
KING, and ROBERT W. REED, and each of them, his true and lawful attorney and
agent to do any and all acts and things, and execute any and all instruments
which, with the advice of Counsel, said attorney and agent may deem necessary
or advisable to enable the Company to comply with the Securities Act of 1934,
as amended, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with the filing under said Act of the Form
10-K Annual Report with the Securities and Exchange Commission, including
specifically, but without limitation thereof, to sign his name as Officer
and/or Director of the Company to the Form 10-K Report, and to any instrument
or document filed as a part of, or in connection with, said Form 10-K Report or
Amendment thereto; and the undersigned does hereby ratify and confirm all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 28th day of March, 1996
/s/ ROBERT CIZIK
- ----------------------------
Robert Cizik
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Officer
and/or Director of PANHANDLE EASTERN CORPORATION (the "Company"), a Delaware
corporation, does hereby constitute and appoint PAUL F. FERGUSON, JR., CARL B.
KING, and ROBERT W. REED, and each of them, his true and lawful attorney and
agent to do any and all acts and things, and execute any and all instruments
which, with the advice of Counsel, said attorney and agent may deem necessary
or advisable to enable the Company to comply with the Securities Act of 1934,
as amended, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with the filing under said Act of the Form
10-K Annual Report with the Securities and Exchange Commission, including
specifically, but without limitation thereof, to sign his name as Officer
and/or Director of the Company to the Form 10-K Report, and to any instrument
or document filed as a part of, or in connection with, said Form 10-K Report or
Amendment thereto; and the undersigned does hereby ratify and confirm all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 28th day of March, 1996
/s/ MILTON CARROLL
- ----------------------------
Milton Carroll
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Officer
and/or Director of PANHANDLE EASTERN CORPORATION (the "Company"), a Delaware
corporation, does hereby constitute and appoint PAUL F. FERGUSON, JR., CARL B.
KING, and ROBERT W. REED, and each of them, his true and lawful attorney and
agent to do any and all acts and things, and execute any and all instruments
which, with the advice of Counsel, said attorney and agent may deem necessary
or advisable to enable the Company to comply with the Securities Act of 1934,
as amended, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with the filing under said Act of the Form
10-K Annual Report with the Securities and Exchange Commission, including
specifically, but without limitation thereof, to sign his name as Officer
and/or Director of the Company to the Form 10-K Report, and to any instrument
or document filed as a part of, or in connection with, said Form 10-K Report or
Amendment thereto; and the undersigned does hereby ratify and confirm all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 28th day of March, 1996
/s/ LEO E. LINBECK, JR.
- ----------------------------
Leo E. Linbeck, Jr.
<PAGE> 8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Officer
and/or Director of PANHANDLE EASTERN CORPORATION (the "Company"), a Delaware
corporation, does hereby constitute and appoint PAUL F. FERGUSON, JR., CARL B.
KING, and ROBERT W. REED, and each of them, his true and lawful attorney and
agent to do any and all acts and things, and execute any and all instruments
which, with the advice of Counsel, said attorney and agent may deem necessary
or advisable to enable the Company to comply with the Securities Act of 1934,
as amended, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with the filing under said Act of the Form
10-K Annual Report with the Securities and Exchange Commission, including
specifically, but without limitation thereof, to sign his name as Officer
and/or Director of the Company to the Form 10-K Report, and to any instrument
or document filed as a part of, or in connection with, said Form 10-K Report or
Amendment thereto; and the undersigned does hereby ratify and confirm all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 28th day of March, 1996
/s/ CHARLES W. DUNCAN, JR.
- ----------------------------
Charles W. Duncan, Jr.
<PAGE> 9
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Officer
and/or Director of PANHANDLE EASTERN CORPORATION (the "Company"), a Delaware
corporation, does hereby constitute and appoint PAUL F. FERGUSON, JR., CARL B.
KING, and ROBERT W. REED, and each of them, his true and lawful attorney and
agent to do any and all acts and things, and execute any and all instruments
which, with the advice of Counsel, said attorney and agent may deem necessary
or advisable to enable the Company to comply with the Securities Act of 1934,
as amended, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with the filing under said Act of the Form
10-K Annual Report with the Securities and Exchange Commission, including
specifically, but without limitation thereof, to sign his name as Officer
and/or Director of the Company to the Form 10-K Report, and to any instrument
or document filed as a part of, or in connection with, said Form 10-K Report or
Amendment thereto; and the undersigned does hereby ratify and confirm all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 28th day of March, 1996
/s/ HARRY E. EKBLOM
- ----------------------------
Harry E. Ekblom
<PAGE> 10
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Officer
and/or Director of PANHANDLE EASTERN CORPORATION (the "Company"), a Delaware
corporation, does hereby constitute and appoint PAUL F. FERGUSON, JR., CARL B.
KING, and ROBERT W. REED, and each of them, his true and lawful attorney and
agent to do any and all acts and things, and execute any and all instruments
which, with the advice of Counsel, said attorney and agent may deem necessary
or advisable to enable the Company to comply with the Securities Act of 1934,
as amended, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with the filing under said Act of the Form
10-K Annual Report with the Securities and Exchange Commission, including
specifically, but without limitation thereof, to sign his name as Officer
and/or Director of the Company to the Form 10-K Report, and to any instrument
or document filed as a part of, or in connection with, said Form 10-K Report or
Amendment thereto; and the undersigned does hereby ratify and confirm all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 28th day of March, 1996
/s/ WILLIAM T. ESREY
- ----------------------------
William T. Esrey
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Panhandle Eastern Corporation Annual Report on Form 10-K for the year ended
December 31, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000351696
<NAME> PANHANDLE EASTERN CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 50,800
<SECURITIES> 0
<RECEIVABLES> 505,100
<ALLOWANCES> 0
<INVENTORY> 135,800
<CURRENT-ASSETS> 1,012,300
<PP&E> 8,400,700
<DEPRECIATION> 3,250,900
<TOTAL-ASSETS> 7,627,300
<CURRENT-LIABILITIES> 1,323,400
<BONDS> 2,091,600
<COMMON> 150,200
0
0
<OTHER-SE> 2,077,100
<TOTAL-LIABILITY-AND-EQUITY> 7,627,300
<SALES> 3,397,200
<TOTAL-REVENUES> 4,967,500
<CGS> 3,131,200
<TOTAL-COSTS> 3,729,600
<OTHER-EXPENSES> 362,200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 241,500
<INCOME-PRETAX> 501,400
<INCOME-TAX> 197,800
<INCOME-CONTINUING> 303,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 303,600
<EPS-PRIMARY> 2.03
<EPS-DILUTED> 2.03
</TABLE>
<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Panhandle Eastern Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[PANHANDLE EASTERN CORPORATION LOGO]
March 15, 1996
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Panhandle Eastern Corporation, on Wednesday, April 24, 1996, at 10:00 a.m., at
the J. W. Marriott Hotel, 5150 Westheimer, Houston, Texas.
Information about the business of the meeting is set forth in the formal
meeting notice and the Proxy Statement on the following pages. In addition,
there will be a discussion of the general operations of the Company, described
in the Company's 1995 Annual Report to Stockholders, and stockholders will be
offered an opportunity to ask questions.
We particularly call your attention to the proposed amendment to the
Company's Restated Certificate of Incorporation in order to change the name of
the Company to "PanEnergy Corp." Your Board of Directors, which supports and
recommends the proposed amendment, believes that the new name, under which the
Company has been doing business since January 2, 1996, reflects the Company's
increasing role in and expanding business focus on serving multiple energy
markets, including natural gas, natural gas liquids, electricity, crude oil, and
refined petroleum products.
There also will be considered a proposal to amend the Company's 1994 Long
Term Incentive Plan, which your Board of Directors supports, and three
stockholder proposals. The attached Proxy Statement contains a complete
description of each and the reasoning of the Board's recommendations in favor of
the first two proposals and against each of the last three stockholder
proposals. We urge that you read this material before completing your Proxy.
We encourage you to participate in this year's Annual Meeting in person or
by mailing your Proxy. Regardless of the number of shares you hold, your
participation and representation in the Company's affairs is important.
Therefore, even if you cannot attend the meeting, please return your proxy to
the Company as soon as possible. To vote, simply place an "X" in the appropriate
box on the enclosed form of Proxy, sign and date it, and mail it in the
self-addressed, postage-paid return envelope.
Sincerely,
/s/ DENNIS HENDRIX /s/ PAUL M. ANDERSON
DENNIS HENDRIX PAUL M. ANDERSON
Chairman of the Board President and
Chief Executive Officer
<PAGE> 3
[PANHANDLE EASTERN CORPORATION LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 24, 1996
To the Stockholders of Panhandle Eastern Corporation:
The 1996 Annual Meeting of Stockholders of Panhandle Eastern Corporation
will be held at the J. W. Marriott Hotel, 5150 Westheimer, Houston, Texas, on
Wednesday, April 24, 1996, at 10:00 a.m., for the purposes of:
1. Electing four Directors, constituting the 1996 Class of the
Company's Board of Directors, for terms of three years, each to hold office
until the 1999 Annual Meeting or until a successor shall have been elected
and shall have qualified;
2. Considering and acting upon a proposal to amend Article FIRST of
the Company's Restated Certificate of Incorporation to change the name of
the Company to "PanEnergy Corp" (the Board of Directors supports this
proposal);
3. Considering and acting upon a proposal to amend the Panhandle
Eastern Corporation 1994 Long Term Incentive Plan (the Board of Directors
supports this proposal); and
4. Considering and acting upon other matters that properly come before
the meeting, such as voting on the three stockholder proposals which begin
on page 22 of the proxy statement (the Board of Directors opposes each of
these proposals).
Stockholders of record on February 29, 1995, are entitled to receive notice
of, and to vote at, the meeting or any adjournment or adjournments thereof. The
transfer books of the Company will not be closed. The list showing stockholders
entitled to vote at the meeting will be located in the office of the Secretary
at the Company's headquarters, 5400 Westheimer Court, Houston, Texas, for
examination for at least 10 days prior to the Annual Meeting.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE SIGN, DATE
AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ ROBERT W. REED
ROBERT W. REED
Secretary
Dated: March 15, 1996
Houston, Texas
<PAGE> 4
[PANHANDLE EASTERN CORPORATION LOGO]
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
APRIL 24, 1996
------------------------
This statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of Panhandle Eastern Corporation (the
"Company") of proxies for use at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held on Wednesday, April 24, 1996, at 10:00 a.m., at the J. W.
Marriott Hotel, 5150 Westheimer, Houston, Texas, for the purposes set forth in
the accompanying Notice of Annual Meeting. Business at the Annual Meeting is
limited to matters properly brought before it.
Unless revoked prior to its exercise, any proxy given pursuant to this
solicitation will be voted at the Annual Meeting. A stockholder may revoke a
proxy at any time prior to the Annual Meeting by giving written notice of such
revocation addressed to the Secretary of the Company, P.O. Box 1642, Houston,
Texas 77251-1642. Also, a stockholder may attend the Annual Meeting and vote in
person, whether or not such stockholder has previously given a proxy. Proxy
material is being mailed to stockholders on or about March 15, 1996.
On February 29, 1996, the record date for the determination of stockholders
entitled to vote at the Annual Meeting, the Company had outstanding 150,724,873
shares of Common Stock, par value $1.00 per share (the "Common Stock"). Each of
such shares is entitled to one vote at the Annual Meeting. Votes cast by proxy
or in person at the Annual Meeting will be tabulated by the independent election
inspectors appointed for the Annual Meeting. The holders of a majority of the
shares entitled to vote at the Annual Meeting, whether present in person or
represented by proxy, will constitute a quorum for the transaction of business
at the Annual Meeting. Directors shall be elected by a plurality of the votes of
the shares present in person or by proxy at the Annual Meeting and entitled to
vote. The proposal to amend the Company's Restated Certificate of Incorporation
to change the name of the Company to "PanEnergy Corp" will require for approval
the affirmative vote of a majority of the outstanding shares entitled to vote at
the Annual Meeting. The stockholder proposal, which your Board opposes, to amend
the Bylaws of the Company to eliminate the classification of the Board, will
require for approval the affirmative vote of 75 percent of the outstanding
shares entitled to vote at the Annual Meeting. All other matters shall be
determined by the affirmative vote of the majority of the shares present in
person or represented by proxy at the meeting and entitled to vote. If no voting
direction is indicated on the proxy card, the shares will be considered votes
FOR the election of the nominees for Director, FOR the proposed amendment to the
Company's Restated Certificate of Incorporation to change the name of the
Company to "PanEnergy Corp", FOR the proposed amendment to the Panhandle Eastern
Corporation 1994 Long Term Incentive Plan, and AGAINST each of the three
stockholders proposals set forth in this Proxy Statement. Proxy cards that are
not signed or that are not returned are treated as not voted for any purposes.
If a broker indicates on a proxy that it does not have discretionary authority
as to certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter.
