<PAGE> 1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 1-6446
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K N ENERGY, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Kansas 48-0290000
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
370 Van Gordon Street
P.O. Box 281304, Lakewood, Colorado 80228-8304
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(303) 989-1740
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock, $5 par value; authorized 50,000,000 shares; outstanding
28,398,165 shares as of April 30, 1996.
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<PAGE> 2
Form 10-Q
K N ENERGY, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1996
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements
Page Number
-----------
<S> <C>
Consolidated Balance Sheets (Unaudited) . . . . . . . . . . . . . . . . . . . . 3 & 4
Consolidated Statements of Income
(Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows
(Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 & 7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . 8 & 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 10 - 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 6. Exhibit 4 - Credit Agreement dated as of December 1, 1994,
among K N Energy, Inc., The Banks Listed Herein, and
Morgan Guaranty Trust Company of New York, as Agent.*
Exhibit 27 - Financial Data Schedule *
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
* Included In SEC EDGAR Filing Only.
2
<PAGE> 3
Form 10-Q
CONSOLIDATED BALANCE SHEETS
K N ENERGY, INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents ...................................... $ 35,982 $ 22,571
Accounts Receivable ............................................ 212,900 214,963
Material and Supplies, at Average Cost ......................... 10,267 10,515
Gas in Underground Storage ..................................... 2,925 9,762
Prepaid Gas .................................................... 6,411 7,800
Other Prepaid Expenses ......................................... 13,593 13,536
Gas Imbalances and Other ....................................... 28,611 23,880
------------ ------------
310,689 303,027
------------ ------------
INVESTMENTS:
Investment in Tom Brown, Inc. .................................. 37,588 --
Investment in Gas and Oil Properties, Net ...................... -- 36,451
Other .......................................................... 17,298 15,784
------------ ------------
54,886 52,235
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Retail Natural Gas Services .................................... 375,080 373,347
Interstate Transportation and Storage Services ................. 315,473 315,686
Gathering, Processing and Marketing Services ................... 671,964 663,754
------------ ------------
1,362,517 1,352,787
Less - Accumulated Depreciation, Depletion and Amortization .... 501,559 489,812
------------ ------------
860,958 862,975
------------ ------------
DEFERRED CHARGES AND OTHER ASSETS .............................. 42,806 39,220
------------ ------------
$ 1,269,339 $ 1,257,457
============ ============
</TABLE>
3
<PAGE> 4
Form 10-Q
CONSOLIDATED BALANCE SHEETS
K N ENERGY, INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current Maturities of Preferred Stock and Long-Term Debt .................. $ 25,048 $ 28,197
Notes Payable ............................................................. 70,500 88,000
Accounts Payable .......................................................... 158,999 157,340
Accrued Taxes ............................................................. 14,705 5,423
Gas Imbalances and Other .................................................. 56,581 50,878
------------ ------------
325,833 329,838
------------ ------------
DEFERRED LIABILITIES, CREDITS AND RESERVES:
Deferred Income Taxes ..................................................... 115,793 112,267
Deferred Revenues ......................................................... 18,739 20,823
Other ..................................................................... 33,527 30,356
------------ ------------
168,059 163,446
------------ ------------
LONG-TERM DEBT ............................................................ 309,613 315,564
------------ ------------
MINORITY INTERESTS IN EQUITY OF SUBSIDIARIES .............................. 16,787 14,277
------------ ------------
PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION ........................... -- 572
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred Stock -
Authorized - Class A, 200,000 Shares; Class B, 2,000,000 Shares,
All Without Par Value
Redeemable Solely at Option of Company at $105 Per Share - Class A,
$5.00 Cumulative Series; 70,000 Shares ............................ 7,000 7,000
------------ ------------
Common Stockholders' Equity -
Common Stock -
Authorized - 50,000,000 Shares, Par Value $5 Per Share
Outstanding - 28,360,586 and 28,097,749 Shares, Respectively ...... 141,803 140,489
Additional Paid-in Capital.............................................. 181,133 176,910
Retained Earnings ...................................................... 119,935 109,895
Deferred Compensation .................................................. (206) (222)
Treasury Stock, at Cost, (19,853 and 10,739 Shares, Respectively) ...... (618) (312)
------------ ------------
Total Common Stockholders' Equity ......................................... 442,047 426,760
------------ ------------
Total Stockholders' Equity ................................................ 449,047 433,760
------------ ------------
$ 1,269,339 $ 1,257,457
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
4
<PAGE> 5
Form 10-Q
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
K N ENERGY, INC. AND SUBSIDIARIES
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
OPERATING REVENUES:
Retail Natural Gas Services ....................... $ 84,354 $ 74,337
Interstate Transportation and Storage Services .... 6,887 7,217
Gathering, Processing and Marketing Services ...... 292,544 209,062
Gas and Oil Production ............................ -- 2,091
---------- ----------
Total Operating Revenues .......................... 383,785 292,707
---------- ----------
OPERATING COSTS AND EXPENSES:
Gas Purchases ..................................... 282,569 196,382
Operations and Maintenance ........................ 47,987 47,294
Depreciation, Depletion and Amortization .......... 12,199 12,338
Taxes, Other Than Income Taxes .................... 5,705 5,201
---------- ----------
Total Operating Costs and Expenses ................ 348,460 261,215
---------- ----------
OPERATING INCOME .................................. 35,325 31,492
---------- ----------
OTHER INCOME AND (DEDUCTIONS):
Interest Expense .................................. (8,551) (8,954)
Minority Interests ................................ (546) (577)
Other, Net ........................................ 1,126 569
---------- ----------
Total Other Income and (Deductions) ............... (7,971) (8,962)
---------- ----------
INCOME BEFORE INCOME TAXES ........................ 27,354 22,530
Income Taxes ...................................... 9,847 8,012
---------- ----------
NET INCOME ........................................ 17,507 14,518
Less - Preferred Stock Dividends .................. 100 123
---------- ----------
EARNINGS AVAILABLE FOR COMMON STOCK ............... $ 17,407 $ 14,395
========== ==========
Number of Shares Used in Computing
Earnings Per Common Share ..................... 28,945 28,144
========== ==========
EARNINGS PER COMMON SHARE ......................... $ 0.60 $ 0.51
========== ==========
DIVIDENDS PER COMMON SHARE ........................ $ 0.26 $ 0.25
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements of income.
5
<PAGE> 6
Form 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
K N ENERGY, INC. AND SUBSIDIARIES
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
---------------------
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income .................................................................... $ 17,507 $ 14,518
Adjustments to Reconcile Net Income to Net Cash from Operating Activities:
Depreciation, Depletion and Amortization ................................... 12,199 12,338
Provisions for Losses on Accounts Receivable ............................... 162 250
Deferred Income Taxes ...................................................... 3,393 6
Deferred Purchased Gas Costs ............................................... 6,605 5,483
Changes in Other Working Capital Items ..................................... 22,232 14,840
Changes in Deferred Revenues ............................................... (2,084) 5,940
Other, Net ................................................................. 1,738 6,598
-------- --------
NET CASH FLOWS FROM OPERATING ACTIVITIES ...................................... 61,752 59,973
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures .......................................................... (10,968) (14,645)
Acquisitions .................................................................. (5,828) (10,369)
Investments ................................................................... (3,114) (995)
Proceeds from Sale of Facilities .............................................. 4,628 425
(Payments) Collections Under Basket Agreement ................................. 6 715
-------- --------
NET CASH FLOWS USED IN INVESTING ACTIVITIES ................................... (15,276) (24,869)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-Term Debt (Net) ......................................................... (17,500) (14,000)
Long-Term Debt - Retired ...................................................... (9,686) (12,237)
Common Stock Issued ........................................................... 3,815 2,213
Treasury Stock - Issued .................................................. 3,997 785
- Acquired ................................................ (4,303) --
Cash Dividends - Common .................................................. (7,367) (6,928)
- Preferred ............................................... (100) (123)
Minority Interests - Contributions ........................................... 5 1,031
- Distributions ........................................... (1,926) (329)
Premium on Debt Re-acquisition and Issue Costs ................................ -- (35)
-------- --------
NET CASH FLOWS USED IN FINANCING ACTIVITIES ................................... (33,065) (29,623)
-------- --------
Net Increase in Cash and Cash Equivalents ..................................... 13,411 5,481
Cash and Cash Equivalents at Beginning of Year ................................ 22,571 20,613
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .................................... $ 35,982 $ 26,094
======== ========
</TABLE>
The accompanying notes are an integral part of these statements of cash flows.
6
<PAGE> 7
Form 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
K N ENERGY, INC. AND SUBSIDIARIES
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
--------------------
1996 1995
-------- --------
<S> <C> <C>
CHANGES IN OTHER WORKING CAPITAL ITEMS SUMMARY
(NET OF ACQUISITION EFFECTS):
Accounts Receivable ............................................. $ 1,901 $ 41,728
Material and Supplies ........................................... 248 2,713
Gas in Underground Storage ...................................... 6,837 14,840
Accounts Payable, Accrued Taxes and Other Current Liabilities ... 16,645 (49,316)
Other Current Assets ............................................ (3,399) 4,875
-------- --------
$ 22,232 $ 14,840
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Paid During the Year for:
Interest (Net of Amount Capitalized) ............................ $ 11,126 $ 9,990
======== ========
Income Taxes .................................................... $ 308 $ 9
======== ========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
On February 16, 1995, K N's gas transmission affiliate, AOG Gas Transmission
Company, L.P., acquired natural gas transmission pipeline and storage assets in
Texas. In conjunction with the acquisition, liabilities were assumed as
follows:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Fair Value of Assets Acquired ..... $ 13,440
Cash Paid for Assets .............. (10,369)
--------
Liabilities Assumed ............... $ 3,071
========
</TABLE>
7
<PAGE> 8
Form 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
In the opinion of management, all adjustments necessary for a fair statement of
the results for the unaudited interim periods have been made. These adjustments
consist only of normal recurring accruals.
Certain prior year amounts have been reclassified to conform with the 1996
presentation.
2. Merger and Acquisition
(A) Pony Express Pipeline
On May 8, 1996, KN Energy, Inc. ("K N") entered into a definitive agreement to
purchase a 900-mile crude oil pipeline owned by Amoco Pipeline Company for
conversion to natural gas service. Also in May, the Company's regulated
interstate pipeline, K N Interstate Gas Transmission Co. ("KNI"), filed with the
Federal Energy Regulatory Commission ("FERC") requesting authority to purchase
from K N the portion of the line, renamed the Pony Express Pipeline, from Lost
Cabin, Wyoming in central Wyoming to Freeman, Missouri near Kansas City. KNI
also requested authority to convert the pipeline to natural gas service, install
compression and construct additional pipeline facilities. The total cost of the
project, including the purchase price, costs to convert the pipeline to natural
gas service and to construct a lateral to Rockport, Colorado is expected to be
less than $160 million. The pipeline is expected to be in service during the
first quarter of 1997.
(B) Gas and Oil Properties
On January 31, 1996, K N and Tom Brown, Inc. ("TBI") closed a transaction
pursuant to which K N transferred its stock in K N Production Company, a wholly
owned subsidiary of K N, to TBI in exchange for common and convertible
preferred stock of TBI. The transaction represents a non-monetary exchange
(valued at approximately $36.3 million) of oil and gas assets for accounting
purposes. In conjunction with this transaction, K N and TBI formed a limited
liability company, owned 55 percent by K N and 45 percent by TBI which performs
certain gathering, processing, field, marketing and storage services in the
Mid-Continent of the United States.
3. TransColorado Project
Agreements have been executed providing for the construction and operation of a
new unregulated gas treating plant in southwestern Colorado to be owned by
affiliates of K N and El Paso Natural Gas Company. The treating plant will tie
into Phase I (New Mexico pre-build) of the TransColorado pipeline. A filing has
been made with the FERC requesting approval to construct Phase I of the project
which consists of 22.5 miles of 24-inch pipeline together with 2.5 miles of
16-inch lateral pipeline. Both the pipeline and plant, which have a combined
capital cost of approximately $30 million and a design capacity to handle up to
120,000 MMBtu per day, are expected to be in service by the end of 1996.
8
<PAGE> 9
Form 10-Q
4. Regulatory Matters
On February 16, 1996, the Wyoming Public Service Commission issued an order
authorizing K N to implement a program to allow 10,000 residential and
commercial customers to choose their energy provider from a qualified list of
suppliers. This new service will commence on June 1, 1996. K N will continue
to provide all other utility services and will manage the gas supplies for
customers in the program.
9
<PAGE> 10
Form 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CONSOLIDATED EARNINGS
K N reported first quarter 1996 consolidated net income of $17.5 million, or
$0.60 per common share after payment of preferred dividends. This reflects an
18 percent increase in per share earnings compared with first quarter 1995's
net income of $14.5 million or $0.51 per share.
This earnings improvement is attributable to the restructuring of the Company
in 1995, expansion of its business and higher prices for natural gas liquids.
RESULTS OF OPERATIONS
Operating results by business segment and consolidated other income and
(deductions) and income taxes are discussed below. In January 1996, K N
transferred its stock in its gas and oil subsidiary to Tom Brown, Inc. ("TBI")
in exchange for common and convertible preferred stock of TBI. Accordingly,
operating results for the gas and oil segment are excluded from the following
discussion; this segment reported operating income of $0.3 million in the first
quarter of 1995. Segment operating revenues, gas purchases, operations and
maintenance expenses and volumetric data cited below are before intersegment
eliminations (dollars in millions).
<TABLE>
<CAPTION>
RETAIL NATURAL GAS SERVICES 1996 1995
------ ------
<S> <C> <C>
Operating Revenues -
Gas Sales $ 80.9 $ 71.9
Transportation and Other 3.7 2.5
------ ------
84.6 74.4
------ ------
Operating Costs and Expenses -
Gas Purchases 50.0 44.0
Operations and Maintenance 15.1 13.6
Depreciation, Depletion and Amortization 3.4 3.2
Taxes, Other Than Income Taxes 1.8 1.9
------ ------
70.3 62.7
------ ------
Operating Income $ 14.3 $ 11.7
====== ======
Systems Throughput (Trillion Btus) -
Gas Sales 14.8 13.3
Transportation 6.9 6.2
------ ------
21.7 19.5
====== ======
System Wide Degree Days 3,375 2,823
====== ======
</TABLE>
This segment's 1996 operating results were favorably impacted by colder weather,
particularly during the last half of January and first week of February 1996.
The impact of 1995 cost savings programs were offset by higher 1996 operations
and maintenance costs resulting from the increased systems throughput.
10
<PAGE> 11
Form 10-Q
<TABLE>
<CAPTION>
INTERSTATE TRANSPORTATION AND STORAGE SERVICES 1996 1995
-------- --------
<S> <C> <C>
Operating Revenues -
Transportation and Storage $ 16.3 $ 15.3
Natural Gas Liquids and Other 2.4 1.3
-------- --------
18.7 16.6
-------- --------
Operating Costs and Expenses -
Gas Purchases 2.0 1.4
Operations and Maintenance 7.4 7.0
Depreciation, Depletion and Amortization 1.8 2.1
Taxes, Other Than Income Taxes 0.8 0.8
-------- --------
12.0 11.3
-------- --------
Operating Income $ 6.7 $ 5.3
======== ========
Systems Throughput (Trillion Btus) - 53.5 38.9
======== ========
Natural Gas Liquids (Millions of Gallons) 3.6 3.5
======== ========
</TABLE>
This segment's 1996 operating results were also favorably impacted by colder
weather. Firm storage service rates were reduced, effective June 1, 1995,
accompanying the transfer of three storage fields to a subsidiary not subject
to regulation on a cost-of-service basis. Increased 1996 systems throughput
volumes more than offset lower 1996 rates. The benefits of 1995 cost savings
programs were substantially offset by higher costs in 1996 associated with
systems throughput volumes.