Abstentions with respect to any matter will be treated as shares present and
entitled to vote. Accordingly, with respect to the proposed amendment to the
Company's Restated Certificate of Incorporation to change the name of the
Company to "PanEnergy Corp" and the stockholder proposal to amend the Bylaws of
the Company to eliminate the classification of the Board, abstentions and broker
non-votes will have the same effect as voting against the proposals. With
respect to the other stockholder proposals described in this Proxy Statement and
the proposed amendment to the Panhandle Eastern Corporation 1994 Long Term
Incentive Plan, abstention from voting will have the same effect as voting
against such proposals and broker non-votes will be disregarded and have no
effect on the outcome of the vote. The Company knows of no proposals to be
considered at the Annual Meeting other than those set forth in the Notice of
Annual Meeting.
1
<PAGE> 5
The cost of preparing, assembling, and mailing the material in connection
with the solicitation of proxies will be borne by the Company. In addition to
use of the mails, proxies may be solicited by officers and other employees of
the Company personally, by telephone, or other means. To assist in the
solicitation of proxies, the Company has engaged Corporate Investor
Communications, Inc., for approximately $9,500. The Company will also request
brokerage houses and other nominees or fiduciaries to forward copies of its
proxy material and Annual Report to beneficial owners of Common Stock held in
their names, and the Company will reimburse them for reasonable out-of-pocket
expenses incurred in doing so.
STOCKHOLDER PROPOSALS
Stockholder proposals will be eligible for consideration for inclusion in
the Proxy Statement for the 1997 Annual Meeting if they are received by the
Secretary of the Company no later than November 15, 1996 at the address set
forth above.
A. ELECTION OF DIRECTORS
Currently, the Board consists of 12 Directors (nine of whom are not
employed by the Company) and two Advisory Directors (neither of whom is employed
by the Company). In accordance with the Company's By-Laws, the Directors have
been divided into three Classes of approximately equal size, with staggered
terms in office. At each Annual Meeting, Directors constituting one Class are
elected for three-year terms. Each Class is designated by the year in which its
current term ends. The members of the 1996 Class of Directors, Milton Carroll,
Robert Cizik, Harold S. Hook and Leo E. Linbeck, Jr., have been nominated for
re-election at this year's Annual Meeting. If re-elected, they will hold office
until the 1999 Annual Meeting or until successors shall have been elected and
shall have qualified. The terms of the Directors constituting the other two
Classes will continue as indicated below.
The proxy holders named on the proxy card will vote FOR the election of the
nominees listed below, unless otherwise instructed on proxy cards that have been
signed or returned. If you do not wish your shares to be voted for particular
nominees, please identify the exceptions on the proxy card. If any of these
nominees should be unable to serve, the proxies will be voted by the proxy
holders for the election of such other person as they shall determine, in
accordance with their judgment.
INFORMATION REGARDING NOMINEES FOR ELECTION AS DIRECTORS
NAME BUSINESS EXPERIENCE AND AGE IN 1996
---- -----------------------------------
1996 CLASS
Milton Carroll............. Age 46. Chairman, President, and Chief Executive
Officer of Instrument Products, Inc., Houston,
Texas, a manufacturer of oilfield tools and other
precision products, since 1977. Director of the
Company since 1993. Director of the Federal Reserve
Bank of Dallas, Houston Industries, Inc., and
BlueCross BlueShield of Texas.
Robert Cizik............... Age 65. Chairman of the Board since 1983, and, from
1975 to 1995, Chief Executive Officer of Cooper
Industries, Inc. ("Cooper"), Houston, Texas, a
diversified, international manufacturing company.
Director of the Company since 1991. Director of
Cooper, Cooper Cameron Corporation, Temple-Inland,
Inc. ("Temple-Inland"), Harris Corporation, and Air
Products and Chemicals, Inc.
Harold S. Hook............. Age 65. Chairman and Chief Executive Officer of
American General Corporation ("American General"),
Houston, Texas, a diversified financial services
organization, for more than five years. Director of
the Company since 1978. Director of American
General, American General Finance, Inc., Chemical
Banking Corporation, Chemical Bank, Cooper, and
Sprint Corporation ("Sprint").
2
<PAGE> 6
Leo E. Linbeck, Jr......... Age 62. Chairman, President and Chief Executive
Officer of Linbeck Corporation, Houston, Texas, a
holding company of five construction-related firms,
since 1990, and Chairman, President, and Chief
Executive Officer of Linbeck Construction
Corporation, Houston, Texas, a client-focused
organization whose expertise is the planning and
building of facilities, since 1975. Director of the
Company since 1986. Director of Daniel Industries,
Inc., and a Director and Trustee of thirty-three
investment companies managed by John Hancock
Advisers, Inc.
INFORMATION REGARDING DIRECTORS CONTINUING IN OFFICE
NAME BUSINESS EXPERIENCE AND AGE IN 1996
---- -----------------------------------
1997 CLASS
Paul M. Anderson........... Age 51. Chief Executive Officer of the Company
since April 1995, President of the Company since
December 1993 and Director of the Company since
December 1992. Executive Vice President of the
Company from March 1991 to December 1993. President
and Chief Executive Officer of Panhandle Eastern
Pipe Line Company ("PEPL") from April 1991 to
January 1994, a Director of PEPL since 1991, and
Chairman of the Board since January 1994. Director
of Texas Eastern Transmission Corporation ("TETCO")
since April 1991 and Chairman of the Board since
January 1994. Vice President, Finance and Chief
Financial Officer, Inland Steel Industries Inc.,
1990-1991. Director of Temple-Inland and of Texas
Eastern Products Pipeline Company ("TEPPCO"), a
wholly-owned subsidiary of the Company and the
general partner of TEPPCO Partners, L.P., a
publicly traded master limited partnership.
William T. Esrey........... Age 56. Chairman since April 1990 and Chief
Executive Officer since April 1985 of Sprint,
Westwood, Kansas, a diversified telecommunications
holding company. President of Sprint from April
1985 to April 1990. Director of the Company since
1985. Director of Sprint, Equitable Life Assurance
Society of the United States, General Mills, Inc.,
and Everen Capital Corporation.
Ann Maynard Gray........... Age 51. Since 1991, President, Diversified
Publishing Group of Capital Cities/ABC, Inc., New
York, New York, involved in television, radio, and
publishing, and Corporate Vice President since
1986. Senior Vice President -- Finance, ABC
Television Network from 1988 to 1991. Director of
the Company since 1994. Director of Cyprus Amax
Minerals Company.
George L. Mazanec.......... Age 60. Vice Chairman of the Board of Directors of
the Company since December 1993 and a Director
since December 1992. Executive Vice President of
the Company from March 1991 to December 1993.
Director since January 1990, Vice Chairman of the
Board since January 1994, and President and Chief
Executive Officer from January 1991 to January
1994, of TETCO. Director of PEPL since January 1990
and Vice Chairman of the Board of PEPL since
January 1994. From 1989 to 1991, Group Vice
President of the Company. Director of Associated
Electric and Gas Insurance Services and of TEPPCO.
1998 CLASS
Charles W. Duncan, Jr...... Age 70. Engaged in private investments in Houston,
Texas, since 1981. Deputy Secretary of the United
States Department of Defense, January
3
<PAGE> 7
NAME BUSINESS EXPERIENCE AND AGE IN 1996
---- -----------------------------------
1977 to August 1979; Secretary of the United States
Department of Energy, August 1979 until January
1981. Director of the Company since 1990. Director
of American Express Company, The Coca-Cola Company,
Chemical Banking Corporation, Newfield Exploration
Company, and United Technologies Corporation.
Harry E. Ekblom............ Age 68. Vice Chairman of A. T. Hudson & Co., Inc.,
Oradell, New Jersey, a management consulting firm,
since 1985, and President of Harry E. Ekblom & Co.,
Inc., Osterville, Massachusetts, a financial
consulting firm, since January 1984. Director of
the Company since 1971. Director of Harris & Harris
Group, Inc., and The Commercial Bank of New York.
Dennis R. Hendrix.......... Age 56. Chairman of the Board of the Company since
November 1990 and Chief Executive Officer from
November 1990 to April 1995. President of the
Company from November 1990 to December 1993.
Director of PEPL and TETCO since November 1990,
Chairman of the Board from November 1990 to January
1994 and Chief Executive Officer from November 1990
to April 1991, of PEPL and TETCO, and President of
TETCO from November 1990 to January 1994. Director
of TECO Energy, Inc., and TEPPCO.
Ralph S. O'Connor.......... Age 70. For more than five years, principally
engaged in investments as Chairman and Chief
Executive Officer of Ralph S. O'Connor &
Associates, Houston, Texas. Director of the Company
since 1991.
B. ADDITIONAL INFORMATION
BOARD OF DIRECTORS RETIREMENT POLICY
In January 1996, the Board amended its policy regarding the retirement of
Nonemployee Directors to provide for the retirement of a Nonemployee Director at
the Annual Meeting of Stockholders next following the Nonemployee Director's
seventy-second birthday. Previously, the policy provided that the Nonemployee
Director would retire at the next Board meeting following the Nonemployee
Director's seventieth birthday.
INFORMATION REGARDING ADVISORY DIRECTORS
In January 1996, the Board elected two Advisory Directors, Senator Lloyd M.
Bentsen and Mr. Cortland S. Dietler, to their second one-year terms. Mr. Max R.
Lents, who in January 1996 completed his eleventh term as an Advisory Director,
did not stand for re-election. An Advisory Director has no voting rights but
attends meetings of the Board and certain Board committees in an advisory
capacity. In January 1996, the Board decided to phase out the use of Advisory
Directors over the next several years. Information regarding the Advisory
Directors is as follows:
NAME BUSINESS EXPERIENCE AND AGE IN 1996
---- -----------------------------------
Lloyd M. Bentsen........... Age 75. Shareholder of the law firm of Verner,
Liipfert, Bernhard, McPherson and Hand, Houston,
Texas. United States Senator from Texas from 1971
to 1993. Secretary of the Treasury of the United
States from January 1993 to December 1994. Advisory
Director of the Company since January 1995.
Director of IVAX Corporation and American
International Group, Inc.
Cortland S. Dietler........ Age 75. Until the December 1994 merger with the
Company, Chairman of the Board and Chief Executive
Officer of Associated Natural Gas Corporation,
Denver, Colorado, a marketer, gatherer, and
processor of natural gas, for more than five years.
Advisory Director of the Company since January
1995.
4
<PAGE> 8
MEETINGS OF THE BOARD AND ITS COMMITTEES
During 1995, the Board met eight times. Each Director attended at least 75
percent of the aggregate number of the Board meetings and the meetings of Board
committees on which he or she served.
The Board has six committees, which are the Audit Committee, the
Compensation & Organization Committee ("Compensation Committee"), the Committee
on Directors, the Executive Committee, the Finance Committee and the Public
Responsibilities Committee. With the exception of the Executive Committee, all
Committees are composed solely of Nonemployee Directors.
Mr. Cizik is Chairman, and Ms. Gray and Messrs. Carroll, Hook, O'Connor,
and Dietler, are members, of the Audit Committee. The Audit Committee recommends
the appointment of independent auditors and reviews the plan, scope, and results
of the audit and monitors the fees for audit and other services; reviews the
recommendations resulting from such audit and management responses thereto; and
reviews the Company's accounting principles, policies, internal accounting
controls, and the internal auditing department plans and procedures. The Audit
Committee also reviews the Company's annual financial statements and recommends
accounting and internal auditing policies which, in the Audit Committee's
judgment, should receive the attention of the Board. The Audit Committee met
three times in 1995.
Mr. Duncan is Chairman of the Compensation Committee and Messrs. Cizik,
Ekblom, Esrey, Linbeck and O'Connor are members. The Compensation Committee
establishes the compensation policies for the Chief Executive Officer and other
senior officers; approves the salaries and certain remuneration arrangements of
senior officers; recommends the adoption of compensation plans in which officers
and certain key employees are eligible to participate; and approves, appoints a
subcommittee which approves, or recommends awards pursuant thereto, including
bonuses, stock option grants, and other awards. The Compensation Committee acts
on management recommendations for the election of officers, recommends the
election of a Chief Executive Officer when appropriate, and reviews management
succession plans. The Compensation Committee met four times in 1995.
Mr. Esrey is Chairman of the Committee on Directors and Messrs. Carroll,
Cizik, Dietler, Duncan, Ekblom and Hook are members. The Committee on Directors
identifies and recommends candidates to fill Board vacancies and considers
nominees for election as Directors at the Annual Meeting; considers the removal
of Directors; reviews the Board's retirement policy and policies pertaining to
Board membership; advises the Board on matters pertaining to Board tenure and
compensation; and considers and makes recommendations pertaining to corporate
governance matters. In addition, the Committee on Directors will consider
stockholders' suggestions of nominees for Director that are submitted in writing
to it, in care of the Secretary of the Company. The Committee on Directors met
three times in 1995.
Mr. Hook is the Chairman of the Finance Committee and the members are Ms.
Gray, Senator Bentsen, and Messrs. Duncan, Ekblom and Linbeck. The Finance
Committee reviews the Company's financial needs and approves the Company's
financing plans, represents the Board in discharging administrative
responsibilities with respect to employee benefit plans, reviews the performance
of the investment managers of the Retirement Income Plan of Panhandle Eastern
Corporation and Participating Affiliates ("Retirement Income Plan"), monitors
the Company's risk management activities, and reviews the Board's dividend
policy. The Finance Committee met three times in 1995.
Mr. Linbeck is Chairman, and Senator Bentsen, Messrs. Carroll, Esrey, and
O'Connor and Ms. Gray are members, of the Public Responsibilities Committee.
This Committee reviews and considers the Company's policies and practices
related to public issues important to the Company and the industry, including:
safety; environmental affairs; governmental relations; community relations;
employee participation in civic and charitable affairs; civic, charitable, and
philanthropic contributions; and equal opportunity policies and programs. The
Public Responsibilities Committee met twice in 1995.
Mr. Hendrix is Chairman, and Senator Bentsen and Messrs. Anderson, Carroll,
Cizik, Duncan, Hook, Linbeck, Mazanec and O'Connor are members, of the Executive
Committee, which reviews and, where appropriate, authorizes corporate action
with respect to the conduct of the business of the Company between
5
<PAGE> 9
Board meetings. Actions taken by the Executive Committee are regularly submitted
to the Board for review and ratification at the next meeting. The Executive
Committee did not meet in 1995.
SECURITY OWNERSHIP OF MANAGEMENT
As of December 31, 1995, all Directors and executive officers of the
Company as a group owned beneficially, or had the right to acquire within 60
days of December 31, 1995, under the 1982 Key Employee Stock Option Plan, as
amended (the "1982 Plan"), the 1989 Nonemployee Directors Stock Option Plan (the
"1989 Plan"), the 1990 Long Term Incentive Plan (the "1990 LTIP"), and the 1994
Long Term Incentive Plan (the "1994 LTIP"), less than 1 percent of the presently
issued and outstanding Common Stock.
The following table shows the number of shares of Common Stock beneficially
owned as of December 31, 1995, or as to which there was a right to acquire
beneficial ownership within 60 days of such date, by each Director or nominee
for Director, each executive officer of the Company named in the Summary
Compensation Table on page 10 ("Named Executive Officers"), and all Directors
and executive officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER
NUMBER OF
OF SHARES
SHARES WHICH
BENEFICIALLY MAY BE
OWNED(1) ACQUIRED(2)
------- -----------
<S> <C> <C>
Paul M. Anderson.................................... 27,632 190,666
Milton Carroll...................................... 500 6,000
Robert Cizik........................................ 1,322 8,000
Charles W. Duncan, Jr............................... 7,767(3) 9,000
Harry E. Ekblom..................................... 4,276(4) 10,000
William T. Esrey.................................... 2,500 10,000
Ann Maynard Gray.................................... 500 5,000
Dennis R. Hendrix................................... 362,100 --
James B. Hipple..................................... 13,192(5) 16,935
Harold S. Hook...................................... 5,600 10,000
Carl B. King........................................ 31,850 21,667
Leo E. Linbeck, Jr.................................. 1,216 10,000
George L. Mazanec................................... 27,368 193,552
Ralph S. O'Connor................................... 34,701(6) 8,000
All Directors, nominees for Director, and ten
executive officers as a group, including those
named above....................................... 566,492 566,746
</TABLE>
- ---------------
(1) Included are beneficially owned and undistributed shares of Common Stock
held as of December 31, 1995, in the Panhandle Eastern Corporation Dividend
Reinvestment and Stock Purchase Plan and shares held as of December 31,
1995, in, and allocable to the individual under, the Employees' Savings Plan
of Panhandle Eastern Corporation and Participating Affiliates.
(2) Shares of Common Stock which the Directors or executive officers of the
Company have the right to acquire, within 60 days of December 31, 1995,
pursuant to options outstanding under the 1982 Plan, the 1989 Plan, the 1990
LTIP, and the 1994 LTIP. Nonemployee Directors do not participate in the
1982 Plan, the 1990 LTIP, or the 1994 LTIP and Employee Directors do not
participate in the 1989 Plan.
(3) Includes 4,531 shares held by Duncan Investors Partnership, a partnership in
which Mr. Duncan is a general partner.
(4) Includes 2,000 shares held by Mrs. Ekblom.
(5) Includes 48 shares held by Mrs. Hipple.
(6) Includes 4,502 shares of Common Stock held by three trusts of which Mr.
O'Connor is co-trustee and as to all of which Mr. O'Connor disclaims
beneficial ownership.
6
<PAGE> 10
Texas Eastern Products Pipeline Company, a wholly owned subsidiary of the
Company, is the general partner of TEPPCO Partners, L.P. ("TEPPCO"), a publicly
traded master limited partnership. The following table shows the number of units
of limited partnership interests in TEPPCO beneficially owned as of December 31,
1995, or as to which there was a right to acquire beneficial ownership within 60
days of such date, by each Director or nominee for Director, each of the Named
Executive Officers, and all Directors and executive officers of the Company as a
group. As of December 31, 1995, the percentage of units beneficially owned by
all Directors and executive officers as a group does not exceed 1 percent of the
presently issued and outstanding units.
<TABLE>
<CAPTION>
NUMBER NUMBER
OF OF UNITS
UNITS WHICH
BENEFICIALLY MAY BE
OWNED ACQUIRED
----- --------
<S> <C> <C>
Paul M. Anderson........................................ 2,000 --
Milton Carroll.......................................... -- --
Robert Cizik............................................ -- --
Charles W. Duncan, Jr. ................................. -- --
Harry E. Ekblom......................................... -- --
William T. Esrey........................................ -- --
Ann Maynard Gray........................................ -- --
Dennis R. Hendrix....................................... 13,500 --
James B. Hipple......................................... 1,000 --
Harold S. Hook.......................................... 2,000 --
Carl B. King............................................ -- --
Leo E. Linbeck, Jr. .................................... -- --
George L. Mazanec....................................... 1,000 --
Ralph S. O'Connor....................................... 1,000 --
All Directors, nominees for Director, and ten executive
officers as a group, including those named above...... 20,500 --
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table shows the number of shares of Common Stock held by
beneficial owners of more than 5 percent of the Common Stock as of December 31,
1995, and the percentage of the total outstanding shares of Common Stock as of
that date.
<TABLE>
<CAPTION>
NUMBER PERCENT
OF OF
SHARES OUTSTANDING
NAME AND ADDRESS BENEFICIALLY SHARES
OF BENEFICIAL OWNER OWNED OWNED
---------------------------------------------------- ----- -----
<S> <C> <C>
Sonatrach Petroleum Investment Corp., B.V.
Sloterkade 138D
1058 HM Amsterdam, The Netherlands.................. 7,700,000 5.13
Employees' Savings Plan of
Panhandle Eastern Corporation and Participating
Affiliates
5400 Westheimer Ct.,
Houston, Texas 77056................................ 9,676,146 6.44
</TABLE>
Sonatrach Petroleum Investment Corp., B.V., is a Dutch corporation owned by
two shareholders: Sonatrach (the national oil and gas company of Algeria), which
owns a 99.9 percent interest, and Banque Algerienne du Commerce Exterieur
("BACE"), a Swiss bank, which owns a 0.1 percent interest. The principal
executive offices of Sonatrach are located at 10, Rue du Sahara, Hydra, Algiers
(Algeria), and the principal executive offices of BACE are located at
Schutzengasse 4, Postfach, 8023 Zurich, Switzerland. Sonatrach and BACE are
wholly owned by the government of Algeria.
7
<PAGE> 11
The Company and Sonatrach, directly and through subsidiaries, are parties
to agreements entered into in 1987 providing for the importation of liquefied
natural gas ("LNG") over a period of up to 20 years at volumes and prices and
upon other terms to be agreed upon from time to time. The agreements provide
that if LNG is purchased by the Company from Sonatrach, Sonatrach will receive
an f.o.b. payment equal to approximately 63 percent of the average gross selling
price of an equivalent quantity of regasified LNG, with the Company receiving
the balance. For the year ended December 31, 1995, payments to Sonatrach under
this program for LNG and shipping were approximately $8.7 million.
Employees' Savings Plan of Panhandle Eastern Corporation and Participating
Affiliates("ESP"), holds shares of Common Stock for the account of participants,
who are employees of the Company and participating affiliates. Generally, the
ESP passes through to participants the right to direct the voting of shares of
Common Stock allocable to their accounts and to direct the tender of such shares
in response to a tender or exchange offer for Common Stock. The ESP is
administered by an administrative committee whose members are H. D. Church,
Senior Vice President of TETCO; Paul F. Ferguson, Jr., Senior Vice President and
Chief Financial Officer of the Company; D. R. Hennig, Vice President of PEPL,
TETCO, and Trunkline Gas Company ("Trunkline"); Bruce A. Williamson, Treasurer
of the Company; Theopolis Holeman, Vice President of PEPL; Sandra P. Meyer, Vice
President and Controller of the Company; Michael J. Bradley, Vice President of
PanEnergy Services, Inc., a subsidiary of the Company; and P. J. Hester, Vice
President and General Counsel of Algonquin Gas Transmission Company.
COMPENSATION OF DIRECTORS
As employees of the Company, Messrs. Anderson, Hendrix, and Mazanec receive
no fees for their service as Directors, for attendance at Board and Committee
meetings, or for chairing Board Committees. Nonemployee Directors and Advisory
Directors receive an annual retainer fee of $30,000, and $1,000 for each Board
meeting and each Committee meeting attended. Nonemployee Committee Chairmen
receive an additional annual retainer of $4,000. Nonemployee Directors and
Advisory Directors are reimbursed for expenses incurred in attending Board and
Committee meetings.
In addition to the foregoing, the Company maintains, or formerly
maintained, the following plans for Nonemployee Directors:
1. The 1982 Directors' Deferred Compensation Plan permits Nonemployee
Directors to elect, on a year-to-year basis, to defer either 50 percent or
100 percent of their Directors' fees. As amended in January 1995, the
annual interest rate applicable to deferred amounts is equal to Moody's
seasoned Baa Corporate Bond Yield Index for the week ending with the final
Friday of the previous November, as reported in the Federal Reserve
statistical release No. 15 or its successor. Amounts accrued are payable
either in a lump sum or over a period of five or 10 years, as elected by
the Nonemployee Director, commencing on January 15th of the year next
succeeding the year in which the Nonemployee Director either ceases to be a
Director or upon the attainment of the age the Nonemployee Director
previously elected. For the year ended December 31, 1995, amounts deferred
under this Plan and interest accrued relative to such deferrals were
$290,459 for the five participating Nonemployee Directors as a group.
2. The 1989 Nonemployee Directors' Stock Option Plan ("1989 Plan")
provides for the granting of non-qualified options for the purchase of
shares of Common Stock to each Nonemployee Director. Stock appreciation
rights ("SARs") are not permitted. All options are granted at the fair
market value of the Common Stock on the date of grant. On May 1, 1989, each
Nonemployee Director was granted an option to purchase 5,000 shares of
Common Stock, and any new Nonemployee Director is granted an option to
purchase 5,000 shares of Common Stock effective on the May 1 next following
election to the Board. Additional options to purchase 1,000 shares of
Common Stock are granted to each Nonemployee Director on May 1 of each
year, through and including May 1, 1998. On May 1, 1995, options to
purchase a total of 9,000 shares of Common Stock were granted under the
1989 Plan at an exercise price of $23.875 per share. Options granted under
the 1989 Plan become exercisable one year from the date of grant and expire
on the tenth anniversary of the date of grant. Accordingly, the options
granted on May 1,
8
<PAGE> 12
1995, are not reflected in the table on page 6 hereof. No options were
exercised during 1995 under the 1989 Plan. There are nine Nonemployee
Directors participating in the 1989 Plan.
3. The Nonemployee Directors' Retirement Plan provides an annual
unfunded retirement benefit for each Nonemployee Director of the Company
upon the later to occur of the Director's retirement date or the attainment
of age 65. A retired Nonemployee Director with 10 years or more of service
on the Board will receive annually for life (a guaranteed minimum of 10
years) an amount equal to 60 percent of the annual retainer fee in effect
on the Director's retirement date. For a Nonemployee Director retiring with
less than 10 years of service, the annual benefit accrues at a rate of 6
percent of the annual retainer fee in effect on the Director's retirement
date for each year of service, not to exceed a total of 60 percent of such
annual retainer fee. In the event of a "change of control" (as defined), a
Nonemployee Director shall be deemed to have served as such until the
earlier of the tenth anniversary of the Director's service on the Board or
attainment of retirement age. There are also certain pre-retirement
supplemental death benefits provided under this plan.