<TABLE>
<CAPTION>
GATHERING, PROCESSING AND MARKETING SERVICES 1996 1995
------ ------
<S> <C> <C>
Operating Revenues -
Gas Sales $252.0 $178.4
Natural Gas Liquids 40.6 25.2
Transportation, Gathering and Other 16.8 18.6
------ ------
309.4 222.2
------ ------
Operating Costs and Expenses -
Gas Purchases 258.9 174.0
Operations and Maintenance 26.1 25.8
Depreciation, Depletion and Amortization 7.0 5.9
Taxes, Other Than Income Taxes 3.1 2.3
------ ------
295.1 208.0
------ ------
Operating Income $ 14.3 $ 14.2
====== ======
System Throughput (Trillion Btus) -
Gas Sales 115.7 89.1
Transportation and Gathering 88.9 81.6
------ ------
204.6 170.7
====== ======
Natural Gas Liquids (Millions of Gallons) 116.0 92.8
====== ======
</TABLE>
11
<PAGE> 12
Form 10-Q
The earnings impact of significant increases in 1996 systems throughput and
natural gas liquids sales volumes was substantially offset by higher gas costs
influenced by the colder, nation-wide 1996 winter weather. 1996 natural gas
liquids prices averaged $0.35 per gallon, or approximately 26 percent higher
than first quarter 1995 prices. In addition to the weather impact on higher
1996 revenues, volumes and expenses, growth in 1996 operating activity reflects
1995 acquisitions of gas transmission and storage assets in February and a
processing plant and gathering facilities in October.
<TABLE>
<CAPTION>
OTHER INCOME AND (DEDUCTIONS) 1996 1995
------ ------
<S> <C> <C>
Interest Expense $ (8.6) $ (9.0)
Minority Interests and Other, Net 0.6 --
------ ------
$ (8.0) $ (9.0)
====== ======
</TABLE>
This decline in 1996 interest expense results from lower amounts of long-term
debt outstanding. The positive 1996 amount for minority interests and other,
net primarily reflects preferred dividends from TBI. Common and convertible
preferred stock was received from TBI in exchange for the Company's gas and
oil subsidiary.
<TABLE>
<CAPTION>
INCOME TAXES 1996 1995
------ ------
<S> <C> <C>
Provisions $ 9.8 $ 8.0
====== ======
Effective Tax Rate 36.0% 35.6%
====== ======
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
First quarter 1996 net cash flows from operations were $61.8 million, compared
with net operating cash flows of $60.0 million for the 1995 first quarter,
consistent with the improved operating results.
In January 1996, the Company announced the purchase of a 900-mile crude oil
pipeline for conversion to natural gas service. Estimated 1996 expenditures
related to the acquisition and conversion costs of this pipeline, plus directly
related projects, are estimated at $105 million. This pipeline is expected to
be in service in early 1997. K N is currently evaluating financing
alternatives for this project, as well as other requirements.
In March 1996, Standard & Poor's lowered its rating on the Company's senior
unsecured debt and preferred stock from A to A- and its commercial paper rating
from A-1 to A-2. This action reflected the rating agency's concern with the
Company's risk profile given its shift toward nonregulated business activities.
12
<PAGE> 13
Form 10-Q
OTHER INFORMATION
Item 1. Legal Proceedings
Westerman, et al. vs. K N Energy, Inc., et al.
As reported in the Company's Annual Report on Form 10-K, on December 8, 1994,
K N and its wholly owned subsidiary K N Gas Supply Services, Inc. ("KNGSS") were
sued by gas producers under claims arising from two gas purchase contracts
covering gas purchases from wells in the Niobrara Field, Colorado. On October
30, 1995, K N and KNGSS reached settlement which resolved all disputes with
parties representing approximately two-thirds of the gas ownership interests
held by the producers. On April 5, 1996, K N and KNGSS reached settlement with
the remaining producer interests, resolving all disputes between these parties,
including a lawsuit filed by K N and KNGSS in federal court in Colorado.
Stipulations for Dismissal With Prejudice have been signed by the courts in
Colorado and Texas, and the cases have been dismissed. The Company believes
that this settlement will have no material adverse effect on the Company's
financial position or results of operations.
For information relating to other legal proceedings see Notes 4 and 5 of Notes
to Consolidated Financial Statements on Pages 41-44 of the 1995 Annual Report
on Form 10-K.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Registrant held its Annual Meeting of Shareholders on
April 11, 1996.
(b) Proxies for the meeting were solicited pursuant to Regulation
14 of the Securities Exchange Act of 1934. There was no solicitation
in opposition to management's nominees for directors as listed in the
Proxy Statement and all such nominees were elected.
(c) A proposal to increase the number of shares authorized for
issuance under the 1994 K N Energy, Inc. Long-Term Incentive Plan was
voted on at the Annual Meeting and the number of affirmative votes,
negative votes, abstentions, and broker no votes with respect to this
matter were as follows:
<TABLE>
<S> <C>
For 18,901,490
Against 3,729,397
Abstain 248,146
Broker No Votes 1,894,514
</TABLE>
(d) A proposal to increase the number of shares authorized for
issuance under the 1992 Stock Option Plan for Nonemployee Directors,
as well as amendments to the plan to increase the number of shares
awarded to each director and to change the timing of such awards was
voted on at the Annual Meeting and the number of affirmative votes,
negative votes, abstentions, and broker no votes with respect to this
matter were as follows:
<TABLE>
<S> <C>
For 20,733,682
Against 1,839,068
Abstain 306,283
Broker No Votes 1,894,514
</TABLE>
13
<PAGE> 14
Form 10-Q
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4 - Credit Agreement dated as of December 1, 1994, among K N Energy,
Inc., The Banks Listed Herein, and Morgan Guaranty Trust Company
of New York, as Agent.
27 - Financial Data Schedule
(b) Reports on Form 8-K
On February 1, 1996, a Current Report on Form 8-K was filed to report
that on January 31, 1996, K N Energy, Inc. closed the merger of K N's
wholly owned oil and gas subsidiary, K N Production Company, into Tom
Brown, Inc., as well as completed the joint formation of a new gas
services company, Wild Horse Energy Partners, LLC.
On February 14, 1996, a Current Report on Form 8-K was filed to
report that on January 30, 1996, K N Energy, Inc. announced it had
entered into a Letter of Intent to acquire a major midwest crude oil
pipeline from Amoco Pipeline Company for conversion to natural gas.
On February 28, 1996, a Current Report on Form 8-K was filed to
report that on February 14, 1996, K N Energy, Inc. announced that
Charles W. Battey, Chairman of the Board of Directors, and David M.
Carmichael, Vice Chairman, would retire at the Company's annual
shareholder's meeting in April, and that Larry D. Hall, President and
Chief Executive Officer, would assume the position of Chairman at that
time.
14
<PAGE> 15
Form 10-Q
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
K N ENERGY, INC.
(Registrant)
May 15, 1996 /s/ Clyde E. McKenzie
----------------------------------------
Clyde E. McKenzie
Vice President & Chief Financial Officer
(On Behalf of the Registrant and as
Principal Financial and Accounting
Officer)
15
<PAGE> 16
INDEX TO EXHBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
4 - Credit Agreement dated as of December 1, 1994, among K N Energy,
Inc., The Banks Listed Herein, and Morgan Guaranty Trust Company
of New York, as Agent.
27 - Financial Data Schedule
</TABLE>
<PAGE> 1
[EXECUTION COPY]
$200,000,000
CREDIT AGREEMENT
dated as of
December 1, 1994
among
K N Energy, Inc.,
The Banks Listed Herein,
and
Morgan Guaranty Trust Company of New York,
as Agent
<PAGE> 2
TABLE OF CONTENTS*
<TABLE>
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ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Accounting Terms and Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 1.03. Types of Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.02. Notice of Committed Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.03. Money Market Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.04. Notice to Banks; Funding of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.05. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.06. Maturity of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.07. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.08. Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.09. Optional Termination or Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.10. Scheduled Termination of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.11. Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.12. General Provisions as to Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.13. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.14. Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE III
CONDITIONS
SECTION 3.01. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 3.02. Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
__________________________________
*The Table of Contents is not a part of this Agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 4.02. Corporate and Governmental Authorization; No Contravention . . . . . . . . . . . . . . . . 29
SECTION 4.03. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.04. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.05. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.06. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.07. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.08. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.09. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.10. Not an Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.11. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE V
COVENANTS
SECTION 5.01. Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 5.02. Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 5.03. Maintenance of Property; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.04. Conduct of Business and Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.05. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 5.06. Inspection of Property, Books and Records . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 5.07. Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 5.08. Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 5.09. Consolidations, Mergers and Sales of Assets . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.10. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 5.11. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
ii
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SECTION 6.02. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 7.02. Agent and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 7.03. Action by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 7.04. Consultation with Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 7.05. Liability of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 7.06. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 7.07. Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 7.08. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 7.09. Agent's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair . . . . . . . . . . . . . . . . . 45
SECTION 8.02. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 8.03. Increased Cost and Reduced Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 8.04. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans . . . . . . . . . . . . . . . . 50
SECTION 8.06. Substitution of Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 9.02. No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 9.03. Expenses; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 9.04. Sharing of Set-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.05. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.06. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.07. Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 9.08. Governing Law; Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . 55
</TABLE>
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SECTION 9.09. Counterparts; Integration; Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 9.10. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Pricing Schedule
Exhibit A - Note
Exhibit B - Money Market Quote Request
Exhibit C - Invitation for Money Market Quotes
Exhibit D - Money Market Quote
Exhibit E - Opinions of Counsel for the Borrower
Exhibit F - Opinion of Special Counsel for the
Agent
Exhibit G - Assignment and Assumption Agreement
</TABLE>
iv
<PAGE> 6
CREDIT AGREEMENT
AGREEMENT dated as of December 1, 1994 among K N ENERGY, INC., the
BANKS listed on the signature pages hereof and MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used
herein, have the following meanings:
"Absolute Rate Auction" means a solicitation of Money Market
Quotes setting forth Money Market Absolute Rates pursuant to Section 2.03.
"Adjusted CD Rate" has the meaning set forth in Section 2.07(b).
"Adjusted London Interbank Offered Rate" has the meaning set forth
in Section 2.07(c).
"Administrative Questionnaire" means, with respect to each Bank,
an administrative questionnaire in the form prepared by the Agent and submitted
to the Agent (with a copy to the Borrower) duly completed by such Bank.
"Affiliate" means (i) any Person that directly, or indirectly
through one or more intermediaries, controls the Borrower (a "Controlling
Person") or (ii) any Person (other than the Borrower or a Subsidiary) which is
controlled by or is under common control with a Controlling Person. As used
herein, the term "control" means possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
<PAGE> 7
"Agent" means Morgan Guaranty Trust Company of New York in its
capacity as agent for the Banks hereunder, and its successors in such capacity.
"Applicable Lending Office" means, with respect to any Bank, (i)
in the case of its Domestic Loans, its Domestic Lending Office, (ii) in the
case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the
case of its Money Market Loans, its Money Market Lending Office.
"Assessment Rate" has the meaning set forth in Section 2.07(b).
"Assignee" has the meaning set forth in Section 9.06(c).
"Bank" means each bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective
successors.
"Base Rate" means, for any day, a rate per annum equal to the
higher of (i) the Prime Rate for such day or (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
"Base Rate Loan" means a Committed Loan to be made by a Bank as a
Base Rate Loan in accordance with the applicable Notice of Committed Borrowing
or pursuant to Article VIII.
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"Borrower" means K N Energy, Inc., a Kansas corporation, and its
successors.
"Borrower's 1993 Form 10-K" means the Borrower's annual report on
Form 10-K/A for 1993, as amended by Amendment No. 2 thereto, as filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934.
"Borrower's Latest Form 10-Q" means the Borrower's quarterly
report on Form 10-Q for the quarter ended
2
<PAGE> 8
September 30, 1994, as filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934.
"Borrowing" has the meaning set forth in Section 1.03.
"CD Base Rate" has the meaning set forth in Section 2.07(b).
"CD Loan" means a Committed Loan to be made by a Bank as a CD Loan
in accordance with the applicable Notice of Committed Borrowing.
"CD Margin" has the meaning set forth in Section 2.07(b).
"CD Reference Banks" means NationsBank of Texas, N.A., Norwest
Bank Colorado, N.A. and Morgan Guaranty Trust Company of New York.
"Closing Date" means the date on or after the Effective Date on
which the Agent shall have received the documents specified in or pursuant to
Section 3.01.
"Commitment" means, with respect to each Bank, the amount set
forth opposite the name of such Bank on the signature pages hereof, as such
amount may be reduced from time to time pursuant to Sections 2.09 and 2.10.
"Committed Loan" means a loan made by a Bank pursuant to Section
2.01.
"Consolidated Assets" means the total amount of assets appearing
on the consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries, prepared in accordance with generally accepted accounting
principles as of the date of the most recent regularly prepared consolidated
financial statements prior to the taking of any action for the purposes of
which the determination is being made.
"Consolidated Debt" of any Person means at any date the Debt of
such Person and its Consolidated Subsidiaries, determined on a consolidated
basis as of such date.
3
<PAGE> 9
"Consolidated Subsidiary" of any Person means at any date any
Subsidiary or other entity the accounts of which would be consolidated with
those of such Person in its consolidated financial statements if such
statements were prepared as of such date.
"Consolidated Net Worth" of any Person means at any date the
consolidated stockholders' equity of such Person and its Consolidated
Subsidiaries, determined as of such date.
"Consolidated Total Capitalization" of any Person means at any
date the sum of Consolidated Debt of such Person and Consolidated Net Worth of
such Person, each determined as of such date.
"Debt" of any Person means at any date, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable or deferred employee and
director compensation arising in the ordinary course of business, (iv) all
obligations of such Person as lessee which are capitalized in accordance with
generally accepted accounting principles, (v) all non-contingent obligations
(and, for purposes of Section 5.08 and the definitions of Material Debt and
Material Financial Obligations, all contingent obligations) of such Person to
reimburse any bank or other Person in respect of amounts paid under a letter of
credit or similar instrument, (vi) all Debt secured by a Lien on any asset of
such Person, whether or not such Debt is otherwise an obligation of such
Person, and (vii) all Debt of others Guaranteed by such Person.
"Default" means any condition or event which constitutes an Event
of Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Derivatives Obligations" of any Person means all obligations of
such Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor
4
<PAGE> 10
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of the foregoing transactions) or any
combination of the foregoing transactions.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law to
close.
"Domestic Lending Office" means, as to each Bank, its office
located at its address set forth in its Administrative Questionnaire (or
identified in its Administrative Questionnaire as its Domestic Lending Office)
or such other office as such Bank may hereafter designate as its Domestic
Lending Office by notice to the Borrower and the Agent; provided that any Bank
may so designate separate Domestic Lending Offices for its Base Rate Loans, on
the one hand, and its CD Loans, on the other hand, in which case all references
herein to the Domestic Lending Office of such Bank shall be deemed to refer to
either or both of such offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in Section
2.07(b).
"Effective Date" means the date this Agreement becomes effective
in accordance with Section 9.09.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating
to the environment, the effect of the environment on human health or to
emissions, discharges or releases of pollutants, contaminants, Hazardous
Substances or wastes into the environment including, without limitation,
ambient air, surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, Hazardous Substances or
wastes or the clean-up or other remediation thereof.
5
<PAGE> 11
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary and all members
of a controlled group of corporations and all trades or businesses (whether or
not incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on
which commercial banks are open for international business (including dealings
in dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Borrower and the Agent.
"Euro-Dollar Loan" means a Committed Loan to be made by a Bank as
a Euro-Dollar Loan in accordance with the applicable Notice of Committed
Borrowing.
"Euro-Dollar Margin" has the meaning set forth in Section 2.07(c).
"Euro-Dollar Reference Banks" means the principal London offices
of NationsBank of Texas, N.A., Norwest Bank Colorado, N.A. and Morgan Guaranty
Trust Company of New York.
"Euro-Dollar Reserve Percentage" has the meaning set forth in
Section 2.07(c).
"Event of Default" has the meaning set forth in Section 6.01.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the
6
<PAGE> 12
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Morgan Guaranty Trust Company of New
York on such day on such transactions as determined by the Agent.