4. At the time it was acquired by the Company in 1989, Texas Eastern
Corporation ("TEC") maintained an unfunded plan, the TEC Directors'
Retirement Plan, which provided an annual benefit payable for 10 years
following a Nonemployee Director's retirement from active service on the
TEC Board of Directors. Upon the Nonemployee Director's death following
retirement, any unpaid installments will be paid to the named beneficiary.
Under this plan, Messrs. Duncan and O'Connor have vested rights to annual
benefits for 10 years of $18,000 commencing January 1, 1999.
5. The Directors' Deferred Compensation Plan of Panhandle Eastern
Corporation ("Nonemployee Directors' Plan") was available until December
31, 1986, to Nonemployee Directors and permitted deferral of up to 100
percent of each participating Nonemployee Director's annual retainer fee.
Benefit payment amounts related to retainer fees deferred, to interest
accrued at seniority-based rates, and to age at the time of deferral. For
the year ended December 31, 1995, interest accrued for the four
participating Nonemployee Directors relative to amounts deferred under the
Nonemployee Directors Plan was $30,968.
9
<PAGE> 13
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table and notes present the cash and certain other
compensation paid or accrued by the Company to or on behalf of the Company's
Chief Executive Officer and each of the four other most highly compensated
executive officers of the Company ("Named Executive Officers"), as of December
31, 1995, for the years ended December 31, 1993, 1994, and 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
- -----------------------------------------------------------------------------------------------------------
AWARDS
---------------------
SECURITIES PAYOUTS ALL OTHER
NAME AND OTHER ANNUAL RESTRICTED UNDERLYING ------- COMPEN-
PRINCIPAL SALARY BONUS COMPENSATION STOCK OPTIONS/SARS LTIP SATION
POSITION(1) YEAR ($) ($) ($)(2) AWARD(S)($)(3) (#)(4) PAYOUTS($) ($)(5)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paul M.
Anderson....... 1995 455,417 333,540 -- -- -- -- 105,725
1994 340,000 191,964 -- -- -- -- 69,424
1993 337,917 160,153 -- -- 250,000 -- 61,066
Dennis R.
Hendrix........ 1995 -- -- 24,921 -- -- -- 42,091
1994 -- -- 19,411 -- -- -- 49,451
1993 -- -- 23,578 6,525,000 -- -- 55,532
George L.
Mazanec........ 1995 372,083 215,259 -- -- -- 149,231 126,227
1994 340,000 189,414 -- -- -- 198,413 97,111
1993 336,667 177,710 -- -- 250,000 203,644 76,851
James B.
Hipple......... 1995 321,250 136,247 -- -- -- 105,841 143,389
1994 277,917 125,910 -- -- -- 64,998 71,682
1993 253,750 113,016 -- -- -- 66,644 63,104
Carl B. King..... 1995 261,875 115,689 -- -- 20,000 13,028 40,639
1994 255,000 135,333 -- -- 15,000 64,998 33,714
1993 253,833 103,709 -- -- -- 67,744 31,485
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) The principal positions of Messrs. Hendrix, Anderson, and Mazanec are
described on pages 3 and 4. Mr. King is Senior Vice President and General
Counsel of the Company. Until September 1, 1995, Mr. Hipple was Senior Vice
President and Chief Financial Officer of the Company, PEPL and TETCO. From
that date until his retirement on December 31, 1995, Mr. Hipple was Senior
Vice President of such companies.
(2) Pursuant to rules on executive and director compensation disclosure adopted
by the Securities and Exchange Commission (the "SEC"), Other Annual
Compensation is reportable if, in the aggregate, the components thereof
exceed the lesser of $50,000 or 10 percent of the sum of the Named Executive
Officer's salary and bonus. Each component thereof that exceeds 25 percent
of the total for each Named Executive Officer for whom disclosure is
required must be identified. Accordingly, the amounts reported in column (e)
include for Mr. Hendrix the following amounts for use of company aircraft:
1993 -- $19,203; 1994 -- $15,980; 1995 -- $21,065.
(3) In November 1990, Mr. Hendrix and the Company entered into an agreement
whereby he would receive no salary for 1991, 1992, and 1993. Instead, Mr.
Hendrix was awarded 300,000 shares of restricted Common Stock under the
terms of the 1990 LTIP as compensation for that period. Mr. Hendrix received
dividends payable to holders of record of Common Stock on the restricted
shares. These shares were initially restricted as to the transfer of
ownership, with such restrictions being removed on 25,000 shares every three
months, beginning in February 1991 and continuing through November 1993. The
value of the 300,000 restricted shares, based on the fair market value of
the Company's Common Stock as reported on The New York Stock Exchange
Composite Reporting System on November 12, 1990, which
10
<PAGE> 14
was $11.00 per share, was $3,300,000. Based on the December 29, 1995, fair
market value of $28.06 per share, the 300,000 restricted shares would be
valued at $8,418,000. Effective February 24, 1993, the agreement with Mr.
Hendrix was amended to extend the term through November 1996 and to award
him an additional 300,000 shares of restricted Common Stock in lieu of
salary for the period November 1993 through November 1996. The restrictions,
and the removal thereof, were the same as for the 1990 award, and Mr.
Hendrix receives dividends payable to holders of record of Common Stock on
these restricted shares. In December 1993 this award was amended to provide
for the accelerated removal of restrictions in that month on 200,000 shares.
It was provided that the restrictions on the remaining 100,000 shares would
be removed as follows: 36,000 shares in quarterly installments of 9,000
shares each in 1994, 34,000 shares in quarterly installments of 8,500 shares
each in 1995, and 30,000 shares in quarterly installments of 7,500 shares
each in 1996. The full amount reported in the table for 1993 represents the
value of the 300,000 restricted shares based on the fair market value of the
Company's Common Stock on February 24, 1993, which was $21.75. Based on the
December 29, 1995, fair market value, these 300,000 shares also would be
valued at $8,418,000 and Mr. Hendrix's aggregate remaining ownership of
restricted stock was 30,000 shares, with a fair market value of $841,800.
(4) In December 1991, the Compensation Committee granted 126 executives and
management employees, including Messrs. Anderson, Mazanec, King, and Hipple,
options to purchase 778,500 shares of Common Stock, together with an
equivalent amount of EPS Performance Units. Stock options for 40,500 shares
of Common Stock, together with an equivalent number of EPS Performance
Units, were also granted in April 1992 to seven executives and management
employees; 12,000 options and EPS Performance Units were granted to one
executive in July 1992; 41,000 options and EPS Performance Units were
granted to eight management employees in January 1993; in December 1993,
Messrs. Anderson and Mazanec each were granted options to purchase 250,000
shares of Common Stock, together with an equivalent number of EPS
Performance Units; in January 1994, 129 executive and management employees,
including Mr. King, were granted options to purchase 324,300 shares,
together with an equivalent number of EPS Performance Units; and in January
1995, 847,000 options and EPS Performance Units were granted to 178
executives and management employees, including Mr. King. Each EPS
Performance Unit creates a credit to an employee's EPS Performance Unit
account when earnings per share exceed a threshold, which was $0.80 per
share for awards made in 1991 and 1992, $1.10 for awards made in January
1993, $1.50 for awards made in December 1993 and January 1994, and $1.61 for
awards made in January 1995. When earnings for a calendar year (exclusive of
certain special items) exceed the threshold, the excess amount is credited
to the employee's EPS Performance Unit account. The balance in the account
may be used to exercise stock options granted in connection with the EPS
Performance Units or shall be paid two years after the underlying options
expire, usually 10 years from the date of grant. Under the agreements for
such stock options, the options become exercisable in equal installments
over periods of one, two, and three years from the date of grant. Options
may also be exercised by normal means once vesting requirements are met.
(5) Pursuant to rules on executive and director compensation disclosure adopted
by the SEC, all other compensation reported for the last completed fiscal
year is required to be identified and quantified in a footnote. Accordingly,
amounts reported for 1995 include (a) amounts credited by the Company for
the Named Executive Officers under the ESP and under the Panhandle Eastern
Corporation Key Employees Deferred Compensation Plan ("KED"), an unfunded,
defined contribution plan that allows eligible employees, including Messrs.
Anderson, Mazanec, Hipple and King, to elect deferral of base salary and
bonus, and receive matching Company contributions and interest credits,
whenever, and to the extent that, their participation in the ESP is limited
by provisions of the Internal Revenue Code, (b) that portion of interest
credits on deferred compensation amounts that are considered, pursuant to
rules promulgated by the SEC, to be at above-market rates, (c) the value of
EPS Performance Units credited to EPS Performance Unit accounts of the Named
Executive Officers in 1995, (d) the imputed value of premiums paid by the
Company for insurance on the Named Executive Officers' lives (none of the
Named Executive Officers has any cash value rights related to such
insurance) and (e) amounts paid to
11
<PAGE> 15
Mr. Hipple in connection with his December 31, 1995, retirement from the
Company (1995 unused vacation -- $25,000, 1996 earned vacation -- $31,250,
accumulated sick pay benefits -- $12,500).
<TABLE>
<CAPTION>
INTEREST VALUE OF PAYMENTS IN
AT ABOVE VALUE OF EPS LIFE INSURANCE CONNECTION WITH
ESP/KED MARKET RATES PERFORMANCE UNITS PREMIUMS RETIREMENT
-------- ------------ ----------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Mr. Anderson............... $42,727 $ 8,863 $51,800 $ 2,335 $ --
Mr. Hendrix................ -- 27,806 -- 14,285 --
Mr. Mazanec................ 30,882 33,949 51,800 9,596 --
Mr. Hipple................. 29,513 18,393 16,195 10,538 68,750
Mr. King................... 19,162 899 17,850 2,728 --
</TABLE>
STOCK OPTION/SAR GRANTS IN 1995
The following table shows all grants of stock options to the Named
Executive Officers in 1995. No SARs were granted to any Named Executive Officer
in 1995 nor were the exercise prices on stock options previously awarded to any
of them amended or adjusted.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
GRANT DATE
INDIVIDUAL GRANTS VALUE
- -----------------------------------------------------------------------------------------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS/
SECURITIES SARS GRANTED GRANT DATE
UNDERLYING TO EMPLOYEES EXERCISE OR PRESENT
OPTIONS/SARS IN BASE PRICE EXPIRATION VALUE(2)
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE $
(a) (b) (c) (d) (e) (f)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mr. Anderson................... -- -- -- N/A --
Mr. Hendrix.................... -- -- -- N/A --
Mr. Mazanec.................... -- -- -- N/A --
Mr. Hipple..................... -- -- -- N/A --
Mr. King....................... 20,000(1) 5 $ 20.875 1-24-05 130,485
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) On January 25, 1995, the Board of Directors granted stock options to
purchase 847,000 shares to 178 management employees, including Mr. King, at
an exercise price of $20.875, which was the fair market value of the Common
Stock on the date of grant. The options, including those granted to Mr.
King, were nonqualified stock options vesting in annual increments of
one-third commencing one year from the date of grant. The options have a ten
year term. The grants include the award of an equivalent number of EPS
Performance Units, but do not include SARs. Each EPS Performance Unit
creates a credit to the grantee's EPS Performance Unit account when the
Company's earnings per share, exclusive of certain special items, exceed a
threshold. For the January 25, 1995 grant, the threshold is $1.61. When
earnings for a calendar year, beginning with 1995, exceed the threshold, the
excess amount is credited to the grantee's EPS Performance Unit account. The
balance of the account may be used to exercise the stock options or it shall
be paid two years after the expiration of the options. The options may also
be exercised by normal means once vesting requirements are met.
(2) Grant date present values are based on the Black-Scholes option valuation
model. The key input variables used in valuing the options were: risk-free
interest rate - 7.9 percent; dividend yield - 4.09 percent; stock price
volatility - .28; option term - ten years. The Standard and Poor's Compustat
Database was used and the volatility variable reflected 36 months of stock
price trading data. No adjustments for non-transferability or risk of
forfeiture were made. The grant date value is set out for illustrative
purposes and, therefore, is not intended to forecast future financial
performance or possible future appreciation, if any, in the price of the
Company's Common Stock.
12
<PAGE> 16
EXERCISES OF STOCK OPTIONS IN 1995 AND YEAR-END OPTION VALUES
The following table provides information concerning stock options exercised
by each of the Named Executive Officers during 1995 and the value of unexercised
stock options to the Named Executive Officers as of December 29, 1995. The value
assigned to each unexercised, "in the money" stock option is based on the
positive spread between the exercise price of such stock option and the fair
market value of the Common Stock on December 29, 1995. The fair market value is
the average of the high and low prices of a share of Common Stock on that date
as reported on The New York Stock Exchange, Inc., Composite Transactions
Reporting System. In assessing the value, it should be kept in mind that no
matter what theoretical value is placed on a stock option on a particular date,
its ultimate value will be dependent on the market value of the Company's Common
Stock at a future date. That future value will depend in part on the efforts of
the Named Executive Officers to foster the future success of the Company for the
benefit of all stockholders.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
SHARES FY-END (#) AT FY-END ($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE* UNEXERCISABLE
(a) (b) (c) (d) (e)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mr. Anderson................... 2,800 6,331 190,666/83,334 1,401,437/562,296
Mr. Hendrix.................... -- -- --/-- --/--
Mr. Mazanec.................... -- -- 193,552/83,334 1,438,742/562,296
Mr. Hipple..................... 989 10,389 16,935/-- 197,885/--
Mr. King....................... -- -- 21,667/20,000 135,054/143,700
- -----------------------------------------------------------------------------------------------
</TABLE>
* Future exercisability of currently unexercisable stock options depends on the
grantee remaining employed by the Company throughout the vesting period of the
options, subject to provisions applicable at retirement, death, or total
disability. The unexercisable options vest and become exercisable on the
following schedule:
<TABLE>
<CAPTION>
JANUARY 25, DECEMBER 1, JANUARY 25, JANUARY 25,
1996 1996 1997 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Mr. Anderson......................... -- 83,334 -- --
Mr. Mazanec.......................... -- 83,334 -- --
Mr. King............................. 6,666 -- 6,667 6,667
</TABLE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, AND CHANGE IN CONTROL
ARRANGEMENTS
In November 1990, Mr. Hendrix and the Company entered into a five-year
employment agreement pursuant to which Mr. Hendrix received no salary for the
first three years of his employment. Instead, he was awarded 300,000 shares of
Common Stock under the terms of the 1990 LTIP, which shares were initially
restricted as to the transfer of ownership. Such restriction was removed on
25,000 shares every three months, beginning in February 1991 and continuing
through November 1993. Mr. Hendrix received dividends on the restricted shares.
The restriction would have terminated early as to all of the restricted shares
in the event of death or disability, involuntary termination by the Company for
any reason other than "cause" (as defined), or change in control of the Company.
Effective February 24, 1993, the employment agreement with Mr. Hendrix was
amended to extend the term through November 1996. The amendment provided that
Mr. Hendrix would continue to receive no salary for the three years from
November 1993 through November 1996. Instead, Mr. Hendrix was awarded an
additional 300,000 shares of Common Stock on the same terms and subject to the
same restrictions as those described above, with restrictions being removed at
the rate of 25,000 shares every three months, beginning in February 1994. Mr.
Hendrix began receiving dividends on the additional shares in December 1993.
13
<PAGE> 17
On January 1, 1994, the Omnibus Budget Reconciliation Act of 1993 (the
"Budget Act") became effective. Certain provisions of the Budget Act would have
denied to the Company a tax deduction for a substantial portion of compensation
expenses related to Mr. Hendrix in 1994, 1995, and 1996. In order to preserve
the deduction, on December 20, 1993, the agreement was amended again to provide
for the restrictions on 200,000 shares to be removed immediately and for the
restrictions on the remaining shares to be removed over the next 36 months.
Based on certain assumptions as to stock price, preserving the deduction was
estimated to result in tax savings to the Company of approximately $1.8 million.
In addition to the restricted shares, Mr. Hendrix participates in the
welfare plans available to employees generally; however, to the extent permitted
by law, Mr. Hendrix has waived and relinquished his right to participate in the
ESP, the Retirement Income Plan, and certain other plans available to Company
employees and executives.
The Company and Mr. Mazanec entered into a five-year employment agreement
in November 1989 which set a minimum base salary of $250,000 per year. In
addition to maintaining certain non-qualified retirement benefits to which Mr.
Mazanec was entitled as an executive of TEC, the agreement provides Mr. Mazanec
a supplemental lump sum cash benefit of $750,000 plus 8 percent interest
compounded semi-annually from November 1, 1989, payable within 30 days of his
termination from the Company for any reason. If Mr. Mazanec terminates
employment due to a material breach of the agreement by the Company which is not
remedied within 30 days after written notice by Mr. Mazanec, or if the Company
terminates the agreement without cause, the Company also will pay Mr. Mazanec,
in a lump sum, base pay and incentive compensation projected through the
employment period, as well as providing him an extension of welfare plan
benefits through the employment period. Effective November 1, 1992, the Company
and Mr. Mazanec entered into an amendment to the employment agreement, extending
the period of employment covered by the agreement through October 31, 1996.
On March 1, 1991, the Company and Mr. Anderson entered into an employment
agreement, the primary term of which originally was to expire on December 31,
1993. Unless either party serves notice of termination, on December 31 of each
year the term is automatically extended for an additional one-year period. On
December 31 of each year from 1991 through 1995 the primary term was
automatically extended and currently is extended through December 31, 1998. The
Company may terminate the agreement for cause, death, or disability. Under such
circumstances, or if Mr. Anderson terminates the agreement for other than good
reason (as defined), Mr. Anderson or his estate will be paid base pay and
incentive compensation earned for that fraction of the year which he was
actually employed. If the agreement is terminated by Mr. Anderson for good
reason, or by the Company for reasons other than cause, death, or disability,
Mr. Anderson will receive in a lump sum the present value of his base pay and
incentive compensation projected through the employment period, as well as an
extension of welfare plan benefits through the employment period.
Effective March 1, 1991, Mr. Anderson was awarded 40,000 shares of
restricted Common Stock under the terms of the 1990 LTIP. These shares were
initially restricted as to the transfer of ownership, with such restriction
being removed on 10,000 shares on March 1 of each year, beginning on March 1,
1992, and continuing through March 1, 1995, provided Mr. Anderson remained in
the employ of the Company during that period. The restriction would have
terminated early as to all of the restricted shares in the event of death or
disability, involuntary termination by the Company for any reason other than
"cause" (as defined), or change in control of the Company. Mr. Anderson received
dividends payable to holders of record of Common Stock on the restricted shares.
The Company's Executive Severance Program ("Program"), which during 1995
covered four executive officers of the Company, including Messrs. Hipple and
King, provides that in the event of a "change in control," as defined in the
agreements entered into between the Company and the participants in the Program,
such participants will have certain benefits provided to them in the event of
the termination of their employment within three years of the effective date of
such change in control. Such benefits are provided unless such termination of
employment is (i) because of the death or retirement of the participant, (ii) by
the Company or its subsidiaries for "cause" (as defined) or disability, or (iii)
by the participant other than for "good reason" (as defined). Generally,
benefits include a lump-sum cash payment equal to two and one-half
14
<PAGE> 18
times the average of the participant's annual compensation for the five years
preceding the change in control (including deferred amounts, bonuses, and
employer contributions to the ESP); cash payment for the participant's account
in the ESP; a continuation of various medical, insurance, and certain other
benefits for a period of two and one-half years; and a lump-sum cash payment, at
termination, equal to the present value of the additional retirement benefits
the participant would have received as a result of two and one-half years
additional service. The aggregate of each participant's benefits, when combined,
will not exceed three times the "base amount" (as defined in the Internal
Revenue Code). In consideration of these benefits, the participant agrees, in
the event a person seeks to effect a change in control, not to leave the employ
of the Company, and to continue to render services commensurate with the
participant's position, until such person has abandoned or terminated efforts or
the change in control has occurred. The participant also agrees to retain in
confidence all of the confidential business information of the Company or its
subsidiaries known to the participant.
The Company's Change in Control Severance Pay Plan ("Severance Plan") is
available for all employees of the Company and certain of its subsidiaries,
except those employees covered by an agreement under the Executive Severance
Program or a collective bargaining agreement. The Severance Plan provides a
number of severance benefits for eligible employees, which would be triggered by
certain specific events occurring subsequent to a "change in control" (as
defined) of the Company. In addition to the variable cash payments provided for
in the Severance Plan, eligible employees and dependents would receive, at no
cost to the employee, six months' continuation of medical and dental benefits at
the current benefit level, or at the benefit level immediately prior to the
change in control, whichever is greater. As of December 31, 1995, no benefits
had been provided under the Severance Plan.
PENSION PLAN
The Company's qualified retirement plan provides, with respect to
participants employed by certain participating subsidiary companies, benefits,
expressed in the form of a single life annuity commencing at normal retirement
date (age 65, or, if later, the fifth anniversary of participation in the
retirement plan), based on a benefit formula that, in part, uses final five-year
average pay, which considers the regular compensation of the participant,
including overtime payments, bonus payments, and some forms of deferred
compensation. The retirement plan also provides, on and after January 1, 1995,
with respect to participants employed by certain other participating subsidiary
companies, benefits, expressed in the form of a cash balance, based on a benefit
formula that uses annual regular compensation accruals and interest accruals.
Qualified retirement plan benefits may be subject to statutory limitations
if the participant receives compensation in excess of a maximum, is covered by
other qualified plans, if benefits are paid before social security retirement
age, if the participant has less than 10 years of plan participation, or if
benefits are paid in a more valuable form than a single life annuity. When
qualified plan benefits are limited by statute, non-qualified plans restore
certain benefits for participants covered by the non-qualified plans to a level
which would have been available if such statutory limits did not exist.
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<PAGE> 19
The table below shows the estimated annual benefits payable at age 65 under
the qualified and non-qualified retirement plans at various levels of final
average compensation and assuming various years of benefit accrual service:
PENSION PLAN TABLE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------
REMUNERATION 15 20 25 30 35
-------------------------------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$ 200..................................... $ 46 $ 62 $ 77 $ 92 $108
300..................................... 70 94 117 140 164
400..................................... 94 126 157 188 220
500..................................... 118 158 197 236 276
600..................................... 142 190 237 284 332
800..................................... 190 254 317 380 444
1,000.................................... 238 318 397 476 556
</TABLE>
The years of benefit accrual service for each Named Executive Officer,
except Mr. Hendrix, who does not participate in the plan, are as follows: Paul
M. Anderson, 17; Carl B. King, 5; James B. Hipple, 38; and George L. Mazanec, 8.
The covered compensation is the sum of the salary and bonus reported in the
Summary Compensation Table on page 10.
In connection with the 1989 acquisition of TEC by the Company, the TEC
Retirement Plan was amended to offer enhanced early retirement benefits to
active employees age 50 or older whose primary work location was in the
headquarters office. Mr. Hipple was among those employees eligible for these
enhanced retirement benefits. The Company entered into a contract with Mr.
Hipple in 1989 under which, in consideration of his agreement to remain in the
employ of the Company through December 1992, the Company agreed to pay him the
actuarial equivalent of the enhanced retirement benefits which he lost by not
exercising his option to retire early. During 1992, the Board of Directors
extended the effectiveness of this contract until Mr. Hipple's retirement, which
occurred as of December 31, 1995.
C. BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee, which is composed exclusively of Nonemployee
Directors, is responsible for, among other things, the Company's executive
compensation programs. The following is the report of the Compensation Committee
on compensation policies regarding executive officers and the basis of
compensation actions it has taken.
The objective of the Company's executive compensation programs is to offer
compensation opportunities which attract and retain talented executive officers
and key employees and which motivates such employees to enhance shareholder
value. Base pay, annual incentives and long term incentives are structured so as
to deliver competitive pay opportunities, reward individual performance and
encourage executives to manage from the perspective of owners with an equity
stake in the Company. The executive compensation programs are intended to
provide total compensation (consisting of base salaries, annual cash incentive
opportunities, and long-term incentive opportunities) that is competitive with
the average total compensation offered other executives employed by companies of
similar size, complexity, and line of business. To determine competitive
compensation levels, the Compensation Committee considers data from surveys,
proxy statements, independent compensation consultants, and those peer group
companies listed in the Stockholder Return Comparison in Section D, below. The
achievement of both corporate and individual annual performance goals determine
the payouts from the annual incentive compensation plans in which executive
officers and key employees participate. Long term incentive compensation awards
are designed to make a significant portion of total pay directly linked to long
term financial performance and the creation of stockholder value.
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<PAGE> 20
DESCRIPTION OF THE CURRENT EXECUTIVE COMPENSATION PROGRAM
Base Salaries. Salaries are reviewed annually and established by the
Compensation Committee based upon the executive's job responsibilities, level of
experience, individual performance and contributions to the business, and
competitive data obtained from surveys. At the Compensation Committee's December
1995 meeting, base pay adjustments were approved for certain key employees,
including Mr. Anderson, in accordance with these criteria.