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money
Market Loans (excluding Money Market LIBOR Loans bearing interest at the Base
Rate pursuant to Section 8.01(a)) or any combination of the foregoing.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in
any other manner the obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part), provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Hazardous Substances" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives,
by-products and other hydrocarbons, or any substance having any constituent
elements displaying any of the foregoing characteristics.
"Indemnitee" has the meaning set forth in Section 9.03(b).
7
<PAGE> 13
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending one,
two, three or six months thereafter, as the Borrower may elect in the
applicable Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date;
(2) with respect to each CD Borrowing, the period commencing on the date of
such Borrowing and ending 30, 60, 90 or 180 days thereafter, as the Borrower
may elect in the applicable Notice of Borrowing; provided that:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (b) below) which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date;
(3) with respect to each Base Rate Borrowing, the period commencing on the
date of such Borrowing and ending 30 days thereafter; provided that:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (b) below) which would otherwise end on a day which is
not a Euro-Dollar
8
<PAGE> 14
Business Day shall be extended to the next succeeding Euro-Dollar Business
Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date;
(4) with respect to each Money Market LIBOR Borrowing, the period commencing
on the date of such Borrowing and ending such whole number of months thereafter
(but not more than nine months) as the Borrower may elect in accordance with
Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date;
(5) with respect to each Money Market Absolute Rate Borrowing, the period
commencing on the date of such Borrowing and ending such number of days
thereafter (but not less than seven days nor more than 360 days) as the
Borrower may elect in accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
9
<PAGE> 15
"Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended, or any successor statute.
"Investment" means any investment in any Person, whether by means
of share purchase, capital contribution, loan, time deposit or otherwise.
"LIBOR Auction" means a solicitation of Money Market Quotes
setting forth Money Market Margins based on the London Interbank Offered Rate
pursuant to Section 2.03.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind, or any other type
of preferential arrangement that has the practical effect of creating a
security interest, in respect of such asset. For the purposes of this
Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money
Market Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money
Market Loans or any combination of the foregoing.
"London Interbank Offered Rate" has the meaning set forth in
Section 2.07(c).
"Material Debt" means Debt (other than the Notes) of the Borrower
and/or one or more of its Subsidiaries, arising in one or more related or
unrelated transactions, in an aggregate principal or face amount exceeding
$10,000,000.
"Material Financial Obligations" means a principal or face amount
of Debt and/or payment obligations in respect of Derivatives Obligations of the
Borrower and/or one or more of its Subsidiaries, arising in one or more related
or unrelated transactions, exceeding in the aggregate $10,000,000.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $10,000,000.
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<PAGE> 16
"Material Subsidiary" means any Subsidiary the consolidated assets
of which constitute 10% or more of Consolidated Assets.
"Money Market Absolute Rate" has the meaning set forth in Section
2.03(d).
"Money Market Absolute Rate Loan" means a loan to be made by a
Bank pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank, its Domestic
Lending Office or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Money Market Lending Office by notice to the
Borrower and the Agent; provided that any Bank may from time to time by notice
to the Borrower and the Agent designate separate Money Market Lending Offices
for its Money Market LIBOR Loans, on the one hand, and its Money Market
Absolute Rate Loans, on the other hand, in which case all references herein to
the Money Market Lending Office of such Bank shall be deemed to refer to either
or both of such offices, as the context may require.
"Money Market LIBOR Loan" means a loan to be made by a Bank
pursuant to a LIBOR Auction (including such a loan bearing interest at the Base
Rate pursuant to Section 8.01(a)).
"Money Market Loan" means a Money Market LIBOR Loan or a Money
Market Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section
2.03(d).
"Money Market Quote" means an offer by a Bank to make a Money
Market Loan in accordance with Section 2.03.
"Multiemployer Plan" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
"Notes" means promissory notes of the Borrower, substantially in
the form of Exhibit A hereto, evidencing
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<PAGE> 17
the obligation of the Borrower to repay the Loans, and "Note" means any one of
such promissory notes issued hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing (as
defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in
Section 2.03(f)).
"Parent" means, with respect to any Bank, any Person controlling
such Bank.
"Participant" has the meaning set forth in Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other
than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to
the minimum funding standards under Section 412 of the Internal Revenue Code
and either (i) is maintained, or contributed to, by any member of the ERISA
Group for employees of any member of the ERISA Group or (ii) has at any time
within the preceding five years been maintained, or contributed to, by any
Person which was at such time a member of the ERISA Group for employees of any
Person which was at such time a member of the ERISA Group.
"Purchase Agreement" means the Purchase and Sale Agreement dated
as of January 28, 1994, among K N Gas Supply Services, Inc., the Borrower, Bank
of America National Trust and Savings Association, as the initial Purchaser (as
defined therein), and Bank of America National Trust and Savings Association,
as agent for the Purchasers.
"Pricing Schedule" means the Schedule attached hereto identified
as such.
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<PAGE> 18
"Prime Rate" means the rate of interest publicly announced by
Morgan Guaranty Trust Company of New York in New York City from time to time as
its Prime Rate.
"Reference Banks" means the CD Reference Banks or the Euro-Dollar
Reference Banks, as the context may require, and "Reference Bank" means any one
of such Reference Banks.
"Refunding Borrowing" means a Committed Borrowing which, after
application of the proceeds thereof, results in no net increase in the
outstanding principal amount of Committed Loans made by any Bank.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Required Banks" means at any time Banks having at least 66 2/3 %
of the aggregate amount of the Commitments or, if the Commitments shall have
been terminated, holding Notes evidencing at least 66 2/3% of the aggregate
unpaid principal amount of the Loans.
"Revolving Credit Period" means the period from and including the
Effective Date to but not including the Termination Date.
"Subsidiary" means, as to any Person, any corporation or other
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by such Person;
unless otherwise specified, "Subsidiary" means a Subsidiary of the Borrower.
"Termination Date" means December 1, 1999, or, if such day is not
a Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day unless
such Euro-Dollar Business Day falls in another calendar month, in which case
the Termination Date shall be the next preceding Euro-Dollar Business Day.
"Unfunded Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the value of all benefit liabilities
under such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii)
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<PAGE> 19
the fair market value of all Plan assets allocable to such liabilities under
Title IV of ERISA (excluding any accrued but unpaid contributions), all
determined as of the then most recent valuation date for such Plan, but only to
the extent that such excess represents a potential liability of a member of the
ERISA Group to the PBGC or any other Person under Title IV of ERISA.
"United States" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
"Wholly-Owned Consolidated Subsidiary" of any Person means any
Consolidated Subsidiary all of the shares of capital stock or other ownership
interests of which (except directors' qualifying shares) are at the time
directly or indirectly owned by such Person.
SECTION 1.02. Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as in effect from time
to time, applied on a basis consistent (except for changes concurred in by the
Borrower's independent public accountants) with the most recent audited
consolidated financial statements of the Borrower and its Consolidated
Subsidiaries delivered to the Banks; provided that, if the Borrower notifies
the Agent that the Borrower wishes to amend any covenant in Article V to
eliminate the effect of any change in generally accepted accounting principles
on the operation of such covenant (or if the Agent notifies the Borrower that
the Required Banks wish to amend Article V for such purpose), then the
Borrower's compliance with such covenant shall be determined on the basis of
generally accepted accounting principles in effect immediately before the
relevant change in generally accepted accounting principles became effective,
until either such notice is withdrawn or such covenant is amended in a manner
satisfactory to the Borrower and the Required Banks.
SECTION 1.03. Types of Borrowings. The term "Borrowing"
denotes the aggregation of Loans of one or more Banks to be made to the
Borrower pursuant to Article II on a single date and for a single Interest
Period. Borrowings
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<PAGE> 20
are classified for purposes of this Agreement either by reference to the
pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is
a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions
of Article II under which participation therein is determined (i.e., a
"Committed Borrowing" is a Borrowing under Section 2.01 in which all Banks
participate in proportion to their Commitments, while a "Money Market
Borrowing" is a Borrowing under Section 2.03 in which the Bank participants are
determined on the basis of their bids in accordance therewith).
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend. During the Revolving Credit
Period each Bank severally agrees, on the terms and conditions set forth in
this Agreement, to make loans to the Borrower pursuant to this Section from
time to time in amounts such that the aggregate principal amount of Committed
Loans by such Bank at any one time outstanding shall not exceed the amount of
its Commitment. Each Borrowing under this Section shall be in an aggregate
principal amount of $5,000,000 or any larger multiple of $1,000,000 (except
that any such Borrowing may be in the aggregate amount available in accordance
with Section 3.02(c)) and shall be made from the several Banks ratably in
proportion to their respective Commitments. Within the foregoing limits, the
Borrower may borrow under this Section, repay, or to the extent permitted by
Section 2.11, prepay Loans and reborrow at any time during the Revolving Credit
Period under this Section.
SECTION 2.02. Notice of Committed Borrowing. The Borrower
shall give the Agent notice (a "Notice of Committed Borrowing") not later than
10:30 A.M. (New York City time) on (x) the date of each Base Rate Borrowing,
(y) the second Domestic Business Day before each CD Borrowing and (z) the third
Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying:
(a) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Domestic
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<PAGE> 21
Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar
Borrowing,
(b) the aggregate amount of such Borrowing,
(c) whether the Loans comprising such Borrowing are to be CD
Loans, Base Rate Loans or Euro-Dollar Loans, and
(d) in the case of a Fixed Rate Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
SECTION 2.03. Money Market Borrowings.
(a) The Money Market Option. In addition to Committed Borrowings
pursuant to Section 2.01, the Borrower may, as set forth in this Section,
request the Banks during the Revolving Credit Period to make offers to make
Money Market Loans to the Borrower. The Banks may, but shall have no
obligation to, make such offers and the Borrower may, but shall have no
obligation to, accept any such offers in the manner set forth in this Section.
(b) Money Market Quote Request. When the Borrower wishes to
request offers to make Money Market Loans under this Section, it shall transmit
to the Agent by telex or facsimile transmission a Money Market Quote Request
substantially in the form of Exhibit B hereto so as to be received not later
than 10:30 A.M. (New York City time) on (x) the fifth Euro-Dollar Business Day
prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction
or (y) the Domestic Business Day next preceding the date of Borrowing proposed
therein, in the case of an Absolute Rate Auction (or, in either case, such
other time or date as the Borrower and the Agent shall have mutually agreed and
shall have notified to the Banks not later than the date of the Money Market
Quote Request for the first LIBOR Auction or Absolute Rate Auction for which
such change is to be effective) specifying:
(i) the proposed date of Borrowing, which shall be a Euro-Dollar
Business Day in the case of a LIBOR Auction or a Domestic Business Day in
the case of an Absolute Rate Auction,
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<PAGE> 22
(ii) the aggregate amount of such Borrowing, which shall be $5,000,000
or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable thereto, subject
to the provisions of the definition of Interest Period, and
(iv) whether the Money Market Quotes requested are to set forth a
Money Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request. No Money Market Quote
Request shall be given within five Euro-Dollar Business Days (or such other
number of days as the Borrower and the Agent may agree) of any other Money
Market Quote Request.
(c) Invitation for Money Market Quotes. Promptly upon receipt of
a Money Market Quote Request, the Agent shall send to the Banks by telex or
facsimile transmission an Invitation for Money Market Quotes substantially in
the form of Exhibit C hereto, which shall constitute an invitation by the
Borrower to each Bank to submit Money Market Quotes offering to make the Money
Market Loans to which such Money Market Quote Request relates in accordance
with this Section.
(d) Submission and Contents of Money Market Quotes. (i) Each
Bank may submit a Money Market Quote containing an offer or offers to make
Money Market Loans in response to any Invitation for Money Market Quotes. Each
Money Market Quote must comply with the requirements of this subsection (d) and
must be submitted to the Agent by telex or facsimile transmission at its
offices specified in or pursuant to Section 9.01 not later than (x) 2:00 P.M.
(New York City time) on the fourth Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) 9:30 A.M.
(New York City time) on the proposed date of Borrowing, in the case of an
Absolute Rate Auction (or, in either case, such other time or date as the
Borrower and the Agent shall have mutually agreed and shall have notified to
the Banks not later than the date of the Money Market Quote Request for the
first LIBOR Auction or Absolute Rate Auction for which such change is to be
effective); provided that Money Market Quotes submitted by the Agent (or any
affiliate of the Agent) in the capacity of
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<PAGE> 23
a Bank may be submitted, and may only be submitted, if the Agent or such
affiliate notifies the Borrower of the terms of the offer or offers contained
therein not later than (x) one hour prior to the deadline for the other Banks,
in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for the
other Banks, in the case of an Absolute Rate Auction. Subject to Articles III
and VI, any Money Market Quote so made shall be irrevocable except with the
written consent of the Agent given on the instructions of the Borrower.
(ii) Each Money Market Quote shall be in substantially the form
of Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for which each
such offer is being made, which principal amount (w) may be greater than or
less than the Commitment of the quoting Bank, (x) must be $5,000,000 or a
larger multiple of $1,000,000, (y) may not exceed the principal amount of
Money Market Loans for which offers were requested and (z) may be subject
to an aggregate limitation as to the principal amount of Money Market Loans
for which offers being made by such quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin above or below the
applicable London Interbank Offered Rate (the "Money Market Margin")
offered for each such Money Market Loan, expressed as a percentage
(specified to the nearest 1/10,000th of 1%) to be added to or subtracted
from such base rate,
(D) in the case of an Absolute Rate Auction, the rate of interest
per annum (specified to the nearest 1/10,000th of 1%) (the "Money Market
Absolute Rate") offered for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
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(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit D hereto or
does not specify all of the information required by subsection (d)(ii);
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set forth
in the applicable Invitation for Money Market Quotes; or
(D) arrives after the time set forth in subsection (d)(i).
(e) Notice to Borrower. The Agent shall promptly notify the
Borrower of the terms (x) of any Money Market Quote submitted by a Bank that is
in accordance with subsection (d) and (y) of any Money Market Quote that
amends, modifies or is otherwise inconsistent with a previous Money Market
Quote submitted by such Bank with respect to the same Money Market Quote
Request. Any such subsequent Money Market Quote shall be disregarded by the
Agent unless such subsequent Money Market Quote is submitted solely to correct
a manifest error in such former Money Market Quote. The Agent's notice to the
Borrower shall specify (A) the aggregate principal amount of Money Market Loans
for which offers have been received for each Interest Period specified in the
related Money Market Quote Request, (B) the respective principal amounts and
Money Market Margins or Money Market Absolute Rates, as the case may be, so
offered and (C) if applicable, limitations on the aggregate principal amount of
Money Market Loans for which offers in any single Money Market Quote may be
accepted.
(f) Acceptance and Notice by Borrower. Not later than 10:30 A.M.
(New York City time) on (x) the third Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed
date of Borrowing, in the case of an Absolute Rate Auction (or, in either case,
such other time or date as the Borrower and the Agent shall have mutually
agreed and shall have notified to the Banks not later than the date of the
Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction
for which such change is to be
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<PAGE> 25
effective), the Borrower shall notify the Agent of its acceptance or
non-acceptance of the offers so notified to it pursuant to subsection (e). In
the case of acceptance, such notice (a "Notice of Money Market Borrowing")
shall specify the aggregate principal amount of offers for each Interest Period
that are accepted. The Borrower may accept any Money Market Quote in whole or
in part; provided that:
(i) the aggregate principal amount of each Money Market Borrowing
may not exceed the applicable amount set forth in the related Money Market
Quote Request,
(ii) the principal amount of each Money Market Borrowing must be
$5,000,000 or a larger multiple of $1,000,000,
(iii) acceptance of offers may only be made on the basis of
ascending Money Market Margins or Money Market Absolute Rates, as the case
may be, and
(iv) the Borrower may not accept any offer that is described in
subsection (d)(iii) or that otherwise fails to comply with the requirements
of this Agreement.