Annual Cash Incentive Opportunities. The Compensation Committee administers
the Annual Cash Bonus Plan ("ACBP") which permits the granting of cash incentive
compensation awards. The ACBP requires the Compensation Committee annually to
establish administrative guidelines to define employees who are entitled to earn
an incentive award, what performance is required to earn it, and how much may be
earned. Guidelines effective for 1995 called for the Chief Executive Officer to
recommend, and the Compensation Committee to approve, an annual bonus
opportunity for each participant. This bonus opportunity, or "target," is
expressed as a percentage of base salary and is determined by the Compensation
Committee's judgement of the direct or indirect impact each individual could
have on the Company's performance, as measured by earnings before interest and
taxes ("EBIT"). Further, the guidelines provided that the half of the bonus
attributable to the EBIT performance would not be paid unless the Company's
earnings per share goal of $2.00 was achieved. Depending upon performance,
participants could receive up to 125% of the bonus target. Of the ten executive
officers of the Company in 1995, nine were participants in the ACBP; Mr. Hendrix
was not a participant.
Each of the executive officers, in consultation with the Chief Executive
Officer, established six to ten specific personal objectives, which were
primarily directed toward development of new services, market expansion, cost
control, increasing returns on capital employed and advancing the Company's
non-jurisdictional business segments. Fifty percent of each executive officer's
1995 bonus was determined by the degree to which, in the opinion of the Chief
Executive Officer and the Compensation Committee, the executive officer achieved
his or her personal objectives. Further, each business unit established, and the
Compensation Committee approved, EBIT objectives. If any one business unit
failed to reach a minimum level of earnings established in the guidelines, the
executive officer would receive no compensation for the portion of the bonus
contingent upon that business unit's results. In 1995, five business units met
or exceeded target EBIT objectives and three did not. Nine of ten participating
executive officers scored in excess of 100 percent on personal objectives.
Long Term Incentive Opportunities. Through the 1990 LTIP and 1994 LTIP,
which were approved by the stockholders in April 1990 and 1994, respectively,
the Compensation Committee has the flexibility to structure long-term awards to
meet particular business needs. To date, four types of awards have been made
under the 1990 LTIP and three types of awards have been made under the 1994
LTIP.
1. 1990 LTIP
a. Restricted Stock. Since 1990 the Compensation Committee has awarded
715,000 shares of stock that is restricted as to transferability to three
executive officers. Mr. Hendrix received grants of 300,000 shares of restricted
stock both in 1990 and 1993 in lieu of salary, bonus and certain employee
benefits. Mr. Anderson received a grant of 40,000 shares of restricted stock in
1991, which vested in four equal installments on the first through fourth
anniversaries of the grant date. In January 1996, an award of 75,000 shares of
restricted stock were granted to James T. Hackett, who joined the Company at
that time as Executive Vice President. The terms of Mr. Hackett's award provide
that restrictions will be removed on 15,000 shares on each of five consecutive
anniversaries of his employment.
b. Conditional Stock. This form of award was employed in November 1990 and
January and April 1991 when the Company's management team was being assembled
following the merger of the Company and TEC and in conjunction with the
Company's reorganization into distinct business units. The awards, made to
grantees that included Messrs. Mazanec, Hipple, and King, as well as other
officers of the Company, were for the purpose of focusing the recipients'
attention on long-term objectives by adding, through the ownership of Common
Stock, a meaningful long-term incentive opportunity. The November 1990 and
January 1991
17
<PAGE> 21
conditional stock awards vested and were distributed in four scheduled annual
installments ending in 1994. The April 1991 conditional stock awards vest and
are distributed in scheduled annual installments over a six year term.
Recipients of conditional stock awards are paid dividend equivalents in cash on
unvested, undistributed shares. These awards were designed for a unique purpose
and time, and the Compensation Committee has no plans to make additional
conditional stock awards.
c. Stock Options. Stock options have been granted to executive officers and
others by the Compensation Committee at various times since the inception of the
1990 LTIP, as a vehicle for providing long-term incentive opportunities to
executives officers. The number of stock options granted was determined through
a process which, first, utilized survey data to determine the annualized value
of long term incentive grants made to other executives and management employees
in the Company's compensation data base ("target value"). Next, the
Black-Scholes stock option pricing model was used to calculate a ratio which,
when multiplied by the exercise price of an option, produced an expected present
value of the option. Finally, the number of options required to make a
competitive long-term grant was calculated by dividing the target value by the
expected present value of a single option plus the expected present value of an
EPS Performance Unit (described below), if an EPS Performance Unit was granted
in connection with an option. The result of this equation, expressed as a number
of options, could be adjusted by the Compensation Committee depending upon the
recipient's individual performance, the size of stock option grants awarded the
recipient in the past, and expectations of future contributions. No options have
been granted under the 1990 LTIP since January 1994, when 129 executive and
management employees, including Mr. King, were granted options to purchase
324,300 shares.
d. EPS Performance Units. The Compensation Committee granted EPS
Performance Units in conjunction with stock options to further encourage stock
ownership by executive officers and key employees and to strengthen the linkage
among financial performance, stockholder return, and long-term incentives.
Beginning in 1991 and ending with grants made in 1995 under the 1994 LTIP, one
EPS Performance Unit was granted in conjunction with each stock option awarded.
Each EPS Performance Unit creates a credit to the grantee's EPS Performance Unit
account when the Company's earnings per share has exceeded a threshold
established by the Compensation Committee based on earnings per share for the
year preceding the grant date. When earnings for a calendar year, exclusive of
certain special items, exceed the threshold, the excess amount is credited to
the grantee's EPS Performance Unit account. The balance in the account may be
used to exercise stock options granted in connection with the EPS Performance
Units or will be paid to the grantee, without interest, two years after the
underlying options expire, usually ten years from the date of grant. Options may
also be exercised by normal means once vesting requirements are met.
2. 1994 LTIP
a. Stock Options. In January 1995, 178 executive and management employees
were granted options under the 1994 LTIP to purchase 847,000 shares. In June
1995, 36 executive and management employees were granted options to purchase
58,350 shares, and in July 1995, one executive was granted an award of 5,000
shares. In January 1996, 146 executives and key employees were awarded options
to purchase 324,900 shares. The method used to determine the number of stock
options granted and the present value of the options was the same as described
for stock option grants under the 1990 LTIP.
b. EPS Performance Units. The Compensation Committee granted to each
participant who received a 1995 stock option grant, a number of EPS Performance
Units equal to the number of stock options granted. The threshold for
calculating credit to the grantee's EPS Performance Unit account was $1.61 per
share for these grants. No EPS units were awarded in connection with the January
1996 grants.
c. Performance-Vested Restricted Stock. At its January 1996 meeting, the
Compensation Committee elected to replace EPS Performance Units by awarding
grants of performance-vested restricted stock ("PVRS") totalling 110,700 shares
to 200 executives and key employees. With the assistance of an outside
compensation consultant, the Compensation Committee determined how many shares
of PVRS in addition to stock options granted to any employee would have a
combined value which approximates a competitive long-term incentive grant. The
Compensation Committee believes that shares of PVRS establish an opportunity for
18
<PAGE> 22
increased share ownership and dividend income by executive management and key
employees and encourages management decision making from the perspective of an
investor in the Company.
The terms of the PVRS awards granted in 1996 provide that one-sixth of the
shares awarded any participant will vest when total shareholder return, measured
from the grant date, equals or exceeds fifteen percent. Another one-third of the
award will vest when total shareholder return measured from the grant date
equals or exceeds thirty percent, and the final one-half of the award will vest
when total shareholder return equals or exceeds forty-five percent. Total
shareholder return is defined as accumulated dividends plus market appreciation
of Common Stock when measured over a ten consecutive trading day period. No
shares may vest before the first anniversary of the award unless there is a
change in control. If the shareholder return targets are not met and the PVRS
awards do not vest within five years, they will be forfeited.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Hendrix, who served as CEO until the appointment of Mr. Anderson as CEO
at the annual meeting of shareholders in April 1995, continues to be compensated
under the terms of his amended employment agreement under which he received only
restricted stock and no salary or bonus. In 1995, Mr. Hendrix had the
restrictions removed on a total of 34,000 shares of restricted stock under the
terms of the agreement. In 1996, the last year of the agreement, Mr. Hendrix
will have restrictions removed on the final 30,000 shares.
Upon Mr. Anderson's appointment to the position of CEO, the Committee
approved a salary of $500,000 and a bonus opportunity of 60 percent of base pay.
At its December meeting, the Committee received an analysis by the compensation
consultants of total compensation opportunities available to CEO's in the
competitive marketplace. The consultants advised that the appropriate salary
range for the CEO is $560,000 to $840,000 with a mid-point of $700,000. After
considering this, the Committee adjusted Mr. Anderson's salary to $600,000
annually. The results of the consultants' study also indicated that a target
bonus opportunity for the CEO should be 70 percent, rather than 60 percent, of
base pay in 1996. Accordingly, the Committee increased Mr. Anderson's bonus
opportunity to 70 percent.
At its January 24, 1996 meeting, the Committee reviewed Mr. Anderson's
personal objectives, established in early 1995, and his performance on each, and
discussed the bonus to be paid to Mr. Anderson pursuant to the 1995 ACBP. His
objectives included: 1) advancing non-jurisdictional businesses, including
established a power services unit; 2) developing a strategy to better utilize
underperforming assets; 3) increasing focus on, and improving return on, capital
employed; 4) advancing major market projects such as Sable Island, Winternet and
the Integrated Transportation Project; and 5) achieving various objectives to
position the Company for the year 2000. After thorough discussion, the Committee
rated Mr. Anderson at 109 percent of his target objectives and awarded the bonus
indicated in the Summary Compensation Table.
Section 162(m) of the Internal Revenue Code imposes a limitation on the
deductibility from income tax by the Company on annual compensation in excess of
$1 million paid to certain employees, generally, the Chief Executive Officer and
the four other highest compensated employees ("Covered Employees"). The
Committee intends to structure compensation that rewards performance while
preserving maximum deductibility of all compensation awards. It is not
anticipated that compensation realized by any executive officer under programs
now in effect will, in the immediate future, result in a material loss of tax
deductions.
THE COMPENSATION AND ORGANIZATION COMMITTEE
Charles W. Duncan, Jr., Chairman William T. Esrey
Robert Cizik Leo E. Linbeck, Jr.
Harry E. Ekblom Ralph S. O'Connor
D. STOCKHOLDER RETURN COMPARISON
SEC rules require that the Company include in this Proxy Statement a line
graph presentation comparing cumulative, five-year stockholder returns on an
indexed basis with the S&P 500 Stock Index and either a
19
<PAGE> 23
nationally recognized industry standard or an index of peer companies selected
by the Company. This information is set forth on the graph below, which covers
the period from year-end 1990 through year-end 1995. The Company has chosen the
Dow Jones Pipeline Group for its peer comparison. The Dow Jones Pipeline Group
includes Coastal Corp., El Paso Natural Gas Company, Enron Corp., Enserch Corp.,
Sonat, Inc., Williams Companies, and the Company.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL
RETURN* AMONG PANHANDLE EASTERN CORPORATION,
S&P 500 STOCK INDEX, AND DOW JONES PIPELINE GROUP
(* Total return assumes quarterly reinvestment of dividends)
<TABLE>
<CAPTION>
Measurement Period Panhandle Dow Jones
(Fiscal Year Covered) Eastern Pipelines S&P 500
<S> <C> <C> <C>
12/90 100.0 100.0 100.0
12/91 135.0 97.5 130.5
12/92 155.7 120.5 140.4
12/93 228.7 151.7 154.6
12/94 197.4 150.8 156.6
12/95 289.1 208.4 215.5
</TABLE>
There can be no assurance that the Company's cumulative total return will
continue into the future with the same or similar trends depicted in the graphs
above.
E. COMPLIANCE WITH THE REPORTING REQUIREMENTS OF SECTION 16(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
To the Company's knowledge, based on information furnished to it and
contained in the reports filed pursuant to Rule 16a-3 of the Securities Exchange
Act of 1934, as well as written representations that no other reports were
required, all applicable Section 16(a) filing requirements were complied with
during the year ended December 31, 1995.
F. AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
The Board has proposed an amendment to the Company's Restated Certificate
of Incorporation in order to change the Company's name to "PanEnergy Corp." The
proposed name change reflects the Company's expanding scope of its energy
services. While the Company began doing business as PanEnergy Corp on January 2,
1996, amendment of the Restated Certificate of Incorporation to officially
change the name
20
<PAGE> 24
requires stockholder approval. The amendment will have no substantive effect on
the Company or its stockholders.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE AMENDMENT OF THE
RESTATED CERTIFICATE OF INCORPORATION. APPROVAL THEREOF WILL REQUIRE THE
AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF
COMMON STOCK ENTITLED TO VOTE AT THE MEETING.
G. AMENDMENT TO PANHANDLE EASTERN CORPORATION 1994 LONG TERM INCENTIVE PLAN
The 1994 LTIP was approved by the stockholders by an 80 percent affirmative
vote at the 1994 Annual Meeting of Stockholders. The provisions of Section 5 of
the 1994 LTIP, which for information purposes are set forth in Exhibit 1 hereto,
were intended to meet the requirements of Section 162(m) of the Internal Revenue
Code, which imposes a limitation on the deductibility by the Company for federal
income tax purposes of annual compensation paid to Covered Employees.
Compensation in excess of $1 million is not deductible unless it constitutes
"qualified performance-based compensation," as defined by Section 162(m).
On December 15, 1995, final regulations implementing Section 162(m) were
issued. Such regulations effectively disapproved the "salary referenced
maximums" that were set forth in Section 5. Therefore, if any Covered Employee
were to be paid annual compensation, including compensation received pursuant to
the 1994 LTIP, in excess of $1 million, the Company would be unable to deduct
such excess.
Accordingly, in order to conform the provisions of Section 5 to the final
regulations and enable otherwise qualifying compensation paid pursuant to the
1994 LTIP to constitute "qualified performance-based compensation" which would
be deductible by the Company, the Board has proposed that the 1994 LTIP be
amended to revise Section 5 in its entirety. In addition, the amendment would
add accumulated dividends to the list of available subjects for performance
targets and delete net income from the list, substituting instead, "income".
Under the proposed amendment, which is set forth in its entirety in Exhibit
1, the Compensation Committee may, but shall not be required to, delegate to a
subcommittee which it appoints ("Subcommittee") and which would consist of two
or more "outside directors", as defined under Section 162(m), the authority to
grant and administer awards under the 1994 LTIP to employees who are likely to
be Covered Employees. Except as otherwise provided in the event of a "change in
control", compensation shall result from an award made by the Subcommittee to a
Covered Employee only upon the attainment of performance targets established by
the Subcommittee with respect to the Company's earnings per share, return on
equity, income, stock price or accumulated dividends or business unit income or
market share, or any combination thereof. During the term of the 1994 LTIP, no
Covered Employee may be granted incentive stock option, non-qualified stock
option, SAR and restricted stock awards by the Subcommittee that cover an
aggregate of more than one million shares. In the case of incentive stock option
and non-qualified stock option awards, compensation resulting from an award will
be equal to the difference between the amount the Covered Employee is required
to pay for the Common Stock that is the basis of the award, which amount is
determined by the Subcommittee and which may not be less than the fair market
value of such Common Stock as of grant of the award, and the fair market value
of such Common Stock as of the exercise of the award. In the case of awards of
SARs, compensation resulting from an award will be equal to the difference
between the fair market value of the Common Stock which is the basis of the
award as of the grant of the award and the fair market value of such Common
Stock as of the exercise of the award. In the case of restricted stock awards,
compensation resulting from an award will be equal to the difference between the
amount the Covered Employee is required to pay for the Common Stock that is the
basis of the award, which amount is determined by the Subcommittee and which may
be zero, and the fair market value of such Common Stock at the time the
forfeiture restrictions lapse. Further, compensation resulting to any Covered
Employee during any calendar year from all other types of awards granted by the
Subcommittee is limited to a maximum value of $2,500,000.
21
<PAGE> 25
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE AMENDMENT TO THE
PANHANDLE EASTERN CORPORATION 1994 LONG TERM INCENTIVE PLAN. APPROVAL THEREOF
WILL REQUIRE THE AFFIRMATIVE VOTE OF THE MAJORITY OF THE SHARES PRESENT IN
PERSON OR REPRESENTED BY PROXY AT THE ANNUAL MEETING AND ENTITLED TO VOTE.
H. STOCKHOLDER PROPOSALS
Set forth below is information concerning three proposals received by the
Company from stockholders for inclusion in this Proxy Statement in accordance
with the rules of the SEC. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE AGAINST EACH
OF THE STOCKHOLDER PROPOSALS.
1. STOCKHOLDER PROPOSAL REGARDING ELIMINATION OF THE CLASSIFICATION OF THE BOARD
Donald L. Smith, Rural Route 3, Box 3036, Pittsfield, Illinois 62363, who
has represented to the Company that he is the owner of at least 603 shares of
Common Stock of the Company, has advised the Company of his intent to present
the following proposal for consideration at the Annual Meeting:
"BE IT RESOLVED: That the classification of the Board of Directors of
Panhandle Eastern Corporation (the "Company") be eliminated (such
declassification to be effected in a manner that does not affect the unexpired
terms of directors previously elected) by amending Section 3.1 of Article III of
the By-Laws of the Company to read in its entirety as follows:
'3.1. The property and business of this Corporation shall be managed by its
Board of Directors, consisting of such number of directors, not less than
three, as may be determined from time to time by the Board. Except as
otherwise provided in the Certificate of Incorporation, each director shall
be elected at the annual meeting of shareholders to serve until the next
annual meeting of shareholders. Except as otherwise provided in the
Certificate of Incorporation, newly created directorships and all other
vacancies may be filled at any time by a majority vote of the directors
then in office, although less than a quorum. A director elected by the
directors to fill a newly created directorship or any other vacancy shall
hold office until the next election of directors. Unless he resigns, dies
or is removed prior thereto, each director shall continue to hold office
until the expiration of his term and until his successor has been elected
and has qualified. Resignations of directors must be in writing and shall
be effective upon the date of receipt thereof by the Secretary or upon an
effective date specified therein, whichever date is later, unless
acceptance is made a condition of the resignation, in which event it shall
be effective upon acceptance of the Board.' "
STOCKHOLDER'S SUPPORTING STATEMENT
"This proposal is submitted in order to urge the Board to eliminate the
classified Board in favor of electing all directors at each annual meeting. The
stagger system now in place serves to keep directors in office for three-year
terms and thus prevents the stockholders from voting on the full Board each
year. This purely defensive measure, designed to protect management against the
threat of takeovers by making it more difficult for a would-be acquiror to gain
a majority of Board seats, results in a Board that is less accountable to the
stockholders.
"I urge the stockholders to VOTE FOR this proposal in order to establish
fairness and accountability in the way that directors of the Corporation are
elected."
STATEMENT IN OPPOSITION TO THE STOCKHOLDER PROPOSAL
The Board has reviewed the proposal and its implications and believes the
proposal is not in the best interests of the Company or its stockholders for a
number of reasons. The Board urges stockholders to vote AGAINST the proposal.
The staggered election of Directors has been in place since 1946 when the
Company's stockholders considered and approved an amendment to the By-Laws of
PEPL (the predecessor parent company) to provide for the classification of the
Board into three classes, each to serve for terms of three years, with one class
being elected each year.
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The Board believes that the classified Board and staggered election of
Directors provides important benefits to the Company, which include:
(a) At any given time at least two-thirds of the Board will have
significant prior experience as Directors of the Company. Accordingly,
there will be greater continuity and stability of the Company's business
strategies and policies.
(b) In the event of sudden and disruptive attempts by individuals or
entities to take over or restructure the Company, the classified Board
would permit the Company time to negotiate with the sponsor, to consider
alternative proposals and to assure that stockholder value is maximized.
(c) The Company's classified Board may cause a person seeking to
acquire control of the Company to initiate such action through arm's length
negotiations with management and the Board, which is in a position to
negotiate a transaction that is fair to all of the Company's stockholders,
rather than through a proxy contest.
ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE AGAINST THE
FOREGOING STOCKHOLDER PROPOSAL. APPROVAL THEREOF WILL REQUIRE THE AFFIRMATIVE
VOTE OF 75 PERCENT OF THE OUTSTANDING SHARES ENTITLED TO VOTE AT THE MEETING.
2. STOCKHOLDER PROPOSAL REGARDING SEVERANCE BENEFITS UPON A CHANGE IN CONTROL
Richard M. Sipe, 606 North 8th Street, Concordia, Missouri 64020, who has
represented to the Company that he is the owner of at least 347 shares of Common
Stock of the Company, has advised the Company of his intent to present the
following proposal for consideration at the Annual Meeting:
"BE IT RESOLVED: That the shareholders of Panhandle Eastern Corporation
(the "Company") request that the Board of Directors in the future refrain from
entering into agreements providing executive compensation contingent upon a
change in control of the Company, unless such agreements or arrangements are
specifically submitted to the shareholders for approval."
STOCKHOLDER'S SUPPORTING STATEMENT
"The Company has agreements (the "Agreements") with certain executive
officers which provide special severance compensation contingent upon a change
in control of the Company. Commonly known as "golden parachutes," the Agreements
provide that if an officer resigns or is fired under certain circumstances
within three years after a change in control of the Company, the officer will
receive a lump sum cash payment equal to two and one-half (2 1/2) times his
average "total annual compensation" for the five years preceding the change in
control, in addition to other compensation such as retirement benefits, life and
health insurance benefits, stock ownership or stock options, disability
benefits, etc. The Agreements define a change in control of the Company as
occurring when an entity acquires 30% or more of the Company's common stock or
all or substantially all of the Company's assets, or when a majority of the
board members fail to win re-election.
"If the Company were to become the target of a takeover, these golden
parachutes would introduce a personal consideration for managers that
potentially conflicts with their fiduciary responsibility to share-
holders. Although the Company's board maintains that the Agreements permit
executives to evaluate potential business combinations involving the Company
"without concern that [they] might be distracted by the personal uncertainties
and risks created by such a proposal," we believe that the golden parachutes may
have just the opposite effect -- faced with the possibility of a windfall,
managers may be inclined to encourage a takeover, regardless of whether it
maximizes shareholder value.
"We believe that the issue of whether the Company should, in the future,
provide management with golden parachutes is of such importance that
shareholders should approve this decision. We believe shareholder approval is
one of the best ways available to address potential conflicts of interest that
may arise between the board and top executives on one hand, and shareholders on
the other hand, when a change of control is threatened.
"IF YOU AGREE, WE URGE YOU TO VOTE FOR THIS PROPOSAL."
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STATEMENT IN OPPOSITION TO THE STOCKHOLDER PROPOSAL
The Board believes that contractual arrangements that provide reasonable
severance benefits for key executives following a change in control of the
Company can be an important and entirely appropriate element of an executive
compensation program, although the Company has not included such provisions in
any executive employment agreement it has entered into since 1990. The Board
believes such arrangements may provide the means of ensuring the stability of
certain of the executive management team during a period when such may be
jeopardized by a threatened hostile takeover. Such stability is believed to be
in the best interest of all stockholders.
The Board of Directors disagrees with the proponent's assertion that
severance agreements create a potential conflict of interest between management
and stockholders. In fact, the Board believes that exactly the opposite may be
the case and that reasonable severance agreements serve to further align the
interests of management with those of the Company and its stockholders. The
Company's existing agreements are designed to help keep executives' undivided
attention focused on their duties, at precisely the time when such attention is
needed most.
The Board believes that reasonable severance agreements related to a change
in control can also inure to the benefit of the Company by enhancing its ability
to recruit, retain and motivate executives. Such severance arrangements related
to a change in control for executives are a standard part of many compensation
programs at other companies. In the view of the Board, it is important for it to
retain the flexibility to offer such severance arrangements in order to recruit
top executives, unless the Company were willing to make other employment
arrangements that might well be more costly to it.
Further, the Board believes that stockholder approval of such arrangements
is not in the best interests of the Company and its stockholders since the
imposition of such a requirement would, as a practical matter, make it extremely
difficult to timely implement compensation arrangements suited to particular
situations and circumstances. Compensation arrangements with executives,
including severance agreements, continue to be the responsibility of the Board,
which is in the best position to evaluate the performance of each executive and,
with the assistance of independent benefit consultants, to assess competitive
compensation practices. In addition, the Company's existing employment and
severance agreements with Company officers have been reviewed and approved by
the Compensation Committee, which Committee is composed exclusively of
Nonemployee Directors.
ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE AGAINST THE
FOREGOING STOCKHOLDER PROPOSAL.
3. STOCKHOLDER PROPOSAL REGARDING ARTICLE SEVENTH OF THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION
Paul K. Merrill, 1105 Columbia, Sweet Springs, Missouri 65351, who has
represented to the Company that he is the owner of at least 2,555 shares of
Common Stock of the Company, has advised the Company of his intent to present
the following proposal for consideration at the Annual Meeting:
"BE IT RESOLVED: That the stockholders of Panhandle Eastern Corporation
(the "Company") request that the Board of Directors adopt, declare advisable and
submit for consideration by the stockholders a resolution deleting Article
SEVENTH of the Restated Certificate of Incorporation of the Company in its
entirety."
STOCKHOLDER'S SUPPORTING STATEMENT
"Article SEVENTH of the Company's charter is a defensive measure that was
adopted in 1983, before the enactment of Delaware's so-called "anti-takeover
statute" in 1987. Ostensibly put in place to protect shareholders against
coercive, two-tier tender offers, the provisions of Article SEVENTH are designed
to force potential acquirors deemed "hostile" by management to negotiate with
the Board of Directors instead of submitting their offer directly to the
shareholders. As a result, Article SEVENTH makes management less accountable to
the Company's shareholders, which we believe may adversely affect shareholder
value. To the
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extent that the "protections" provided by Article SEVENTH may have been
warranted in the 1980s, they are no longer required today in light of the
Delaware statute and the virtual disappearance of coercive, two-tier tender
offers in the 1990s.