(g) Allocation by Agent. If offers are made by two or more Banks
with the same Money Market Margins or Money Market Absolute Rates, as the case
may be, for a greater aggregate principal amount than the amount in respect of
which such offers are accepted for the related Interest Period, the principal
amount of Money Market Loans in respect of which such offers are accepted shall
be allocated by the Agent among such Banks as nearly as possible (in multiples
of $1,000,000, as the Agent may deem appropriate) in proportion to the
aggregate principal amounts of such offers. Determinations by the Agent of the
amounts of Money Market Loans shall be conclusive in the absence of manifest
error.
SECTION 2.04. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the Agent shall
promptly notify each Bank of the contents thereof and of such Bank's share (if
any) of such Borrowing and such Notice of Borrowing shall not thereafter be
revocable by the Borrower.
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(b) Not later than 12:00 Noon (New York City time) on the date of
each Borrowing, each Bank participating therein shall (except as provided in
subsection (c) of this Section) make available its share of such Borrowing, in
Federal or other funds immediately available in New York City, to the Agent at
its address referred to in Section 9.01. Unless the Agent determines that any
applicable condition specified in Article III has not been satisfied, the Agent
will make the funds so received from the Banks available to the Borrower at the
Agent's aforesaid address.
(c) If any Bank makes a new Loan hereunder on a day on which the
Borrower is to repay all or any part of an outstanding Loan from such Bank,
such Bank shall apply the proceeds of its new Loan to make such repayment and
only an amount equal to the difference (if any) between the amount being
borrowed and the amount being repaid shall be made available by such Bank to
the Agent as provided in subsection (b) of this Section, or remitted by the
Borrower to the Agent as provided in Section 2.12, as the case may be.
(d) Unless the Agent shall have received notice from a Bank prior
to the date of any Borrowing that such Bank will not make available to the
Agent such Bank's share of such Borrowing, the Agent may assume that such Bank
has made such share available to the Agent on the date of such Borrowing in
accordance with subsections (b) and (c) of this Section 2.04 and the Agent may,
in reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so
made such share available to the Agent, such Bank and the Borrower severally
agree to repay to the Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid to the Agent, at
(i) in the case of the Borrower, a rate per annum equal to the higher of the
Federal Funds Rate and the interest rate applicable thereto pursuant to Section
2.07 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank
shall repay to the Agent such corresponding amount, such amount so repaid shall
constitute such Bank's Loan included in such Borrowing for purposes of this
Agreement.
SECTION 2.05. Notes. (a) The Loans of each Bank shall be
evidenced by a single Note payable to the order of
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<PAGE> 27
such Bank for the account of its Applicable Lending Office in an amount equal
to the aggregate unpaid principal amount of such Bank's Loans.
(b) Each Bank may, by notice to the Borrower and the Agent,
request that its Loans of a particular type be evidenced by a separate Note in
an amount equal to the aggregate unpaid principal amount of such Loans. Each
such Note shall be in substantially the form of Exhibit A hereto with
appropriate modifications to reflect the fact that it evidences solely Loans of
the relevant type. Each reference in this Agreement to the "Note" of such Bank
shall be deemed to refer to and include any or all of such Notes, as the
context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.01(a),
the Agent shall forward such Note to such Bank. Each Bank shall record the
date, amount, type and maturity of each Loan made by it and the date and amount
of each payment of principal made by the Borrower with respect thereto, and
may, if such Bank so elects in connection with any transfer or enforcement of
its Note, endorse on the schedule forming a part thereof appropriate notations
to evidence the foregoing information with respect to each such Loan then
outstanding; provided that the failure of any Bank to make any such recordation
or endorsement shall not affect the obligations of the Borrower hereunder or
under the Notes. Each Bank is hereby irrevocably authorized by the Borrower so
to endorse its Note and to attach to and make a part of its Note a continuation
of any such schedule as and when required.
SECTION 2.06. Maturity of Loans. Each Loan included in any
Borrowing shall mature, and the principal amount thereof shall be due and
payable, on the last day of the Interest Period applicable to such Borrowing.
SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall
bear interest on the outstanding principal amount thereof, for each day from
the date such Loan is made until it becomes due, at a rate per annum equal to
the Base Rate for such day. Such interest shall be payable for each Interest
Period on the last day thereof. Any overdue principal of or interest on any
Base Rate Loan shall bear interest, payable on demand, for each day until paid
at a rate per annum equal to the sum of 2% plus the rate otherwise applicable
to Base Rate Loans for such day.
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(b) Each CD Loan shall bear interest on the outstanding principal
amount thereof, for each day during the Interest Period applicable thereto, at
a rate per annum equal to the sum of the CD Margin for such day plus the
Adjusted CD Rate applicable to such Interest Period; provided that if any CD
Loan shall, as a result of clause (2)(b) of the definition of Interest Period,
have an Interest Period of less than 30 days, such CD Loan shall bear interest
during such Interest Period at the rate applicable to Base Rate Loans during
such period. Such interest shall be payable for each Interest Period on the
last day thereof and, if such Interest Period is longer than 90 days, at
intervals of 90 days after the first day thereof. Any overdue principal of or
interest on any CD Loan shall bear interest, payable on demand, for each day
until paid at a rate per annum equal to the sum of 2% plus the higher of (i)
the sum of the CD Margin for such day plus the Adjusted CD Rate applicable to
the Interest Period for such Loan and (ii) the rate applicable to Base Rate
Loans for such day.
"CD Margin" means a rate per annum determined in accordance with
the Pricing Schedule.
The "Adjusted CD Rate" applicable to any Interest Period means a
rate per annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
__________
* The amount in brackets being rounded upward, if necessary, to the next
higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate
of interest determined by the Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum
bid at
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10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the
first day of such Interest Period by two or more New York certificate of
deposit dealers of recognized standing for the purchase at face value from each
CD Reference Bank of its certificates of deposit in an amount comparable to the
principal amount of the CD Loan of such CD Reference Bank to which such
Interest Period applies and having a maturity comparable to such Interest
Period.
"Domestic Reserve Percentage" means for any day 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 maximum reserve requirement (including without limitation any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of new non-personal time deposits in dollars in New York City having a
maturity comparable to the related Interest Period and in an amount of $100,000
or more. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. Section 327.3(e) (or any successor provision) to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation's (or such
successor's) insuring time deposits at offices of such institution in the
United States. The Adjusted CD Rate shall be adjusted automatically on and as
of the effective date of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for
such day plus the Adjusted London Interbank Offered Rate applicable to such
Interest Period. Such interest shall be payable for each Interest Period on
the last day thereof and, if such Interest Period is longer than three months,
at intervals of three months after the first day thereof.
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"Euro-Dollar Margin" means a rate per annum determined in
accordance with the Pricing Schedule.
The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the
applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar
Reserve Percentage.
The "London Interbank Offered Rate" applicable to any Interest
Period means the average (rounded upward, if necessary, to the next higher 1/16
of 1%) of the respective rates per annum at which deposits in dollars are
offered to each of the Euro-Dollar Reference Banks in the London interbank
market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days
before the first day of such Interest Period in an amount approximately equal
to the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference
Bank to which such Interest Period is to apply and for a period of time
comparable to such Interest Period.
"Euro-Dollar Reserve Percentage" means for any day 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 maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of any Bank to
United States residents). The Adjusted London Interbank Offered Rate shall be
adjusted automatically on and as of the effective date of any change in the
Euro-Dollar Reserve Percentage.
(d) Any overdue principal of or interest on any Euro-Dollar Loan
shall bear interest, payable on demand, for each day until paid at a rate per
annum equal to the higher of (i) the sum of 2% plus the Euro-Dollar Margin for
such day plus the Adjusted London Interbank Offered Rate applicable to the
Interest Period for such Loan and (ii) the sum of 2% plus the Euro-Dollar
Margin for such day plus the quotient obtained (rounded upward, if necessary,
to the next
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higher 1/100 of 1%) by dividing (x) the average (rounded upward, if necessary,
to the next higher 1/16 of 1%) of the respective rates per annum at which one
day (or, if such amount due remains unpaid more than three Euro-Dollar Business
Days, then for such other period of time not longer than six months as the
Agent may select) deposits in dollars in an amount approximately equal to such
overdue payment due to each of the Euro-Dollar Reference Banks are offered to
such Euro-Dollar Reference Bank in the London interbank market for the
applicable period determined as provided above by (y) 1.00 minus the
Euro-Dollar Reserve Percentage (or, if the circumstances described in clause
(a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of
2% plus the rate applicable to Base Rate Loans for such day).
(e) Subject to Section 8.01(a), each Money Market LIBOR Loan
shall bear interest on the outstanding principal amount thereof, for the
Interest Period applicable thereto, at a rate per annum equal to the sum of the
London Interbank Offered Rate for such Interest Period (determined in
accordance with Section 2.07(c) as if the related Money Market LIBOR Borrowing
were a Committed Euro-Dollar Borrowing) plus (or minus) the Money Market Margin
quoted by the Bank making such Loan in accordance with Section 2.03. Each
Money Market Absolute Rate Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period applicable thereto, at a rate
per annum equal to the Money Market Absolute Rate quoted by the Bank making
such Loan in accordance with Section 2.03. Such interest shall be payable for
each Interest Period on the last day thereof and, if such Interest Period is
longer than three months, at intervals of three months after the first day
thereof. Any overdue principal of or interest on any Money Market Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the sum of 2% plus the Base Rate for such day.
(f) The Agent shall determine each interest rate applicable to
the Loans hereunder. The Agent shall give prompt notice to the Borrower and
the participating Banks of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
(g) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated
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by this Section. If any Reference Bank does not furnish a timely quotation,
the Agent shall determine the relevant interest rate on the basis of the
quotation or quotations furnished by the remaining Reference Bank or Banks or,
if none of such quotations is available on a timely basis, the provisions of
Section 8.01 shall apply.
SECTION 2.08. Facility Fee. The Borrower shall pay to the
Agent for the account of the Banks ratably a facility fee at the Facility Fee
Rate (determined daily in accordance with the Pricing Schedule). Such facility
fee shall accrue (i) from and including the Effective Date to but excluding the
Termination Date (or earlier date of termination of the Commitments in their
entirety), on the daily aggregate amount of the Commitments (whether used or
unused) and (ii) from and including the Termination Date or such earlier date
of termination to but excluding the date the Loans shall be repaid in their
entirety, on the daily aggregate outstanding principal amount of the Loans.
Accrued fees under this Section shall be payable quarterly in arrears on each
March 31, June 30, September 30 and December 31 and upon the date of
termination of the Commitments in their entirety (and, if later, the date the
Loans shall be repaid in their entirety).
SECTION 2.09. Optional Termination or Reduction of Commitments.
During the Revolving Credit Period, the Borrower may, upon at least three
Domestic Business Days' notice to the Agent, (i) terminate the Commitments at
any time, if no Loans are outstanding at such time or (ii) ratably reduce from
time to time by an aggregate amount of $15,000,000 or any larger multiple of
$5,000,000, the aggregate amount of the Commitments in excess of the aggregate
outstanding principal amount of the Loans.
SECTION 2.10. Scheduled Termination of Commitments. The
Commitments shall terminate on the Termination Date, and any Loans then
outstanding (together with accrued interest thereon) shall be due and payable
on such date.
SECTION 2.11. Optional Prepayments.
(a) The Borrower may, upon at least one Domestic Business Day's
notice by 11:00 A.M. (New York City time) to the Agent, prepay any Base Rate
Borrowing (or any Money Market Borrowing bearing interest at the Base Rate
pursuant
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to Section 8.01(a)) in whole at any time, or from time to time in part in
amounts aggregating $5,000,000 or any larger multiple of $1,000,000, by paying
the principal amount to be prepaid together with accrued interest thereon to
the date of prepayment. Each such optional prepayment shall be applied to
prepay ratably the Base Rate Loans of the several Banks included in such
Borrowing.
(b) Subject to Section 2.13, the Borrower may, upon at least
three Domestic Business Days' notice to the Agent, prepay any CD Borrowing or
upon at least three Euro-Dollar Business Days' notice to the Agent prepay any
Euro- Dollar Borrowing, in each case in whole at any time, or from time to time
in part in amounts aggregating $5,000,000 or any larger multiple of $1,000,000,
by paying the principal amount to be prepaid together with accrued interest
thereon to the date of prepayment. Each such optional prepayment shall be
applied to prepay ratably the Loans of the several Banks included in such
Borrowing.
(c) Except as provided in Section 2.11(a), the Borrower may not
prepay all or any portion of the principal amount of any Money Market Loan
prior to the maturity thereof.
(d) Upon receipt of a notice of prepayment pursuant to this
Section, the Agent shall promptly notify each Bank of the contents thereof and
of such Bank's ratable share (if any) of such prepayment and such notice shall
not thereafter be revocable by the Borrower.
SECTION 2.12. General Provisions as to Payments. (a) The
Borrower shall make each payment of principal of, and interest on, the Loans
and of fees hereunder, not later than 12:00 Noon (New York City time) on the
date when due, in Federal or other funds immediately available in New York
City, to the Agent at its address referred to in Section 9.01. The Agent will
promptly distribute to each Bank its ratable share of each such payment
received by the Agent for the account of the Banks. Whenever any payment of
principal of, or interest on, the Domestic Loans or of fees shall be due on a
day which is not a Domestic Business Day, the date for payment thereof shall be
extended to the next succeeding Domestic Business Day. Whenever any payment of
principal of, or interest on, the Euro-Dollar Loans shall be due on a day which
is not a Euro-Dollar Business Day, the date for payment thereof shall be
extended to the next succeeding
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Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another
calendar month, in which case the date for payment thereof shall be the next
preceding Euro-Dollar Business Day. Whenever any payment of principal of, or
interest on, the Money Market Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day. If the date for any payment of
principal is extended by operation of law or otherwise, interest thereon shall
be payable for such extended time.
(b) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Banks hereunder that the
Borrower will not make such payment in full, the Agent may assume that the
Borrower has made such payment in full to the Agent on such date and the Agent
may, in reliance upon such assumption, cause to be distributed to each Bank on
such due date an amount equal to the amount then due such Bank. If and to the
extent that the Borrower shall not have so made such payment, each Bank shall
repay to the Agent forthwith on demand such amount distributed to such Bank
together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the
Agent, at the Federal Funds Rate.
SECTION 2.13. Funding Losses. If the Borrower makes any
payment of principal with respect to any Fixed Rate Loan (pursuant to Article
II, VI or VIII or otherwise) on any day other than the last day of the Interest
Period applicable thereto, or the last day of an applicable period fixed
pursuant to Section 2.07(d), or if the Borrower fails to borrow or prepay any
Fixed Rate Loans after notice has been given to any Bank in accordance with
Section 2.04(a) or 2.11(d), the Borrower shall reimburse each Bank within 15
days after demand for any resulting loss or expense incurred by it (or by an
existing or prospective Participant in the related Loan), including (without
limitation) any loss incurred in obtaining, liquidating or employing deposits
from third parties, but excluding loss of margin for the period after any such
payment or failure to borrow or prepay, provided that such Bank shall have
delivered to the Borrower a certificate setting forth in reasonable detail the
amount of such loss or expense, which certificate shall be conclusive in the
absence of manifest error.
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SECTION 2.14. Computation of Interest and Fees. Interest based
on the Prime Rate hereunder shall be computed on the basis of a year of 365
days (or 366 days in a leap year) and paid for the actual number of days
elapsed (including the first day but excluding the last day). All other
interest and fees shall be computed on the basis of a year of 360 days and paid
for the actual number of days elapsed (including the first day but excluding
the last day).
ARTICLE III
CONDITIONS
SECTION 3.01. Closing. The closing hereunder shall occur upon
receipt by the Agent of the following documents, each dated the Closing Date
unless otherwise indicated:
(a) a duly executed Note for the account of each Bank dated on or
before the Closing Date complying with the provisions of Section 2.05;
(b) opinions of Vinson & Elkins L.L.P., special counsel for the
Borrower, Glaves, Irby and Rhoads, Kansas counsel for the Borrower, and
William S. Garner, Jr., General Counsel of the Borrower, substantially in
the respective forms of Exhibits E-1, E-2 and E-3 hereto and covering such
additional matters relating to the transactions contemplated hereby as the
Required Banks may reasonably request;
(c) an opinion of Davis Polk & Wardwell, special counsel for the
Agent, substantially in the form of Exhibit F hereto and covering such
additional matters relating to the transactions contemplated hereby as the
Required Banks may reasonably request; and
(d) all documents the Agent may reasonably request relating to
the existence of the Borrower, the corporate authority for and the validity
of this Agreement and the Notes, and any other matters relevant hereto, all
in form and substance satisfactory to the Agent.
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The Agent shall promptly notify the Borrower and the Banks of the Closing Date,
and such notice shall be conclusive and binding on all parties hereto.
SECTION 3.02. Borrowings. The obligation of any Bank to make a
Loan on the occasion of any Borrowing is subject to the satisfaction of the
following conditions:
(a) the fact that the Closing Date shall have occurred on or prior
to December 2, 1994;
(b) receipt by the Agent of a Notice of Borrowing as required by
Section 2.02 or 2.03, as the case may be;
(c) the fact that, immediately after such Borrowing, the
aggregate outstanding principal amount of the Loans will not exceed the
aggregate amount of the Commitments;
(d) the fact that, immediately before and after such Borrowing,
no Default shall have occurred and be continuing; and
(e) the fact that the representations and warranties of the
Borrower contained in this Agreement (except, in the case of a Refunding
Borrowing, the representations and warranties set forth in Sections
4.04(c), 4.05 and 4.07 as to any matter which has theretofore been
disclosed in writing by the Borrower to the Banks) shall be true on and as
of the date of such Borrowing.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to the facts specified in clauses
(c), (d) and (e) of this Section.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Borrower is a
corporation duly incorporated, validly existing and in good standing under the
laws of Kansas, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of this
Agreement and the Notes are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official (other
than (i) approval by the Public Service Commission of the State of Wyoming,
which approval has been obtained and is in full force and effect, and (ii)
filings of this Agreement and the Notes with the Securities and Exchange
Commission pursuant to the reporting requirements of the Securities Exchange
Act of 1934) and do not contravene, or constitute a default under, any
provision of applicable law or regulation or of the articles of incorporation
or by-laws of the Borrower or of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Borrower or any of its Subsidiaries
or result in the creation or imposition of any Lien on any asset of the
Borrower or any of its Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement constitutes a
valid and binding agreement of the Borrower and each Note, when executed and
delivered in accordance with this Agreement, will constitute a valid and
binding obligation of the Borrower, in each case enforceable in accordance with
its terms.
SECTION 4.04. Financial Information.
(a) The consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of December
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31, 1993 and the related consolidated statements of income, cash flows and
common stockholders' equity for the fiscal year then ended, reported on by
Arthur Andersen LLP and set forth in the Borrower's 1993 Form 10-K, a copy of
which has been delivered to each of the Banks, fairly present, in conformity
with generally accepted accounting principles, the consolidated financial
position of the Borrower and its Consolidated Subsidiaries as of such date and
their consolidated results of operations and cash flows for such fiscal year.
(b) The unaudited consolidated balance sheet of the Borrower and
its Consolidated Subsidiaries as of September 30, 1994 and the related
unaudited consolidated statements of income and cash flows for the nine months
then ended, set forth in the Borrower's Latest Form 10-Q, a copy of which has
been delivered to each of the Banks, fairly present, in conformity with
generally accepted accounting principles applied on a basis consistent with the
financial statements referred to in subsection (a) of this Section, the
consolidated financial position of the Borrower and its Consolidated
Subsidiaries as of such date and their consolidated results of operations and
cash flows for such nine-month period (subject to normal year-end
adjustments).
(c) Since September 30, 1994 there has been no material adverse
change in the business, financial position, results of operations or prospects
of the Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.05. Litigation. There is no action, suit or
proceeding pending against, or to the knowledge of the Borrower threatened
against or affecting, the Borrower or any of its Subsidiaries before any court
or arbitrator or any governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which would materially adversely
affect the business, consolidated financial position or consolidated results of
operations of the Borrower and its Consolidated Subsidiaries, considered as a
whole, or which in any manner draws into question the validity of this
Agreement or the Notes.
SECTION 4.06. Compliance with ERISA. Each member of the ERISA
Group has fulfilled its obligations under the minimum funding standards of
ERISA and the Internal Revenue Code with respect to each Plan and is in
compliance in all material respects with the presently applicable provisions
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of ERISA and the Internal Revenue Code with respect to each Plan. No member of
the ERISA Group has (i) sought a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to
make any contribution or payment to any Plan or Multiemployer Plan or in
respect of any Benefit Arrangement, or made any amendment to any Plan or
Benefit Arrangement, which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security under ERISA or the Internal
Revenue Code or (iii) incurred any liability under Title IV of ERISA other than
a liability to the PBGC for premiums under Section 4007 of ERISA, which waiver,
failure or liability could reasonably be expected to materially adversely
affect the business, consolidated financial position or consolidated results of
operations of the Borrower and its Consolidated Subsidiaries, considered as a
whole.
SECTION 4.07. Environmental Matters. In the ordinary course of
its business, the Borrower conducts an ongoing review of the effect of
Environmental Laws on the business, operations and properties of the Borrower
and its Subsidiaries, in the course of which it identifies and evaluates
associated liabilities and costs (including, without limitation, any capital or
operating expenditures required for clean-up or closure of properties presently
or previously owned, any capital or operating expenditures required to achieve
or maintain compliance with environmental protection standards imposed by law
or as a condition of any license, permit or contract, any related constraints
on operating activities, including any periodic or permanent shutdown of any
facility or reduction in the level of or change in the nature of operations
conducted thereat, any costs or liabilities in connection with off-site
disposal of wastes or Hazardous Substances, and any actual or potential
liabilities to third parties, including employees, and any related costs and
expenses). On the basis of this review, the Borrower has reasonably concluded
that such associated liabilities and costs, including the costs of compliance
with Environmental Laws, are unlikely to have a material adverse effect on the
business, financial condition, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.08. Taxes. The Borrower and its Subsidiaries have
filed all United States Federal income tax
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returns and all other material tax returns which are required to be filed by
them and have paid all taxes shown to be due on such returns or pursuant to any
assessment received by the Borrower or any Subsidiary to the extent that such
taxes have become due and before they have become delinquent, except such taxes
as are being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with generally accepted
accounting principles.
SECTION 4.09. Subsidiaries. Each of the Borrower's corporate
Material Subsidiaries is a corporation duly incorporated, validly existing and
in good standing under the laws of its jurisdiction of incorporation, and has
all corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
SECTION 4.10. Not an Investment Company. The Borrower is not
an "investment company" or controlled by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
SECTION 4.11. Full Disclosure. All information heretofore
furnished by the Borrower to the Agent or any Bank for purposes of or in
connection with this Agreement or any transaction contemplated hereby is, and
all such information hereafter furnished by the Borrower to the Agent or any
Bank will be, true and accurate in all material respects on the date as of
which such information is stated or certified. The Borrower has disclosed to
the Banks in writing any and all facts peculiar to the business of the Company
or any of its Subsidiaries which materially and adversely affect or may affect
(to the extent the Borrower can now reasonably foresee), the business,
operations or financial condition of the Borrower and its Consolidated
Subsidiaries, taken as a whole, or the ability of the Borrower to perform its
obligations under this Agreement.
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ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note remains unpaid:
SECTION 5.01. Information. The Borrower will deliver to each
of the Banks:
(a) as soon as available and in any event within 90 days after
the end of each fiscal year of the Borrower, a consolidated balance sheet
of the Borrower and its Consolidated Subsidiaries as of the end of such
fiscal year and the related consolidated statements of income, cash flows
and common stockholder's equity for such fiscal year, setting forth in each
case in comparative form the figures for the previous fiscal year, all
audited by Arthur Andersen LLP or other independent public accountants of
nationally recognized standing; provided, however, that delivery pursuant
to clause (g) below of copies of the Annual Report on Form 10-K (without
exhibits) of the Borrower for such fiscal year filed with the Securities
and Exchange Commission shall be deemed to satisfy the requirements of this
clause (a);
(b) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the
Borrower, a consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as of the end of such quarter and the related consolidated
statements of income and cash flows for such quarter (in the case of such
statements of income) and for the portion of the Borrower's fiscal year
ended at the end of such quarter, setting forth in the case of such income
and cash flows in comparative form the figures for the corresponding
quarter (in the case of such statements of income) and the corresponding
portion of the Borrower's previous fiscal year, all certified (subject to
normal year-end adjustments) as to fairness of presentation, generally
accepted accounting principles and consistency by an authorized financial
or
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accounting officer of the Borrower; provided, however, that delivery
pursuant to clause (g) below of copies of the Quarterly Report on Form 10-Q
(without exhibits) of the Borrower for such quarter filed with the
Securities and Exchange Commission shall be deemed to satisfy the
requirements of this clause (b);
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of an
authorized financial or accounting officer of the Borrower (i) setting
forth in reasonable detail the calculations required to establish whether
the Borrower was in compliance with the requirements of Sections 5.07 and
5.08 on the date of such financial statements and (ii) stating whether any
Default exists on the date of such certificate and, if any Default then
exists, setting forth the details thereof and the action which the Borrower
is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements (i)
whether anything has come to their attention to cause them to believe that
any Default existed on the date of such statements and (ii) confirming the
calculations set forth in the officer's certificate delivered
simultaneously therewith pursuant to clause (c) above; provided, however,
that such accountants shall not be liable to anyone by reason of their
failure to obtain knowledge of any Default which would not be disclosed in
the course of an audit conducted in accordance with generally accepted
auditing standards;
(e) within five Domestic Business Days after any officer of the
Borrower obtains knowledge of any Default, if such Default is then
continuing, a certificate of the chief financial officer or the chief
accounting officer of the Borrower setting forth the details thereof and
the action which the Borrower is taking or proposes to take with respect
thereto;
(f) promptly upon the mailing thereof to the public shareholders
of the Borrower generally, copies of all financial statements, reports and
proxy statements so mailed;
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(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements
on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or
their equivalents, in each case without exhibits) which the Borrower shall
have filed with the Securities and Exchange Commission;
(h) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined
in Section 4043 of ERISA) with respect to any Plan which might constitute
grounds for a termination of such Plan under Title IV of ERISA, or knows
that the plan administrator of any Plan has given or is required to give
notice of any such reportable event, a copy of the notice of such
reportable event given or required to be given to the PBGC; (ii) receives
notice of complete or partial withdrawal liability under Title IV of ERISA
or notice that any Multiemployer Plan is in reorganization, is insolvent or
has been terminated, a copy of such notice; (iii) receives notice from the
PBGC under Title IV of ERISA of an intent to terminate, impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or
appoint a trustee to administer any Plan, a copy of such notice; (iv)
applies for a waiver of the minimum funding standard under Section 412 of
the Internal Revenue Code, a copy of such application; (v) gives notice of
intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such
notice and other information filed with the PBGC; (vi) gives notice of
withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such
notice; or (vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit Arrangement which has resulted or could
result in the imposition of a Lien or the posting of a bond or other
security, a certificate of the chief financial officer or the chief
accounting officer of the Borrower setting forth details as to such
occurrence and action, if any, which the Borrower or applicable member of
the ERISA Group is required or proposes to take; and
(i) from time to time such additional information regarding the
financial position or business of the
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Borrower and its Subsidiaries as the Agent, at the request of any Bank, may
reasonably request.
SECTION 5.02. Payment of Obligations. The Borrower will pay
and discharge, and will cause each Subsidiary to pay and discharge, at or
before maturity, all their respective material obligations and liabilities,
including, without limitation, tax liabilities, except where the same may be
contested in good faith by appropriate proceedings, and will maintain, and will
cause each Subsidiary to maintain, in accordance with generally accepted
accounting principles, appropriate reserves for the accrual of any of the same.
SECTION 5.03. Maintenance of Property; Insurance. (a) The
Borrower will keep, and will cause each Subsidiary to keep, all property useful
and necessary in its business in good working order and condition, ordinary
wear and tear excepted.
(b) The Borrower will maintain or cause to be maintained with, in
the good faith judgment of the Borrower, financially sound and reputable
insurers, or through self-insurance, insurance with respect to its properties
and business and the properties and businesses of its Subsidiaries against loss
or damage of the kinds customarily insured against by corporations of
established reputation engaged in the same or similar business and similarly
situated, of such types and in such amounts as are customarily carried under
similar circumstances by such other corporations. Such insurance may include
self-insurance or be subject to co-insurance, deductibility or similar clauses
which, in effect, result in self-insurance of certain losses, provided that
such self-insurance is in accord with the approved practices of corporations
similarly situated and adequate insurance reserves are maintained in connection
with such self- insurance, and, notwithstanding the foregoing provisions of
this Section 5.03 the Borrower or any Subsidiary may effect workers'
compensation or similar insurance in respect of operations in any state or
other jurisdiction either through an insurance fund operated by such state or
other jurisdiction or by causing to be maintained a system or systems of self-
insurance in accord with applicable laws.
SECTION 5.04. Conduct of Business and Maintenance of Existence.
The Borrower will continue, and will cause
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each Material Subsidiary to continue, to engage in business of the same general
type as now conducted by the Borrower and its Subsidiaries, and will preserve,
renew and keep in full force and effect, and will cause each Subsidiary to
preserve, renew and keep in full force and effect their respective corporate
existence and their respective rights, privileges and franchises necessary or
desirable in the normal conduct of business; provided that nothing in this
Section 5.04 shall prohibit (i) the merger of a Subsidiary into the Borrower or
the merger or consolidation of a Subsidiary with or into another Person if the
corporation surviving such consolidation or merger is a Subsidiary and if, in
each case, after giving effect thereto, no Default shall have occurred and be
continuing, (ii) the sale or other disposition (whether by merger or otherwise)
of the capital stock or assets of any Subsidiary, if such transaction complies
with the provisions of Section 5.09 or (iii) the termination of the corporate
existence of any Subsidiary if the Borrower in good faith determines that such
termination is in the best interest of the Borrower and is not materially
disadvantageous to the Banks.
SECTION 5.05. Compliance with Laws. The Borrower will comply,
and cause each Subsidiary to comply, in all respects with all applicable laws,
ordinances, rules, regulations, and requirements of governmental authorities
(including, without limitation, Environmental Laws and ERISA and the rules and
regulations thereunder) except (i) where the necessity of compliance therewith
is contested in good faith by appropriate proceedings or (ii) where failure to
comply could not reasonably be expected to materially adversely affect the
business, consolidated financial position or consolidated results of operations
of the Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 5.06. Inspection of Property, Books and Records. The
Borrower will keep, and will cause each Subsidiary to keep, proper books of
record and account in which full, true and correct entries, as required by
generally accepted accounting principles, shall be made of all dealings and
transactions in relation to its business and activities; and will permit, and
will cause each Subsidiary to permit, representatives of any Bank at such
Bank's expense to visit and inspect any of their respective properties, to
examine and make abstracts from any of their respective books and records
(subject to compliance with
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confidentiality agreements, copyrights and the like) and to discuss their
respective affairs, finances and accounts with their respective officers,
employees and independent public accountants, all at such reasonable times and
as often as may reasonably be desired.
SECTION 5.07. Debt. Consolidated Debt of the Borrower will at
no time exceed 67% of Consolidated Total Capitalization of the Borrower, total
Debt of all Consolidated Subsidiaries of the Borrower (excluding Debt of a
Consolidated Subsidiary of the Borrower to the Borrower or to another
Consolidated Subsidiary of the Borrower) will at no time exceed 51% of
Consolidated Debt of the Borrower, and Consolidated Debt of each Material
Subsidiary will at no time exceed 65% of the Consolidated Total Capitalization
of such Material Subsidiary.