"Article SEVENTH of the Restated Certificate of Incorporation requires that
certain "business transactions" between the Company and certain "related
persons" (i.e., any person who is the beneficial owner of more than 10% of the
Company's common stock) be approved by the holders of at least 80% of the voting
stock unless (i) the transaction is approved by two-thirds of the "continuing
directors" (i.e., the directors in office on the date the "related person"
became such) or (ii) the transaction is a merger in which the stockholders of
the Company receive the highest price paid by the "related person" in specified
instances. For purposes of Article SEVENTH, the term "business transaction"
includes a merger, a sale of all or substantially all of the Company's assets,
the adoption of a plan of dissolution of the Company and recapitalizations and
reclassifications of the Company's securities.
"Euphemistically characterized by management as a "fair price" provision,
Article SEVENTH is actually an anti-takeover device frequently adopted by
corporation boards to prevent shareholders from responding directly to outside
offers for their shares. Like the Company's "poison pill" rights plan, Article
SEVENTH is a defensive measure that has the practical effect of entrenching
management and thereby reducing their accountability to the shareholders, which
we believe may adversely affect shareholder value. In any event, Section 203 of
the Delaware General Corporation Law, which prohibits certain business
combinations between a Delaware corporation and its "interested" stockholders,
makes the provisions of Article SEVENTH superfluous. (Note, however, that
Article SEVENTH goes further than Section 203 in certain respects; for example,
Article SEVENTH requires 80% supermajority approval of certain business
transactions while Section 203 requires only 66 2/3%.)
"For the reasons stated above, we urge you to VOTE FOR this proposal."
STATEMENT IN OPPOSITION TO THE STOCKHOLDER PROPOSAL
At the April 27, 1983 Annual Meeting of Stockholders, the Company's
stockholders approved adoption of the provision now contained in Article SEVENTH
of the Company's Restated Certificate of Incorporation. Article SEVENTH is
intended to help ensure the Company's stockholders receive a fair price in the
event the Company enters into certain mergers or consolidations.
The Board believes the considerations which led stockholders to adopt this
Article in 1983 are equally compelling today. In particular, the Board disagrees
with the assertion by the proponent of the proposal that Section 203 of the
Delaware General Corporation Law makes the provisions of Article SEVENTH
superfluous. First, Section 203 would not apply to any transaction with an
acquiror who obtains 85 percent or more of the outstanding shares of the
Company's voting stock in the same transaction in which such acquiror acquires
in excess of 15 percent of such outstanding shares and, thus, would not provide
any protection to the Company's minority stockholders remaining after such
transaction. Article SEVENTH, however, would continue to provide to minority
stockholders protection against a "freeze out" transaction at a lower price
following a tender offer for 86 percent of the outstanding shares of the
Company's Common Stock. In addition, Article SEVENTH applies to transactions
between the Company and a beneficial owner of more than 10 percent of the
Company's Common Stock while Section 203 applies only to transactions between
the Company and holders of 15 percent of the Company's Common Stock. Moreover,
Article SEVENTH applies to certain transactions which may have a coercive effect
on, or otherwise disadvantage, minority stockholders (such as a liquidation or
dissolution of the Company or certain purchases by the Company of assets from a
Related Person) to which Section 203 may not apply. As a result, Article SEVENTH
affords protection to the Company's stockholders in certain situations in which
Section 203 would not apply.
Under Article SEVENTH, the approval of 80 percent of the Company's Voting
Stock (as defined) is required, not for all mergers, but only for certain
Business Transactions (as defined) with a Related Person which (i) have not been
approved by two-thirds of the Company's Continuing Directors and (ii) fail to
meet certain conditions, including the condition that the Business Transaction
is a merger or consolidation in which
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the amount paid per share to the holders of the Company's Common Stock is equal
to or greater than the highest amount paid per share by the Related Person for a
share of Common Stock during a specified period.
Article SEVENTH does not preclude the Board from either opposing or
approving a future takeover proposal. Nor does Article SEVENTH prevent any
tender offer followed by a second-step merger which complies with the minimum
price requirements of the Article or has been approved by two-thirds of the
Continuing Directors in accordance with the Article.
Instead, Article SEVENTH is designed to protect the Company's stockholders
against "two-tiered" or "front-end loaded" tender offers in which the potential
acquiror first makes an unsolicited partial cash tender offer, usually at a
premium over the current market price, for just enough of a company's
outstanding voting securities to acquire control of the company. After taking
control, the acquiring party then proceeds to "freeze out" the remaining public
stockholders in a second-step merger (usually using some form of stock or debt
securities) at a price lower than that paid in the first-step cash tender offer.
The Board believes such offers would be unfair to stockholders since they are
designed to coerce stockholders into tendering their shares in the first-step
tender offer out of fear that, if they do not, they will be required to accept
less consideration in the second-step merger.
ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE AGAINST THE
FOREGOING STOCKHOLDER PROPOSAL.
I. OTHER MATTERS
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP ("Peat Marwick") served as the Company's independent
auditor during 1995, and was again appointed by the Board to serve in that
capacity for 1996. Representatives of Peat Marwick will be present at the Annual
Meeting to respond to appropriate questions from stockholders and to make a
statement if they desire to do so.
OTHER MATTERS BEFORE THE MEETING
The Company does not expect any other matters to come before the Annual
Meeting. However, if any other matters properly come before the Annual Meeting,
it is the intention of the persons named in the accompanying form of proxy to
vote such proxy in accordance with their judgment on such matters.
It is important that the proxies be returned promptly. All stockholders,
whether or not they expect to attend the Annual Meeting in person, are urged to
mark, sign, date, and return the accompanying form of proxy in the enclosed
pre-addressed envelope, which requires no postage if mailed in the United
States.
BY ORDERS OF THE BOARD OF DIRECTORS,
/s/ ROBERT W. REED
ROBERT W. REED
Secretary
Dated: March 15, 1996
Houston, Texas
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<PAGE> 30
EXHIBIT 1
A. CURRENT SECTION 5 OF THE PANHANDLE EASTERN CORPORATION 1994 LONG TERM
INCENTIVE PLAN:
5. AWARDS TO COVERED EMPLOYEES
The Committee may determine that any Award granted hereunder for any
Plan Year to a Participant who is a Covered Employee shall be made and
administered by a subcommittee consisting solely of two or more "outside
directors" (as defined in Treasury regulations promulgated under Section
162(m) of the Code) appointed by the Committee (the "Subcommittee"). Any such
Award may be determined solely on the basis of (a) the achievement by the
Company of a specified target earnings per share, return on equity or net
income, all as adjusted to exclude items that the Subcommittee determines to
be inappropriate for purposes of the Award, (b) the Company's stock price,
(c) the achievement by a business unit of the Company of a specified target
net income as adjusted to exclude items that the Subcommittee determines to
be inappropriate for purposes of the Award, or market share, or (d) any
combination of the goals set forth in (a) through (c) above. If an Award is
made on such basis, the Subcommittee shall establish such goals prior to the
beginning of the Plan Year (or such later date as may be prescribed by the
Internal Revenue Service for purposes of Section 162(m) of the Code). Amounts
received for each Plan Year pursuant to Awards granted under Sections 4(d)
through 4(h) of this Plan, or any combination thereof, to each Covered
Employee shall be limited to a maximum value of 500% of the Covered
Employee's annual salary at the rate in effect on the first day of such Plan
Year. In no event may the cumulative amounts paid pursuant to Awards granted
in any Plan Year under Sections 4(d) through 4(h) of this Plan, or any
combination thereof, to any Covered Employee exceed 500% of the Covered
Employee's annual salary at the rate in effect on the first day of such Plan
Year. For purposes of the two preceding sentences, if a Covered Employee does
not receive a salary, the Covered Employee shall be deemed to have an annual
salary of $500,000. Any payment of an Award granted under this Section 5,
other than Awards referred to in Sections 4(a), 4(b) or 4(c) of this Plan or
any combination thereof, shall be conditioned on the written certification of
the Subcommittee that the goals used as the basis for any such Award, and any
other material terms, were in fact satisfied.
B. PROPOSED AMENDMENT AND RESTATEMENT OF SECTION 5:
5. AWARDS TO COVERED EMPLOYEES
The Committee may determine that any Award granted hereunder for any
Plan Year to a Participant who is a Covered Employee shall be made and
administered by a subcommittee consisting solely of two or more "outside
directors" (as defined in Treasury regulations promulgated under Section
162(m) of the Code) appointed by the Committee (the "Subcommittee"). Except
as otherwise permitted by Section 8 of this Plan, compensation resulting from
any Award made by the Subcommittee shall be paid solely on the attainment of
performance goals established in writing by the Subcommittee with reference
to (a) the achievement by the Company of a specified target earnings per
share, return on equity or net income, (b) the Company's stock price, (c)
accumulated dividends paid on the Company's stock, (d) the achievement by a
business unit of the Company of a specified target income or market share, or
(e) any combination of the goals set forth in (a) through (d) above. With
respect to any Award made by the Subcommittee, the Subcommittee shall
establish such performance goals prior to the beginning of the Plan Year for
which the Award is granted (or such later date as may be prescribed by the
Internal Revenue Service for purposes of Section 162(m) of the Code). No more
than one million (1,000,000) shares of common stock shall be cumulatively
available for Awards made by the Subcommittee and granted under Sections 4(a)
through 4(d) of this Plan to any Covered Employee, and compensation resulting
to any Covered Employee during any Plan Year from Awards made by the
Subcommittee and granted under Sections 4(e) through 4(h) of this Plan, shall
be limited to a maximum value of $2,500,000. Any payment of compensation to a
Covered Employee resulting from an Award made by the Subcommittee upon
attainment of related performance goals, other than Awards granted under
Sections 4(a) through 4(c) of this Plan, shall be conditioned upon the
written certification of the Subcommittee that the performance goals, and all
other material conditions and terms, relating to such Award have, in fact,
been satisfied.
<PAGE> 31
proxy
[PANHANDLE EASTERN CORPORATION LOGO]
-----------------------------------
SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS
APRIL 24, 1996, 10:00 A.M.
As evidenced by the signature(s) on the reverse side hereof, the
undersigned hereby appoints Paul F. Ferguson, Jr., Carl B. King, and Robert W.
Reed, and any one of them, as Proxies, each with full power of substitution, to
represent and vote all shares of the Common Stock of Panhandle Eastern
Corporation (the "Company") which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Stockholders of the Company to be
held at the J.W. Marriott Hotel, 5150 Westheimer, Houston , Texas, on April 24,
1996, at 10:00 A.M., and at any adjournments thereof, with all power the
undersigned would possess if personally present. This card also provides voting
instructions for shares, if any, held in the Company's Dividend Reinvestment
and Stock Purchase Plan and, if applicable, shares held in the various employee
benefit plans.
The shares represented by this proxy will be voted as directed by the
stockholder. IF NO DIRECTION IS GIVEN, SHARES WILL BE VOTED "FOR" ITEMS 1, 2,
AND 3 AND "AGAINST" ITEMS 4, 5 AND 6.
(CONTINUED, AND TO BE SIGNED, ON THE OTHER SIDE)
<PAGE> 32
<TABLE>
<S> <C> <C> <C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, AND 3 AND PLEASE MARK VOTES / / OR /X/
AGAINST ITEMS 4, 5, AND 6.
Item 1--Election of duly Item 2--Proposal to Amend the Item 3--Proposal to amend Sec- Item 4--Proposal to amend the
nominated Directors Company's Restated Certificate tion 5 of the Panhandle Eastern By-laws of the Company to elimi-
(Three year terms). of Incorporation to change the Corporation 1994 Long Term nate the classification of the
Nominees: Milton Carroll, Company's name to "PanEnergy Incentive Plan. Board of Directors.
Robert Cizik, Harold S. Hook, Corp."
and Leo E. Linbeck, Jr.
FOR all nominees Witheld
(except as marked (as to all
to the contrary nominees)
as provided)
/ / / / For Against Abstain For Against Abstain For Against Abstain
To withhold authority to / / / / / / / / / / / / / / / / / /
vote for any individual
nominee write that nominee's
name on space provided below.
- -----------------------------
Item 5--Proposal regarding Item 6--Proposal to delete Item 7--On any other matters
Severance Benefits Upon A Article SEVENTH of the that may properly come before
Change in Control of the Company's Restated the meeting.
Company. Certificate of
Incorporation.
For Against Abstain For Against Abstain
/ / / / / / / / / / / /
P Dated __________________________________, 1996
R _____________________________________________________
Signature(s) of Stockholder(s)
O
_____________________________________________________
X Signature(s) of Stockholder(s)
Y When signing as attorney, executor, administrator,
trustee or guardian or in other representative
capacities, please give your full title as such.
Please date, sign and mail this proxy as your name A Proxy for shares held in joint ownership should be
appears above and return in the enclosed envelope. signed by EACH owner.
</TABLE>