SECTION 5.08. Negative Pledge. Neither the Borrower nor any
Subsidiary will create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it, except:
(a) any Liens deemed to exist on the date of this Agreement
under the Purchase Agreement;
(b) Liens arising in the ordinary course of its business which
(i) do not secure Debt or Derivatives Obligations, (ii) do not secure any
obligation in an amount exceeding $50,000,000 and (iii) do not in the
aggregate materially detract from the value of its assets or materially
impair the use thereof in the operation of its business;
(c) Liens on cash and cash equivalents securing Derivatives
Obligations, provided that the aggregate amount of cash and cash
equivalents subject to such Liens may at no time exceed $20,000,000;
(d) statutory or common law liens of or upon deposits of cash
in favor of banks or other depository institutions; and
(e) Liens not otherwise permitted by the foregoing clauses of
this Section securing Debt in an aggregate principal or face amount at any
date not to exceed 10% of Consolidated Net Worth of the Borrower.
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SECTION 5.09. Consolidations, Mergers and Sales of Assets. The
Borrower will not (i) consolidate or merge with or into any other Person or
(ii) sell, lease or otherwise transfer, directly or indirectly, all or
substantially all of its assets to any other Person, unless:
(i) immediately after giving effect to the transaction, no
Default shall have occurred and be continuing; and
(ii) except in the case of a merger in which the Borrower is
the surviving corporation:
(x) the Person formed by or surviving such
transaction, in the case of a consolidation or merger, and the
transferee, in the case of a transfer, assumes all obligations of
the Borrower hereunder and under the Notes;
(y) the Person formed by or surviving such
transaction, in the case of a consolidation or merger, and the
transferee, in the case of a transfer, is organized under the laws
of the United States or any state thereof; and
(z) the Borrower has delivered to the Agent an
officer's certificate and opinion of counsel, each stating that
such consolidation, merger, or transfer and such assumption comply
with the provisions hereof.
No such sale, lease or other transfer of assets shall have the
effect of releasing the Borrower (or any successor that shall have become such
in the manner prescribed in this Section) from its liability under this
Agreement and the Notes.
SECTION 5.10. Use of Proceeds. The proceeds of the Loans made
under this Agreement will be used by the Borrower for general corporate
purposes. None of such proceeds will be used, directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of buying or carrying any
"margin stock" within the meaning of Regulation U.
SECTION 5.11. Transactions with Affiliates. The Borrower will
not participate in any material transaction with an affiliate (other than a
Subsidiary) unless such
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transaction is in the ordinary course of its business and on terms no less
advantageous to the Borrower than could be obtained in such a transaction with
an unaffiliated party.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the
following events ("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of or
interest on any Loan, any fees or any other amount payable hereunder;
(b) the Borrower shall fail to observe or perform any covenant
contained in Sections 5.07 to 5.11, inclusive;
(c) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clause
(a) or (b) above) for 10 days after notice thereof has been given to the
Borrower by the Agent at the request of any Bank;
(d) any representation, warranty, certification or statement made
by the Borrower in this Agreement or in any certificate, financial
statement or other document delivered pursuant to this Agreement shall
prove to have been incorrect in any material respect when made (or deemed
made);
(e) the Borrower or any Subsidiary shall fail to make any payment
in respect of any Material Financial Obligations when due or within any
applicable grace period; provided, however, that if any such failure is
cured by the Borrower or such Subsidiary or is waived by the requisite
percentage of holders of such Material Financial Obligations entitled to so
waive, then the Event of Default under this Agreement by reason of such
failure shall be deemed to have been cured;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any
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Material Debt or enables (or, with the giving of notice or lapse of time or
both, would enable) the holder of such Debt or any Person acting on such
holder's behalf to accelerate the maturity thereof; provided, however, that
if any such acceleration is rescinded, or any such event or condition is
cured by the Borrower or any Subsidiary or is waived by the requisite
percentage of holders of such Material Debt entitled to so waive, then the
Event of Default under this Agreement by reason of such acceleration, event
or condition shall be deemed to have been cured;
(g) the Borrower or any Material Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or shall consent to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it,
or shall make a general assignment for the benefit of creditors, or shall
fail generally to pay its debts as they become due, or shall take any
corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced
against the Borrower or any Material Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for relief shall be entered
against the Borrower or any Material Subsidiary under the federal
bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an
amount or amounts aggregating in excess of $20,000,000 which it shall have
become liable to pay
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under Title IV of ERISA; or notice of intent to terminate a Material Plan
shall be filed under Title IV of ERISA by any member of the ERISA Group,
any plan administrator or any combination of the foregoing; or the PBGC
shall institute proceedings under Title IV of ERISA to terminate, to impose
liability (other than for premiums under Section 4007 of ERISA) in respect
of, or to cause a trustee to be appointed to administer any Material Plan;
or a condition shall exist by reason of which the PBGC would be entitled to
obtain a decree adjudicating that any Material Plan must be terminated; or
there shall occur a complete or partial withdrawal from, or a default,
within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or
more Multiemployer Plans which could cause one or more members of the ERISA
Group to incur a current payment obligation in excess of $20,000,000; and
in each of the foregoing instances such condition shall continue for 10
days after notice thereof has been given to the Borrower by the Agent at
the request of any Bank;
(j) a judgment or judgments for the payment of money in excess of
$20,000,000 in the aggregate shall be rendered against the Borrower or any
Material Subsidiary and such judgment or judgments are not, within 30 days
after entry thereof, bonded, discharged or stayed pending appeal, or are
not discharged within 30 days after the expiration of such stay; or
(k) any person or group of persons (within the meaning of Section
13 or 14 of the Securities Exchange Act of 1934, as amended) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated
by the Securities and Exchange Commission under said Act) of 30% or more of
the outstanding shares of common stock of the Borrower; or, during any
period of twelve consecutive calendar months, individuals who were
directors of the Borrower on the first day of such period shall cease to
constitute a majority of the board of directors of the Borrower;
then, and in every such event, the Agent shall (i) if requested by Banks having
more than 50% in aggregate amount of the Commitments, by notice to the Borrower
terminate the Commitments and they shall thereupon terminate, and (ii) if
requested by Banks holding Notes evidencing more than 50% in aggregate
principal amount of the Loans, by notice to the
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Borrower declare the Notes (together with accrued interest thereon) to be, and
the Notes shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower; provided that in the case of any of the Events
of Default specified in clause (g) or (h) above with respect to the Borrower,
without any notice to the Borrower or any other act by the Agent or the Banks,
the Commitments shall thereupon terminate and the Notes (together with accrued
interest thereon) shall become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower.
SECTION 6.02. Notice of Default. The Agent shall give notice
to the Borrower under Section 6.01(c) or 6.01(i) promptly upon being requested
to do so by any Bank and shall thereupon notify all the Banks thereof.
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization. Each Bank
irrevocably appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement and the Notes as
are delegated to the Agent by the terms hereof or thereof, together with all
such powers as are reasonably incidental thereto.
SECTION 7.02. Agent and Affiliates. Morgan Guaranty Trust
Company of New York shall have the same rights and powers under this Agreement
as any other Bank and may exercise or refrain from exercising the same as
though it were not the Agent, and Morgan Guaranty Trust Company of New York and
its affiliates may accept deposits from, lend money to, and generally engage in
any kind of business with the Borrower or any Subsidiary or affiliate of the
Borrower as if it were not the Agent hereunder.
SECTION 7.03. Action by Agent. The obligations of the Agent
hereunder are only those expressly set forth herein. Without limiting the
generality of the foregoing, the Agent shall not be required to take any action
with
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respect to any Default, except as expressly provided in Article VI.
SECTION 7.04. Consultation with Experts. The Agent may consult
with legal counsel (who may be counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
SECTION 7.05. Liability of Agent. Neither the Agent nor any of
its affiliates nor any of their respective directors, officers, agents or
employees shall be liable for any action taken or not taken by it in connection
herewith (i) with the consent or at the request of the Required Banks or (ii)
in the absence of its own gross negligence or willful misconduct. Neither the
Agent nor any of its affiliates nor any of their respective directors,
officers, agents or employees shall be responsible for or have any duty to
ascertain, inquire into or verify (i) any statement, warranty or representation
made in connection with this Agreement or any borrowing hereunder; (ii) the
performance or observance of any of the covenants or agreements of the
Borrower; (iii) the satisfaction of any condition specified in Article III,
except receipt of items required to be delivered to the Agent; or (iv) the
validity, effectiveness or genuineness of this Agreement, the Notes or any
other instrument or writing furnished in connection herewith. The Agent shall
not incur any liability by acting in reliance upon any notice, consent,
certificate, statement, or other writing (which may be a bank wire, telex,
facsimile transmission or similar writing) believed by it to be genuine or to
be signed by the proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably in
accordance with its Commitment, indemnify the Agent, its affiliates and their
respective directors, officers, agents and employees (to the extent not
reimbursed by the Borrower) against any cost, expense (including counsel fees
and disbursements), claim, demand, action, loss or liability (except such as
result from such indemnitees' gross negligence or willful misconduct) that such
indemnitees may suffer or incur in connection with this Agreement or any action
taken or omitted by such indemnitees hereunder.
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SECTION 7.07. Credit Decision. Each Bank acknowledges that it
has, independently and without reliance upon the Agent or any other Bank, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent or
any other Bank, 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 any action under this Agreement.
SECTION 7.08. Successor Agent. The Agent may resign at any
time by giving notice thereof to the Banks and the Borrower. Upon any such
resignation, the Required Banks shall have the right to appoint a successor
Agent, with the consent of the Borrower, which shall not be unreasonably
withheld. If no successor Agent shall have been so appointed by the Required
Banks, and shall have accepted such appointment, within 30 days after the
retiring Agent gives notice of resignation, then the retiring Agent may, on
behalf of the Banks, appoint a successor Agent, which shall be a commercial
bank organized or licensed under the laws of the United States of America or of
any State thereof and having a combined capital and surplus of at least
$50,000,000. Upon the acceptance of its appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation hereunder as Agent, the provisions of this Article
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent.
SECTION 7.09. Agent's Fee. The Borrower shall pay to the Agent
for its own account fees in the amounts and at the times previously agreed upon
between the Borrower and the Agent.
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ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any Fixed
Rate Borrowing:
(a) the Agent is advised by the Reference Banks that deposits in
dollars (in the applicable amounts) are not being offered to the Reference
Banks in the relevant market for such Interest Period, or
(b) in the case of a Committed Borrowing, Banks having 50% or
more of the aggregate amount of the Commitments advise the Agent that the
Adjusted CD Rate or the Adjusted London Interbank Offered Rate, as the case
may be, as determined by the Agent will not adequately and fairly reflect
the cost to such Banks of funding their CD Loans or Euro-Dollar Loans, as
the case may be, for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the Banks,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, the obligations of the Banks to make
CD Loans or Euro-Dollar Loans, as the case may be, shall be suspended. Unless
the Borrower notifies the Agent at least two Domestic Business Days before the
date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously
been given that it elects not to borrow on such date, (i) if such Fixed Rate
Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a
Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market
LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall
bear interest for each day from and including the first day to but excluding
the last day of the Interest Period applicable thereto at the Base Rate for
such day.
SECTION 8.02. Illegality. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority,
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central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Euro-Dollar Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency shall make it unlawful
or impossible for any Bank (or its Euro-Dollar Lending Office) to make,
maintain or fund its Euro-Dollar Loans and such Bank shall so notify the Agent,
the Agent shall forthwith give notice thereof to the other Banks and the
Borrower, whereupon until such Bank notifies the Borrower and the Agent that
the circumstances giving rise to such suspension no longer exist, the
obligation of such Bank to make Euro-Dollar Loans shall be suspended. Before
giving any notice to the Agent pursuant to this Section, such Bank shall
designate a different Euro-Dollar Lending Office if such designation will avoid
the need for giving such notice and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank. If such Bank shall determine that it
may not lawfully continue to maintain and fund any of its outstanding
Euro-Dollar Loans to maturity and shall so specify in such notice, the Borrower
shall immediately prepay in full the then outstanding principal amount of each
such Euro-Dollar Loan, together with accrued interest thereon. Concurrently
with prepaying each such Euro-Dollar Loan, the Borrower shall borrow a Base
Rate Loan in an equal principal amount from such Bank (on which interest and
principal shall be payable contemporaneously with the related Euro-Dollar Loans
of the other Banks), and such Bank shall make such a Base Rate Loan.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or
after (x) the date hereof, in the case of any Committed Loan or any obligation
to make Committed Loans or (y) the date of the related Money Market Quote, in
the case of any Money Market Loan, the adoption of any applicable law, rule or
regulation, or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive (whether or not having the
force of law) of any such authority, central bank or comparable agency shall
impose, modify or deem applicable any reserve (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal Reserve
System, but excluding (i) with respect to any CD Loan any such
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requirement included in an applicable Domestic Reserve Percentage and (ii) with
respect to any Euro-Dollar Loan any such requirement included in an applicable
Euro-Dollar Reserve Percentage), special deposit, insurance assessment
(excluding, with respect to any CD Loan, any such requirement reflected in an
applicable Assessment Rate) or similar requirement against assets of, deposits
with or for the account of, or credit extended by, any Bank (or its Applicable
Lending Office) or shall impose on any Bank (or its Applicable Lending Office)
or on the United States market for certificates of deposit or the London
interbank market any other condition affecting its Fixed Rate Loans, its Note
or its obligation to make Fixed Rate Loans and the result of any of the
foregoing is to increase the cost to such Bank (or its Applicable Lending
Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount
of any sum received or receivable by such Bank (or its Applicable Lending
Office) under this Agreement or under its Note with respect thereto, by an
amount deemed by such Bank to be material, then, within 15 days after demand by
such Bank (with a copy to the Agent), the Borrower shall pay to such Bank such
additional amount or amounts as will compensate such Bank for such increased
cost or reduction.
(b) If any Bank shall have determined that, after the date
hereof, the adoption of any applicable law, rule or regulation regarding
capital adequacy, or any change in any such law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on capital of such Bank (or its Parent) as a consequence of such Bank's
obligations hereunder to a level below that which such Bank (or its Parent)
could have achieved but for such adoption, change, request or directive (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Bank to be material, then from time to time, within 15 days
after demand by such Bank (with a copy to the Agent), the Borrower shall pay to
such Bank such additional amount or amounts as will compensate such Bank (or
its Parent) for such reduction.
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(c) Each Bank will promptly notify the Borrower and the Agent of
any event of which it has knowledge, occurring after the date hereof, which
will entitle such Bank to compensation pursuant to this Section and will
designate a different Applicable Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. A
certificate of any Bank claiming compensation under this Section and setting
forth in reasonable detail the additional amount or amounts to be paid to it
hereunder shall be conclusive in the absence of manifest error. In determining
such amount, such Bank may use any reasonable averaging and attribution
methods. Notwithstanding the foregoing subsections (a) and (b) of this Section
8.03, the Borrower shall only be obligated to compensate any Bank for any
amount arising or accruing during (i) any time or period commencing not more
than 90 days prior to the date on which such Bank notifies the Agent and the
Borrower that it proposes to demand such compensation and identifies to the
Agent and the Borrower the statute, regulation or other basis upon which the
claimed compensation is or will be based and (ii) any time or period during
which, because of the retroactive application of such statute, regulation or
other such basis, such Bank did not know that such amount would arise or
accrue.
SECTION 8.04. Taxes. (a) For purposes of this Section 8.04,
the following terms have the following meanings:
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by the
Borrower pursuant to this Agreement or under any Note, and all liabilities with
respect thereto, excluding (i) in the case of each Bank and the Agent, taxes
imposed on its income, and franchise or similar taxes imposed on it, by a
jurisdiction under the laws of which such Bank or the Agent (as the case may
be) is organized or in which its principal executive office is located or, in
the case of each Bank, in which its Applicable Lending Office is located and
(ii) in the case of each Bank, any United States withholding tax imposed on
such payments but only to the extent that such Bank is subject to United States
withholding tax at the time such Bank first becomes a party to this Agreement.
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"Other Taxes" means any present or future stamp or documentary
taxes and any other excise or property taxes, or similar charges or levies,
which arise from any payment made pursuant to this Agreement or under any Note
or from the execution or delivery of, or otherwise with respect to, this
Agreement or any Note.
(b) Any and all payments by the Borrower to or for the account
of any Bank or the Agent hereunder or under any Note shall be made without
deduction for any Taxes or Other Taxes; provided that, if the Borrower shall be
required by law to deduct any Taxes or Other Taxes from any such payments, (i)
the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 8.04) such Bank or the Agent (as the case may be) receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall
pay the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable law and (iv) the Borrower shall furnish
to the Agent, at its address referred to in Section 9.01, the original or a
certified copy of a receipt evidencing payment thereof.
(c) The Borrower agrees to indemnify each Bank and the Agent
for the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable
under this Section 8.04) paid by such Bank or the Agent (as the case may be)
and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto. This indemnification shall be paid within
15 days after such Bank or the Agent (as the case may be) makes demand
therefor.
(d) Each Bank organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and
delivery of this Agreement in the case of each Bank listed on the signature
pages hereof and on or prior to the date on which it becomes a Bank in the case
of each other Bank, and from time to time thereafter if requested in writing by
the Borrower (but only so long as such Bank remains lawfully able to do so),
shall provide the Borrower with Internal Revenue Service form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
certifying that such Bank is
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entitled to benefits under an income tax treaty to which the United States is a
party which exempts the Bank from United States withholding tax or reduces the
rate of withholding tax on payments of interest for the account of such Bank or
certifying that the income receivable pursuant to this Agreement is effectively
connected with the conduct of a trade or business in the United States.
(e) For any period with respect to which a Bank has failed to
provide the Borrower with the appropriate form pursuant to Section 8.04(d)
(unless such failure is due to a change in treaty, law or regulation occurring
subsequent to the date on which such form originally was required to be
provided), such Bank shall not be entitled to indemnification under Section
8.04(b) or (c) with respect to Taxes imposed by the United States; provided
that if a Bank, which is otherwise exempt from or subject to a reduced rate of
withholding tax, becomes subject to Taxes because of its failure to deliver a
form required hereunder, the Borrower, at such Bank's expense, shall take such
steps as such Bank shall reasonably request to assist such Bank to recover such
Taxes.
(f) If the Borrower is required to pay additional amounts to
or for the account of any Bank pursuant to this Section 8.04, then such Bank
will change the jurisdiction of its Applicable Lending Office if, in the
judgment of such Bank, such change (i) will eliminate or reduce any such
additional payment which may thereafter accrue and (ii) is not otherwise
disadvantageous to such Bank.
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed
Rate Loans. If (i) the obligation of any Bank to make Euro-Dollar Loans has
been suspended pursuant to Section 8.02 or (ii) any Bank has demanded
compensation under Section 8.03 or 8.04 with respect to its CD Loans or
Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar Business
Days' prior notice to such Bank through the Agent, have elected that the
provisions of this Section shall apply to such Bank, then, unless and until
such Bank notifies the Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer exist:
(a) all Loans which would otherwise be made by such Bank as CD
Loans or Euro-Dollar Loans, as the case may be, shall be made instead as
Base Rate Loans (on which interest and principal shall be payable
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contemporaneously with the related Fixed Rate Loans of the other Banks), and
(b) after each of its CD Loans or Euro-Dollar Loans, as the case
may be, has been repaid, all payments of principal which would otherwise be
applied to repay such Fixed Rate Loans shall be applied to repay its Base
Rate Loans instead.
SECTION 8.06. Substitution of Bank. If (i) the obligation of
any Bank to make Euro-Dollar Loans has been suspended pursuant to Section 8.02
or (ii) any Bank has demanded compensation under Section 8.03 or 8.04, the
Borrower shall have the right, with the assistance of the Agent, to seek a
mutually satisfactory substitute bank or banks (which may be one or more of the
Banks) to purchase the Note and assume the Commitment of such Bank.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
telex, facsimile transmission or similar writing) and shall be given to such
party: (x) in the case of the Borrower or the Agent, at its address, facsimile
number or telex number set forth on the signature pages hereof, (y) in the case
of any Bank, at its address, facsimile number or telex number set forth in its
Administrative Questionnaire or (z) in the case of any party, such other
address, facsimile number or telex number as such party may hereafter specify
for the purpose by notice to the Agent and the Borrower. Each such notice,
request or other communication shall be effective (i) if given by telex, when
such telex is transmitted to the telex number specified in this Section and the
appropriate answerback is received, (ii) if given by facsimile transmission,
when transmitted to the facsimile number specified in this Section and
confirmation of receipt is received or (iii) if given by any other means, when
delivered at the address specified in this Section; provided that notices to
the Agent under Article II or Article VIII shall not be effective until
received.
55
<PAGE> 61
SECTION 9.02. No Waivers. No failure or delay by the Agent or
any Bank in exercising any right, power or privilege hereunder or under any
Note shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses; Indemnification. (a) The Borrower
shall pay (i) all reasonable out-of-pocket expenses of the Agent, including
fees and disbursements of special counsel for the Agent, in connection with the
preparation and administration of this Agreement, any waiver or consent
hereunder or any amendment hereof or any Default or alleged Default hereunder
and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by
the Agent and each Bank, including (without duplication) the fees and
disbursements of outside counsel and the allocated cost of inside counsel, in
connection with such Event of Default and collection, bankruptcy, insolvency
and other enforcement proceedings resulting therefrom.
(b) The Borrower agrees to indemnify the Agent and each Bank,
their respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in
connection with any investigative, administrative or judicial proceeding
(whether or not such Indemnitee shall be designated a party thereto) brought or
threatened relating to or arising out of (i) any actual or proposed use of
proceeds of Loans hereunder or (ii) any actual or alleged Default under this
Agreement or any actual or alleged untruth or inaccuracy of any representation
or warranty made by the Borrower in or in connection with this Agreement;
provided that no Indemnitee shall have the right to be indemnified hereunder
for such Indemnitee's own gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction.
SECTION 9.04. Sharing of Set-Offs. Each Bank agrees that if it
shall, by exercising any right of set-off or counterclaim or otherwise, receive
payment of a
56
<PAGE> 62
proportion of the aggregate amount of principal and interest due with respect
to any Note held by it which is greater than the proportion received by any
other Bank in respect of the aggregate amount of principal and interest due
with respect to any Note held by such other Bank, the Bank receiving such
proportionately greater payment shall purchase such participations in the Notes
held by the other Banks, and such other adjustments shall be made, as may be
required so that all such payments of principal and interest with respect to
the Notes held by the Banks shall be shared by the Banks pro rata; provided
that nothing in this Section shall impair the right of any Bank to exercise any
right of set-off or counterclaim it may have and to apply the amount subject to
such exercise to the payment of indebtedness of the Borrower other than its
indebtedness hereunder. The Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that any holder of a participation in a
Note, whether or not acquired pursuant to the foregoing arrangements, may
exercise rights of set-off or counterclaim and other rights with respect to
such participation as fully as if such holder of a participation were a direct
creditor of the Borrower in the amount of such participation.
SECTION 9.05. Amendments and Waivers. Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such amendment
or waiver is in writing and is signed by the Borrower and the Required Banks
(and, if the rights or duties of the Agent are affected thereby, by the Agent);
provided that no such amendment or waiver shall, unless signed by all the
Banks, (i) increase or decrease the Commitment of any Bank (except for a
ratable decrease in the Commitments of all Banks) or subject any Bank to any
additional obligation, (ii) reduce the principal of or rate of interest on any
Loan or any fees hereunder, (iii) postpone the date fixed for any payment of
principal of or interest on any Loan or any fees hereunder or for termination
of any Commitment or (iv) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes, or the number of Banks, which
shall be required for the Banks or any of them to take any action under this
Section or any other provision of this Agreement.
SECTION 9.06. Successors and Assigns. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that the Borrower
may not
57
<PAGE> 63
assign or otherwise transfer any of its rights under this Agreement without the
prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment
or any or all of its Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon notice to the
Borrower and the Agent, such Bank shall remain responsible for the performance
of its obligations hereunder, and the Borrower and the Agent shall continue to
deal solely and directly with such Bank in connection with such Bank's rights
and obligations under this Agreement. Any agreement pursuant to which any Bank
may grant such a participating interest shall provide that such Bank shall
retain the sole right and responsibility to enforce the obligations of the
Borrower hereunder including, without limitation, the right to approve any
amendment, modification or waiver of any provision of this Agreement; provided
that such participation agreement may provide that such Bank will not agree to
any modification, amendment or waiver of this Agreement described in clause
(i), (ii) or (iii) of Section 9.05 without the consent of the Participant. The
Borrower agrees that each Participant shall, to the extent provided in its
participation agreement, be entitled to the benefits of Article VIII with
respect to its participating interest. An assignment or other transfer which
is not permitted by subsection (c) or (d) below shall be given effect for
purposes of this Agreement only to the extent of a participating interest
granted in accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part (equivalent to
an initial Commitment of not less than $10,000,000) of all, of its rights and
obligations under this Agreement and the Notes, and such Assignee shall assume
such rights and obligations, pursuant to an Assignment and Assumption Agreement
in substantially the form of Exhibit G hereto executed by such Assignee and
such transferor Bank, with (and subject to) the subscribed consent of the
Borrower, which shall not be unreasonably withheld, and the Agent; provided
that if an Assignee is an affiliate of such transferor Bank or was a Bank
immediately prior to such assignment, no such consent shall be required; and
provided further that such assignment may, but need not, include rights of the
transferor Bank in respect of
58
<PAGE> 64
outstanding Money Market Loans. Upon execution and delivery of such instrument
and payment by such Assignee to such transferor Bank of an amount equal to the
purchase price agreed between such transferor Bank and such Assignee, such
Assignee shall be a Bank party to this Agreement and shall have all the rights
and obligations of a Bank with a Commitment as set forth in such instrument of
assumption, and the transferor Bank shall be released from its obligations
hereunder to a corresponding extent, and no further consent or action by any
party shall be required. Upon the consummation of any assignment pursuant to
this subsection (c), the transferor Bank, the Agent and the Borrower shall make
appropriate arrangements so that, if required, a new Note is issued to the
Assignee. In connection with any such assignment, the transferor Bank shall
pay to the Agent an administrative fee for processing such assignment in the
amount of $2,500. If the Assignee is not incorporated under the laws of the
United States of America or a state thereof, it shall deliver to the Borrower
and the Agent certification as to exemption from deduction or withholding of
any United States federal income taxes in accordance with Section 8.04.
(d) Any Bank may at any time assign all or any portion of its
rights under this Agreement and its Note to a Federal Reserve Bank. No such
assignment shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's
rights shall be entitled to receive any greater payment under Section 8.03 or
8.04 than such Bank would have been entitled to receive with respect to the
rights transferred, unless such transfer is made with the Borrower's prior
written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04
requiring such Bank to designate a different Applicable Lending Office under
certain circumstances or at a time when the circumstances giving rise to such
greater payment did not exist.
SECTION 9.07. Collateral. Each of the Banks represents to the
Agent and each of the other Banks that it in good faith is not relying upon any
"margin stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 9.08. Governing Law; Submission to Jurisdiction. This
Agreement and each Note shall be
59
<PAGE> 65
governed by and construed in accordance with the laws of the State of New York.
The Borrower hereby submits to the nonexclusive jurisdiction of the United
States District Court for the Southern District of New York and of any New York
State court sitting in New York City having subject matter jurisdiction for
purposes of all legal proceedings arising out of or relating to this Agreement
or the transactions contemplated hereby. The Borrower irrevocably waives, to
the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum.
SECTION 9.09. Counterparts; Integration; Effectiveness. This
Agreement may be signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject matter
hereof. This Agreement shall become effective upon receipt by the Agent of
counterparts hereof signed by each of the parties hereto (or, in the case of
any party as to which an executed counterpart shall not have been received,
receipt by the Agent in form satisfactory to it of telegraphic, telex,
facsimile or other written confirmation from such party of execution of a
counterpart hereof by such party).
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
60
<PAGE> 66
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the day and
year first above written.
K N ENERGY, INC.
By ____________________________
Title: Vice President -
Finance and Accounting
370 Van Gordon Street
Lakewood, CO 80228-8304
Attention: Treasurer
Facsimile number: (303) 763-3514
61
<PAGE> 67
Commitments
$40,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By ____________________________
Title:
$25,000,000 BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By___________________________
Title:
$25,000,000 THE CHASE MANHATTAN BANK N.A.
By___________________________
Title:
$25,000,000 CITIBANK, N.A.
By___________________________
Title:
$25,000,000 NATIONSBANK OF TEXAS, N.A.
By___________________________
Title:
62
<PAGE> 68
Commitments
- -----------
$20,000,000 CHEMICAL BANK
By___________________________
Title:
$20,000,000 THE NORTHERN TRUST COMPANY
By___________________________
Title:
$20,000,000 NORWEST BANK COLORADO, N.A.
By___________________________
Title:
- -----------------
Total Commitments
$200,000,000
- -----------------
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By___________________________
Title:
60 Wall Street
New York, New York 10260-0060
Attention: John Kowalczuk
Telex number: 177615
Facsimile number: 212-648-5014
63
<PAGE> 69
PRICING SCHEDULE
The "Euro-Dollar Margin", "CD Margin" and "Facility Fee Rate" for
any day are the respective percentages set forth below in the applicable row
under the column corresponding to the Status that exists on such day:
<TABLE>
<CAPTION>
====================================================================================================================
Level Level Level Level Level Level
Status I II III IV V VI
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Euro-Dollar 0.1700% 0.2000% 0.2250% 0.2500% 0.2625% 0.4000%
Margin
- --------------------------------------------------------------------------------------------------------------------
CD Margin 0.2950% 0.3250% 0.3500% 0.3750% 0.3875% 0.5250%
- --------------------------------------------------------------------------------------------------------------------
Facility Fee Rate 0.0800% 0.1000% 0.1250% 0.1500% 0.1875% 0.2500%
====================================================================================================================
</TABLE>
For purposes of this Schedule, the following terms have the
following meanings:
"Level I Status" exists at any date if, at such date, the
Borrower's long-term debt is rated AA- or higher by S&P and Aa3 or higher by
Moody's.
"Level II Status" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated A or higher by S&P and A2 or higher by
Moody's and (ii) Level I Status does not exist.
"Level III Status" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated A- or higher by S&P and A3 or higher by
Moody's and (ii) neither Level I Status nor Level II Status exists.
"Level IV Status" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated BBB+ or higher by S&P and Baa1 or higher by
Moody's and (ii) none of Level I Status, Level II Status and Level III Status
exists.
"Level V Status" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated BBB or higher by S&P and Baa2 or higher by
Moody's and (ii) none of Level I status, Level II Status, Level III Status and
Level IV Status exists.
<PAGE> 70
"Level VI Status" exists at any date if, at such date, no other
Status exists.
"Moody's" means Moody's Investors Service, Inc.
"S&P" means Standard & Poor's Rating Group, a division of
McGraw-Hill, Inc..
"Status" refers to the determination of which of Level I Status,
Level II Status, Level III Status, Level IV Status or Level V Status exists at
any date.
The credit ratings to be utilized for purposes of this Schedule are those
assigned to the senior unsecured long-term debt securities of the Borrower
without third-party credit enhancement, and any rating assigned to any other
debt security of the Borrower shall be disregarded. The rating in effect at
any date is that in effect at the close of business on such date.
2
<PAGE> 71
EXHIBIT A
NOTE
New York, New York
, 199
For value received, K N Energy, Inc., a Kansas corporation (the
"Borrower"), promises to pay to the order of (the
"Bank"), for the account of its Applicable Lending Office, the unpaid principal
amount of each Loan made by the Bank to the Borrower pursuant to the Credit
Agreement referred to below on the last day of the Interest Period relating to
such Loan. The Borrower promises to pay interest on the unpaid principal
amount of each such Loan on the dates and at the rate or rates provided for in
the Credit Agreement. All such payments of principal and interest shall be
made in lawful money of the United States in Federal or other immediately
available funds at the office of Morgan Guaranty Trust Company of New York, 60
Wall Street, New York, New York.
All Loans made by the Bank, the respective types and maturities
thereof and all repayments of the principal thereof shall be recorded by the
Bank and, if the Bank so elects in connection with any transfer or enforcement
hereof, appropriate notations to evidence the foregoing information with
respect to each such Loan then outstanding may be endorsed by the Bank on the
schedule attached hereto, or on a continuation of such schedule attached to and
made a part hereof; provided that the failure of the Bank to make any such
recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Credit Agreement.
<PAGE> 72
This note is one of the Notes referred to in the Credit Agreement
dated as of December 1, 1994 among the Borrower, the banks listed on the
signature pages thereof and Morgan Guaranty Trust Company of New York, as Agent
(as the same may be amended from time to time, the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meanings.
Reference is made to the Credit Agreement for provisions for the prepayment
hereof and the acceleration of the maturity hereof.
K N ENERGY, INC.
By________________________
Title:
2
<PAGE> 73
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Amount of
Amount of Type of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
</TABLE>
3
<PAGE> 74
EXHIBIT B
Form of Money Market Quote Request
[Date]
To: Morgan Guaranty Trust Company of New York
(the "Agent")
From: K N Energy, Inc.
Re: Credit Agreement (the "Credit Agreement") dated as of December 1,
1994 among the Borrower, the Banks listed on the signature pages
thereof and the Agent
We hereby give notice pursuant to Section 2.03 of the Credit
Agreement that we request Money Market Quotes for the following proposed Money
Market Borrowing(s):
Date of Borrowing: __________________
Principal Amount* Interest Period**
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
__________________________________
*Amount must be $5,000,000 or a larger multiple of $1,000,000.
**Not less than one month and not more than nine months (LIBOR Auction) or
not less than seven days and not more than 360 days (Absolute Rate Auction),
subject to the provisions of the definition of Interest Period.
<PAGE> 75
Terms used herein have the meanings assigned to them in the Credit
Agreement.
K N ENERGY, INC.
By________________________
Title:
2
<PAGE> 76
EXHIBIT C
Form of Invitation for Money Market Quotes
To: [Name of Bank]
Re: Invitation for Money Market Quotes to K N Energy, Inc. (the
"Borrower")
Pursuant to Section 2.03 of the Credit Agreement dated as of
December 1, 1994 among the Borrower, the Banks parties thereto and the
undersigned, as Agent, we are pleased on behalf of the Borrower to invite you
to submit Money Market Quotes to the Borrower for the following proposed Money
Market Borrowing(s):
Date of Borrowing: __________________
Principal Amount Interest Period
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
Please respond to this invitation by no later than [2:00 P.M.]
[9:30 A.M.] (New York City time) on [date].
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By______________________
Authorized Officer
<PAGE> 77
EXHIBIT D
Form of Money Market Quote
To: Morgan Guaranty Trust Company of New York,
as Agent
Re: Money Market Quote to K N Energy, Inc. (the "Borrower")
In response to your invitation on behalf of the Borrower dated
_____________, 19__, we hereby make the following Money Market Quote on the
following terms:
1. Quoting Bank: ________________________________
2. Person to contact at Quoting Bank:
_____________________________
3. Date of Borrowing: ____________________*
4. We hereby offer to make Money Market Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
Principal Interest Money Market
Amount** Period*** [Margin****] [Absolute Rate*****]
- --------- --------- ------------- --------------------
$
$
[Provided, that the aggregate principal amount of Money Market Loans for
which the above offers may be accepted shall not exceed $____________.]**
__________
* As specified in the related Invitation.
** Principal amount bid for each Interest Period may not exceed principal
amount requested. Specify aggregate limitation if the sum of the individual
offers exceeds the amount the Bank is willing to lend. Bids must be made for
$5,000,000 or a larger multiple of $1,000,000.
(notes continued on following page)
<PAGE> 78
We understand and agree that the offer(s) set forth above, subject
to the satisfaction of the applicable conditions set forth in the Credit
Agreement dated as of December 1, 1994 among the Borrower, the Banks listed on
the signature pages thereof and yourselves, as Agent, irrevocably obligates us
to make the Money Market Loan(s) for which any offer(s) are accepted, in whole
or in part.
Very truly yours,
[NAME OF BANK]
Dated:_______________ By:__________________________
Authorized Officer
___________
*** Not less than one month and not more than nine months or not less than
seven days and not more than 360 days, as specified in the related Invitation.
No more than five bids are permitted for each Interest Period.
**** Margin over or under the London Interbank Offered Rate determined for the
applicable Interest Period. Specify percentage (to the nearest 1/10,000th of
1%) and specify whether "PLUS" or "MINUS".
***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
2
<PAGE> 79
EXHIBIT E-1
OPINION OF
SPECIAL COUNSEL FOR THE BORROWER
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have acted as special counsel for K N Energy, Inc. (the
"Borrower") in connection with the Credit Agreement (the "Credit Agreement")
dated as of December 1, 1994 among the Borrower, the banks listed on the
signature pages thereof and Morgan Guaranty Trust Company of New York, as
Agent. Terms defined in the Credit Agreement are used herein as therein
defined. This opinion is being rendered to you at the request of our client
pursuant to Section 3.01(b) of the Credit Agreement.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
<PAGE> 80
1. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes require no action by or in respect of, or filing
with, any governmental body, agency or official of the State of Texas or the
United States of America (other than filings of the Credit Agreement and the
Notes with the Securities and Exchange Commission pursuant to the reporting
requirements of the Securities and Exchange Act of 1934) and do not contravene,
or constitute a default under, any provision of applicable law or regulation of
the State of Texas or the United States of America, or of the articles of
incorporation or by-laws of the Borrower.
2. The Credit Agreement constitutes a valid and binding agreement
of the Borrower and each Note constitutes a valid and binding obligation of the
Borrower, in each case enforceable against the Borrower in accordance with its
terms, except as the same may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and by general principles of equity.
We are members of the Bar of the State of Texas and the foregoing
opinion is limited to the laws of the State of Texas, the State of New York and
the federal laws of the United States of America. In giving the foregoing
opinion, we express no opinion as to the effect (if any) of any law of any
jurisdiction in which any Bank is located which limits the rate of interest
that such Bank may charge or collect. Insofar as the foregoing opinion
involves matters governed by the laws of the State of Kansas (which matters do
not in our view include the non-contravention opinion in paragraph 1), we have
relied, without independent investigation, upon the opinion of Glaves, Irby and
Rhoads, delivered to you pursuant to Section 3.01(b) of the Credit Agreement.
This opinion is rendered solely to you and any Assignee or
Participant in connection with the above matter. This opinion may not be
relied upon by you or any Assignee or Participant for any other purpose or
relied upon by any other person without our prior written consent.
Very truly yours,
2
<PAGE> 81
EXHIBIT E-2
OPINION OF
KANSAS COUNSEL FOR THE BORROWER
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have acted as counsel in the State of Kansas for K N Energy,
Inc. (the "Borrower") in connection with the Credit Agreement (the "Credit
Agreement") dated as of December 1, 1994 among the Borrower, the banks listed
on the signature pages thereof and Morgan Guaranty Trust Company of New York,
as Agent. Terms defined in the Credit Agreement are used herein as therein
defined. This opinion is being rendered to you at the request of our client
pursuant to Section 3.01(b) of the Credit Agreement.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The Borrower is a corporation duly incorporated, validly
existing and in good standing under the laws of Kansas, and has all corporate
powers required to carry on its business as now conducted.
2. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes are within
<PAGE> 82
the Borrower's corporate powers, have been duly authorized by all necessary
corporate action, require no action by or in respect of, or filing with, any
governmental body, agency or official of the State of Kansas and do not
contravene, or constitute a default under, any provision of applicable law or
regulation of the State of Kansas.
We are members of the Bar of the State of Kansas and the foregoing
opinion is limited to the laws of the State of Kansas.
This opinion is rendered solely to you and any Assignee or
Participant in connection with the above matter. This opinion may not be
relied upon by you or any Assignee or Participant for any other purpose or
relied upon by any other person without our prior written consent.
Very truly yours,
2
<PAGE> 83
EXHIBIT E-3
OPINION OF
GENERAL COUNSEL OF THE BORROWER
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
I am General Counsel of K N Energy, Inc. (the "Borrower"), and I
have represented the Borrower in connection with the Credit Agreement (the
"Credit Agreement") dated as of December 1, 1994 among the Borrower, the banks
listed on the signature pages thereof and Morgan Guaranty Trust Company of New
York, as Agent. Terms defined in the Credit Agreement are used herein as
therein defined. This opinion is being rendered to you at the request of my
client pursuant to Section 3.01(b) of the Credit Agreement.
I have examined originals or copies, certified or otherwise
identified to my satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as I have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, I am of the opinion that:
1. The Borrower has all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted.
2. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes require no action by or in respect of, or filing
with, any governmental
<PAGE> 84
body, agency or official of the State of Colorado or, to the best of my
knowledge, any other jurisdiction (other than (i) approval by the Public
Service Commission of the State of Wyoming, which approval has been obtained
and is in full force and effect, and (ii) filings of the Credit Agreement and
the Notes with the Securities and Exchange Commission pursuant to the reporting
requirements of the Securities Exchange Act of 1934) and do not contravene, or
constitute a default under, any provision of applicable law or regulation of
the State of Colorado or, to the best of my knowledge, any other jurisdiction
or of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Borrower or any of its Subsidiaries or result in the creation
or imposition of any, Lien on any asset of the Borrower or any of its
Subsidiaries.
3. There is no action, suit or proceeding pending against, or to
the best of my knowledge threatened against or affecting, the Borrower or any
of its Subsidiaries before any court or arbitrator or any governmental body,
agency or official, in which there is a reasonable possibility of an adverse
decision which could materially adversely affect the business, consolidated
financial position or consolidated results of operations of the Borrower and
its Consolidated Subsidiaries, considered as a whole, or which in any manner
draws into question the validity of the Credit Agreement or the Notes.
4. Each of the Borrower's corporate Material Subsidiaries is a
corporation validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
I am a member of the Bar of the State of Colorado and the
foregoing opinion is limited to the laws of the State of Colorado and the
General Corporation Law of the State of Delaware. Insofar as paragraph 2 above
addresses the laws of other jurisdictions, I have relied upon my familiarity
with advice given by counsel admitted to practice in those jurisdictions, in
connection with this and other transactions.
This opinion is rendered solely to you and any Assignee or
Participant in connection with the above matter.
2
<PAGE> 85
This opinion may not be relied upon by you or any Assignee or Participant for
any other purpose or relied upon by any other person without our prior written
consent.
Very truly yours,
3
<PAGE> 86
EXHIBIT F
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the Credit Agreement
(the "Credit Agreement") dated as of December 1, 1994 among K N Energy, Inc., a
Kansas corporation (the "Borrower"), the banks listed on the signature pages
thereof (the "Banks") and Morgan Guaranty Trust Company of New York, as Agent
(the "Agent"), and have acted as special counsel for the Agent for the purpose
of rendering this opinion pursuant to Section 3.01(c) of the Credit Agreement.
Terms defined in the Credit Agreement are used herein as therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that the
Credit Agreement constitutes a valid and binding agreement of the Borrower and
each Note constitutes a valid and binding obligation of the Borrower, in each
case enforceable in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency or similar laws
<PAGE> 87
affecting creditors' rights generally and by general principles of equity.
We are members of the Bar of the State of New York and the
foregoing opinion is limited to the laws of the State of New York and the
federal laws of the United States of America. In giving the foregoing opinion,
we express no opinion as to the effect (if any) of any law of any jurisdiction
(except the State of New York) in which any Bank is located which limits the
rate of interest that such Bank may charge or collect. Insofar as the
foregoing opinion involves matters governed by the laws of Kansas, we have
relied, without independent investigation, upon the opinion of Glaves, Irby and
Rhoads, delivered to you pursuant to Section 3.01(b) of the Credit Agreement.
This opinion is rendered solely to you in connection with the
above matter. This opinion may not be relied upon by you for any other purpose
or relied upon by any other person without our prior written consent.
Very truly yours,
2
<PAGE> 88
EXHIBIT G
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, 19__ among [ASSIGNOR] (the
"Assignor"), [ASSIGNEE] (the "Assignee"), K N ENERGY, INC. (the "Borrower") and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent").
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the
"Agreement") relates to the Credit Agreement dated as of December 1, 1994 among
the Borrower, the Assignor and the other Banks party thereto, as Banks, and the
Agent (the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has
a Commitment to make Loans to the Borrower in an aggregate principal amount at
any time outstanding not to exceed $__________;
WHEREAS, Committed Loans made to the Borrower by the Assignor
under the Credit Agreement in the aggregate principal amount of $__________ are
outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of
the rights of the Assignor under the Credit Agreement in respect of a portion
of its Commitment thereunder in an amount equal to $__________ (the "Assigned
Amount"), together with a corresponding portion of its outstanding Committed
Loans, and the Assignee proposes to accept assignment of such rights and assume
the corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
<PAGE> 89
SECTION 1. Definitions. All capitalized terms not otherwise
defined herein shall have the respective meanings set forth in the Credit
Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to
the Assignee all of the rights of the Assignor under the Credit Agreement to
the extent of the Assigned Amount, and the Assignee hereby accepts such
assignment from the Assignor and assumes all of the obligations of the Assignor
under the Credit Agreement to the extent of the Assigned Amount, including the
purchase from the Assignor of the corresponding portion of the principal amount
of the Committed Loans made by the Assignor outstanding at the date hereof.
Upon the execution and delivery hereof by the Assignor, the Assignee[, the
Borrower and the Agent] and the payment of the amounts specified in Section 3
required to be paid on the date hereof (i) the Assignee shall, as of the date
hereof, succeed to the rights and be obligated to perform the obligations of a
Bank under the Credit Agreement with a Commitment in an amount equal to the
Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date
hereof, be reduced by a like amount and the Assignor released from its
obligations under the Credit Agreement to the extent such obligations have been
assumed by the Assignee. The assignment provided for herein shall be without
recourse to the Assignor.
SECTION 3. Payments. As consideration for the assignment and
sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor
on the date hereof in Federal funds the amount heretofore agreed between them.*
[It is understood that commitment and/or facility fees accrued to the date
hereof are for the account of the Assignor and such fees accruing from and
including the date hereof are for the account of the Assignee.] Each of the
Assignor and the Assignee hereby agrees that if it receives any amount under
the Credit Agreement which is for the account of the other party hereto, it
shall receive the same for the account of such other party to the extent of
such
__________________________________
*Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee, net of any portion
of any upfront fee to be paid by the Assignor to the Assignee. It may be
preferable in an appropriate case to specify these amounts generically or by
formula rather than as a fixed sum.
2
<PAGE> 90
other party's interest therein and shall promptly pay the same to such other
party.
SECTION 4. Consent of the Borrower and the Agent. This Agreement
is conditioned upon the consent of the Borrower and the Agent pursuant to
Section 9.06(c) of the Credit Agreement. The execution of this Agreement by
the Borrower and the Agent is evidence of this consent. Pursuant to Section
9.06(c) the Borrower agrees to execute and deliver a Note payable to the order
of the Assignee to evidence the assignment and assumption provided for herein.
SECTION 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition, or statements of the
Borrower, or the validity and enforceability of the obligations of the Borrower
in respect of the Credit Agreement or any Note. The Assignee acknowledges that
it has, independently and without reliance on the Assignor, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and will continue to be
responsible for making its own independent appraisal of the business, affairs
and financial condition of the Borrower.
SECTION 6. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
SECTION 7. Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
[ASSIGNOR]
By_________________________
Title:
3
<PAGE> 91
[ASSIGNEE]
By__________________________
Title:
K N ENERGY, INC.
By__________________________
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By__________________________
Title:
4
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